Introduction

How British Petroleum formulates strategies will be revealed in this report. Strategies are a set of competitive movements and tactics that an organization uses to enhance competitiveness, attract more customers, and improve sales and innovation (Ansoff et al., 2018). British Petroleum (BP) is a British Fuel and energy giant having operations in 78 countries and employing 73,000 employees (British Petroleum, 2019). This report has been divided into three sections: section one analyzes the strategic position of BP, the next section advises future strategic options for BP, and the final section has critically evaluated possible future strategic options with three business partners: Spark, M&S, and Delivero.

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Organizational Strategies of British Petroleum (BP)

Strategic Positioning of British Petroleum (BP)

This section has analyzed the strategic position of BP by showing some strategic decisions of the company and its relative competitive position with competitors.

Targeting Net Carbon emission to Zero: BP has effective R&D in place to invent technology for low carbon emission to comply with the Paris Agreement (British Petroleum, 2020). This strategic movement has, on one side, enabled the company to make the fuel more workable, and on another side, has attracted customers’ attention which has resulted in increased sales.

More focus on efficient fuel and renewable energy: The company has made huge investments to make oil and gas more efficient, which resulted in energy savings and low negative CO2 impact on the environment (British Petroleum, 2020). The company has also invested in gas renovation and gas-derived products, which have much less carbon footprint on the ecosystem. BP has invested more than $650m in renewable fuel, solar energy, bio-power, and wind power in association with 40 companies in Brazil (British Petroleum, 2020). All these strategic movements has put BP to compete at the frontline and kept the company updated with changing need and technologies.

Expanding business to emerging economies: Another potential strategic approach of BP is to introduce advanced and improved energy products and services in collaboration with new partners in new countries (British Petroleum, 2020). Such strategic movement with new and improved products provides a company with enough energy and strength to grow (Rothaermel, 2016). This has enabled the company to bring new growth, and huge revenue flow to the financial portfolio. The company has targeted emerging economies such as India, Indonesia, and China to have an impact on their economic growth on the growth of the company itself. As part of the movement, BP has made an agreement with Reliance Industries to establish a retail service network and aviation fuel across India.

Application of Artificial Intelligence (AI) in energy management: BP has launched advanced technology in energy management, and Artificial Intelligence (AI) is one of them (British Petroleum, 2020). As part of a strategic move, BP has invented Grid Edge, which has enabled the company to build a system of predicting, controlling and optimizing the energy profiles of a building. BP has invested more than $5 million in the project.

Strategic positioning of BP compared to competitors in a competitive mapping: Below figure 1 shows the competitive positioning of BP in the global fuel industry. It can be seen that BP is considered a company with advanced technologies and good services at relatively fair prices.

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How British Petroleum formulates strategies: Ansoff’s Growth Matrix on British Petroleum (BP):

The below graph is called Ansoff Growth Matrix, which implies that there are four ways to expand a business: market penetration, market development, product development and diversification (Hitt, Ireland and Hoskisson, 2012).

BP should develop a new market: Analysis from section one has revealed the company has a number of newly developed products and services such as Bio-energy, solar energy, wind energy, application of AI in energy efficiency management. Now it is time for the company to implement these new products and services in new countries such as EU countries, North American countries and in Australia. BP already has in-depth market knowledge in these countries, which means the company has the good market knowledge and knows about the competition. Therefore, it can be argued that BP will face fewer risks in executing this strategic option.

BP should develop new products: The fuel and energy industry has become intensively competitive and will be further competitive in the near future (David and David, 2016). To maintain pace with such a competitive industry, BP must continue R&D to optimize Gas derived products, renewable energy, wind energy, and solar energy. Such new development costs a company highly; however, it brings huge opportunities for the new market. Therefore, BP should invest in the above-mentioned products to realize future opportunities.

BP should diversify: The final strategy of this model BP should implement is diversification. The company should introduce the newly proposed products (Gas derived products, renewable energy, wind energy, and solar energy) to a new market in emerging economies such as Taiwan, Vietnam, Bangladesh, Pakistan, Indonesia, South Africa. Expansion in these emerging economies with new products will definitely bring new risk factors for BP, however, this will be highly rewarding because of the enormous underlying opportunities.

Porter’s Generic Strategies on British Petroleum (BP):

Porter’s Generic Strategies is an excellent model to help a company think about the strategic scope of business which has four dimensions: cost leadership, differentiation, cost focus and differentiation focus (Hill, Jones and Schilling, 2014). BP should implement Cost Leadership and Differentiation approach.

BP should follow Cost Leadership Strategy: The Company should follow a cost leadership strategy by making the energy efficient and making the products and services available to most countries.

BP should implement a Differentiation Strategy: BP should make sure that it offers differentiated products and services so that it can be unique in terms of product offering. This will help the company to make premium prices.

Future Strategic Options of BP with other business partners

How British Petroleum formulates strategies: Recommendations for British Petroleum (BP)

BP should make an agreement with M&S Energy to provide energy supplies: M&S Energy provides renewable electricity to retail consumers in the UK, and the company takes power supplies from a company named Octopus (Marks and Spencer LTD., 2020). Given that BP already has a proficient and notable reputation in the energy industry, moreover, the company has a recognizable investment in solar power, renewable energy and gas-derived energy. Therefore, making an agreement with M&S Energy can be a profitable and sustainable business for the company. BP already has a huge investment in the sector with proficient market knowledge. Thus there is a chance that M&S Energy will be convinced to make an agreement with BP.

BP should make an understanding with Spark to introduce reward cards at every BP station: Spark is a loyalty card which can be used to pay in more than 280 BP M&S branded food stores across the UK (BP plc. 2020). BP should make an agreement with Spark to include the loyalty point facilities, payment facilities, and priority access. BP can expand its services to as many BP stations as possible. This will significantly increase customers’ engagement with the company because of the perceived financial privileges of such a system. As a result, existing customers will be retained, and there is high chance that new customers will be interested in getting the new facilities.

BP should make arrangements with Delivero to make home delivery from BP M&S food stations: Delivero is an online-based food delivery company which takes orders from customers, and it delivers the goods to the customers (Marks and Spencer plc. Waterside House, 2020). Currently, customers can enjoy the services of Delivero only in 100 BP M&S branded food stores in the UK. On the other hand, there are more than 280 BP M&S branded food stores in the UK (BP plc. 2020). The customers have already praised the services; therefore, BP M&S should take action to expand the services in all the stores across the UK. This will certainly enhance the food business of the partnership.

Conclusion

In this competitive nosiness world, companies must show the best tactics in compiling strategies because these strategies will provide them the strength and competencies to sustain in future (Ward, 2012). BP has emphasized sustainable energy growth, and has invested in R&D extensively to stay ahead of the competition. It has been shown in the analysis that BP should emphasize new product development, new market development and market diversification. It has also been found that the company should put importance on cost leadership and differentiation. BP should also emphasize expanding the operation and activities with third parties such as M&S through supplying renewable energy; Spark through an understanding of implementing loyalty cards in all BP stations worldwide; Delivero through enabling the services in all BP M&S Food Stations across UK.

References:

British Petroleum, 2019. Annual report-2019. Retrieved from: https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/investors/bp-annual-report-and-form-20f-2018.pdf [Assessed on 23 April 2020]

British Petroleum, 2020. Our Strategy. Retrieved from: https://www.bp.com/en/global/corporate/what-we-do/our-strategy.html [Assessed on 22 April 2020]

Business Wire, Inc., 2020. Research and Markets: BP Plc – Competitor Analysis: The Perfect Insight Required by Investors Following the Deepwater Horizon Oil Spill. Retrieved from: https://www.businesswire.com/news/home/20110413006184/en/Research-Markets-BP-Plc—Competitor-Analysis [Assessed on 22 April 2020]

BP plc., 2020. M&S Sparks. Retrieved from: https://www.bp.com/en_gb/united-kingdom/home/products-and-services/loyalty/M_and_S_Sparks.html#tab_Why%20should%20I%20join? [Assessed on 24 April 2020]

Crafts, 2020. BP competitors. Retrieved from: https://craft.co/bp-british-petroleum/competitors?competitors=bp-british-petroleum%2Cengie%2Ctotal-sa%2Cchevron%2Cexxon-mobil%2Cshell [Assessed on 22 April 2020]

Dan & Bradstreet, Inc., 2020. Company Profile. Retrieved from: https://www.dnb.com/business-directory/company-profiles.bp_plc.d18edf6f7373a27c7a21ebe2156d11d1.html [Assessed on 23 April 2020]

The Petroleum Economist Ltd., 2020. BP sees increasing energy sector competition. Retrieved from: https://www.petroleum-economist.com/articles/corporate/company-profiles/2018/bp-sees-increasing-energy-sector-competition [Assessed on 23 April 2020]

Ward, K., 2012. Strategic management accounting. Routledge.