Introduction

External Positioning Audit for The Company

Porter’s 5 Forces

Threat of
new
entrants
LOW

Bargaining Bargaining
power of Industry power of
suppliers Rivalry customer
LOW HIGH

Threat of
substitute
MODERATE

Threat of new entrants

The barriers to entry in the oil and energy industry is very high, although it is an attractive

industry for new businesses due to its high yielding profits, but it has two main barriers to

entry which results in low threat of new entrants:

1) The initial start up cost of business is high which means that new businesses will

have to make a large initial investment to enter the oil and energy sector.

2) The existing firms in the market are few but large that have captured the market share.

This means that a new firm will have to compete with the brand names that have their

own customer base, and most consumers will not be willing to switch to a small

company’s offerings.
Threat of substitute

Substitutes are any product that can be consumed by the people for the same purpose.

Biofuels and other renewable energy resources are a substitute for oil, but the threat of

substitute is still moderate to BP as companies producing biofuels are still new in the market

and it will take some time for consumers to switch to biofuels or renewable resources. This is

also because the complementary products such as cars or motor vehicles should also be

manufactured in a way that they work on biofuels instead of oil or diesel. However, BP is

also aware of this threat and the company has made advanced move to produce low carbon

oil. According to the CEO in the BP Annual Report, the business opportunities that prevail

the organisation with tremendous potential in the transitional growth are bioenergy,

convenience, renewable energy, electric car charging, and hydrogen. BP’s expertise,

connections, resources, and brand provides a significant competitive edge in each of these

fields. They are all in growing industries with promising investment prospects (BP PLC,

2021).

Bargaining power of suppliers

The bargaining power of suppliers is low in the case of BP. This is mainly because of

two factors. Firstly, there are several suppliers that BP can buy oil from. Suppliers can also be

located in other countries that are willing to sell them to BP. Secondly, BP is a big name in

the oil industry and no supplier would want to lose their business with BP. In both the cases,

BP has an edge of bargaining with their suppliers thus taking away the bargaining power of

suppliers.

Bargaining power of customers

In the oil industry, the price of the oil depends on its demand in the global market.

Countries such as United States, Japan or UK can easily bargain with even big companies
such as BP. Also, in the global market, the global consumers have various options to switch

to. Thus, the bargaining power of customers is high.

Industry Rivalry

The industry rivalry in the oil industry is very high. There are just a few really large,

powerful corporations in the energy sector, and there are a lot more smaller ones. Large

businesses dominate the market for precisely this reason, and with each passing year, rivalry

among these businesses becomes more severe. The main competitors of BP are Shell,

Chevron, ExxonMobil, Total, Gulf Coast, and Petro China. Due to differences in their

products, economies of scale, and fixed and variable expenses for their businesses, the rivals

in the energy sector compete with one another in this market. These and other elements all

affect how successful these businesses may be in this sector. Now that the oil resources are

running out, businesses are battling for a fair part of the market as the globe moves toward

this future. In order to get a competitive advantage over their other large rivals, these giant

firms, like British Petroleum, have begun pushing toward mergers with smaller ones. These

businesses are competing to develop the strongest methods for developing their methods of

renewing resources when it comes to renewable resources. In the case of BP, their main

strategic progress towards biofuels that can be seen in 2021 include starting up projects for

low carbon energy by setting up wind projects in two of the best regions of the world (BP

PLC, 2021).

PESTEL Analysis

Political

BP operates in numerous countries exposing itself to the different types of political

environments and their risk making it a geopolitical business. Each country has its own

political decisions and factors such as tax laws, employment regulation laws, competition

rules, terrorism etc that BP has to comply with. In many of the locations where BP does
business, there is inherent geopolitical risk, and the company might suffer if there are

increased political or social tensions or if important partnerships shift. By building and

maintaining ties with governments, stakeholders, and acting as dependable partners in each

nation and area, the company aims to mitigate this risk (BP PLC, 2021). For instance, BP

withdrew its operations from Russia due to their ongoing conflict with Ukraine (BP PLC,

2021).

Economical

BP is affected by the global economic conditions as well as individual economic

conditions of each nation it has operations in. Economic factors such as interest rates, foreign

exchange rate, inflation rate, economic growth or recession all impact the performance of the

company. In 2021, the global economy experienced a growth of 5.9%, which represents the

fastest rate after a recession in 80 years. This economic growth supported the natural gas

demand of BP (BP PLC, 2021). As the global economy is expanding, the demand for BP oil

and natural gas will increase which means the business should be prepared to meet the

increased demand in future.

Social

Changes in social trends can impact the business. The aging population in England is

increasing which will increase the cost of pension funds for BP in England. Furthermore, the

world population is increasing which means that the demand for oil products will also

increase in the future (Read, 2011).

Technological

Technological advancements are disrupting various industries and the way they

operate. Businesses that do not upgrade technology can easily be competed out by their rivals

who can gain technological edge by producing more efficiently. BP uses large and secure IT

system to monitor their oil flow which flows through huge pipelines. Furthermore, BP should
make investments in technology to optimize the energy use in their productions considering

their environmental impact. BP introduced innovation in technology by growing digital

expertise in India and enhanced safety with automated machines in the North Sea (BP PLC,

2021).

Environmental

In the increasing awareness of climate change and environmental impact, the business

of BP can be severely affected by their actions and practices. According to Williams & Curtis

(2006), BP’s alleged unsound environmental practices can affect the confidence consumers

have on their products. Some practices that BP must consider and the environmental impact

they have are waste management of oil and gas, air and water pollution, landfill wastes.

However, to highlight their efforts, BP publishes sustainability report every year to show

their corporate social responsibility.

Legal

Legal factors affect the operations of BP. Different countries have different robustness

in implementing laws which BP must be aware of. Legal factors such as safety laws, health

related laws, minimum wage laws, employment regulation laws are few of the examples that

affect BP and its business in different countries. To avoid heavy litigation charges, BP must

stay informed of each country’s laws and regulations and ensure strict compliance. BP’s

legal staff oversees all of BP's litigation, including cases involving the effects of climate

change, and provides guidance on risk management (BP PLC, 2021).

 Internal Positioning Audit of the Company

Strengths and Weaknesses of BP

Strategic Analysis

Internal External

Strengths Weaknesses
build; enhance resolve; reduce

Strengths of BP

As BP is the leading firm in the market, it has several strengths that enable it to thrive

amongst huge competitors and maintain their market share. Following are some of the

strengths identified for BP:

 Strong brand name: Over the years, BP has established a foothold in the market

through its strong brand name by delivering quality oil and gas products to its

customers across the globe. The CEO in the annual report 2021 identified that brand

was one of the 5 growth factors that give BP a competitive advantage in the market

(BP PLC, 2021).

 Large customer base: BP has its operations across the world which means the

company not only has individual customers in each nation, but also different countries

are their customer such as the United States, United Kingdom and Japan. These

customers have developed brand loyalty towards the brand name of BP and thus serve

as a strength to the company. In 2021, BP also gained new customers by taking

ownership at Midwest US of the whole Thorntons business (BP PLC, 2021).

Furthermore, the number of customer touchpoints per day for BP account for more

than 12 million customers (BP PLC, 2021).

  Strong distribution network: Since BP operates in multiple countries, it has developed

a strong network of distributors across the world to deliver its products. The reliable

distribution network allows BP to reach its potential market across the globe.

Weaknesses of BP

Weaknesses are the areas of business that need improvement or BP can work to reduce

those weaknesses in order to build its strategic position. Following are some of the

weaknesses identified for BP:

 Ethical issues: With growing awareness about the environmental impact and global

warming, BP is subjected to numerous ethical issues mainly due to the nature of the

business. This is an unavoidable situation as oil and gas extraction and production is

damaging to the environment which are the main products of BP. However, to combat

this, BP has expanded its production into greener options such as EV charging points

etc. Furthermore, BP had a controversy where they turned blind eye towards the price

in Azerbaijan Gas Project. The internal weakness in this case is that BP executives

have been alarmingly alerted of the accusations, but they took no action (OCCRP,

2022).

 BP has faced several controversies regarding oil spills and damage to environment

that can tarnish its brand image. In 2010, the company had a major explosion at

Deepwater Horizon in Gulf of Mexico that to date continues to harm the sea wildlife

(Meiners, 2020). Such shortfalls at the end of BP can be costly to its image as well as

finances therefore the operations of the BP must be managed and supervised at each

oil rig and attempts to mitigate accidents must be taken.

VRIO Analysis

To assess the resource and capabilities of BP, a VRIO analysis is conducted below.

This strategic tool will allow to determine if the resources and capabilities of BP allow
building of competitive advantage and strategic position in the long run. Resources are

tangible assets of the company including the human, financial, physical, technological, legal

assets. Capabilities are intangible assets and include skills, knowledge, reputation of the firm,

uniqueness etc.

Impact on
Resource or
Valuable Rare Inimitable Organization Competitive
Capability
Advantage

Competitive
Land Yes No No Yes
parity

Competitive
Technology Yes No No Yes
parity

Infrastructur Competitive
Yes No No Yes
e parity

Strong global Competitive

Yes Yes Yes Yes
presence advantage

Brand Competitive
Yes Yes Yes Yes
reputation advantage

Intellectual Competitive
Yes Yes Yes Yes
property advantage
 Patents and Competitive
Yes Yes Yes Yes
copyrights advantage

Competitive
Goodwill Yes Yes Yes Yes
advantage

Customer and Temporary

supplier Yes Yes No Yes Competitive

relationships advantage

Temporary
Marketing
Yes Yes No Yes Competitive
rights
advantage

Customer Competitive
Yes Yes Yes Yes
experience advantage

Through VRIO analysis, it can be seen that BP has superior edge over its competitors

through resources and capabilities that are inimitable by the competitors. These include: the

customer experience BP provides its customers which allows it to generate more than 12

million customer touchpoints every day (BP PLC, 2021), brand reputation, and strong global

presence. The areas where BP has competitive parity, meaning neither it is industry

advantage or disadvantage, the company can budget its funds in a manner that allows it to

achieve industry-average results. However, the resources and capabilities that generate

competitive advantage for BP must be allocated larger proportion of expenditure to excel at

those areas and gain more competitive edge in the long run.
 Potential Problems and Resistance in Implementing Strategy

Stakeholder Analysis
High

Keep Satisfied Manage Closely

Employees Customers
Stakeholder Influence

Government Shareholders
Environmentalist Directors
Media

Keep Informed
Monitor
Managers
Suppliers
Trade Unions Contractors
Distributors

Low High
Stakeholder Interest

Keep Satisfied Stakeholders

These are the stakeholders of BP that have high influence but low interest. These

stakeholders must be kept satisfied while making a strategic decision. When BP plans on

implement a new strategy or alter the strategy, following resistance might arise:

1. Employees: Employee performance might deteriorate as they will have to learn new

skills or techniques to implement the new strategy. Some employees might be

resistant to change because a new strategy might mean the employees have to get laid

off who do not fit into the new strategy. Furthermore, BP will have to provide training

to its employees which might also serve as a problem in implementing. However, BP

is considerate of their employees as it mentioned in the report that in townhall and

leadership meetings, BP employees are encouraged to voice their concerns (BP PLC,

2020). This can help to mitigate the resistance in implementing new strategy.
 2. Government: Government laws and regulations may serve as a resistance to

implementing a new strategy. This risk can be minimized by gaining prior permission

and approvals from government bodies to avoid resistance while implementing.

3. Environmentalist: As the environmental concerns are growing, the environmentalist

might pose a hindrance in the new strategy implementation of BP if they believe that

the new strategy might damage the environment. However, BP PLC (2020) mentions

that BP sought the feedback of communities, Nongovernmental organizations,

scholars, industry groups, and even some of bp's major criticisms in discussions about

the business's future as well as issues relating to governance, the climate, and aspects

of society in order to benefit from their outside concerns and expert knowledge.

Attempts like these in future will also ensure that the environmentalists are satisfied

with new strategies if discussed in such feedback meetings.

Manage Closely Stakeholders

These are the stakeholders of BP that have high interest and influence therefore must be

managed closely while making strategic decisions.

1. Customers:

2. Shareholders: Shareholders play a crucial role in BP because they spend a significant

amount of investment necessary to establish and run the business. BP’s decisions

regarding new strategy and financial frame are taken after extensive dialogue from the

shareholders and receiving feedback from them (BP PLC, 2020). However, if a

strategy seems to be not of value to the shareholders, then they may hinder the

implementation of the strategy by holding back their investment.

Keep Informed Stakeholders

1. Suppliers/Contractors: Suppliers or contractors cannot directly influence the

implementation of strategy. However, they may cause problems by delaying their

 supplies or contractual payment delays. A proper communication and relationship

must be kept with suppliers to ensure that the strategy implementation is done without

resistance.

Lewin’s Change Model

Unfreeze Change Refreeze

Unfreeze

This step involves analysing what changes are required and preparing for the change.

Most individuals are often reluctant to change and prefer to remain in familiar surroundings.

Employees often become used to this constant atmosphere and feel uneasy if any change, no

matter how little, takes place. Unfreezing can be seen as a challenge by businesses (Burnes,

2020). Firstly, BP must identify the change that is required in strategy and communicate it

with upper management to ensure that the change will be supported top to bottom. Resistance

would be faced mainly in getting on board of employees to change from their quasi-stationary

equilibrium (Lewin, 1936). In unfreeze phase BP can prepare to get out of this frozen

condition, which is accomplished via motivation of employees.

Change

To successfully implement change, BP has to effectively communicate it to those who

will be involved in this process including the managers, investors, board and employees.

Communication will allow to resolve the issues and align actions of the stakeholders with the

change being implemented. The change occurs when the action force is greater than the

resistance force (Lewin, 1946). Therefore, to implement a strategic change with less

resistance, it is important to empower action. BP can achieve this by communicating the

benefits of change and incentivizing those who act towards implementing it. Although, BP

ensures that they effectively communicate change with all relevant stakeholders as mentioned

in their report. As per the report, BP shareholders are expressing their support for the change

that BP is undertaking even before that chance arises. This shows that the shareholders

believe that BP is capable of handling the risks and possibilities that the energy transition

brings. The board seems to be more deeply and broadly involved with all of bp's

stakeholders whether via drop-in discussions with bp teams, discussion with government and

shareholders (BP PLC, 2021).

Refreeze

In this stage, the changes that are required to bring about the permanence of new

situation have to be considered. For this, BP needs to anchor the changes into the culture of

company. This can be achieved by ensuring that each stakeholder contributes their part after

implementing the strategy and continues to work towards the goal. Milestones must be set by

BP to make sure that firm is moving in the right strategic change. BP must also provide

necessary support and training that is required to sustain the new strategy. Lastly, the most

important part of change is celebrating the achievements. This will encourage people

involved in the change to work more efficiently. By celebrating success of the company

overall due to the new strategy and also acknowledging and awarding those involved in

bringing the change will ensure that refreeze stage is effectively achieved.
 References

BP PLC. (2021). Annual Report and Form. Retrieved from

https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/investors/

bp-annual-report-and-form-20f-2021.pdf

BP PLC. (2020). Annual Report and Form. Retrieved from

https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/investors/

bp-ar-2020-section-172-statement.pdf.

Burnes, B. (2020). The origins of Lewin’s three-step model of change. The Journal of

Applied Behavioral Science, 56(1), 32-59.

Lewin, K. (1936). Principles of topological psychology. New York, NY: McGraw-Hill.

Lewin, K. (1946). Action research and minority problems. In G. W. Lewin (Ed.), (1948):

Resolving social conflict (pp. 201-216). New York, NY: Harper & Row.

Meiners, J. (2020). Ten years later, BP oil spill continues to harm wildlife. Retrieved from

https://www.nationalgeographic.com/animals/article/how-is-wildlife-doing-now--ten-

years-after-the-deepwater-horizon

OCCRP. (2022). BP Turned a ‘Blind Eye’ to Corruption in Prize Azerbaijan Gas Project.

Retrieved from https://www.occrp.org/en/investigations/bp-turned-a-blind-eye-to-

corruption-in-prize-azerbaijan-gas-project

Read, C. (2011). Demand for Oil in Our Future. In BP and the Macondo Spill (pp. 30-36).

Palgrave Macmillan, London.

Williams, J., & Curtis, T. (2006). Marketing management in practice, 2006-2007. Oxford:

Butterworth-Heinemann.