Porters Five Forces Analysis In Companies Business Essay

The Environmental analysis can be defined as a study of environment within the organization for the purpose of locating environmental factors that effect on the operations. For the purpose of analysis the business environment we can categorize in to three levels: Internal environment, Operating environment and General environment. This can be shown in figure as below.

STEEPLE Analysis

By the STEEPLE analysis we can examine that which external factors can be influenced the organization’s ability to achieve its vision and mission.

FACTOR

EVENTS

Social Factors

• The life styles of the people’s is changing due to economic crisis therefore, they change to use energy for sometime
• People would like to use bio fuel rather than normal fuel due to reduce environmental pollution

Technical Factors

• The International Energy Agency states that alternative energy markets will be underpinned by technological breakthroughs.
• technology is the key to competitiveness in the alternative energy industry;
• The government spending for research on bio fuel and other alternatives

Environmental Factors

• BP should highly concern on Environmental Law
• Responsibility of Oil Spill damage
• Economic Factors
• Due to economic crisis there is a declining demand for energy
• There is a increasing demand for Alternative energy sources

Political Factors

• The global energy market is becoming more unstable because of geopolitical instability.
• Encouragement of the government towards more sustainable forms of energy due to CO2 emission

Legal Factors

• According to the environmental law, responsible for Payments on oil spill damages
• Transportation safety
• Ethical Factors
• Charitable giving
• Investment on development programme

Table 01. STEEPLE Analysis

Source: EU (2004) The European Union Greenhouse Gas Emission Trading Scheme, EUROPA, http://europa.eu.int/comm/environment/climat/emission.htm [Accessed 22nd May 2011].

Porter’s Five Forces Analysis

The Analysis of Porter’s five forces help to assess where the power of BP lies in Market and also helps to analyze the attractiveness of the industry. In addition to that we assess the current strength and future strength needs to plan in the BP’s competitive position as shown:

(Source: http://notesdesk.com/…/ porters-five-forces-model.jpg -Accessed on 23rd may 2011)

Potential Entrance

• Strict government policies and requirements
• High technological focus on alternative energy industry
• Large initial capital is required

Threat of Substitutes

• Alternative energy due to higher cost

Competitive Rivalry

• High exit barriers
• High fixed costs
• High stakes for Shell Renewable and low stakes for BP Solar.

Bargaining Power of Buyers

• Low volume of buyer
• Low information of buyers
• High availability of substitutes

Bargaining Power of Suppliers

• Low concentration of alternative energy suppliers (principally just BP Solar and Shell Renewable)

Strategic Group Analysis

Helps identify who the most direct competitors are and on what basis they compete. We can decide that SHELL is the major competitor in the industry for BP in both geographic coverage and service diversification by analyzing SGA as follows:

SWOT analysis for BP

Strengths

• World third largest energy company
• Strong Brand loyalty
• Financial strength of the company.
• It has vertical integration operation system.

Weaknesses

• Increase the petrol price in UK
• Has to paid criminal charges due to spread huge amount of oil in the Alaska Sea in 2006.
• Reduce in natural gas and crude oil production.

Opportunities

• Has high investment capacity
• Research to investigate alternative fuel such as Hydrogen, Solar, Wind and natural gas
• Increase demand for natural gas in USA and Europe countries.
• Implement more flexible price polices to face their competitors.

Treats

• Unsound policies related to Environment after oil and toxic spill in 2006.
• Explosion of refinery tunnels in occasionally
• Has big rivals such as Shell and Chevron
• Instability in some oil and gas producing countries and regions

Task Two

Strategic Options and role of corporate parent

Strategic Options is an important facet and it helps to craft company’s alternatives and provide safe and keep up the competitive situation. The international requirements for energy for the next 20 years are such that hydrocarbons are still going to have a leading part in meeting that energy demand. BP supports emissions trading mechanisms as a means of putting a value on carbon in order to make appropriate investment decisions.

Corporate Mission of the BP

BP mentioned that there goal for next few years to realize the latent impending of their advantage base by improving the efficiency and effectiveness of everything they do. They will dynamically drive cost and capital efficiency whilst at the same time maintaining the first main concern of safe and reliable operations.

Objectives of the BP

BP has some objectives for their growth in 2015. And all employees are working as a team to achieve company goals.

Average 1-2% p.a. volume growth to 2015

• Underpinned by upward resource base and quality through preference
• Key sources of growth beyond 2015 will come from:
• Increasing deepwater
• Leveraging expertise in gas
• Managing world’s enormous oilfields
• Enabled by application of technology

Source-: http://www.bp.com/sectionbodycopy.do?categoryId=2&contentId=7065607

Values and ethics of the BP

BP is a compilation of resources and there people working together. To attain business objects they focus on sustaining and encouraging their leaders and staff. And they maintain recruitment stands and developing people skills at every level. BP is a well distinguish organization and wants to do some different in the world. BP is a performance driven company which is competitively booming. Through all this they prefer high ethical stand.

Directions and methods of Strategic Options

BP’s direction is clear and it is the unrelenting pursuit of competitive leadership in respect of cash costs, capital efficiency and margin quality.

The ‘Strategy Clock’ is another suitable way to analyze a company’s destructive position in comparison to the contributions of competitors. The Ansoff Growth matrix tool which is helps businesses to decide their product and market growth strategy.

Figure 02.Ansoff Market mix

(Source-: http://tutor2u.net/business/strategy/ansoff_matrix.htm)

Evaluating strategies at BP

SOP Matrix is a tool which can use to identify the company relevant strategies through external environmental factors. As an example BP Opportunities and treats as below and by indentifying the external environmental factors can recognize the relevant strategies options.

• Has high investment capacity
• Invest in HR development and through that develop the skills of the staff members. A same time invest in market opportunities.
• R&D to investigate alternative fuel such as Hydrogen, Solar, Wind and natural gas
• By research can find the best alternative and company can give attention to that.
• Extension of acquisition of North sea area
• Can develop deep sea oil well.
• Increasing demand for natural gas in USA and European countries.
• Efficient and effective resource allocation to maximize profit.
• Implement more flexible price polices to face their competitors.
• By price reducing can get more customers on their products
• Gas and Oil searching
• Will help to increase their market values and can demand them among the competitors

Threats

Strategic Option

• Unsound policies related to Environment after oil and toxic spill in 2006.
• Understand the policies and work with less effect to environment
• Explosion of factory tunnels in occasionally
• By keeping the brand image without harm can face the problem
• Has big rivals such as Shell and Chevron
• To make company as No1. And more promotional works
• Sold corporate owned stations.
• Buy the stations
• Pipeline decomposition
• Should check the pipeline back and do the needful changers
• Insecurity in some oil and gas producing countries and regions
• Should find some more producers in case to use.

Task Three

SMART Objectives of BP

BP Objectives are prepared according to SMART (Specific, Measurable, Achievable, Realistic, and Timed).That means it should be particular about what we are going to achieve and should calculate about the objectives.

There are a several types of objectives like process objectives, outcome objectives, personal objective that all can be done in the SMART format.

BP’s five year plan objectives are,

Increase profitability by 20%

Increase production

Financial gain by serving to the increasing demand

Build brand value that was affected by the oil spills

BP spends on growing technology budget on potentially most competitively profitable innovations both in open and new power spaces. It is both a strategic option and an opportunity for BP when comparing with the rivals as BP is strategically positioned themselves in a highly innovative R&D processes which is unmatchable by the rivals easily. While facing major challenges of dilapidated supplies and defense of supply in oil and gas, global warming and insist for pure energy in major markets, BP’s percentage of expend on novel technologies is growing.

Five year development plan for BP

Business plan is a statement about company’s future goals and plans to achieve those goals. This can be externally focus or internally focus.

BP’s Strategies in development can position as,

Upstream growth

Downstream turnaround

Alternative Energy: alert disciplined Corporate overview

In the upstream will hub on cost and capital efficiency to distribute profitable growth. In the downstream will drive additional efficiencies and a focus on quality and incorporation. They will maintain their disciplined approach to substitute energy and will carry on unlock corporate efficiency through a culture of uninterrupted enhancement.

Evaluating and implementing the plan

In business strategy, Johnson, Scholes and Whittington shows a model in strategic options are evaluated next to three key success criteria such as Suitability, Feasibility, and Acceptability.

Recommendations

Strategic investments in R&D to exploit new market opportunities and to maximize efficient and effective productions.

To negotiate with governments and other low and medium sized firms in the industry through a joint profit sharing process to search for new avenues of the market.

Recruit experienced and capable sales, marketing and research experts.

Re-build the brand value and affinity using new media opportunities like social media to reduce the black mark occurred as a consequence of oil spills.

Streamline production and business operations by using just in time (JIT) and creating a agile end at the supplier end of the operations.

Conclusion

Strategic planning plays a vital role in strategic management and the leadership. Strategic planning can divide in to three stages as strategic Analysis, Strategic Options and Evaluation and Implementation. The British petroleum Corporation is a well established organization in petroleum industry and here it is illustrated through the strategy and competitive advantages of the BP and the technical tools which they could could use to analyze the situations. The porter’s five forces investigation helped identifying the competitive environment and market situation BP is facing.

There are major rivals like Solar, Sharp, Chevron in the market and BP engaged with mass production. By the SWOT analysis company situation and the market position identified which extracts the internal and external environment of the company. BP is focused on customers and they believe in their mass productions over its rivals.

Company can use strategy clock, Ansoff growth matrix tools to analysis their position in the market. To develop strategic options first it should identify the external context and priorities and clusters. Then it should develop the strategic options. SOP matrix is one of the best tools to identify the strategies of the company. BP has a decentralized en route for R&D units. It also drives the strategic positioning of BP in competition among rivals. Cost advantage exits when company can give same benefits as competitor with lower cost. And differentiation advantage exits when the company can make different benefits or the value to the customer from their products (Broad differentiation strategy). As an Example BP is using combination of Crude oil and natural energy such as solar power to give differentiation to their customers and it is a well successful strategy.

STEEPLE analysis also can be used to investigate the external environment in a business operates and concerned with the political, economic, social factors influential industry change and helps to gain a better understanding for external conditions for growth in a market. The porter’s five forces investigation helps to diversity a competitive environment. For example, BP analyzes the market for Quality oil production.

BP entered into solar market in 1973 and produced BP solar in 2000, it was one of main strategy to face current oil crisis and environment issues. BP solar becomes profitable but it is not prominently spread among the public, so government involvement is important to become popular of solar power. BP business plan has advantage in the Research and investigation area. The crude oil plus the solar power combinations was very successful strategy implemented in recently. Products segmentation, explorations and productions, significantly company restructuring, improve cost efficiency, centralized company departments are their current strategies to compete with rivalry and increase company profits.

They entered into oil plus solar power combination and they should strategically positioned the product segmentation, improve cost efficiency and enter into new market opportunities through the findings of R&D to increase their profits. They have created value through technology innovation and this is a barrier for their competitors. But the opportunity is yet to be scrutinized with more investments to the R&D. By a comprehensive situation analysis company can create strategic options to devise organization’s external atmosphere and can exploit the potential.