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1.0 Globalization

Globalization is becoming an irresistibly stream in this age. People

believe that globalization will bring tremendous for turn and benefit for

them. However, as the deepening of globalization, it has revealed a lot of

problem, especially for developing countries.

Globalization is the tendency of investment funds and businesses to move

beyond domestic and national markets to other markets around the

globe, thereby increasing the interconnectedness of different markets.

Globalization has had the effect of markedly increasing not only

international trade, but also cultural exchange. The worldwide movement

toward economic, financial, trade, and communications integration.

Globalization implies the opening of local and nationalistic perspectives

to a broader outlook of an interconnected and interdependent world with

free transfer of capital, goods, and services across national frontiers.

However, it does not include unhindered movement of labor and, as

suggested by some economists, may hurt smaller or fragile economies if

applied indiscriminately.

1.1 Features of Globalization

The main features of globalization are stated below.

1. Liberalization: The freedom of the industrialist/businessman to

establish industry, trade or commerce either in his country or

abroad; free exchange of capital, goods, service and technologies

between countries;

2. Free Trade: Free trade between countries; absence of excessive

governmental control over trade;

3. Globalization of Economic Activities: Control of economic

activities by domestic market and international market;

coordination of national economy and world economy;

4. Connectivity: Localities being connected with the world by

breaking national boundaries; forging of links between one

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society and another, and between one country and another

through international transmission of knowledge, literature,

technology, culture and information.

5. Borderless Globe: Breaking of national barriers and creation of

inter- connectedness; the ideal of 'borderless globe' articulated

by Kenichi Ohmae.

6. A Composite Process: Integration of nation-states across the

world by common economic, commercial, political, cultural and

technological ties; creation of a new world order with no national

boundaries;

7. A Multi-dimensional Process: Economically, it means opening

up of national market, free trade and commerce among nations,

and integration of national economies with the world economy.

Politically, it means limited powers and functions of state, more

rights and freedoms granted to the individual and empowerment

of private sector; culturally, it means exchange of cultural values

between societies and between nations; and ideologically, it

means the spread of liberalism and capitalism.

8. A Top-Down process: Globalization originates from developed

countries and the MNCs (multinational corporations) based in

them. Technologies, capital, products and services come from

them to developing countries. It is for developing countries to

accept these things, adapt themselves to them and to be

influenced by them.

9. Global State vs. Global Civil Society: In protest against the

harmful effects of globalization on the vast multitude of people

all over the world, particularly in developing countries, protest

marches, demonstrations and meetings have been organized in

different countries. These protests have taken militant forms in

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the last decade. Protest groups have tried to disturb and

paralyze the meetings of WTO, World Bank and IMF.

1.2 Advantages of Globalization:

Integrations of markets: Markets are interlinked- European Union

Cheaper Products for Consumer: Trainers are Cheap

Leads to Outsourcing in some cases which can lead to job losses:

Moving call centers to India.

Lowering of international Barriers: Now European Union can Trade

with ASEAN and NAFTA.

Providing jobs in LEDC's and help develop economy (less

Economically Developed Countries)

Helps prevent market Saturation in a specific market: stops there

being too much competitors in one place e.g too much call centers

in UK, so move to India

Standardizations of product: the same products can be seen in

some many places - e.g coke and McDonalds

1.3 Disadvantages of Globalization

Intense Competition

Widening of Gap between rich and poor countries

Harder for Smaller businesses to establish themselves

Exploitation of workers: Paying the workers in LEDC's a fraction of

what would be paid in to workers in LEDCs.

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2.0 BP

BP is one of the world's leading international oil and gas companies.

Through our work we provide customers with fuel for transportation,

energy for heat and light, lubricants to keep engines moving, and the

petrochemicals products used to make everyday items as diverse as

paints, clothes and packaging.

2.1 Brief History, Mission and Vision

1909: Anglo-Persian Oil Company formed.

1914: Deal with UK government to help Royal Navy switch coal to

fuel.

1912-1918: Increase in oil production in Iran.

1917: Acquires BP co. from the marketing subsidiary of the

European Petroleum Union.

1935: Company renamed Anglo-Iranian Oil Co.

1951: Iranian oil industry was formally nationalized.

1960-1970: Major oil discoveries in Alaska & North Sea.

1969: Signed agreement with Standard Oil Co. of Ohio which aided

BP’s transportation of the fuel in the biggest oil field in the U.S.

1982: Adopted present corporate name “BP”.

1987: BP acquired Standard outright and merged with BP’s other

interests in the United States to form BP America.

Mission Statement:

Long term commitment to prosper as an integrated, international

company with strong technology base and a focused marketing

effort.

Vision Statement:

“To improve our performance and have a steady disciplined

growth.”

Strategic Culture:

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BP’s culture rest heavily on their employees. They are the key to

BP’s future growth.

Technology is key to both up and downstream operations.

HSE- raises health standards, no damage to environment or people.

Better relationships with countries where operations already exist.

2.2 Organization Structure

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2.3 BP’s Facts and figures

(as at, or for the year ended, 31 December 2012, updated for IFRS 11

and IAS19 where relevant)

Countries of operation :Over 80

Number of employees :85,900

Sales and other operating revenues :$375,765 million

Cash flow :$20.5 billion

Replacement cost profit :$11.4 billion

Proved reserves :17,000 million barrels of oil equivalent

Retail sites :20,700

Refineries (wholly or partly owned) :15

Refining throughputs :2,354 thousand barrels per day

2.4 BP’s Four Core Values

BP specifies four core values to express the way the organization does

business and help translate the mission into practical action:

Progressive: BP is always looking for new and better ways to

conduct business. It has developed a relationship with Ford to

build hydrogen vehicles and fueling stations in California,

Michigan, and elsewhere. BP also has reformulated its BP

Amoco Ultimate fuel to reduce air pollutants.

Innovative: Through the creative approaches of employees, and

the development and application of cutting-edge drilling

technology, BP seeks breakthrough solutions for its customers.

Green: BP is committed to environmental leadership—the

proactive and responsible treatment of the planet’s natural

resources and developing lower carbon emission energy

CEO

CFO COB

BP Exp/Prod

N & S America

Africa

S.E. Asia

HSE

BP Mark/Refining

Europe

USA

Australia

Chief Exec. Oil

BP Chemical

Asia

Europe

S. America

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sources. As a result, BP now stores its gasoline in double-

skinned tanks to prevent spills and leaks.

Performance-driven: BP sets the global standards of

performance on financial and environmental dimensions, as well

as safety, growth, and customer and employee satisfaction.

2.5 List of Products and Services

Each of BP’s brands has its own heritage and personality, but they all

have one thing in common - they all symbolize, embody or provide

tremendous energy.

BP

BP is our main global brand. It is the

name that appears on production

platforms, refineries, ships and

corporate offices as well as on wind

farms, research facilities and at retail

service stations. 

Since ‘BP’ petrol first went on sale in

Britain in the 1920s, the brand has grown to become recognized

worldwide for quality gasoline, transport fuels, chemicals and alternative

sources of energy such as wind and bio fuels. We are committed to

making a real difference in providing better energy that is needed today

and in the changing world of tomorrow.

BP is committed to safety, respect, excellence, courage and One Team.

They make us the company we are. Everything we do has to live up to

these values Our logo - the Helios - symbolizes these values. Named after

the Greek sun god, the Helios represents energy in its many forms. Of all

the forms of energy that make up BP and its services, perhaps the most

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vital is the human energy our people bring to everything we do. This is

what fuels our brand. 

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Aral

The blue Aral diamond is a trusted and

familiar symbol on the German roadside. Aral

is one of the most trusted brands in Germany.

It has been associated with quality

automotive fuels since the 1920s. Today

people also associate Aral with good food and

excellent service on the go.

Every day more than 2.5 million customers

visit an Aral station to fill up on petrol, use an on-site car wash or

purchase a beverage or snack. In fact, some 40% of Aral customers stop

by just to shop in the sleekly designed retail spaces, which stock a range

of convenience items and Aral branded motor oils, along with coffee and

food. 

So in addition to being Germany’s leading fuel brand marketer Aral is

also the country’s third largest fast food retailer, after McDonald’s and

Burger King. 

“Alles Super” is the Aral slogan. “Everything’s super.” So in Petit Bistros,

Aral’s onsite cafés, you’ll find Crossinos, which are made with select

ingredients to be super tasty. 

It may be no coincidence then that Aral is a Super brand, one of 73

brands in Germany to be awarded this designation by an independent

organization. Or that for several years in a row Reader’s Digest readers

have named Aral Germany’s most trusted brand in fuel.

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Castrol:

Castrol is widely seen as the world’s truly

global lubricants specialist

You have probably heard of Castrol, the

lubricants brand BP acquired in 2002.

Castrol’s motor oils for automobiles and

motorbikes are particularly well known.

But did you know that Castrol also makes

lubricants for every conceivable application on Land Sea and in the air.

Castrol’s founder, C.C. Wakefield, believed in working with

manufacturers and other businesses to develop lubricants to meet their

specific needs, especially where new lubricants could ease the way for

advances in engine or industrial design. Castrol continues to work

collaboratively like this today as the preferred lubricants partner to VW,

Audi, BMW, Komatsu and others.

Castrol’s brand is about passion, excitement and performance. For many,

that means speed. Castrol has been actively engaged with motorsport

teams and Castrol-sponsored drivers have broken the land speed record

more than 20 times. Such relationships have been a proving ground for

Castrol's products and central to building Castrol’s reputation as the

world's most advanced engine oils and fluids.

Today you will find a wide range of technologically advanced Castrol

lubricants for your vehicles at a local BP station or automotive supply

shop. Castrol products are sold in more than 150 countries.

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ampm

Back in 1978, the thought of fueling-up

more than your car at a service station

was unheard of. But the folks at ampm

always saw things differently.

The very first ampm store opened its

doors in Southern California, as a value-

add-on to select gas stations. From

packaged beverages, grab-n-go

sandwiches, treats or fountain drinks - the recipe at ampm has always

been simple: provide a great value and variety to conquer the snack and

thirst cravings of our customers.

Thirty-plus years later, ampm has grown to approximately 950 covering

California, Oregon, Washington, Nevada and Arizona as part of select BP

fueling stations.

Wild Bean Cafe

Good food and quality coffee can

be hard to come by on the road,

but Wild Bean Cafe is an exception

to the rule. Tucked into many BP

Connect stations, these on-the-go

cafés offer inventive sandwiches,

fresh baked goods and delicious,

fresh-ground coffee. 

Conceived as a brand that would take convenience food to a new level,

Wild Bean offers the speed and affordability of more typical service

station shops plus one more thing. Everything’s made with quality

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ingredients and served fresh. You can enjoy your food, coffee or

cappuccino in the coffee shop space or take it with you to enjoy on the

move. 

Wild Bean Cafe operates in several continents around the world. You’ll

find it in parts of Europe, Australia and South Africa. We also have a

presence in China and Russia, and new branches are opening all the

time. 

3.0 BP’s 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:

Operates petrochemical businesses worldwide through the

network of its subsidiaries and retail brands(Amoco; ARCO; BP

Express, BP Connect; BP Travel Centre; ampm; Burmah Castrol

etc)

Participates in London Stock Exchange, IPO in New York Stock

Exchange. and is listed in the FTSE 100 Index;

BP Amoco strong brand loyalty for oil;

Strong brand management driven by the ‘Beyond Petroleum’

slogan.  

BO Q3 net profit increase by 83% due to record oil and gas

prices. The indicator amounts to $53.43 per share compared to

$21.27 during the same period in 2007.

Weaknesses:

Launch of controversial business with the Baku-Tbilisi-Ceyhan

pipeline;

Increase in petrol prices in the UK;

Explosion of BP refinery in Texas that caused 100 injuries and

15 deaths in 2005;

Criminal charges due to the spread of 270.000 gallons of crude

oil in the Alaskan tundra in 2006;

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Toxic spill of 2,000 gallons of methanol in the oil field

(Prudhoe Bay) managed by BP.

Closing of Alaskan oil wells.

Opportunities:

8 b. USD investment in the research of alternative fuel methods,

including hydrogen, natural gas, wind and solar over the

forthcoming decade;

Expansion of frontier areas suitable for BP’s future reserves

(post-Soviet Union territories);

Extension of strategic oil and gas acquisitions in North Sea area;

Launch of more flexible price policy to compete main rivals;

 Threats:

Environmentally unsound policies due to oil and toxic spills;

Occasional refinery explosions;

Corrosion in pipelines;

Competition from Shell and Chevron

Ceasing operations in a number of potential locations  with their

further re-branding (Conoco);

Sale of corporate-owned stations;

More than 5.000 shortages within coming months;

$66,71 per barrel creates considerable tensions for running oil

business;

Further lawsuits considering the company’s ecological activities;

SWOT analysis At a Glance:

Strengths

Human Resources

Technology

“Mutual Advantage”

Upgrading Refineries

Infrastructure/Leadership

Fuels in Europe

Opportunities

Technological Advances

Emerging Markets (Asia/Pacific)

Oil remains main source of

energy

Formation of European Union

Introduction of “euro”

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Improving Operational

Efficiencies

Weaknesses

Recovering from large debt

Weak market outside of Europe

Less upstream investment to

replace production in long run

Dependent on small no of gas

fields

Producing more than it needs for

its operations

Threats

Environmental Regulations

Substitute Products

Power of OPEC

Overcapacity in mature markets

Supermarkets gaining market

share

European Economic woes

Commoditization – no brand

equity in Europe

Tight oligopoly, mature market,

cutthroat competition

4.0 PESTEL Analysis

Political

Wоrld enеrgy markets arе bеcomіng mоrе volаtile due tо thе

thrеаt оf geopolіtical іnstabilіty.

Grеаtеr climate de-stabilizаtiоns frоm CO2 emіssiоns arе

leadіng govеrnments tо encourage mоrе sustaіnable fоrms оf

enеrgy.

Wоrld enеrgy markets arе bеcomіng mоrе volаtile due tо thе

grоwіng oil rеquirеments оf а buoyаnt Chіnese ecоnоmy,

crеаtіng tensiоn bеtween nаtiоns.

Economic

Ecоnоmy іs undеrpіnned bу іts enеrgy supply.

Enеrgy markets will see demаnd іncrеаsіng bу almost 60

pеrcent, wіth fоssil fuels meetіng most оf thіs, аnd nuclear аnd

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rеnewable enеrgy markets havіng limіted rеlаtive

cоntributiоn.

Altеrnаtive enеrgy sоurces аs а pеrcentage оf tоtal enеrgy

supply arе іncrеаsіng аnd arе expected tо cоntіnue tо do sо,

triplіng frоm 2 pеr cent іn 2002 tоwards 6 pеr cent іn 2030.

(Brоadhurst, А. 2002, p87)

Social

Kyotо Agrеement, signed іn 1992, hаs led tо carbоn funds аnd

emіssiоn tradіng іn Eurоpe аnd around the world, which іs

bеcomіng а legal rеquirеment.

People’s wоrldview іs startіng tо chаnge tо а cоncеrn ovеr thе

sustaіnabilіty оf thе futurе, although thіs іs nоt expected tо

chаnge dramatically to justify widespread changes to energy use

for some time.

Technology

The Іntеrnаtiоnal Energy Agency states that alternative energy

markets will be underpinned by technological breakthroughs.

Research shows technology is the key to competitiveness in the

alternative energy industry; whilst alternative energy

technologies (AETs) are underpinned by 48 critical success

factors across technological, commercial, sоcio-polіtical and

оrgаnizаtiоnal categories.

Environmental and Legal

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The Kyoto Agreement, signed in 1992, has led to carbon funds

and emission trading in Europe and around the world, which is

become a legal requirement.

New laws from government.

Higher EU pollution standards.

International Environment Organizations.

More attention has been drawn towards the concern about

sustainability of the future, other forms of alternative energy

such as solar and wind energy.

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5.0 BP’s Global Exploration Zone

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6.0 Political Economy & International Business

In response to the mentioned political influences, BP's strategy has been

changed the following way. Generally, it is possible to observe two main

tendencies. First, BP attempts to hedge political risks in the oil producing

countries by means of partnership and deals with the governments. For

instance, BP signed a contract with the Russian state-run oil company

Rosneft in 2009 (Hernandez, 2011:1). Second, the company evacuated its

personnel from northern Africa because of growing political instability in

Tunisia, Egypt and Libya. Simultaneously, BP develops its cooperation

with emerging economies in Asia, which are more politically stable,

namely India (Hernandez, 2011:1). These changes were necessary in

order to avoid political risks in the countries, which prove to be the

leading producers of oil.

It is reported that the company started producing solar panels after the

acquisitions of Lucas Energy Systems (1980) and Amoco (1998). At the

present moment, the company proves to be the largest manufacturer of

solar panels in the world. BP has launched two main types of solar

energy products, namely products for individual consumers and products

for organizations. For instance, the firm is planning to run a new solar

energy project aimed at energy supply for Wal-Mart stores (BP, 2011:1).

Furthermore, it is reported that BP invested more than $6 billion in wind

and bio-fuel energy projects during the period from 2005 to 2010 (BP,

2010:61). These changes were necessary because the PB attempted to

attract customers by cheaper and 'green' energy.

Economic Opportunity:

Oil prices increased this year.

Benefit integrated oil companies overall.

Specifically help Exploration & Production companies.

Hurt Refining & Marketing companies.

Some signs of modest economic upturn in European Union:

GDP increased 0.5% in 1st Qtr. 1996.

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Exports have grown larger than imports over the last five

years.

European International Conference held this year; two main

concerns:

Expansion of EU to the east and south.

Review of the Maastricht Treaty.

Economic Threats:

Continued slow growth throughout EU

Growth rate down from 4% to 2.5% per year over last two

decades

GDP of 15 EU states down to 6.91 billion

GDP/PPS (purchasing power standards) per head is only

18,446

Consistently high unemployment

Average of 15 EU states is 10.8%

Average of 11 “euro-zone” states is 11.5%

Country-specific inflation problems across Europe.

Productivity growth is steadily declining.

Difficulty financing new projects.

Global Opportunity:

North American SUV’s becoming more popular.

Once restructuring and deregulation happen in Japan greater

competition will occur stimulating more consumption

Relaxation of control over markets in China and Asia will boost

demand for oil.

Global Threats:

North American economy becoming more efficient, moving from

manufacturing to services.

Russian economy in shambles, many people jobless, energy

consumption falling (energy inefficient).

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Africa’s & Mid East political turmoil blocking economic growth.

Both resource rich.

Potential threat of conflicts with oil-rich countries.

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7.0 International Business Strategy of BP

In analyzing the business strategy being adopted by BP, the use of

porter’s generic strategies can be used to analyze Bp. BP over the years

has been trying to differentiate itself amongst various competitors in a

way that makes them appeal to customers compared to their other

competitors, and this differentiation approach is achieved via quality,

innovations and responsiveness to customers.

BP has different brands such as BP, Ampm, Arco, Castrol, Aral and Wild

bean cafe (www.bp.com), and also diversification into development and

production of alternative sources of energy which differentiate the

company, makes Bp flexible and also able to respond to the demands of

the market.

Differentiation strategy involves Identifying possibilities based on

competences by adding benefits, new features (product innovation) etc.

BP has used it various brands and involvement in many segments and

other capabilities of the company to develop the differentiated strategy.

Factor input in the BP plc is innovative and involves technological

creativity in nature, the processes involved in the company is flexible and

of quality which gives rise to products differentiations and uniqueness in

their productivity i.e. output to final consumers both individual and

industrial consumers. The competitive scope is of broad target because

Bp does not only produce fuel for the marine, aviation and automotive

industry, they also have plans for alternative energy source by engaging

in the development of the alternative sources of energy and by so doing

this makes by to stand out in the industry.

Bp has been identified as an organization that adopts differentiation

strategy over the years due to the proper utilization of the company’s

competences or capabilities in terms of having brands and also technical

creativity or innovation in terms of the development and production of

alternative energy source such as bio-fuels, wind and solar energy.

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7.1 Global Competitive Environment of BP

In analyzing the competitive environment of the BP, as earlier stated, a

very useful tool to consider is the five forces model of competition which

was developed by Professor Michael Porter of the Harvard Business

School in 1980, this model shows the organization’s competitiveness in

the industry and also how attractive the industry in question is. The five

forces identified by porter include:

Threat of entrants – from organizations currently outside the ‘industry’

Power of suppliers i.e. providers of inputs or materials for production

Power of buyers i.e. recipients of products/services

Threat of substitutes i.e. things customers might buy instead

Competitors/rivalry – competition within the ‘industry’

THREAT OF NEW ENTRANCE: The threat of entrance into the oil and

gas industry is Low due to the fact that there is high barrier of entrance

into the industry. Investment requirements; Some of the companies that

constitutes the oil and gas industry like BP uses heavy and very

expensive equipments at well sites For example, pumping trucks and

other huge equipments, huge capital investment expenses is involved,

such as High infrastructure cost i.e. pipeline, road access in fields, land

acquisition and wells for drilling in which Bp alone has 274 worldwide

(company monitor) the cost of Bp’s assets is $236.0 billion ( balance

sheet of Bp plc from www.wolframalpha.com). Economics of scale of the

industry is also a factor to be considered and also the availability of

human resources in terms of scarcity of subsurface reservoir engineer

and geologist all this contribute to the high barrier of entrance into the

industry.

POWER OF THE SUPPLIER: The bargaining power of suppliers is

Medium and this is because there is the suppliers according to oil and

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gas statistics (www.oilandgassuppliers.com) show that there are quite

a number of suppliers and also the buyers as well such as Bp and some

other companies that constitute the industry are quite a number as well

Although in the case of Bp it is vertical integrated in operation just like

some of the other major players in the industry and this means that they

can afford to provide some of their supplies due to their operation and at

the same time the industry is mainly the key customers to most of the

suppliers Considering all this, the power of the suppliers is Medium.

POWER OF BUYERS: The balance of power shifts toward buyers. Oil is a

commodity and one company's oil is not that much different from another

company’s and this leads buyers to go in favor of lower prices and or

better contract terms. The power of the buyer will be regarded has being

Medium because buyers are many and can switch from the consumption

of Bp products to another oil and gas company’s product and at the same

time an individual buyer’s decision does not necessarily have an impact

on the company and the industry is the key supplying group to the many

buyers.

THREAT OF SUBSTITUTES: Threat of substitutes is Low and

the Substitutes for the oil and gas industry includes alternative fuels such

as coal, gas, solar power, wind power, hydroelectricity and nuclear

energy which is still in the developing phase as in the case of Bp

(Bp.com) and also involves high cost of production. Oil is of great

importance; it is not only used in fuelling cars alone, it is also used to

produce plastics and other materials, majority of the means of

transportation still relies heavily on oil and Oil is needed in order to

generate electricity and the usage of the alternative sources of energy is

not that much as regards the use of oil which implies that oil and gas

would be depended on rather than the alternative due to its level of

development and high cost of production.

COMPETITIVE RIVALRY:  The level of competitive rivalry is high; the

industry is characterized by big companies which produce low

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differentiated products and there is low threat of substitute and also

low threat of new entrance into the oil and gas industry.

Another tool that can also be used in the analysis of the competitive

environment of the BP is the strategy group framework by Porter,

According to porter, a strategic group is defined as a set of companies

within an industry pursuing strategies that are similar to each other and

different from firms outside the group on one or more key dimensions of

their strategy.

In terms of the oil and gas industry which BP belongs to, the level of

competition is very high because major players in the industry such as

Royal Dutch shell, Bp, Exxon Mobil, Total, chevron, and Conoco Phillips

all adopt similar strategy and competing on similar bases which is

adaptation of a vertical integration to an extent (integrated oil and gas

companies wolframalpha.com) and they also produces similar range of

products to an extent which brings about differentiation. Royal Dutch

shell, Bp, Exxon Mobil, Total, chevron, and Conoco Phillips all have a

wider geographical coverage. Although there are other companies too in

this industry as well adopting separate strategy such specialization in

drilling oil but there is high mobility barrier in the strategic groups such

as movement of being national boundaries to a multinational boundaries

and also trying to get a wider geographical coverage and this can be a

barrier for this other strategic groups to move from one strategic group

to another.

Using both frameworks, porter’s five forces and porter’s strategic

groups, we can observe that the industry’s major players are the giant

companies in the industry, and the level of rivalry is high and the

industry is somewhat attractive to an extent although the powers of both

the suppliers and buyers is medium but the threat of new entrance and

substitute is low which means that profitability is not reduced by

substitute and the industry is attractive.

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7.2 BP’s Global Operating Management System

7.3 BP’s Strategic Priorities

Our aim is to be an oil and gas company that grows over the long term.

We will seek to continually enhance safety and risk management, earn

and keep people’s trust, and create value for shareholders. We will

continue to simplify our organization and fine tune the portfolio. We will

focus on efficient execution in our operations and our use of capital. We

will build capability through the pursuit of greater standardization and

increased functional expertise.

7.4 BP’s Financial Framework

We expect our organic capital expenditure to be in the range of $24-27

billion per year through to the end of the decade, with investment

prioritized towards the Upstream segment. All investments will continue

to be subject to a rigorous capital allocation review process.

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We expect to make around $2-3 billion of divestments per year in order

to constantly optimize our portfolio. We will target gearing in the 10-20%

range while uncertainties remain. Our intention is to increase

shareholder distributions in line with BP’s improving circumstances.

7.5 BP’s 10-Point Plan

In 2011 BP put forward a 10-point plan that outlined what could be

expected from BP over the next three years. During 2012 we worked

towards the milestones we had set out for 2014. We refined our plans

and communicated further information on our longer-term strategic

objectives beyond 2014.

Through this work and the actions taken to strengthen the group, BP

enters 2013 a more focused oil and gas company with promising

opportunities and a clear plan for the future. BP’s strengthened position;

distinctive capabilities, strong financial framework and vision for the

future provide the foundation for our long-term strategy. This strategy is

intended to ensure BP is well positioned for the world we see ahead.

What you can expect:

1. A relentless focus on safety and managing risk through the

systematic application of global standards.

2. We will play to our strengths in exploration, deep water, giant

fields and gas value chains.

3. Stronger and more focused with an asset base that is high graded

and higher performing.

4. Simpler and more standardized with fewer assets and operations in

fewer countries; more streamlined internal reward and

performance management processes.

5. Improved transparency through reporting TNK-BP as a separate

segment and breaking out the numbers for the three downstream

businesses.

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What you can measure

6. Active portfolio management to continue by completing $38 billion

of disposals over the four years to the end of 2013, in order to focus

on our strengths.

7. We expect to bring new upstream projects on-stream with unit

operating cash margins around double the 2011 average by 2014.

8. We are aiming to generate an increase of around 50% in net cash

provided by operating activities by 2014 compared with 2011.

9. We intend to use half our incremental operating cash for

reinvestment, half for other purposes.

10. Strong balance sheet with intention to target our level of

gearing in the lower half of the 10-20% range over time.

Longer-term Objectives

Maintain momentum on safety and risk reduction. 

Develop and apply new technologies that access new hydrocarbons

or extract and process them more efficiently

Upstream

Generate strong returns within a disciplined financial framework.

Deliver growth through increased reinvestment in higher return

opportunities.

Maintain our strong incumbent positions and a diversified portfolio

of deep water, giant fields and gas value chains.

Build material new positions for the long term

Downstream

Grow free cash flow

Reduce our exposure to refining when not part of an integrated

value chain. 

Re-orientate the geographic mix of our downstream footprint to

growth markets.

28

29

8.0 Entry Strategy and Strategic Alliance

Among from several entry modes, BP chooses licensing to expand its foreign

operation. Their strategies for licensing are:

Proprietary technology: BP is the first company to identify the need to invest into

development of new ways to produce energy; it has invested 8 billion dollars to

develop and posses the new technologies in production.

Access to raw materials and other inputs: Though the tendency of this

particular barrier might not seem appropriate to BP’s production as they are

freely and abundantly available in nature however BP still can gain competitive

advantage by reserving the copy rights of the technology that is being/will be used

to convert the alternative resources into energy. Thus generating revenue

Risk: Traditionally established companies are often not the first to be in the new

emerging industry due to technological advancement even having the ability and

obvious strengths, but climb the band wagon latter, and tries to establish

by placing high higher opportunity cost, in this case BP has some relatively

obvious strengths like knowledge of the customers and brand strength, so it

is advisable that BP continue to press by investing into research

of alternative fuels

Strategic Alliance:

In a move characterized as the "largest ever industrial merger," BP Co.

plc and Amoco Corp. have agreed to unite their businesses on a global

and comprehensive basis.

The combined firm, to be based in London, will be the U.K.'s biggest

company. BP will hold a 60% equity interest, and Amoco 40%.

Called BP Amoco plc, the firm will be "one of the most comprehensive

and competitive energy and petrochemical enterprises in the world,"

according to Amoco. The merger shoots BP and Amoco into the ranks of

30

the top three energy majors, along with Royal Dutch/Shell and Exxon

Corp.

9.0 Value Chain Analysis

Value Chain Analysis explains the activities that goes on in business

organization and relates them into an analysis of the competitive

strength of the business it considers. According to Michael Porter

business activities could be grouped into Primary Activities which are

activities that are directly concerned with creating and delivering

products and also Support Activities which are activities not directly

involved in production, but they are activities that increase effectiveness

or efficiency. It is rare for a business to undertake all primary and

support activities.

Value Chain Analysis is a way of identifying which activities are best

undertaken by a business and which are best provided by others. Linking

Value Chain Analysis to Competitive Advantage it points out what

activities of the business directly linked to achieving competitive

advantage amongst various competitors.

31

Fig: Petroleum Value chain Model

9.1 Primary Activities

Inbound Logistics includes warehousing, materials handling,

inventory control, etc.

32

Operations are the activities that transform inputs into finished

products (e.g. machining, testing, packaging, equipment

maintenance, etc.).

Outbound Logistics includes the activities that store and distribute

products to buyers (e.g. warehousing, delivery vehicle operations,

order processing, etc.).

Marketing and Sales are the activities that provide the means for

the buyer to purchase (e.g. advertising, sales force operations,

selection and management of distribution channels, etc.).

Service includes activities which enhance or maintain the value

such as installation, repair, parts supply, etc.).

BP’s primary activities include research and development in terms of

technological innovations, production creation of fuels and other

products, marketing and sales in terms of distribution via service stations

and lastly services to the customers and the supportive activities include

the company infrastructure like buildings and equipments, information

system, human resources (skill employers) and finance in terms of cash.

9.2 Support Activities

Procurement specifically refers to the function of purchasing not to the

purchased inputs themselves. While raw materials procurement is

usually concentrated in a purchasing department, other purchasing is

often dispersed throughout a firm (temporary office staff, hotel and travel

expenses, office equipment and even strategic consulting).

Technology Development as Porter defines it is wider than R&D. It

includes engineering and process development and, while usually

associated with an engineering or development function, is also

dispersed (office automation, telecommunications, etc.).

33

Human Resource Management includes the recruitment, hiring,

training, development and compensation of all personnel. Partly

centralized but increasingly dispersed Porter points out that the skills

and motivation of employees and the costs involved may be critical to

competitive advantage.

Firm Infrastructure broadly encompasses general management activities,

as well as finance, accounting, legal, corporate affairs and quality

management. Often viewed as an overhead, these can be a considerable

source of advantage (e.g. skillful negotiations with regulatory bodies).

An organization can outperform its various competitors

through differentiating itself by trying to produce products with higher

quality and will also have to perform its value chain activities better than

the opposition. BP has the potential of adding value via marketing and

sale of its products which is the way the company handles it marketing

and sales of products to the diverse consumers or market through the

company’s various brands where it markets diversified alternative energy

sources as well as oil and gas.

The good marketing and sales or distribution flow of BP, outstanding

performances in relations to its competitors, various brands and also

diversification into alternative energy sources are all competence of the

company which the company has used through it marketing and sales

activities in adding value.

34

Fig: Value Chain of BP

10.0 BP’s Global Marketing

Multinational corporations operating in complex and diverse political,

economic, social and cultural environments have to improve, adjust and

develop their marketing strategies on a regular basis. Changing

environmental factors create new conditions for their operating, which

often require considerable and serious changes in strategic decision-

making and positioning of companies. Inflexible and rigid firms will cease

to be competitive in the market every time changes occur. The aim of the

present report is to identify the past and present changes in marketing

strategy of BP, which have occurred under the pressure of environmental

factors.

10.1 BP’s 4P

BP has some unique characteristics that influence how we follow the 4Ps

of marketing – product, price, place and promotion.

35

1. Product: Fuel is a commodity product offered by all the oil

companies in all over the world. It is difficult to offer customers a

point of difference with fuels. However, BP does so by selling petrol

and diesel that is better for the environment. BP is the only oil

company in world to sell superior fuels that are kinder to the

environment. BP’s Products Line is:

Fuels & stations

Motor Oils& Lubricants

Convenience Shop

2. Price: With common products in the oil industry, prices between

competitors are easily matched, which means it’s difficult to

differentiate our product based on price. If BP’s competitors undercut

us on price, BP see significant losses in volumes sold. A one cent per

liter price reduction requires retailers to achieve a 25% increase in

volume to break even on site. Pricing Strategy is:

Competition Based

Profit Oriented for Extremely Inelastic demand

Invigorate

3. Place: BP’s network of service stations is a vital strength in marketing

strategy – we have some of the best locations for the service they

provide. And research shows customers mainly choose fuel retailers

based on their location. They have a significant investment in ensuring

right number and quality of locations for our customers. Strategy is:

Direct and Indirect Marketing

Worldwide Retail Network

Distribution Channel

4. Promotion: Research shows that customers respond well to our

promotion campaigns, such as the AA Rewards programme. Our

loyalty programmes are a valuable point of differentiation; we use

36

them to drive sales volumes and counter our competitors’ activity.

BP’s main promotional focus is on:

Commercials

Out of Home advertizing

Pumps reward program

CSR Activity

10.2 Market Segments

This consists of a group of customers who share a common need or want.

The task was to identity the different segments in the target market in

order to target them. With segment marketing, the company offers a

better design, price, delivers the product better and is able to fine-tune

the marketing program. The segment marketing was divided into

geographic segmentation and demographic segmentation.

Geographic segmentation

Population Density

Territory

Weather

Demographics segmentation

Income

Occupation

Age

Behavioral and Psychographic Segmentation

Green Revolution and environment consciousness

Luxury of Travel

10.3 Market Promotion

BP’s strategy was a promotional campaign to transform BP’s retail brand

image at its locations in the United States. Buying gasoline is a low

37

involvement purchase and consumers have low expectations regarding

their purchase experiences. Armed with that consumer insight, BP

created and executed the $45 million Helios Power advertising and

brand-building campaign, which is an extension of BP’s “Beyond

Petroleum” corporate campaign that began in the early 2000s. The

Helios Power campaign consisted of the following marketing tactics:

“A little better” tagline. BP customers can expect to receive “a little

better” experience at its service stations and other retail outlets

compared to those of its competitors. Hand elaborates, “In this

market, a little better means a lot. People see refueling as a

necessary and unpleasant chore. However, BP can be cleaner and

friendlier, and that’s why people will choose us rather than our

competitors.” And this choice will be made on an emotional basis

because customers “like what we stand for.”

Animated TV ads. These feature a family of characters (the

Lighthouse family, the Babies, and the Beeps) and a catchy tune

designed to reinforce the emotional appeal of the BP brand. The TV

ads aired during some of the top U.S. TV shows (American Idol,

Ugly Betty) and also had exposure on YouTube. The purposes of the

ads were to generate awareness of and an emotional connection to

the BP brand and its offerings.

In-store give-aways. At the launch in April 2007, environmentally

friendly paper bags, T-shirts with a fun new look from the

campaign, kid’s activity books and trading cards featuring the

campaign characters, and sunflower seed packets were handed out

to customers throughout the entire network of BP stations.

Unique Web site. The www.alittlebettergasstation.com Web site

features the “Gas Mania” interactive game, selected animations,

ringtones, screensavers, a sweepstakes, and the TV ads.

38

Street teams. BP and Ford teamed up to promote the use of BP’s

Ultimate gasoline in Ford’s new Edge automobile. Videos featuring

groups of college-aged students were created to showcase the BP

brand in Florida and the ARCO brand in California.

10.4 Branding

Branding is all about creating alignment of company’s business processes

with its corporate culture. BP (BP) provides a case in point of a brand

that got way out front of its business process and culture to produce

tremendous exposure to risk. Back in 2000, BP announced a major

change in posture from "BP" to "Beyond Petroleum" and spent hundreds

of millions of dollars promoting their new position. Only BP is the only

global energy company moving to new sources of energy that includes

solar power.

BP Three Branding Themes:

BP Progressive and Profitable – (appeals to Investors Archetype)

Moving to new and profitable sources of energy for the future.

BP Business Alternative Energy Sources – (appeals to Business

Archetype) Developing more efficient and alternative forms of

energy to move you ahead.

BP Beyond Petroleum – (appeals to Public Perception Archetype)

Investing for a Greener future

BP Brand attributes supporting being only:

BP Green – BP is the only energy company investing in and

pursuing alternative energy sources; namely solar power

BP Progressive – BP is striving to find more efficient ways to

produce energy with proven leadership in solar power

39

BP Quality – BP focuses on safety and operational excellence

BP’s Brand Archetypes:

BP Investors Archetype: Investors are looking for profitable

companies with less investment risk. BP is the only company vs. its

direct competition coming up with unique and profitable alternative

energy sources.

BP Business Archetype: BP helps businesses be more energy

efficient and green through partnering. BP provides multiple

energy alternatives.

BP Public Perception Archetype: The lesser evil of oil companies,

BP is the greenest energy company with demonstrated leadership

in solar power.

10.5 BCG Matrix

Fuels

LOW

HIGH

European Downstream

LOW Market Share HIGH

Emerging MarketsExploration &

Production

40

Cash Cows:

BP has a big market share in oil and gas industry with its wings extended in 80

different countries, however these SBU are with high market share with less

room for the growth as it is a mature market, these SBU need to be

managed well with right strategy to maintain the profits

Stars:

BP is presently well established in most of its operating countries

however, there is still room to grow to stars as it the fourth largest in terms of

revenue making followed by royal Dutch and Exxon Mobil (cnn, 2010)

Question Marks:

BP is trying to venture into new markets by investing into sustainable and

renewable energy resources, since it has small share in high growth

market as it is predicted that market for these renewable energies were

likely to rise rapidly Also BPs CNG products c,n be another question

mark as it has high growth which can be replaced by petrol in the

developed nations

Dogs:

BP business can be effected by electrification of rail transport in the third

world countries, Wherever BP is operating in. Due to the market for supplying

diesel to locomotives are at the dog’s state, because it has relatively low

growth and small share, and this market might sooner vanish. However BP can

continue with this present SBU, as it cannot affect the other SBUs BP has

a stable market share in an unstable market, despite the facing allegations from

recent gulf of Mexico disaster.

41

10.6 Product Life Cycle

42

11.0 BP’s Global Human Resources Management

BP is progressive, responsible, innovative and performance driven.” They

have further defined this statement as:

Progressive – They are restless in the research and development and

improvement in exploration and refinery of oil, gas and fuels. They

believe they have the principle of mutual advantage and can build

productive relationships between themselves, their clients and partners.

Responsible – It is committed to the safety and development of its

people and the communities in the societies in which they operate. They

aim for no accidents, no harm to people and protecting the natural

environment.

Innovate – we push boundaries today and create tomorrow’s

breakthroughs through our people and technology

Performance Driven – BP is committed to deliver on their promises

through continuous improvement and safe, reliable operations, by

learning from their mistakes.

11.1 Recruitment Policy

An organization’s overall strategies and HR policies need to be closely

integrated with chosen recruitment strategies in order to achieve

desirable outcomes. Organizations seeking culture change may favor

external recruitment options while those which desire commitment and

high quality may favor largely internal recruitment or an appropriate

blend of both options. The choices may change from time to time,

reflecting the needs of organizations at different stages. Strategies BP

use are:

Internal Talent Pool

43

BP largely favors internal recruitment of senior managers by focusing

on the internal talent pool which exists within. This is evident with senior

management appointments from within the company over the years. The

strength and experience of its management team has allowed promotion

of internal candidates to important more senior roles and created

continuing growth opportunities within the company”.

E-recruitment

BP is making increased use of e-recruitment techniques through internet

and intranet. Professional networking sites (PNS) such as LinkedIn

where senior management jobs are posted, has been frequently used as

well as BP’s corporate career website. Also increasingly being used as

part of the recruitment process are partner websites which specify the

required competencies. Competency-based recruitment methods

provides a unique opportunity to create and shape a recruitment system

based on competencies that have been identified within the organization

as being critical for success in the targeted job or role.

External recruitment services

When recruiting externally, BP makes use of external recruitment

partners to assist with recruitment of senior management staff. These

partners offer BP a range of services - attracting candidates, managing

candidate responses, screening and short listing, or running assessment

centers on the BP’s behalf. BP has systems in place to ensure its

recruitment partners develop a good understanding of BP and its

requirements. This is essential because employers and agencies that are

committed to collaborative partnerships are more likely to achieve

positive results.

Employer Branding

Employer brand is the image of your organization as an employer and

place to work as perceived internally and externally while reinforcing

why talented people would want to join and stay with an organization.

44

The employer brand is part of building an identity and employees are

defined nowadays by the company they work for.

BP has consistently focused on projecting its brand as an environmentally

friendly company looking to the future and alternative fuel sources.

When BP in 2001 renamed itself BP, they also adopted the tagline

“Beyond Petroleum to signal a focus outside the oil business. This is a

visionary and inspiring way of moving the brand in a positive direction,

creating purpose and adding value. This attracts top talent in many

different fields, sharing that vision and outlook.

11.2 Workforce Diversity

Despite having operations around the globe, spanning diverse culture,

the nationality of BP plc has been reflected in the make-up of the

workforce in general and senior management in particular. BP faces the

challenge of operating in a globalised world where this model is no

longer sustainable. HR managers have to tackle national and cultural

diversity issues, while still promoting the overall corporate strategy.

In response, BP has launched a “Global Path to Diversity and Inclusion”

strategy. Among its three main directives are: as a global company, its

leaders should reflect the local communities in which it operates; while

diversity and inclusion must be viewed as a business imperative. This is

both a welcome and challenging initiative in order to meet its changing

business needs.

As a global company of around 80,000 people, BP has a naturally diverse

workforce in terms of gender, race, nationality and culture. BP actively

embeds diversity and inclusion across the organization through our

global diversity council, the establishment of diversity plans tailored to

each Strategic Performance Unit (SPU) and support for affinity groups

45

for networking and sharing experiences. Mandatory training in

diversity and inclusion for 6,000 senior leaders also began in 2010.

HR managers are increasingly faced with the management of employees

in a global businesses operating across national boundaries. Therefore,

comparing HR activities and policies across different societies becomes a

major issue. At the same time being a strategic partner by promoting the

overall corporate strategy. Coordination of HR activities on a global

scale- e.g. comparative pay rates, performance assessments,

management employment policies, employee relocation and expatriation

etc have to be considered

11.3 BP’s Health & safety Policy

Everybody who works for BP Lubricants Americas is responsible for

getting Health, Safety and Environment (HSE) right. Good HSE

performance and the health, safety and security of everyone who works

for BP are critical to the success of our business. BP’s goals are simply

stated – no accidents, no harm to people, and no damage to the

environment.

We will continue to drive down the environmental and health impact of

our operations by pollution prevention, reducing waste, emissions and

discharges, and using energy efficiently. BP will produce quality products

that can be used safely by our customers.

BP will:

consult, listen and respond openly to our customers, employees,

neighbors, public interest groups and those who work with us

work with others – our partners, suppliers, competitors and

regulators – to raise the standards of our industry

46

as a minimum, comply with all applicable laws and regulations

and any other requirements to which the company subscribes

openly report our performance, good and bad

recognize those who contribute to improved HSE performance

BP is committed to continual improvement of our HSE performance and

management systems. BP’s business plans include measurable HSE

targets. BP is committed to meeting them. There are thirteen elements to

the BP Health, Safety and Environmental Management Systems

Framework.

1. Leadership and accountability

2. Risk assessment and management

3. People, training and behaviors

4. Working with contractors and others

5. Facilities, design and construction

6. Operations and maintenance

7. Management of change

8. Information and documentation

9. Customers and products

10. Community and stakeholder

awareness

11. Crisis and emergency

management

12. Incidents, analysis and

prevention

13. Assessment, assurance and

improvement

11.4 Career Development Interventions

It is generally agreed that increasing emphasis on human resources

development provides for increases in productivity, enhances

competitiveness and supports organizational growth. BP has a set of

systematic and planned activities designed to provide its senior

managers with the necessary skills to meet current and future job

demands.

BP has a global approach to developing its leaders that is focused on the

main behaviors that are critical to achieving high performance. The

company adheres to a single, common leadership framework, with a clear

47

and focused set of expectations. This model is used throughout BP to

help select, assess, develop and reward leaders.

Continuous Professional Development

BP runs a series of development programmes called Managing Essentials

to help managers apply the leadership framework in their own teams; in

both the US and the UK, BP continues to work closely with around 20

core pursuing continuous improvement in performance. CPD in BP

comprise a balanced mix of activities which include work based activities,

courses, seminars, and conferences, as well as self-directed informal

learning.

BP runs three specialist development programmes designed to build

excellence in the 3 important functional areas of operations, finance and

human resources. The Operations Academy, set up in partnership with

MIT, provides BP’s senior managers with a systematic and rigorous

approach to managing safe and efficient operations.

Senior Leadership/Management Development Programmes

The Executive Operations Programme enables senior leaders to support

the changes made by operations-level management, reflect on their own

contributions to the process and commit to systematic and verifiable

change across the organization. To date, the group chief executive, his

executive team and approximately 90 group leaders, including the

strategic performance unit leaders, have participated in this programme.

Coaching

BP also utilizes coaching for senior leadership development. For

instance, BP Angola has worked closely with i-coach academy to design

and deliver a coaching programme to work alongside a leadership

development initiative aimed to support Angolan Leaders.

48

A large number of coaches are intentionally selected in order to offer a

diversity of style and approach whereby each participant can be matched

with the most appropriate coach. Participants are also afforded the

opportunity available to develop a learning community within their

cohort which would offer peer support and challenge during the

programme and beyond.

Thus far, positive outcomes have been recorded regarding BP’s coaching

program. Most participants acknowledge it provided the necessary

learning interventions which fulfill the needs for effective transition into

more senior leadership positions including stakeholder management,

influencing skills, performance management, and feedback skills.

E-learning

BP has also developed e-learning initiatives as a HRD method for its

senior managers. Since 2006, BP embarked on one of its largest global

safety and operations e-learning training initiatives. An e-learning

solution provider, Kineo was selected in 2007 at the start of the

curriculum development to lead the blended design of the technical

modules. The programme- Operating Essentials, driven by the Health,

Safety and Operations team, is designed to enhance operations and

maintenance Leaders to manage teams and operations effectively, across

BP’s global business.

12.0 BP’s Financial Analysis

12.1 Income Statement and Balance Sheet

Income Statement: 31/12/2012 31/12/2011 31/12/2010 31/12/2009 31/12/2008

49

  (Millions) (Millions) (Millions) (Millions) (Millions) Revenue: 375,580.00 375,517.00 297,107.00 239,272.00 361,143.00 Operating Profit / (Loss): 13,724.00 33,001.00 (9,140.00) 21,733.00 30,682.00 Net Interest: 465.00 (650.00) (489.00) (318.00) (220.00) Profit Before Tax: 18,809.00 38,834.00 (4,825.00) 25,124.00 34,283.00 Profit after tax from continuing operations:

11,816.00 26,097.00 (3,324.00) 16,759.00 21,666.00

Discontinued Operations:  Profit after tax from discontinuing operations:

n/a n/a n/a n/a n/a

Profit for the period: 11,816.00 26,097.00 (3,324.00) 16,759.00 21,666.00 Attributable to:  Equity holders of parent company:

11,582.00 25,700.00 (3,719.00) 16,578.00 21,157.00

Minority Interests / Other Equity:

234.00 397.00 395.00 183.00 509.00

Total Dividend Paid: 34.00 29.00 21.00 56.00 55.05 Retained Profit / (Loss) for the Financial Year:

n/a n/a n/a n/a n/a

Earnings per Share:  Basic: $0.61 $1.36 $-0.20 $0.88 $1.13 Diluted: $0.60 $1.34 $-0.20 $0.88 $1.12 Adjusted: $0.61 $1.36 $-0.20 $0.88 $1.13 Dividend per Share: $0.34 $0.29 $0.21 $0.56 $0.55

Balance Sheet: 31/12/2012 31/12/2011 31/12/2010 31/12/2009 31/12/2008   (Millions) (Millions) (Millions) (Millions) (Millions) Assets:  Non-Current Assets:  Property, Plant & Equipment: 120,448.00 119,214.00 110,163.00 108,275.00 103,200.00

50

Intangible Assets: 35,902.00 33,202.00 22,896.00 20,168.00 20,138.00 Investment Properties: n/a n/a n/a n/a n/a Investments: 21,424.00 31,442.00 29,453.00 29,826.00 28,681.00 Other Financial Assets: 4,989.00 5,922.00 5,104.00 5,004.00 6,049.00 Other Non-Current Assets: 6,449.00 5,704.00 10,434.00 5,042.00 3,786.00   189,212.00 195,484.00 178,050.00 168,315.00 161,854.00 Current Assets:  Inventories: 27,867.00 25,661.00 26,218.00 22,605.00 16,821.00 Trade and Other Receivables: 39,178.00 45,047.00 38,816.00 31,493.00 32,688.00 Cash at Bank & In Hand: 19,548.00 14,067.00 18,556.00 8,339.00 8,197.00 Current Asset Investments: 319.00 288.00 1,532.00 n/a n/a Other Current Assets: 24,069.00 12,521.00 9,090.00 5,216.00 8,678.00   110,981.00 97,584.00 94,212.00 67,653.00 66,384.00 Other Assets: n/a n/a n/a n/a n/a Total Assets: 300,193.00 293,068.00 272,262.00 235,968.00 228,238.00 Liabilities:  Current Liabilities:  Borrowings: 10,030.00 9,044.00 14,626.00 9,109.00 15,740.00 Other Current Liabilities: 67,556.00 75,274.00 69,253.00 50,211.00 54,053.00   77,586.00 84,318.00 83,879.00 59,320.00 69,793.00 Net Current Assets: n/a n/a n/a n/a n/a Non-Current Liabilities:  Borrowings: 38,767.00 35,169.00 30,710.00 25,518.00 17,464.00 Provisions: 45,398.00 41,482.00 33,326.00 31,632.00 28,306.00 Other Non-Current Liabilities: 18,822.00 19,617.00 28,456.00 17,385.00 20,566.00   102,987.00 96,268.00 92,492.00 74,535.00 66,336.00 Other Liabilities: n/a n/a n/a n/a n/a Total Liabilities: 180,573.00 180,586.00 176,371.00 133,855.00 136,129.00 Net Assets: 119,620.00 112,482.00 95,891.00 102,113.00 92,109.00 Capital & reserves:  Share Capital: 5,261.00 5,224.00 5,183.00 5,179.00 5,176.00 Share Premium Account: 9,974.00 9,952.00 9,987.00 9,847.00 9,763.00 Other Reserves: 15,694.00 13,226.00 14,059.00 13,932.00 9,284.00 Retained Earnings: 87,485.00 83,063.00 65,758.00 72,655.00 67,080.00 Shareholders’ Funds: 118,414.00 111,465.00 94,987.00 101,613.00 91,303.00 Minority Interests / Other Equity:

1,206.00 1,017.00 904.00 500.00 806.00

Total Equity: 119,620.00 112,482.00 95,891.00 102,113.00 92,109.00

12.2 Ratio Analysis

51

Dec 31, 2012

Dec 31, 2011

Dec 31, 2010

Dec 31, 2009

Dec 31, 2008

Turnover Ratios

Inventory turnover 13.48 14.63 11.33 10.58 21.47

Receivables turnover 14.46 13.45 12.25 10.59 15.79

Payables turnover 12.64 12.59 10.80 10.45 17.94

Working capital turnover 11.25 28.31 22.90 28.71 –

Average No. of Days

Average inventory processing period

27 25 32 34 17

Add: Average receivable collection period

25 27 30 34 23

Operating cycle 52 52 62 69 40

Less: Average payables payment period

29 29 34 35 20

Cash conversion cycle 23 23 28 34 20

*Source: Based on data from BP Annual Reports

Ratio Description The company

Inventory turnover An activity ratio calculated as revenue divided by inventory.

BP PLC's inventory turnover improved from 2010 to 2011 but then slightly deteriorated from 2011 to 2012.

Receivables turnover An activity ratio equal to revenue divided by receivables.

BP PLC's receivables turnover improved from 2010 to 2011 and from 2011 to 2012.

Payables turnover An activity ratio calculated as revenue divided by payables.

BP PLC's payables turnover increased from 2010 to 2011 and from 2011 to 2012.

Working capital turnover An activity ratio calculated as revenue divided by working capital.

BP PLC's working capital turnover improved from 2010 to 2011 but then deteriorated significantly from 2011 to 2012.

Average inventory processing period

An activity ratio equal to the number of days in the period divided by inventory turnover

BP PLC's average inventory processing period improved from 2010 to 2011 but then

52

over the period. slightly deteriorated from 2011 to 2012.

Average receivable collection period

An activity ratio equal to the number of days in the period divided by receivables turnover.

BP PLC's average receivable collection period improved from 2010 to 2011 and from 2011 to 2012.

Operating cycle Equal to average inventory processing period plus average receivables collection period.

BP PLC's operating cycle improved from 2010 to 2011 but then slightly deteriorated from 2011 to 2012.

Average payables payment period

An estimate of the average number of days it takes a company to pay its suppliers; equal to the number of days in the period divided by payables turnover ratio for the period.

BP PLC's average payables payment period declined from 2010 to 2011 and from 2011 to 2012.

Cash conversion cycle A financial metric that measures the length of time required for a company to convert cash invested in its operations to cash received as a result of its operations; equal to average inventory processing period plus average receivables collection period minus average payables payment period.

BP PLC's cash conversion cycle improved from 2010 to 2011 but then slightly deteriorated from 2011 to 2012.

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13.0 Recommendation

BP Company’s project, is a significant step toward the growth of the

company, but the Chief Executive officer should ensure that the

established Centralized Developments organization enhance the integrity

in the project implementation process. The strategy should also establish

a body of expertise in greenhouse gases in order to reduce emissions that

may hinder the attainment of the project goal. The other

recommendation is that BP should invest much on renewable energy

sources like wind power, solar panel and bio-fuels because they present

little or fewer risks on people health and environment. In the transport

area, the CEO should ensure more investments in the pipeline because

this would ensure safety on the environment.  Road transport can cause

danger to the people for instance if a transits explode. Another

recommendation is that, though BP Company has assigned a treaty with

the World Bank to allow it access funds through loans, the Company

should not rely more on the loans because, its payment may contribute to

the downfall of the company if misappropriated. There is also a need for

the BP Company to consider reorganize its 4 P’s of marketing viz.

product, price, promotion and placement so as to secure a competitive

advantage over the other six competitors in the industry. With this

regard, the company may employ competitive strategies like

benchmarking against the competitors.

It is recommended that BP should use the diversification strategy as a

future strategic option in order to continue responding to the

environmental challenges. The company should diversify its product

range associated with the production of solar and wind energy for

individual and corporate customers. It is expected that these products

will be popular in the emerging markets such as India and China where

incomes are not high, but energy consumption patterns are growing very

fast. Furthermore, it is recommended that the company should increase

expenditures on infrastructure maintenance and employee safety.

Together with alternative energy production, this will positively influence

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corporate reputation after the recent safety scandals and 'green

washing'. Finally, it is recommended that BP should continue

popularizing efficient use of energy by individual consumers and

industrial enterprises.

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14.0 Conclusion

BP is back in business in the deep waters of the Gulf of Mexico, having

recently received its first permit to drill since the explosion on their

Deepwater Horizon rig last year that killed 11 people and ruptured the

Macondo well hemorrhaging millions of barrels of oil into the Gulf — the

largest offshore oil spill in U.S. history. That explosion destroyed ten

years of green marketing for BP — which adopted “Beyond Petroleum”

tagline and cheery green and yellow sunburst logo in 2000 — as the

ensuing environmental disaster plunged the brand into a nightmare as

deep as the waters it drills.

The “meet our people” and storytelling strategy is “one small step” in

BP’s post-Gulf branding, focused on its human resources rather than

product or promises.

It may be concluded that the main strategic changes undertaken by BP in

response to the turbulent and dynamic environment are contracts with

the governments to avoid political risks, moving to more stable countries

such as India from the northern Africa, acquisition of the solar panel

manufacturers, investment in wind and solar projects, moving

manufacturing facilities to China, investment in energy efficiency,

reduction of carbon content in fuels, participation in 'green' activities an

'green washing'. The company had to transform its generic strategy from

cost leadership to differentiation since cost reducing practices had led to

oil spills and leaks. It may be summarized that the identified changes

were necessary. Nevertheless, the company could have been more honest

and open in its CSR projects.

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