BRITISH PETROLEUM

Business Strategy Analysis of the British Petroleum



Business Strategy Analysis of the British Petroleum

Introduction

BP p.l.c. is the holding company of one of the world's largest petroleum and petrochemicals groups. Our main activities are exploration and production of crude oil and natural gas; refining, marketing, supply and transportation; and manufacturing and marketing of petrochemicals.

Part 1

Earlier, in 1959, the Dutch had discovered a giant gas field on the edge of the North Sea at Groningen. This discovery encouraged others to begin searching for hydrocarbons offshore. BP scored the first success in British waters when, in 1965, it found the West Sole gas field, which it brought on stream two years later (Bamberg 2004 24-38). The search for oil spread farther north and in 1970 BP discovered the Forties field -- the first major commercial find in the UK sector.

The 1970s was the decade of the two great oil price shocks (1973 and 1979/80) that were to have serious effects on the world's economies. It was also a decade when the major oil companies saw a decisive change in their old concessionary relationships. Like its major competitors, BP lost direct access to most of its supplies of OPEC oil as the OPEC countries took control of production and prices.

Diversification and a new structure

The upheavals of the 1970s led BP to conclude that it should broaden its activities so that it could operate in the future with more balanced sources of income. Accordingly, from the mid-1970s there was increased emphasis on diversification into new areas of activity (Bamberg 2004 24-38).

As a result of the purchase in 1986 of the US Company, Purina Mills, BP Nutrition became one of the world's largest feed millers. In 1990, it also took responsibility for BP's household cleaning and personal care products -- successors of the old detergents business (Sztucki 2004 43).

Rationalisation

Also during the early 1980s, BP's refining, shipping and chemicals operations were suffering from the effects of industry-wide overcapacity and economic recession. Consequently, these activities were thoroughly rationalised. BP cut back its refining capacity, particularly in Europe, so that by the end of 1988 it was left with five main fuels refineries in the region, compared with 16 in 1981.

In chemicals, BP had augmented its interests substantially when, at the end of 1978, it acquired European assets from Union Carbide and Monsanto. But the difficult trading environment that emerged shortly afterwards led BP to make severe cuts in its operations (Sztucki 2004 43). Between 1980 and 1984 it closed a number of chemicals plants and withdrew from certain products

(Bamberg 2000 348-468).

Major Divestments

After the diversifications of the 1970s and early 1980s BP found -- like other companies which followed a similar course -- that it experienced mixed success in managing its 'new' businesses. Towards the end of the decade, in a change of strategy, the company decided to concentrate on its core, hydrocarbon-based activities (Bamberg 2000 348-468). To that end, it began a series of divestments. In early 1988, BP sold its subsidiary, Scicon, and so withdrew ...