Report on scenario planning of BP in 2030

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RISHI GOYAL M00244007
19/02/2009

SCENARIO PLANNING OF BRITISH PETROLEUM IN 2030
INTRODUCTION Here in this report we are considering the scenario planning of BP also known as British petroleum in 2030. BP is one of the largest energy company and a multinational oil company and a multinational oil company. The company is also among the largest private sector energy cooperation in the world. The company is listed in London stock exchange and is a constituted of the FTSE 100 Index. British petroleum was merged with Amoco in December 1998 becoming BP Amoco and was renamed as BP again in 2000 and adopted a tag line “beyond petroleum” which is still in use as Amoco was ranked 1 petroleum brand by consumers. In 2004, BP decided to move most of his petrochemical business into separate entity called “INNOVENE”. This was done to launch IPO (Initial public offering) for this brand but Innovene was sold to one of the UK based company and the plan was dropped. BP recently looked to grow its oil exploration activities in frontier areas like the former Soviet Union for its future reserves. In Russia, BP owns almost 50% of TNK-BP which is Russia’s major vertically integrated oil company. BP has also tried its hands in other sectors and has expanded its business in other area as well which signifies that BP is not limited only to oil business but want to extend its wings to other part. It holds 8 retail brands which are also doing a great job. Ampm: - it is a convenience store chain in U.S ARCO: - it is BP’s retail brand BP TRAVEL CENTRE:- It is BP’s travel centre and has sites located in Australia it also features other retail tenant such as Mc Donald’s and KFC. BP CONNECTS: - It features the wild bean cafe which offers coffee and fast food. BP EXPRESS: - It offers bakery services BP SHOP: - it is usually a selection of convenience store style food and automotive products. BP 2GO:- BP 2go offers similar bakery food to BP Connect but in a pre-packaged form.

AIR BP AND BP SHIPPING: - Air BP is the aviation fuel arm, BP Marine the marine fuels and lubricants arm and BP Shipping is the Shipping arm within the BP group. Now by next month BP is launching its new product BP bio fuel. This is for the rising world fuel price and the growing demand of energy. Another main reason for this product is BP is concerned about global warming. Bio fuel already constitute the major source of energy over half of the world’s population, accounting for more than 90% of energy consumption. Biogas has been seen as promising and largely untapped of renewable source of energy and improvement of technology in biogas may result it to the best alternative fuel for which the hunt was going on from very long time. Here are the two scenarios which describes what will happen if this situation takes place in 2030.

SUMMARY OF SCENARIOS
Out of the eight scenarios we choose we presented the two scenarios which we think are better and will leave greater impact in scenario planning of British petroleum for bio fuel. And in accordance to impact we gave them a specific name so that they can be well distinguished. 1. Conventional scenario 2. 2nd generation scenario Conventional scenario:This scenario is named conventional scenario because in this scenario we assumed that the demand of bio fuel is increased and the production remains the same with good agriculture practices. This thing can only happen if the technology of bio fuel is high and people have adopted bio fuel as their next source of energy. If this happens then the price of bio fuel will be increased with the growth of demand and the price of agricultural crop will decrease. For this we will have to consider some other optional source of energy like wind energy or solar energy. It may also have good impact on bio fuel companies as the government of their countries are giving special subsidies or tax benefits for bio energy companies. 2nd Generation scenario:In this scenario we assumed that the demand of bio fuel is high with the increase in production and the agriculture practise is worst. This will increase the risk of quality of food. If the agricultural practise gets worse than people will not get quality food which might not be beneficial for public health. Looking at the positive side, due to high demand and

traditional method of agricultural practises there will be scope of innovation and technology in this field and alternative resources can be used for production of bio fuel. As agricultural land is limited there might be an increase in land crises. There is an improvement in productivity with other innovations and better supporting government policies. The crop technology innovation responses will affect the farm production level which will result in aggressive demand for bio fuel from traditional food crops.

A DESCRIPTION OF OPPORTUNITIES AND THREATS FOR THE ORGANISATION.
Let us start with the first scenario Opportunities and threats for conventional scenario:As price and demand are directly proportionate to each other, if the demand is high then company can increase its price. If the demand continues to remain high than not only price will increase but other means of production will also improve to higher the output. As in this scenario high quality of agriculture products are available the quality of the end product will also be high and which will lead to better quality of fuel which will help the organisation to build its market reputation. If there is high production of raw material than company can also stock it for the current and future demand. At the other end if the demand and supply are good the company have an opportunity to expand and can come with new plants to fulfil its demand and make its investor happy by coming with good profit numbers and by increasing market share. In this world competition is always a threat and if one company fails to fulfil the demand of the consumer then this demand will be fulfilled by other competitors. Large capital investment is required to come up with new plants to meet the demand of the consumers and if other alternative resource of energy is invented then huge capital investment can be at high risk. Public and government policies play a major role in the working of any organisation and if it lacks the support then it becomes difficult to stand in such situation.

Opportunities and threats for 2nd generation scenario:If the demand is high and the agriculture practice is worse than the output will be at low price. As the production and demand are also high and

materials are available in low cost it will give us high profit margin. As the final production will be at low cost due to low price the company can have the platform to grab the market share of its competitors by lowering the cost of the bio fuel price. As there is worse agriculture practice with demand and production high the quality of the bio fuel will not be good. This can be a threat to the organisation’s market reputation.As low quality will surely effect the reputation of the company and as the reputation of the company will go down it will give a bad image to the customer and which will make the customer less loyal toward the company’s brand. As competitor is aware of the negative points of the other rival companies they will focus the customer attention toward the low quality of the BP’s fuel. Losing the market will be very much possible due to the low quality and competitors which will decrease the sales or lower the demand.

RECOMMENDATION OF A STRATEGY FOR THE ORGANISATION
After considering both scenarios my recommendation for the organisation would be to focus on satisfying the need of the customers. If at any moment of the time supply is low than the demand due to any reason a company should not produce a sub standard product. As BP is more than 100 years old company and people trust the name, so the company should continue building the higher image instead of ruining it. As it is said “it takes years to built relationship and a second to ruin it”. The organisation should concentrate on the purchase of the quality raw material because that is the base of the end product. The organisation can also produce their own raw material to offer their customers the lowest price possible so that they can grab more market and also make their customers happy. Another main strategy of the organisation should always focus on the innovation and new technology so that it will improve the production, reduce the wastage and high quality will be ensured.

RECOMMENDATION FOR THE DECISION
Bio fuel has always been a topic of research and now BP has launched bio fuel after doing all the research and has approved that it can be an alternative source of energy in future. Here, in both the scenario’s i.e. conventional scenario and 2nd generation scenario we have assumed that there will be increase in demand this is because of the efficiency of bio fuel and it is environmental friendly. Due

to the high prices of crude oil the demand for the bio fuel will be high. The projected demand for the bio fuel is very high and is increasing rapidly because of the demand of the countries like India, China and United States. As bio fuel is mainly dependent on agricultural crops so it will have great affect on the production of bio fuel. The two possibilities that we can assume is that either agricultural practise will be good than will be limited production and if the practice is bad the quality will be affected. So for this reason we considered that agricultural practice as the key point of scenario planning. After analysing both the scenarios I can recommend that the demand of the bio fuel will be high and the organisation should plan something for the raw material i.e. agricultural crop used for bio fuel and should start producing its own raw material. I would also recommend the organisation to continue the research process and adopt new technology to give the best quality to the customers. It should also try their hands in some other alternative source of energy to fulfil the consumers demand like the wind and solar energy which can be easily obtained.

REFERENCES :http://en.wikipedia.org/wiki/BP BRITISH PETROLEUM REPORTS http://www.bp.com/marketingsection.do?categoryId=2&contentId=70136 28

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