Assignment Sample on BUS7B64 Strategy And Leadership
Introduction
Strategy and leadership practices are essential in an organisation to successfully promote culture of innovation and movement into the current competitive business domain. Ensuring strategy and leadership traits in regular practices assists a business organisation to cultivate rational leadership styles and mobilise organisational actions or functionalities. This study sheds light on evaluation of strategic approaches and leadership adopted “British Petroleum (BP)” within the business process. Critical analysis of resource based view strategy along with PESTLE analysis in this study helped to highlight main opportunities and threats for BP in foreign market. Beside this, application of McKinsey 7 Ps model and SAFe criteria in this study was also helpful to critically analyse successful strategic approaches adopted by BP within the competitive business domain.
1. Situation or strategic issue
Presence of strategic issue in British Petroleum (BP)
BP generated a higher level of operating revenue of $157.7 in 2021, which was 49% of higher from the last year of 2020. BP has generated or operated as an oil and gas company and is considered as the largest oil company within the global context. In 2020, upstream business segment of BP brought in $34.2 billion in annual revenue whereas, downstream segment of BP’s revenue was reached at $163 (STATISTA, 2021). Annual revenue had been decreased across the both downstream and upstream segment in 2020 due to the unprecedented situation of COVID-19. Barbosa et al. (2020), imposition of COVID-19 restrictions surged consequences on market oversupply of fuel, oil and gas and reduced demand of oil within fall in petroleum product sales. In the context of analysing this fact, it has been analysed that BP was witnessing over £ 4.2 billion losses in the on-going pandemic situation due to reduction in oil demand (THEGUARDIAN, 2021). Due to the pandemic scenario, this company was forced to cut demand for transport fuel prices and resulted in increasing cost of oils within the global market.
On the other hand, the deep water horizon disaster was considered as another strategic issue faced by BP. In this scenario, annual loss of this company included write down in matter of both operating and non-operating charges by £ 18.1 billion in the year of 2020 (NATIONALGEOGRAPHIC, 2020). In-depth analysis of strategies issues disrupted on-going process and performance of business within an effective manner.
Recommendations as a CEO for addressing strategic issue
In terms of analysing recommendations strategies of reducing strategic issues, BP has ambitious plans to transform the business domain into fossil fuels. As shown in Figure 2, in 2021, the concerned oil firm reported increasing profit percentage to $12.8 billion and spending more in low-carbon energy alternative process (Ambrose, 2022). This resulted in increasing investment of BP by £ 2 for every £1 within the decade of Britain’s market palace.
Record improvement or development in the offshore wind farms within the West coast of UK in 2021 helped this company to achieve success in increasing business domain. Ambrose (2022) suggested power capacity of the Scottish coast in UK has been increased by 5 GW and promotes business expectation towards organisational settings. Apart from this, another strategic approach adopted by BP is to be aware of a tight gas market during the month of winter. As per views of Ambrose and Kollewe (2021) increasing business landscape into global gas supply by BP thrive higher profit of £ 2.4 billion for the third quarter of 2022. Therefore, imposing recommended approaches by BP in these scenarios helps to reduce strategic issues and maintain a strong position in the global market.
2. Resource-based view of strategy
Dynamic capabilities required to obtain sustainable competitive advantage
British Petroleum (BP) functions as one of the leading oil and gas service providers in European and global industrial sectors. Existing operational strategies of this organisation involve extensive integration of sustainability through “resilient hydrocarbons”, “convenience and mobility” and “low carbon energy” (BP, 2023). Observing the importance of attaining low-cost operations and environment-friendly services, BP had pledged to improvise mobility and flexibility within its organisational policies. However, it was reported that in August 2021 it was reported that since 2004, BP had foiled sustainability reports by showing lower carbon footprint in its annual reports (THEGUARDIAN, 2021). Legal accusations against BP’s inauthentic “carbon footprint calculator” systems had raised concerns about the lack of transparency prevailing in this organisation.
In relation to this above observation, BP can be recommended to introduce transparent carbon footprint auditing measures to reduce irregularities, communication gap and presence of any corrupted behaviour. For instance, a carbon footprint can highlight all necessary causes related to extensive CO2 or GHG emissions during operational pr industrial processes of an organisation (APOLLOENERGY, 2023). Frequent auditory actions allow firms to observe changes in carbon footprint ratios and derive immediate alternative strategies or solutions. Appointment of third-party auditor organisations would enable BP to maintain transparency in carbon footprint auditing and deliver factual figures to stakeholders for environmental control.
Exploiting current markets and exploring future opportunities
Rising global demand for digital integrations had positively influenced organisations to observe necessary strategies for technological improvements. For example, in 2022 British Petroleum had focused on increasing capital expenditure by 40% till 2025 and by 2030, 50% increase in sustainability measures were proclaimed (BP, 2022). In existing international oil and gas industry, BP had aimed to generate net earnings of $9 to $10 million by 2030 through considerations of five transition growth engines. As per annual reports, five transition growth engines of BP would be “bioenergy,” “convenience”, “electric vehicle (EV) charging”, renewables and hydrogen (BP, 2022). Hence, to exploit new market opportunities BP would either need to concentrate on one major concept or deliver satisfaction to all five growth engines.
3. Organisational Business Model
Business Model on Value Creation, Value Configuration and Value Capture Strategies
Value creation
Business model innovation through value creation is considered an integral agenda for most of the industrial firms which generated strong interest within management of literature. Reason behind business innovation is to create, capture and deliver value of business management and shift products from selling practices to outcome-based services. Sjödin et al. (2020) explained that the value creation process in the business innovation model shifted relational roles and responsibilities of the management team while performing value based business operations. However, through this value creation process challenges, needs and requirements are likely to evolve throughout the innovation model of business. Meanwhile, the importance of value creation has been critically analysed through interpreting temporal and procession aspects of the business innovation model.
In terms of analysing value creation in the business innovation model, BP has increased the proportion of its annual capital expenditure within transition growth business by 40% in 2023 to 2025. It was expected to generate business earnings of $9 to $10 billion by 2030 (BP, 2022). Imposing value creation within the business model innovation process, this company has driven five transition growth engines such as electric vehicle charging, renewable energy resources, low carbon, convenience and bio-energy.
Value configuration
Value configuration business innovative model describes the process of value created in a company for its providers and customers. Development of suitable configuration in business paves the way of conducting business processes efficiently. As per views of Climent and Haftor (2021), through development of value configuration business model new technology, services market application and product development have been considered. It helps to foster a process of improvement and development in the business performance management.
Likewise, generating profitability throughout the business performance management was considered as best value configuration or availability of changes in the business process of BP. Introducing $283 billion of total revenue along with $25 billion of underlying EBITDA has supported the upstream segment of business in the global context (FORBES, 2021). Therefore, development of proper configuration in the business process helped BP to generate annual sales reach and provide strong competitions in the current market globally.
Value capture
In business innovation model, competitions offer a higher level of business capture and value creation process that helps to generate both collaboration and competitiveness in the business process. As per views of Bouncken et al. (2020), managing dualism in matters of value capture and creation encourages firms to work harder and make a strong position in the current competitive market. On the other hand, Sjödin et al. (2020) contradicted that instead of value capture processes in business innovation model, distributed networks between providers and active customers were disrupted. In the note, critical analysis of this context revealed aspects of value capture in business innovation model which involved managing activities or business functionalities for enabling additional value created processes.
In terms of analysing the value capturing process, BP has grown profit margins share from developing electrification, mobility and conveniences from 25% to 29% in 2021. In matters of business innovation through this value capturing process, BP was witnessing strategic growth in both hydrocarbon transitions and renewable energy resources usage process. It helps to achieve 8% to 10% returns on investment process (BP, 2022). Therefore, successful value capturing processes in business innovation models strengthen the strategic presence of BP in the current competitive market.
Evaluating Existing Cultural prevalence at BP through Cultural Web
The application of the culture web model in business processes is to determine the existing culture, traits and structure of an organisation. As per opinion by Burchardt and Maisch (2019), understanding multiple influences of culture web in business processes helps to analyse business paradigms properly and measure controlling systems within the business performance management. Organisational symbols, power and structure are also analysed through this culture web model.
Aligning with culture web mode, BP had generated business operations safely and securely through introducing effective leadership principles. Providing genuine care for workers, focusing on comprising factors and recognizing employees to speak up are considered as the primary culture web model of BP in the current business process (BP, 2022). Based on the context of “Plan to Win”, considering people’s perspectives are top most priority by BP to avail success in the business process. Promoting diversity, equality and inclusion in the business model cultural web helps BP to develop “care for others” and manage cross-cultural management in business working.
4. a. PESTLE Analysis
| Factors | Impact on British Oil and Gas Industry |
| Political | ● In March 2022, “Offshore Engineers UK” (OEUK) representing oil and gas industry in Britain had reported a significant lack of Government’s commitment towards the industry’s future (BBC, 2022).
● As per OEUK reports, Government investment in oil and gas sector had declined by £16 billion till 2014, by £5.5 billion in 2019 and by £4 billion in 2022. |
| Economic | ● As of 2022, oil and gas industry spending across Britain stood between £3.5 billion to £4 billion in terms of capital investment (STATISTA, 2022)
● Compared to £3.4 billion investment conducted in 2021, a 0.1% increase in 2022 can be considered as a progressive impact. |
| Social | ● In December 2021, three environmental campaigners had argued about British Oil and Gas Authority (OGA’s) proposal of maximising economic recovery (LORDSLIBRARY.PARLIAMENT, 2022). |
| Technological | ● “Technology Strategy” introduced by OGA had introduced key subsea technologies such as “Remotely Operated Vehicles” (ROCs) and “Autonomous Underwater Vehicles” (AUVs) (ASSETS.PUBLISHING.SERVICE, 2022). |
| Legal | ● In December 2020, a revised “Oil and Gas Strategy” for OGA was presented to British Parliament, which had come into force from February 2021 (LORDSLIBRARY.PARLIAMENT, 2022)
● Revised Oil and Gas Strategy had focused on retrieving economically recoverable petroleum from strata beneath UK Waters, alongside focus on meeting UN’s Net zero Targets. |
| Environmental | ● “OSPAR Offshore Industry Committee” functioning in UK supervises impact of oil and gas industry on marine life of UK and induces necessary limits and measurements to reduce ecological disruptions (GOV, 2022). |
Table 1: PESTLE Analysis of British Oil and Gas industry
(Source: LORDSLIBRARY.PARLIAMENT, 2022)
Analysis
Consistent Political disagreements between UK and Scottish Government in North Sea borders had caused operational disruptions at oil reserves, thereby acting as a major Threat. On the other hand, Technological growth in automating supervision of il extraction processes at deep sea ports acts as a major Opportunity. However, a net decline in capital investments from £16.3 billion in 2021 to £ 3.4 billion in 2022 can be considered as a major Threat. In support for attaining environmental sustainability, revised oil and gas strategy amended for OGA would provide Opportunities for operational development to satisfy UN Net zero targets. Simultaneously, it was observed that OGA had failed to consider public money supporting oil and gas industry of Britain, which explains that social factors would act as a major Threat. On the other hand, involvement of OSPAR Offshore Industry Committee in governing marine life and ecological balance would provide Opportunities to BP for simultaneous ecological restoration.
b. Deadline with competitive environment
Game Theory
The concept of Game Theory was first developed by American John Nash for understanding the roles of diverse competitive environments on decision-making of an individual, group or organisational bodies. As observed by Taleizadeh and Sadeghi (2019), Game Theory rationales decision-making activities and potential consequences to derive best feasible option that can be proposed to acquire success. Primary benefits of applying Game Theory lies in understanding primary reasons behind decision-making and which strategies can be utilised for proposing counter decisions. For instance, by implementing Game Theory British Petroleum (BP) would be able to evaluate decision-making strategies undertaken by major competitors like Royal Dutch Shell, Exxon Mobil, Chevron, and ConocoPhillips. Based on their individual decision-making criteria, BP would be able to understand how each organisation had tackled oil and gas price ruse, environmental concerns, and ongoing supply chain disruption due to Covid-19 pandemic.
Value Net Concern
Organisations functioning in competitive business environments tend to derive strategies for attaining maximum stakeholder satisfaction. Theoretical perspectives such as “Value Net Concept” combine four major concepts to acquire operational success through continuous interactions (Saeidi et al. 2019). Major concepts involving “customers”, “suppliers”, “competitors” and “complementors” were required to be targeted by organisations willing to achieve competitive advantage. For example, BP would need to conduct regular customer and supplier interactions through physically operated or automated communication platforms. Regular interactions related to price rise, sustainable transportation needs and accessibility to oil and gas services would allow BP to understand rising queries and potential risks of substitutions. Salunke et al. (2019) explained that, value net concept interlinks competitors and complementors functioning within an industry for identifying feasible business ideas that would contribute in organisational stability. For instance, by observing competitors’ marketing strategy, customer service and pricing criteria, BP would be able to acquire detailed insights on deriving suitable promotional ideas. Additionally, complementors such as media, Government organisations and NGOs for Environment Control Boards can simultaneously be satisfied by observing their requirements in social, economic, and ecological balance.
Blue Ocean Concept
Blue Ocean Concept is a promotional and business development approach for firms opting to acquire competitive advantage. According to Campling and Colás (2021), business environments possessing limited possibilities of market entry are likely to be safer areas for existing organisations to discover and propose new ideas to satisfy internal and external stakeholders. Observing high or low attributes of competing factors and offering levels in an industry, Blue Ocean Concept proposes feasible strategic moves over existing market value. For instance, implementation of Blue Ocean Concept for British Petroleum (BP) would aid in identifying technological and leadership necessities that can transform profit margin.
5a. Application of Mckinsey 7S Alignment Model
The “McKinsey 7S alignment model” is considered as essential tools to analyse organisational design for a company. As per views of Chmielewska et al. (2022), incorporating “McKinsey 7S alignment model” assists a business organisation to determine effectiveness of achieving business key elements such as structure, strategy, systems, skills, staff, styles and shared values. In terms of analysing strategy, structure and system, BP has invested in strategic conveniences pipeline into renewable energy development process in 2020 to 2021 from 6 GW to 25.5 GW (BP, 2022). It helps to increase capital expenditure within low carbon energy planning and manage growth percentage by $3 to $5 billion by 2023 to 2025. In terms of analysing styles and shared value, BP has generated three business groups which are supported by four integrators for facilitating collaborative working and unlocking value creation in the business innovation model (BP, 2021). This company has created as well as generated more value in the business process by operating oil and gas production processes including BPX energy resources effectively.
5b. Evaluation of successful strategy using SAFe Criteria
Scaled Agile Framework (SAFe) can be implemented for BP to evaluate long-term industrial feasibility of renewable energy resource generation planning proposed to reduce CO2 emissions. As per the views of Aldianto et al. (2021), SAFe Lean Agile Framework is generally segregated into ten major principles commonly focusing upon improving social, economic and environmental wellbeing. Based on ten major sustainability principles, operational efficiency of associated industries is measured accordingly. For instance, implementation of SAFe principles on business evaluation of BP would likely increase decision-making agility among internal governing bodies of the company. Adekola and Clelland (2020) explained that, 5th principle introduced in SAFe framework focuses on interlinking project milestones with organisational objectives for improvement of working systems. Observing this fact, renewable energy resourcing objective of BP would need to be interlinked with internal organisational capacity of handling mass projects and potential feasibility in external industrial segments.
Conclusion
Operations Management Strategy observed in British Petroleum (BP) had presented an overview of how oil and gas service companies have been introducing sustainable measures. Evaluating the concept of operational sustainability, need for attaining social, economic, and environmental sustainability was simultaneously addressed. It was observed that leading oil and gas service companies like BP would need to improve carbon footprint auditing transparency to present factual results across client and stakeholder groups.
References
Aldianto, L., Anggadwita, G., Permatasari, A., Mirzanti, I.R. and Williamson, I.O., (2021). Toward a business resilience framework for startups. Sustainability, 13(6), p.3132.
Ambrose, J. (2022), BP has ambitious plans to move beyond fossil fuels – but are they enough?, , Available at: https://www.theguardian.com/business/2022/feb/10/bp-has-ambitious-plans-to-move-beyond-fossil-fuels-but-are-they-enough [Accessed on 27th December, 2022]
Ambrose, J. and Kollewe, J (2021), BP profits surge amid higher oil and gas price, Available at: https://www.theguardian.com/business/2021/nov/02/bp-winter-gas- [Accessed on 27th December, 2022]
APOLLOENERGY.CO.UK (2023). Carbon Footprinting Audits. Available at: https://www.apolloenergy.co.uk/environmental-services/carbon-footprinting-audits.[Accessed on: 27 December 2022]
ASSESTS.PUBLISHING.SERVICE.GOV.UK (2022). Technology Strategy. Available at:https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/554205/Technology_Strategy_JMC_VER9.pdf.[Accessed on: 21 December 2022]
Barbosa, F., Bresciani, G., Graham, P., Nyquist, S. and Yanosek, K., (2020). Oil and gas after COVID-19: The day of reckoning or a new age of opportunity. McKinsey & Company, May, 15, p.2020.
BBC.COM (2022). Energy firms warn of UK oil and gas dependency. Available at: https://www.bbc.com/news/uk-scotland-scotland-business-60907660.[Accessed on: 20 December 2022]
Bouncken, R.B., Fredrich, V. and Kraus, S., (2020). Configurations of firm-level value capture in coopetition. Long Range Planning, 53(1), p.101869.
BP (2021), Our business model, Available at: https://www.bp.com/en/global/corporate/what-we-do/our-business-model.html [Accessed on 29th December, 2022]
BP (2022), BP Code of Conduct, Available at: https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/who-we-are/our-code-our-responsibility.pdf [Accessed on 29th December, 2022]
BP (2022), bp update on strategic progress, Available at: https://www.bp.com/en/global/corporate/news-and-insights/press-releases/bp-update-on-strategic-progress.html [Accessed on 28th December, 2022]
BP.COM (2022). BP update on strategic progress. Available at:https://www.bp.com/en/global/corporate/news-and-insights/press-releases/bp-update-on-strategic-progress.html.[Accessed on: 27 December 2022]
BP.COM (2023). Our Strategy. Available at: https://www.bp.com/en/global/corporate/what-we-do/our-strategy.html. [Accessed on: 26 December 2022]
Burchardt, C. and Maisch, B., (2019). Digitalization needs a cultural change–examples of applying Agility and Open Innovation to drive the digital transformation. Procedia Cirp, 84, pp.112-117.
Campling, L. and Colás, A., (2021). Capitalism and the sea: the maritime factor in the making of the modern world. Verso Books.
Chmielewska, M., Stokwiszewski, J., Markowska, J. and Hermanowski, T., (2022). Evaluating Organizational Performance of Public Hospitals using the McKinsey 7-S Framework. BMC health services research, 22(1), pp.1-12.
Climent, R.C. and Haftor, D.M., (2021). Value creation through the evolution of business model themes. Journal of Business Research, 122, pp.353-361.
FORBES (2021), BP’s Business Model Is Changing, And So Are The Key Metrics Investors Should Watch, Available at: https://www.forbes.com/sites/greatspeculations/2021/01/20/bps-business-model-is-changing-and-so-are-the-key-metrics-investors-should-watch/?sh=406a8fe53c84 [Accessed on 28th December, 2022]
GOV.UK (2022). Oil and gas: environmental policy. Available at:https://www.gov.uk/guidance/oil-and-gas-environmental-policy..[Accessed on: 22 December 2022]
LORDSLIBRARAY.PARLIAMENT.UK (2022). Oil and gas industry: outside interests. Available at: https://lordslibrary.parliament.uk/oil-and-gas-industry-outside-interests/.[Accessed on: 21 December 2022]
NATIONALGEOGRAPHIC (2020), We still don’t know the full impacts of the BP oil spill, 10 years later, Available at: https://www.nationalgeographic.com/science/article/bp-oil-spill-still-dont-know-effects-decade-later[Accessed on 27th December, 2022]
Saeidi, P., Saeidi, S.P., Sofian, S., Saeidi, S.P., Nilashi, M. and Mardani, A., (2019). The impact of enterprise risk management on competitive advantage by moderating role of information technology. Computer standards & interfaces, 63, pp.67-82.
Salunke, S., Weerawardena, J. and McColl-Kennedy, J.R., (2019). The central role of knowledge integration capability in service innovation-based competitive strategy. Industrial Marketing Management, 76, pp.144-156.
Sjödin, D., Parida, V., Jovanovic, M. and Visnjic, I., (2020). Value creation and value capture alignment in business model innovation: A process view on outcome‐based business models. Journal of Product Innovation Management, 37(2), pp.158-183.
STATISTA (2021), Operating revenue of BP from 2005 to 2021*, Available at: https://www.statista.com/statistics/264185/bp-group-revenue-since-2003/ [Accessed on 27th December, 2022]
STATISTA.COM (2022). Capital expenditure on the United Kingdom Continental Shelf (UKCS) from 2014 to 2021, with a forecast for 2022. Available at: https://www.statista.com/statistics/830000/ukcs-capital-expenditure-united-kingdom-uk/#:~:text=In%202022%2C%20the%20oil%20and%20gas%20industry%20is,reflection%20of%20global%20oil%20and%20gas%20supply%20issues. [Accessed on: 20 December 2022]
Taleizadeh, A.A. and Sadeghi, R., (2019). Pricing strategies in the competitive reverse supply chains with traditional and e-channels: A game theoretic approach. International Journal of Production Economics, 215, pp.48-60.
THEGUARDIAN (2021), BP reports $5.7bn loss as Covid-19 pandemic hits oil demand Available at: https://www.theguardian.com/business/2021/feb/02/bp-loss-covid-19-oil-demand [Accessed on 27th December, 2022]
THEGUARDIAN.COM (2021). Big oil coined ‘carbon footprints’ to blame us for their greed. Keep them on the hook. Available at: https://www.theguardian.com/commentisfree/2021/aug/23/big-oil-coined-carbon-footprints-to-blame-us-for-their-greed-keep-them-on-the-hook.[Accessed on: 26 December 2022]
Know more about UniqueSubmission’s other writing services:
