Comparison of MNCs

Comparison of Pakistan State Oil and British Petroleum
11/3/2010 Air University Shehiryar Ahmed

BBA 3b (080670)

Submitted to: Sir Manzoor Iqbal Awan, Col (R)

PSO is the largest oil company of Pakistan and the most successful in Pakistan as well. British Petroleum is the 3rd largest company of the world and is most successful petroleum company in the whole world. The strategies, management practices, marketing, etc of both MNCs differ quite significantly.

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PSO is the market leader in Pakistan but BP is the market leader in world. .Introduction In this project. A lot is common between these two companies because both belong to same industry. I have compared the management practices of two multinational companies i.e. Both companies are doing well and are successful. Pakistan State Oil and British Petroleum. The main difference between both is that PSO only operates in Pakistan but BP operates throughout the world.

Following that. I have tried my level best to compare and contrast both MNCs . Pakistan State oil History The creation of Pakistan State Oil (PSO) can be traced back to the year 1974. when on January 1st.I have compared the MNCs in a way that firstl y I have written the details of PSO and then I have written the details of BP in the same order which shows the comparison of both MNCs. Soon after that. PSDC was then renamed as State Oil Company Limited (SOCL) on August 23rd 1976. the government took over and merged Pakistan National Oil (PNO) and Dawood Petroleum Limited (DPL) as Premiere Oil Company Limited (POCL). Petroleum Storage Development Corporation (PSDC) came into existence. In this project. the ESSO undertakings were purchased on 15th September 1976 and control was vested in SOCL. The end of that year (30th December 1976) . on 3rd June 1974.

This program over the years included the revamping of the organizational architecture. financial. . that PSO has been able to maintain its market leadership in a highly competitive business environment. After PSO¶s inception. employee empowerment and transparency in decision making through cross functional teams. We are truly the drivers of economy of this country. various industrial units. the corporate culture underwent a comprehensive renewal program which was fully implemented in 2004. and marine sectors of Pakistan. It is due to this effective implementation of corporate reform and consistent application of the best industrial practices and business development strategies. Inorder to reinforce and monitor this structural change. Human Resource Development became one of the main priorities on the company¶s agenda under this corporate reform. This new corporate renewal program has divided the company¶s major operations into independent activities supported by legal. power projects. Values Values of PSO are as follow: y y y y y y Excellence Cohesiveness Respect Integrity Innovation Corporate responsibility Products & Services PSO caters to POL requirements of a wide spectrum of customers comprising the retail consumer. aviation. Vision To excel in delivering value to customers as an innovative and dynamic energy company that gets to the future first. rationalization of staff.saw the merger of the Premier Oil Company Limited and State Oil Company Limited. government. Mission We are committed to leadership in energy market through competitive advantage in providing the highest quality petroleum products and services to our customers. related check and balances have been established by incorporating monitoring and control systems. informative and other services. giving way to Pakistan state Oil (PSO).

Korangi Fish Harbour & Port Qasim. PSO also supplies fuel to industrial units like textile. PNSC. PSO industrial consumer dominance in the government sector can be judged by the fact that all the major government entities like OGDC. PSO is the sole furnace oil supplier to all Independent Power Projects (IPPs) in Pakistan with a share of over 80% in furnace oil market. Islamabad. PSO also serves the fuel needs of both national & international air carriers. the pattern of supplies from Karachi have been drastically changed as the entire white oil movement from Karachi has been switched over from tank lorries to pipeline. Moreover. Lahore. Karachi. We also provide jet fuel into-plane refuelling facilities at 9 airports of Pakistan i. PSO is also playing its due role in meeting the growing energy demand of the country. We are proud to cater to the fuel and non fuel needs of approximately 2. Moreover. We also supply fuel to ships at Karachi Port.) Ltd Product Movement The modes used for product movement of POL products by PSO include tank lorries. cement. where PSO has developed consumer outlets for timely refuelling of their fleets. Our industrial consumer base includes prestigious entities like the Presidency and the Prime Minister Secretariat. equipped with tracking and pilfer proof system. Karachi Port Trust. transport etc. PAF Wah and HIT have entrusted PSO to meet their POL needs. Faisal Marine Oil Services (Pvt . NLC. Navy.8 million customers per day. We have a fleet of around 6. Besides supplying fuel to national power utilities like WAPDA and KESC. Faisalabad. Furthermore. agriculture. tank wagons and pipeline. Pakistan railways. Multan. Turbat. Pakistan Army.000 tank lorries. Maritime Security Agency. Around 1200 tank lorries. . With the inception of white oil pipeline (WOPP) from Karachi to Mehmood Kot via Shikarpur & MFM (Mehmood Kot / Faisalabad / Machikey) pipeline. we cater to the fuel requirements of Pakistan Navy. have been upgraded as per international standards which are engaged in delivering quality fuels across the country. Peshawar.A network of 3612 retail outlets enables us to reach Pakistanis from Nagarparkar to Sost.e. Pasni and Sialkot.

The company has also been meeting the fuel needs of the armed forces of Pakistan. There are already four players in the market other than PSO itself. The idea of setting CoCo sites was to make these stations flagships under maximum supervision and intense scrutiny to maintain the highest level of efficiency. sugar and the textile industry.8 million customers every day. railways. Moreover. Shell. namely Shell Pakistan. PSO also provides refueling facilities at 9 airports in Pakistan as well as marine ship fuel at 2 ports. Out of a total number of 3620 outlets. 53 outlets cater to agriculture sector and 183 outlets serve our bulk customers. These cards are well-established and have received an overwhelming response from the corporate world and from the masses Porter five forces analysis of PSO (Industry Analysis) The industry in which Pakistan State Oil (PSO) is doing business is highly competitive. PSO serves 2.735 have been upgraded as per the New Vision Retail Program with most modern facilities. 1. Competitors of PSO Competitors of PSO are Caltex. The following five key factors highlight this fact. Marketing and Distribution The company has the largest distribution network comprising of 3. Being a national oil company has its advantages but the company still has to face pressure from different sources.Premier-XL Green-XL. service and customer care. the company also was a pioneer in introducing an array of cards for the convenience of our customers. This can be portrayed with the help of new entrants like Admore and Zic which haven¶t been able to pose a threat to the already present players Threat to Substitute Products . and Total.620 outlets. Our leading retail brands include environment friendly fuels . fleet and pre-paid cards for individuals. there are 37 company owned and company operated (Co-Co) sites to serve our retail customers. PSO also caters to the fuel demands of industrial consumers that include power generation. Moreover. Out of which 3. Caltex. Threat of new entrants The threat of new entrants in the industry that PSO is associated with is small but it cannot be eliminated.Industrial Consumer Alongside its retail and non-fuel retail business. Total Parco and Attock Petroleum.384 serve retail customers. These cards include corporate. New companies will not have a large market segment to capture therefore starting business in this industry will be far from lucrative.

Last but not least Attock Petroleum has the smallest share of the market. All these companies in essence are competing for the same customers. For example. Bargaining Power of Buyers PSO has a wide customer base which includes retail customers. government.As alternative of fuel. Other than that. KESC and many more. the bargaining power of suppliers would be fairly high for PSO. opportunities. All these buyers combined from a formidable force which can have the power to influence PSO. NLC. It is evident that world oil will eventually run out and alternate sources of fuel will be required hence PSO has to keep up with technology and be prepared for this eventual repercussion to avoid being wiped. WAPDA. Firstly as Pakistan has to import oil. PSO only allows a small discount to large organizations on its own behalf. Pakistan Railways. PSO and Shell Pakistan. However after some research it has been determined that this is not the case. SWOT Analysis SWOT stands for strengths. Rivalry among Competitors The petroleum. CNG is already available at most PSO outlets. A weakness could be the lack of a new product. PSO has maintained a 47-year mutually-beneficial business relationship with Kuwait Petroleum Corporation (KPC). however nothing like that has materialized to date. aviation. various industrial units.1 percent share of the Black Oil market and 51. and marine sectors of Pakistan including Pakistan Army. Strengths and weaknesses are internal factors. This can be portrayed with the example of Shell that was the first to highlight the longer mileage with its fuel when oil prices were soaring around the world. PSO enjoys the advantage that the government regulates the prices of its various petroleum products. A threat could be a new competitor in your home market. oil. an opportunity could be a developing market such as the Internet. and threats. . Caltex and Total Parco were the third and fourth entrants respectively. This protects PSO from frequent price fluctuations in the international market. Pakistan State Oil is developing Ethanol which will eventually be available at reasonably less price. thus there¶s no real threat from them either. The transport fleet consists of 5777 tank Lorries which are equipped with state of the art technology to keep them monitored. Even though PSO has an 80. Opportunities and threats are external fact ors. For example. Bargaining Power of Suppliers It can be assumed that being an oil company. power projects. and lubricants industry in Pakistan is composed of two major players. it still faces fierce competition from its competitors which are vigilant in launching their advertisement campaigns according to the prevalent conditions of the market. strength could be your specialist marketing expertise. weaknesses.0 percent share of the White Oil market. Pakistan Navy.

STRENGTHS y PSO is having good competitive skills. y It has well conceived functional area strategies. y Ability to move with the better strategies i. y Although the services of PSO are quite well but it has weak market image as compared to Shell. . y Sometimes the organization is unable to implement strategies in front of its competitors.e. THREATS y Likely entry of new competitors that are having new technology and are going to provide better services. y PSO petrol pumps are computerized y PSO is having product innovation as it frequently introduces new products according to the require ments of its consumer.e. creating some unique features in the products to attract their consumer. not in any other product offered by competitors. y Introduce the new product with features that are new in the market i. y It has adequate financial resources as it is a public sector organi zation and is having support of the government. government may increase the taxation rate on the products offered to the customers. y Add some complementary products in the future. y Adverse government policies i. OPPORTUNITIES y Diversity into the related products i.e. y Rising sales of the substitute products offered by the competitors. increase the financial resources or increase the market share.e. applying some new ways to cover the losses. y It is a well-recognized market leader as it has top oil market in Pakistan. y Growing competitor pressures can be proved as threat to the survival of the organization. WEAKNESSES y The organization is falling behind in research and development. y It is likely in the future that the organization is going to expand the business and enter into the new market.

and environmental care an integral part of all company projects and a responsibility of all employees. So far five PSO facilities (Mehmmod Kot. ISO 14001 assist our managers in analyzing the environmental and safety risk involved within the total business system through review of all the organization¶s activities. Machike. Environment Management System PSO has implemented a health. safety. PSO has not overlooked the expectations of its stakeholders. safety and environmental management system and related standards to carry out operations and activities in a manner that is protective of human health and the environment. and realizes its national and moral obligations ever so strongly. products.y Buyer¶s needs and tendencies may change and they are not fully satisfied by the existing products and may switch to the other products offered by the competitors. LMT Korangi. PSO has come a long way from being a government department in early 1970s to where it is today as a major corporate heavyweight on Pakistan Stock exchanges. y Adverse demographic changes. Our main CSR thrusts are Education. children welfare and relief efforts during and after natural calamities have emerged. we at PSO believe in making a difference in lives . all the processes have been designed in such a manner that they not only remain environment friendly but their performance is measured and continual improvement targets are set for performance improvement. At these facilities. Corporate Social Responsibility in PSO Every business has its social dimensions. CSR ± or Corporate Social Responsibility. With a strong sense of corporate social responsibility.a difference that is able to permeate the very fabric of society towards uplifting the economic well being of the people wherever they are. Keamari Terminal ± C and Central Lab) have third-party verification of the environmental management system according to the ISO 14001 standards. This environmental management system at PSO is designed to make health.has become an integral part of businesses today. Having become the largest oil marketing company in the nation. and services. health care and community building which entails activities for women empowerment. PSO¶s HR Mission: y y y We value people of PSO as our greatest Resource As a partner in Business we undertake to achieve business goals through people We aspire to create a good working environment for our people where they are motivated to reach PSO goals . It has now made itself synonymous with community contribution.

80 miles northeast of Ahvaz. Reynolds. near the border with the Ottoman Empire. There was no oil here either. called the ³Green Document. invested in gold mines in Rockhampton. The very first attempt at drilling in western Iran. Reynolds had visited Baghdad frequently and had paid close attention to loca l legends. D¶Arcy was to pay the government of Iran £20. Queensland. he and his family returned to England.British Petroleum History British Petroleum is the UK¶s largest corporation. This outfit has been cheating humanity since its inception. D¶Arcy obtained a concession from the government of Iran to drill for mineral resources. B. was disappointing. in Qaser Shirin. A third well was drilled near Masjid Sulaiman. For nearly 80 years. The history of crude-oil exploration and production in the Middle East began with William Knox D¶Arcy (1849-1917). of Iran. . He hired G. The mess we have today in the Gulf of Mexico is not the first time BP has committed crimes against the environment and against people.000 in cash and £20. D¶Arcy. a British subject living in Australia who became very rich very quickly²twice.´ was written on a page of green paper signed by the Shahanshah. Reynolds had worked in India and been drilling in Sumatra. This concession. It is a vertically integrated cartel that operates oil and natural-gas exploration. He never set foot on the land that made him a wealthy man. After becoming a millionaire by the end of 19th century. Many people do not know that BP was born. It is among the largest private-sector energy corporations in the world. He had two areas in mind. the capital of Khuzestan province. He hired scouts from local nomadic tribes. beyond business. D¶Arcy founded the First Exploration Company in 1903. and distribution all over the globe. interfered in its politics. In 1901. to oversee the drilling. plus a royalty of 16% of net profits from all enterprises formed under the agreement. and committed many crimes against the people of Iran. it seized the wealth of that nation. marketing. BP. This is a proverbial drop in the bucket for BP. however. named after. an experienced geologist engineer. a lawyer.000 in stock in the proposed opera tion. with the exception of the five northern provinc es the Russians wanted. king of kings. goes beyond petroleum. D¶Arcy conducted business through representatives and later through the UK government. indeed. especially the stories about Zoroastrian temples built on eternal fire and tar pits in southwestern Iran. These were akin to Native Americans guiding Ponce de Leon to the Fountain of Youth. and destroyed its future.

educated people in Iran realized the country was in effect occupied and controlled by AIOC. But Reynolds was sure he would find oil. By the post-WWII era and the beginning of decolonization. refining. Persia. Reynolds had struck one of the world¶s r ichest oil fields on the edge of the Persian Gulf basin. With the help of these corrupt shahs. This one was a gusher. is only one of 30 provinces in Iran. who was installed by the Allies in 1941. While waiting for the mail. he and his scouts followed their noses day and night.180 feet deep.000 to no avail and was ready to sell his precious Green Document. And this was only the first of many productive Persian Gulf reservoirs. Iran¶s shah. the Masjid Sulaiman field was still producing about 7. these oil imperialists were supported by the full military might of their respective governments. The owners not only discouraged but prevented native populations from obtaining the skills and education to manage their own resources. The crude shot 50 feet over the derrick from a well that was 1. D¶Arcy remained a director until his death in 2000.D¶Arcy had spent more than £225.000 barrels of oil per day in the early 1980s. searching for that rottenegg smell. Western oil companies eventually attained total control over the middle-eastern oil industry. All aspects of exploration. acquiring 50 percent of the voting stock. the British government became part owner of APOC in 1914. D¶Arcy telegraphed Reynolds and told him to close do wn the operation. headed a corrupt dictatorship. Oil concessions generally covered very large areas and were for long durations. which normally took two weeks. Winston Churchill. In order to protect its supplies of this now crucial military resource. Greek historians mistakenly assumed that all people in Iran were Persians. Britain¶s First Lord of the Admiralty. or Pars. APOC was forced to change its name to Anglo -Iranian Oil Company (AIOC). In 1923. Reynolds ordered drilling for a fourth well where he had found traces from a natural seepage in the same vicinity as the third. On May 26. production. first backed by the British then by the US. AIOC appropriated the lion¶s share of Iran¶s wealth. Until 1953. Coinciding with the growth of a new nationalist fervor in the region. They¶d had enough. had been following the progress of the burgeoning petroleum industry because he was thinking of converting the British navy¶s ships from coal to oil. More importantly. this well had produced more than one billion barrels of light crude oil. and granting him £900. and marketing were controlled by these multinational corporations. non-negotiable royalty. the most significant chapter in the history of the Middle East²if not the whole of mankind²opened. There is no telling what or how much he stole from his people. the shah was f orced . 1908. and workers were treated no better than slaves.000 worth of shares. which he implemented in 1911. With 314 wells. The government of Iran was not even allowed to check AIOC¶s records. He telegraphed back and asked for written confirmation to be sent by mail. fixed. reimbursing all of D¶Arcy¶s expenditures. By its 100th anniversary. the Iranian government sent a memorandum to all foreign embassies in Tehran to address the country by its correct name: Iran²not Persia. AIOC was paying Iran a 16% royalty. In 1935.000 to Churchill to lobby the UK government to grant APOC a monopoly on Iranian oil resources (Myers 2009). They paid a small. and the British and others kept repeating this mistake (Kamiar 2007). D¶Arcy formed the Anglo-Persian Oil Company (APOC). The rush was on. the company secretly paid £5. In 1909. These companies often became de facto rulers of these semi-colonial territories. He mortgaged his remaining gold holdings but was still running out of money.

By 1975. American victory in Iran resulted a newly formed oil consortium.4). This same tactic had been used successfully in Italy in 1948 to prevent the communists from winning the elections. In return for US help. and the establishment of SAVAK. and was put under house arrest until his death in 1967. remaining primarily as a figurehead. funded by the US. drug addicts. The British then approached Washington for help. He remained in demand as a consultant and liaison between American oil companies and Middle Eastern governments. Mossadeq was found guilty of treason. AIOC responded with a boycott of Iranian oil. The majority of his supporters. The shah¶s return opened a reign of terror. Fayazmanesh. spent three years in solitary confinement. mostly planned by Donald N. prostitutes. Much of this money went to the US as Iran became the largest purchaser of American weapons. Mossadeq¶s foreign minister. During the wars of 1967 and 1973 between Israel and its Arab neighbors. but the incoming president. and thugs (Gelvin. of instigating a counter-coup designed to return the shah to total power. the year Eisenhower took office. 2005. were turned over to firing squads. but its complaint was dismissed. however. torture. Mossadeq. The shah showed his gratitude to US foreign -policy makers. Nothing much developed during the remainder of the Truman presidency. was also supported by few ayatollahs. Mohammad Mossadeq. was a very close friend and ally of Churchill¶s and did not ignore his comrade¶s pleas for assistance. BP expanded beyond the Middle East to Alaska. nationalized Iran¶s oil industry. and Mossadeq was forced to resign. AIOC changed its name to British Petroleum. Roosevelt accepted a job with Gulf Oil. The British had. p. who headed the CIA¶s Middle East division. the shah provided cheap fuel for the Israeli war machine even as Arab members of OPEC decreased oil production and created an oil embargo directed at the western nations. causing oil prices to quadruple in two months. an architecture expert. in effect. and big merchants. In 1954. Hossein Fate mi. powerful landlords. Upon returning to the US. SAVAK was created in 1957 with CIA assistance and US tax dollars. Wilbur. expansion of the right of extraterritoriality (meaning US and UK nationals could not be tried in Iranian courts). and in 1965 it was the first company to strike oil in the North Sea. In 1953. as the world¶s second-largest oil producer (after Saudi Arabia).aside. The CIA paid out $1 million to hire demonstrators ²mostly gang members. was taken from a hospital to be executed. Operation Ajax. AIOC agreed to share its Iranian concession with US oil companies. Its primary mission was to eliminate threats to the shah. The riots and chaos that ensued did the trick. the shah¶s secret police. ³disappearances´ of dissidents. The British government contested the nationalization at the International Court of Law. In 1959. been kicked out of Iran. and a new prime minister. for putting him back on his Peacock Throne. 2003. Kermit Roosevelt. in partnership with the British. in Iran . called Operation Ajax. The director of the operation was Theodore Roosevelt¶s grandson. Eisenhower. he personally expressed his gratitude to his savior. . Kermit Roosevelt. Dwight D. the CIA went into action. with the approval of Majlis (the Iranian parliament). and execution. Iran was earning nearly $20 million per hour. 279. was elected in 1951. Eisenhower approved the plan. Its tactics included censorship. When the shah triumphantly returned to Tehran on August 19. but that was not enough to bring the country to its knees. p.

polluted and poor. and mobility. from remote tropical islands to nextgeneration bio fuels± a revitalized BP is driving greater efficiency. 2001 ²we begin to see Operation Ajax¶s ultimate cost in terms of money and lives.Today. Mission BP wants to be recognised as a great company ± competitively successful and a force for progress. Now it is drilling offshore near the US in the Gulf of Mexico. and know-how to meet energy needs and deliver long-term value. We strive to do that by producing energy that is affordable. innovative and performance driven. Iran was a BP prison. light. the counter -coup in Iran seemed like a bargain for the US. the oil company that began in Iran has gone global. Vision BP operates at the frontiers of the energy industry. We use world-class assets. BP is progressive. We have a fundamental belief that we can make a difference in the world. secure and doesn¶t damage the environment. But was it? Drawing a straight line from the overthrow of Mossadeq¶s government in 1953 to the Iranian revolution of 1979 ²and perhaps to the events of September 11. responsible. From deep beneath the ocean to complex refining environments. responsible. innovative and performance driven. From 1953 to 1979. We have a fundamental belief that we can make a difference in the world. At $1 million. secure and doesn¶t damage the environment. capability. We help the world meet its growing need for heat. Products On the road y BP Bio fuels y Gas and fuel cards y Gas and petrol stations . It has oil wells and gas stations on all continents. and business growth. technology. the shah. run with an iron fist by the company and its puppet. sustained momentum. and mobility. We help the world meet its growing need for heat. Many Americans in the region are beginning to feel the pain and outrage Iranians endured for 70 years²getting a small taste of how BP goes Beyond Politics. Values BP wants to be recognised as a great company ± competitively successful and a force for progress. We strive to do that by producing energy that is affordable. light. BP is progressive. The ingenuity and determination of our people have brought new resilience to BP.

They plan to explore these areas successfully and pursue the best projects for development. lower-cost natural gas fields with a great potential for a strong return on capital. In order to provide opportunities for growth. as fifty-six percent of sales are accounted for in this segment. In the marketing division.a non-profit carbon offsetting initiative For the home y Liquefied Petroleum Gas (LPG) y Solar powered energy For business y Air BP y ARCO Aluminium y Aromatics & Acetyls y Asphalt and bitumen y BP Crudes y BP Franchising y BP Shipping y Gas and fuel cards y Gas and power energy y Industrial lubricants y Invoice tracking system y Liquefied Natural Gas (LNG) y Liquefied Petroleum Gas (LPG) y Marine fuels and lubricants y Natural Gas Liquids (NGL) Business Sectors Exploration and Production BP¶s exploration and production segment accounts for eleven percent of BP¶s total sales. BP currently has three main strategies for the exploration and production sector. BP¶s focus in this area is to invest in large. Azerbaijan. deepwater Gulf of Mexico. Angola.y Motor oil and lubricants y Route & journey planner y Gas and petrol station locator y Target neutral . In the retail business. thus promoting their new environmental friendly image (BP . Refining and Marketing Refining and Marketing is BP¶s largest operating segment. Asia Pacific and Algeria (BP Online). BP plans to manage their producing assets by only investing in the best opportunities and maximizing operating efficiency (BP 2004 Annual Report). Sales in this sector increased twenty-two percent from 2003 to 2004 mostly due to increased production and higher oil and gas prices (BP 2004 Annual Report). competitive sales growth is maintainted by increasing investments and focusing on operating excellence. BP has been expanding the number of sites that carry the BP helios. There was a seventy-eight percent improvement in sales from 2003 to 2004 (BP 2004 Annual Report). BP has been developing new profit centers including ones in Trinidad. BP believes it is imperative to search out new profit centers with large oil and natural gas potential.

Aromatics. These include solar. BP has five major strategies for improving their refining and marketing division. and to provide original products to selected customers. The Aromatics and Acetyis businesses will be integrated within the Refining and Marketing segment in attempts to gain operational and organizational synergies (BP 2004 Annual Report). gas marketing and solar. natural gas liquids (NGL). by leveraging the BP brand name and technology. BP¶s strategy for this sector includes three main goals. Power and Renewables The Gas. and experienced a sixty-five percent increase in sales from 2003 to 2004 (BP 2004 Annual Report). BP will look for areas where they have a competitive advantage and will restructure assets to these areas. and Naphthalates (BP Online). BP¶s main advertising campaign has been focused on their renewable and alternative energy businesses. The main strategy of the petrochemicals sector is to restructure this division. wind. Recently. hydrogen power and gas-fired power . they plan to divest the Olefins and Derivatives business with an initial public offering (BP Online). PTA/Polyester intermediates. This segment accounts for twenty-six percent of total sales. Alternative Energy BP intends to invest $8 billion into this industry in the next ten years (BP Alternative Energy Online). BP¶s focus in the marketing division is to generate customer value by providing quality products and offerings. and they continue to close down more of this business today. to expand gross margin by optimizing the gas and power value chains. The largest sales increase in this sector came from the solar business with an increase of thirty-five percent (BP Alternative Energy Online). BP wants to build strong strategic relationships in the business-to-business sector (BP 2004 Annual Report). In 2004. Less profitable areas will be sold and higher profit areas will be expanded. They plan to capture retail market share in areas where BP has a supply advantage. hydrogen. liquefied natural gas (LNG). The strong sales growth in the solar business was due to strong industry demand and becoming more customer focused. Petrochemicals Petrochemicals are chemical substances produced from petroleum in refinery operations. configuration and operational excellence can contribute to large returns. All alternative energy businesses are also included in this segment. Their final strategy goal for this sector is to build a sustainable solar business and continue to grow their renewable and alternative energy sources (BP 2004 Annual Report). More specifically. BP closed down many of their petrochemical business that did not meet strategic and financial criterion. They want to focus on automotive-related markets. The refining business has had record performance due to the strong product demand and availability of resources. 2005 was the first year the solar business has been able to achieve a positive operating profit (BP 2004 Annual Report). They do this by offering differentiated fuels at convenient locations. And they want to enhance their strengths in emerging markets. BP claims this is due to higher exceptional and non-operating charges. BP plans to divest this operating segment enough so that is will no longer be required to report it as a separate segment in the financial reports . BP production of petrochemicals mostly includes Acetyls. particularly China. They plan to focus on refining locations where scale. The following is BP¶s view on renewable and alternative energy: ³We believe that solar. To capture world-scale market positions ahead of supply. and natural gas power. wind. Power and Renewables segment has four main revenue producing business areas. Gas. BP¶s petrochemicals segment resulted in a $900 million loss in 2004 (BP 2004 Annual Report).Online).

BP currently has two wind farms in the Netherlands. wind can cost less than conventional power generators. Marketing The final value-creating activity is BP marketing and sales. which markets BP¶s commitment to sustainability and cleanliness in the biotic community. Wind is one of the most cost-completive regimes in low-carbon power. and government incentives. which is primarily comprised of its BP Service Stations. Competitors The competitors of British Petroleum are Shell. and ExxonMobil. 2004). BP has the technology for hydrogen power and is working to develop and commercialize this new clean energy (BP Alternative Energy Online). Wind power is a growing business for BP. BP has excelled in sales due to its advertising campaign. Using hydrogen power as a fuel produces virtually no greenhouse gas emissions and the main byproduct is water. over the last five years (BP Alternative Energy Online). It has done this by . BP currently has interest in a series of gas-fired power stations with enough generating capacity to power ten million homes. Vietnam. BP has been taking many steps to try and become the leader in the alternative energy market. protection against rising energy prices. Chevron. The company is marketing their solar electric systems to residential and business sectors. Hydrogen power is a new technology that creates low-carbon electricity. BP also claims that solar energy offers companies the following financial benefits: Cost savings. global business in the course of the next decade´ (BP Alternative Energy Online). revenue for solar power. a complete installed solar home power system that can be bought at selected Home Depot stores (BP Alternative Energy Online). The company markets its oil and gas through its global retail network. These plants are located in the US. In the right location. BP is also working on hydrogen power as an alternative energy source. as to appear more green-friendly. BP is advertising that their solar products are ³[F]or companies that care about environmental stewardship. Wind has the potential to provide about eleven percent of the world¶s power needs (BP Alternative Energy Online). 2005). and has entered this market in 160 countries (Newswire. Spain. BP believes that ³natural gas is the ideal lower carbon solution to help bridge between a world once wholly dependent on fossil fuels and a future where renewables and alternatives are among the primary source of energy´ (BP Alternative Energy Online). and plans to grow their position in this industry. BP has joined forces with Home Depot and is offering BP Solar Home Solutions. energy efficiencies. BP is currently one of the world¶s top solar power companies. It has grown twenty percent per year. The company has re-branded itself. Natural gas is the cleanest fossil fuel available. To reach the residential customer. highgrowth. To reach the business sector. and South Korea (BP Alternative Energy Online). reinforcing company values´ (BP Alternative Energy Online). BP is also making significant investments into natural gas plants. [and that] switching to solar power is a logical fit.technologies have reached the tipping point and that we can create a profitable. Hydrogen has the potential to generate large amounts of clean electricity using existing fossil fuels. and it produces fifty-five percent less carbon dioxide than traditional coal-fired power (Purdy. It is currently the fastest growing source of low-carbon power.

No other oil company has re-branded itself in the way in which BP has. fossil fuels pose as a significant substitute to renewable energy. players in the alternative energy industry will be dominated by consumers who are highly sensitive to price changes and substitutes in the early stage. but this bargaining power will be in the short-run.changing its name from British Petroleum to BP. Nearly all of them are investing large amounts of capital in developing alternative energy. Swot analysis Strengths BP is ranked at the world¶s 3rd largest energy company and is positioned as a multinational oil company headquartered in London that: . this should not be underestimated as the business climate and acceptability of alternative energies change. Bargain power of suppliers There are no definite suppliers in alternative and renewable industry by its definition. which asserts the company¶s commitment to sustainability. and will decrease in the long-run. Players in this industry will be in the mercy of its major supplier±nature. Favourable government policy for existing players also creates barriers for a new player in the market. However. Alternative energy industry is. Due to current high capital requirement and geographical limitation of alternative energies. Thus. but one can say with absolute certainty that fossil fuel based energy is the most sought after and cheapest source of energy right now. but they also use this market to promote positive images of themselves. inferring but not asserting that it stands for ³Beyond Petroleum´. capital intensive industry and recoverability of that cost is low at its current stage. competition in the alternative energy industry will come from whichever company successfully positions itself to provide energy from the different sources of alternative energy. Therefore. The ³Beyond Petroleum´ campaign includes BP¶s new logo. Threat of substitutes It is premature to determine which alternative energy will dominate future energy industry. a green and yellow helios. Porter five forces analysis of BP (Industry Analysis) Threat of entry The threat of new player entering into the renewable energy market is low. However. Due to geographical limitations. Bargain power of buyers Buyers of alternative energy also threaten the profitability of the energy providers. the advertised commitment to sustainability and green energy has created a competitive advantage for BP. by its nature. No one can accurately predict when fossil fuel domination will end. the continuing evolution of technology in generating alternative energy and favourable political climates will enable firms to gain control over the buying power of consumers. Firms in the energy industry not only use investment to position themselves as early starters in emerging alternative energy markets. Rivalry among existing competitors Trends show that nearly every super-major oil firm recognizes that fossil fuels will eventually be exhausted and alternative energy will become the way of the future.

wind and solar over the forthcoming decade. Increase in petrol prices in the UK.71 per barrel creates considerable tensions for running oil business. Launch of more flexible price policy to compete main rivals. Competition from Shell and Chevron Ceasing operations in a number of potential locations with their further re-branding (Conoco).000 gallons of crude oil in the Alaskan tundra in 2006.000 shortages within coming months. Extension of strategic oil and gas acquisitions in North Sea area. Closing of Alaskan oil wells. Criminal charges due to the spread of 270. The indicator amounts to $53. IPO in New York Stock Exchange. BP Travel Centre. ARCO. Burmah Castrol etc) Participates in London Stock Exchange. Opportunities 8 b. $66. BP Amoco strong brand loyalty for oil. Strong brand management driven by the µBeyond Petroleum¶ slogan. Sale of corporate-owned stations. Occasional refinery explosions. Threats Environmentally unsound policies due to oil and toxic spills. ampm.27 during the same period in 2007. y y y y y y y y y y y y y y y y y y y y y y . Weaknesses Launch of controversial business with the Baku-Tbilisi-Ceyhan pipeline. Corrosion in pipelines. Toxic spill of 2. BO Q3 net profit increase by 83% due to record oil and gas prices.y Operates petrochemical businesses worldwide through the network of its subsidiaries and retail brands(Amoco. Explosion of BP refinery in Texas that caused 100 injuries and 15 deaths in 2005.43 per share compared to $21. including hydrogen.000 gallons of methanol in the oil field (Prudhoe Bay) managed by BP. and is listed in the FTSE 100 Index. USD investment in the research of alternative fuel methods. BP Express. BP Connect. Expansion of frontier areas suitable for BP¶s future reserves (post-Soviet Union territories). natural gas. More than 5.

In addition to fully complying with all legal requirements. we will constantly strive to drive down the environmental and health impact of our operations through the responsible use of natural resources and the reduction of waste and emissions. it may be necessary to work closely with governments. BP must also work closely with governments in order to isolate energy demands so that it knows where and when to build large facilities. For this reason. Policy & Coherence (through small Corp. solar or hydrogen. Research and Development. With operations such as electricity production from hydrogen and natural gas. health and safety record. HR Vision The elements of HR Strategy that form part of this backbone are: ‡ Operational Excellence (through value -added infrastructure) ‡ Business Partnering and Support (business-differentiated HR) ‡ Governance. For this reason. One way in which BP could grow its research and development for alternative energy is to continue to merge with or acquire alternative energy companies. refineries and offices ± wherever we operate in the world. Government Relations Similar to the need to work with governments in the field of oil and gas operations. the company can also shift many resources over to alternative energy for the purpose of developing that business to its full potential. Centre) . These challenges apply to all parts of our business and to all facilities. wind or hydrogen alternative energy ± producing company for the purpose of learning from this organization. BP already has a global network of government relations managers that are employed for the sole reason of working closely with governments. This management team can easily begin to persuade green-friendly governments to create sustainable energy plants that use wind. it would be entirely possible for BP to purchase a smaller solar. we will strive to minimize any damage to the environment arising from our activities. For this extraction. especially in regions where private ownership of resources is not allowed.y Further lawsuits considering the company¶s ecological activities. it is still necessary to work closely with governments in alternative energy as well. Environment management system Wherever we operate. Learning Organization As BP is committed to research and development for the purposes of making their oil and gas operations more efficient. Working to protect the natural environment and the health and safety of the communities in which we operate is a core commitment of our company. it is still necessary to procure the hydrogen and natural gas. plants. One of BP¶s core competencies is its ability to manage corporate culture and create a learning organization. the group reports externally on our environmental. Knowledge from a company that specializes in alternative energy combined with the global power and leverage of BP could create amazing synergies that would greatly benefit the company.

and theories of both MNCs differ significantly. Hence it is concluded that the international management of both companies is entirely different from each other .Conclusion: From the above details of both companies it is quite clear that the practices. philosophies. There is always a margin for improvement and both companies are facing some environmental issues like oil spilling which they should control to save the atmosphere. Both companies are market leaders in their respective markets. Both are doing exceptionally well and are successful.

scribd. www. . 3.Bibliography 2.bp.

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