Analysing Market Competition of British Petroleum and Compempetitors Essay

British crude oil was originally created by a German house as a manner of marketing its production in Britain. British crude oil started 1908 in a rugged portion of Persia ( history of Bp 2010 ) and has had a batch of oil and gas in the proverbial grapevine ( Bp New millenium2010 )., including finds from BP ‘s ain research installations. British crude oil is one of the universe ‘s largest energy companies, supplying its clients with fuel for transit, energy for heat and visible radiation, retail services and petrochemical merchandises for mundane points ( Bp At a Glance2010 ).BP is the universe ‘s 2nd biggest oil house by market value. BP had grown to go a planetary energy company, supplying big measures of oil while besides doing paces along a promising way towards oil ‘s options ( Bp At a Glance2010 ). British crude oil cost net income as at twelvemonth terminal 2009 was 14.0 billion and militias at 18.3billion barrels of oil tantamount i.e. its geographic expedition and refines entirely and partially owned are in 30 states.

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This paper analyses BP and its rivals such as Exxon Mobile, Shell, Chevron in footings of the market competition every bit good as its place within the crude oil industry. This essay is besides aimed at measuring both the internal and external factors that greatly influence the concern activities of the planetary crude oil company. Relevant accent would be made on the analysis of the critical success factors of BP alongside its concern schemes over the past five old ages. However, the essay will measure the endurance of BP in the competitory nature of oil and gas/renewable energies every bit good as an analysis of the resources and capablenesss acquired by the company over the period of five old ages showing the extent to which such resources have been efficaciously utilized to derive competitory advantage over its rivals within the oil and gas industry.


Oil and Gas companies such as British Petroleum yields a immense sum of bend over for industries. In 2005 Bp delivered a record degree of hard currency flow of $ 25billion and yielded hard currency returns of $ 8.3billion and launched the alternate BP concern, besides administering $ 19billion of hard currency to portion holders ( Bp Presentation Script 2006 ). As at 2007 terminal oil and gas militias were valued at 177.9billion, which is an addition from the old twelvemonth of $ 120.9billion, while gas was estimated to be deserving $ 68.3billion in the UK ( National statistics2010 ).

Oil and gas industries remain extremely attractive due to its favorable market place with strong fiscal makeup and strong net incomes growing and by this barrier to entry to oil and gas industries is really high. However the oil and gas industry consist of a few participants such as Exxon Mobile, shell, Saudi Aram carbon monoxide, stripe which are involved in the big graduated table of International operations which increases the competition degree ( Energy Business Daily 2010 ). ( energy 2010 ) argued that menace of new entrants is low due to the fact that taking oil companies as mentioned earlier are really big in size and extremely incorporate which make usage of the big graduated table of their production and distribution to cut down cost and increase net income and besides by puting to a great extent on boring rig, engineering and invention that are difficult to retroflex which leads to fabricating capablenesss and investing which is a important barrier to come in.

Strong participants such as BP, Exxon Mobile, Shell, Saudi Aramco and few others use their graduated table of economic systems, strong research and development ( R & A ; D ) which act as a important barrier to entry. Major disadvantage of high barrier to entry is it increases competition between rivals and most particularly worsening industries which is related to the competitory competition between BP and rivals such as stripe, shell, Exxon mobile ( Energy Business Daily 2010 ).

However in 2009 BP marked the 17th twelvemonth of presenting militias replacing consecutively of more than 100 %, invested $ 20billion in its concern and gained $ 4billion in hard currency cost nest eggs about 40 % of lower fuel cost ( one-year reappraisal 09 ). Production grew by 4 % while production cost reduced by 12 % which makes BP the largest manufacturer in deep H2O field globally ( Annual. Reporting 09 ).

On the other manus shell seeks a big rival method by re-enforcing its place as a leader in the industry with the ability to supply competitory stockholders return and the projection of 8billion barrels of oil to better its fiscal place boulder clay 2020 ( Shell scheme 2010 ).


Critical success factor is of import as it allows houses concentrate on constructing their capablenesss and allows houses to do a determination on whether they have the capableness to construct the necessary demands to run into its Critical success factors ( Rockart J & A ; Bullen C 1981 ). Rockart in ( Mind tool 2010 ) states that critical success factors are

”The limited figure of countries in which consequences, if they are satisfactory, will guarantee successful competitory public presentation for the organisation. They are the few cardinal countries where things must travel right for the concern to boom. If consequences in these countries are non equal, the organisation ‘s attempts for the period will be less than desired. “.

Critical success factors are those major factors of a company such as repute, trade name, first-class services, bringing, merchandise scope and invention ” ( Johnson & A ; Scholes2002 ). Presently Bp is confronting a immense loss in the concern related to the oil spill with the consequence on the environment at big in April. Early on this twelvemonth BP has paid $ 11.6bn in entire costs on the gulf of M’xico oil spill, but still faces ongoing clean-up charges which is estimated to be $ 39.9billion ). ( Guardian2010 ).

2.1.1 Cost decrease: Bp suspended its dividend quarterly payments made to stockholders, which is about 9.5pence per portion amounting to $ 2.6billion as a consequence of the oil spill doing all attempts to cut cost and maximise net income ( BBC New2010 ). Bp laid off 1000s of workers, approximately 20 % by cutting down capital outgo significantly as portion of bits per second program to cut down one-year cost ( BBC News Channel2008 ). Bp sold four oil and gas bets in the gulf of M’xico to Marubien corporation at $ 650billion as a consequence to raise financess to pay portion of the amendss of oil spill which is as a consequence of cutting cost ( Euro News 2010 ). BP agreed to sell portion of its assets in North America and Egypt for $ 7 billion which is portion of BP ‘s program to acquire money to pay out of the amendss they caused in the gulf of M’xico which is another procedure of cutting cost ( Bloomberg Business hebdomad 2010 ). ( Market Watch2010 ). Bp established $ 20billion escrow fund for victims of the oil spill distributing out the payment quarterly, initial payment of $ 3billion in 3rd one-fourth, $ 2billion in 4th one-fourth and $ 1.5billion per one-fourth boulder clay its to the full paid as a consequence of cutting cost.

2.1.2 Gross saless and Selling: British Petroleum is into all sorts of energy merchandises such as air current, solar, bio fuel, C, H power, gas fired power and storage systems ( Bp 2008 pg33-34 ). British Petroleum invested $ 1.4billion in as portion of the committedness of the company to pass $ 8billion in 10years by developing alternate energy such as air current, bio fuel, C and storage ( Bp 2008 pg 33 ). The industry is presently confronting a down bend in alternate energy by shuting mills around the universe and cutting alternate budget from $ 1.4billion ( ‘850m ) to between $ 500million and 1billion ( Guardian article 2009 ).

2.1.3 Process Invention: British crude oil invented Bright Water with the usage of polymer Zea mays everta as a procedure of retrieving oil from the deep shores of the sea which helps Bp to hike its oil out significantly, which is an advantage for British crude oil to better its research and development and addition competitory advantage over its challengers ( Bp study 2010 ).

2.1.4 Research and Development: British crude oil commenced on a $ 500billion research in Illinois on farm bio-energy production ( Tech 2010 ). Bp launched a major new personal development programme which would give immature people from different parts of the universe the chance to hold a better life and the positively influence local communities ( London 2012 ). Bp has established a new research of $ 500million analyzing the impact of the deep H2O skyline ( Bp2010 ). Bp is the taking participant in the planetary bio fuel market, Bp and martek bio scientific discipline corporation entered a jointed understanding to turn out microbic oil for bio-fuels ( Bp imperativeness 2010 ).

Bp in 2008 commenced on a undertaking of geographic expedition and extraction of rough oil and natural gas from Wellss of 8 different states and besides completed 9 major production undertakings which led to enter net income of $ 37.9billion before revenue enhancement about 39 % higher than the old twelvemonth ( Bp2008 pg13-14 ). Bp is the largest manufacturer of oil and gas in the US Gulf of Mexico, bring forthing about 400,000 barrels of oil every individual twenty-four hours. It has besides made patterned advance on nine undertakings n the Gulf of Mexico such as Atlanta Phase2, Tubular Bells, Kodiak, Freedom, Kaskida, Isabela, Santa Cruz, Mad Dog Tie Backs and Great White ( Bp Press Releases 2009 ). Therefore British crude oil has a good repute on research and development which as a consequence, increase competitory advantage over it rivals.

3.0 Decision


Cost leading scheme, distinction scheme and concentrate scheme are the three chief strategic attack that can be applied to any merchandises of any industry to derive competitory advantage ( mind tool 2010 ). Cost leading scheme is besides referred to as low cost leading scheme which is aimed at deriving competitory advantage by cut downing cost below its rivals ( Ecofine 2003 ). Differentiation scheme is a competitory concern scheme in other to derive competitory advantage by the distinctions of merchandise and services from that of rivals ( Ecofine 2003 ). Focus scheme is the usage of nucleus competences of an industry to function a group of clients ”Niche Market ” ( Ecofine 2003 ). Bps ‘ method of deriving competitory advantage is by cutting cost which led to the detonation in 2005 in Texas. It was stated that Bp implemented a 25 % cut on fixed cost from 1998 to 2000 which impacted the care and substructure of the refinery ( Washington station 2006 ).

Four consecutive accidents took topographic point between 2005 and 2006, the detonation at the Texas metropolis refinery, the oil spills in Alaska, the $ 1billion boom oil rig in the gulf of M’xico was as a consequence of hapless care and cost film editing ( The Sunday Times 2010 ). As at 2007 twelvemonth terminal Bp shed more than 7500 occupations and contractors singing its net income to $ 4.3billion after a loss of $ 3.3billion the old twelvemonth which is as a consequence of cutting cost ( SA Business2010 ). The freshly appointed CEO in 2008 carried out a plan on cutting cost on occupation cuts of 14500 workers and $ 1billion over caput cost cut by maximising its net income with a much greater investing in Canadian oil littorals ( Guardian2008 ). A nest egg of $ 1billion and a cost cut of $ 2billion and the lower oil monetary value led to increase in net income ( BBC New2009 ).

It has ever been a tradition of Bp to cut cost by maximising net income their by increasing its competitory advantage in the concern, nevertheless cutting cost in 2010 has left Bp with a chopped repute as a consequence of hapless public presentation and safety cautiousness ( Panel 2010 ). Furthermore British Petroleum has besides imbibed distinction scheme by prosecuting in new undertakings and new researches and developments which would heighten its competitory advantage over its challengers. Bp and Edison Mission Group a sister company to Edison International in 2005 planned a undertaking of $ 1billion that would bring forth electricity with the usage of minimum C utilizing H fuelled power workss in California ( Green Car Congress2006 ). Bp is committed to developing other new undertaking of bio fuel such as Algae, Diesel and Butanol ( Good Clean Tech 2009 ). Bp differentiates itself from its challengers by new researches and developments, affecting in new undertakings by making and spread outing energy merchandises.

Bp and Emerson Project Management increased the flow of wireless web engineering by spread outing its cherry point refinery application and put ining Emerson ‘s smart radio throughout its R & A ; D installation in Naperville ( Control Global 2009 ). However Bp imbibed selling and refinement scheme by treating rough oil to crude oil merchandises and selling them around the universe in over 100 states runing in 17refineries worldwide at the capacity of 2,155million barrels per twenty-four hours, while its retail web consists of 22600 Stationss branded Bp, Amoco, Arco, Castrol trade name as portion of its agencies of distinguishing itself within the energy industry and a agency of deriving competitory advantage ( Bp2008 pg27-28 ). The company has set a criterion with the usage of cost leading scheme, market scheme, distinction scheme and a spot of focal point scheme to maximise net income, generate gross and holding a competitory advantage in the energy industry.

4.1 Decision

This study has shown that British crude oil used cost leading scheme which is besides known as low cost scheme as a manner of deriving competitory advantage which in bend had diverse consequence on the concern due to the detonations and positively impacted on the concern. Besides British crude oil has used distinction scheme as portion of its concern scheme by distinguishing its merchandises by making and developing alternate energies to give more returns for the concern alongside and besides integrating marketing scheme by puting the concern mercantile establishments in over 100 states around the Earth as a agency of holding an advantage of its challengers.


The Value concatenation are the activities through which it develops competitory advantage through its production, gross revenues and selling, care, through the usage of administrative substructure, human resource direction and research and development in which put together builds merchandises and services ( Johnson & A ; schools 2008 ).

Primary activities ; A Company ‘s primary activities are the procedures involved in bring forthing or fabricating a merchandise or merchandises ( Richard lynch 2006 ). Bp is good known for its cost decrease scheme, gross revenues and selling scheme, research and development scheme which are alternate energy ‘s and geographic expedition and production of oil and gas and renewable energy ‘s, its invention scheme which are the primary activities of British crude oil.

Research and development ; After the major catastrophe British crude oil caused in the gulf of Mexico, and the on-going debt it still has to pay, BP is still forcing further on its concern by subscribing a trade with verenium for cellulosic ethyl alcohol engineering which is a procedure of agitation of biomass into ethyl alcohol which is one of British crude oil engineering on bio fuel which is an alternate energy ( C Net News 2010 ).

Gross saless and Selling ; Despite the immense loss in the Gulf of Mexico crisis early this twelvemonth and the damaged image of Bp, Bp is back in net income in dealingss to the addition in oil monetary value which boosted its net incomes in the geographic expedition and production division to ‘1.3billion ( BBC News by Peston Picks 2010 ). Bps geographic expedition and development activities include production of natural gas and oil and boring of Wellss to finish production and such activities take topographic point in UK, USA, Canada, Egypt, Azerbaijan, Trinidad and Tobago, Norway and many others while BPs refinement and selling subdivision is involved in rough oil, crude oil merchandises, petrochemical merchandises and aluminum merchandises by providing these merchandises to clients such as Amoco, Arco, Castrol trade names and besides bring forthing alternate energies which are the primary activities of BP ( Business Week 2010 ).

TNK-BP produces natural gas in subordinate countries in West Seberia and besides in the nucleus countries in West Seberia known as Nizhnevartovsk ( TNK-BP2010 ). Bp sells its merchandises through powerful trade names such as ARCO, Castrol, Amoco, Aral and BP in more than 250,000 filling Stationss all over the universe, Bp is besides the largest retail merchant in crude oil merchandises in Germany and has approximately 2,700outlets at that place. Bp is besides be aftering to construct mercantile establishments in China which would be named Petro China and Sinopec ( BP Investment and income2010 ).

However BP has divested a figure of its oil and natural gas belongingss which means selling off a portion of its geographic expedition and production substructure concerns and illustrations are BP sold four boring rigs such as Magnolia, Merganser, Nansen, and Zia which produced a sum of 15,000 barrels of oil per twenty-four hours which is as a consequence of researching new energies in the locality and the hard currency from the gross revenues all four boring rig would be used to pay out of the misdemeanor charges of the gulf of M’xico oil spill ( Guardian 2010 ).

Supportive activities ; supportive activities are activities that support the primary activities that makes it more efficient and effectual such as procurance, substructure, Human Resource Management and engineering development ( Johnson. G & A ; Scholes. K 2002 ). Bp new scheme of low cost is divestment of its telecommunication engineering subdivision of the concern to Telekom system in other to salvage cost and go on its efficiency.


This study shows how British Petroleum has achieved its competitory advantage through its concern schemes b cutting cost, introducing new merchandises such as renewable energies, expeditiously working on research and development and besides using its gross revenues and selling schemes. In the past five old ages has aligned its concern scheme to resources and capablenesss their by giving it competitory advantage. Bp has besides faced a batch of challenges associating to the oil spill in 2005-2006 but has besides bit by bit gained its bases in the oil and gas industry. However there are recent challenges due to the recent detonation in the gulf of M’xico doing Bp to lose its license to pull out oil and confronting a six month suspense due to the detonation. Bp should concentrate more safety step and environmental issues by fixing for any farther amendss and besides developing workers in Fieldss on how to rapidly descry jobs with oil rigs and speedy solutions to the jobs.

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