BP Essay PDF

Submitted By LolaSummers
Words: 4599
Pages: 19

What market are you in and how do you compete?
BP is one of the largest energy companies in the world that is positioned as a multinational oil company with headquarters in London.
It operates in two business segments: Exploration and Production, and Refining and Marketing.
BP p.l.c. provides fuel for transportation, energy for heat and light, lubricants to engines, and petrochemicals products worldwide. BP also sells refined petroleum products, such as gasoline, diesel, aviation fuel, and liquefied petroleum gas (LPG). This segment offers lubricants under
Castrol, BP, and Aral brand names to automotive, industrial, marine, aviation, and energy markets.
BP p.l.c. is also involved in alternative energy business, as well as offers shipping and treasury services. (yahoo finance business summary)
The world energy markets are unpredictable due to the threat of geopolitical instability. Global warming has lead to governments encouraging more sustainable forms of energy. Shale gas is expected to contribute 47% of the growth in global natural gas supplies between 2012 and 2035.
New markets such China are opening up, thus demand is increasing, creating tension between nations. More than 60% of the world’s known reserves of natural gas are in just five countries and at least 80% of global oil reserves are located in nine countries, most of which are far away from the hubs of energy consumption. (annual report)
The economy relies on its energy supply and demand keeps increasing, demand for oil will thus stay stable although demand for alternative energy sources as a percentage of total energy supply are expected to triple in the next few years. Alternative energy markets will be underpinned by technological breakthroughs. Oil prices have been falling which may unfortunately lead to job cuts and have started rumours about a merger with Royal Dutch Shell. These however, are not confirmed. Rising costs are causing difficulty to finance new projects.
People are starting to become more worried about their future and sustainability and the Kyoto agreement of 1992 has put more pressure on the industry. There are higher EU pollution standards and pressure groups and international environment organisations also are to be taken into consideration. BP operates in over 80 countries and employs about 85, 900 people worldwide.
BP maintains partnerships and deals with governments in order to avoid political risks in the oil producing countries. US and EU sanctions against Moscow are in danger of turning round and biting the west by constraining global oil supply and pushing up prices in coming years. (FT) The political turmoil in Africa and the Middle east are blocking economic growth, however both are resource rich. BP is developing its cooperation with emerging economies in Asia which are more politically stable.
Reliance on computers and network technology keeps increasing, therefore a cybersecurity breach could have a significant effect on business operations.
Porters 5 forces:
1. Threat of new entrants: High investment requirements, expensive equipment and infrastructure cost , economics of scale and other factors such as scarcity of subsurface reservoir engineers means that there is a high barrier of entrance into the oil and gas industry.
2. Power of the supplier is medium
3. Power of buyers: Oil being a commodity means that buyers will often make a decision based on price and contract terms. Customers can easily switch between companies but individual customers switching won’t make a huge difference.
4. Threat of substitutes: Alternative energy sources are still in the development phase and oil is used for a great number of things, therefore, threat of substitutes is low.
5. Competitive rivalry: Competition within the oil and gas industry is very high. Major players in the industry include Royal Dutch Shell, BP, Exxon Mobil, Total, Chevron, Conoco Philips.

The industry is still fairly attractive since the threat of new entrance and