British Petroleum and its Operations - Essay Example

British Petroleum and its Operations 1. Specify the nature, structure, types of products or service of your chosen organization. British Petroleum, which is also referred to as BP PLC is a British international Gas and Oil Company, which its headquarters stationed in London, England. Based on the revenue statistics released in 2012, British Petroleum is the fifth largest Oil and Gas Company in the world. It deals with the exploration, production, transportation, refining, marketing, distribution and trading of oil and petroleum products. It also deals with power generation, research and exploration of renewable energy sources such as wind energy, solar energy and biofuels. British Petroleum helps provide oil-based fuels for machines, lubricants and petroleum products used in infrastructure development, making plastics, gas, and petrochemicals among other products (BP p.l.c., 2013). This essay will focus on British Petroleum, its stakeholders, its operations and controversies, and discuss how stakeholders can influence decisions in the corporation. BP America forms the largest British Petroleum subsidiary. The company also owns nineteen percent stake in Rosneft, which is a Russian Oil Company that is the most publicly traded in the Oil and Gas sector of the stocks exchange. British Petroleum’s market capitalisation is an excess of eighty five billion pounds and makes the fourth largest company listed on the London Stock Exchange. The company is headed by a board, which is responsible for oversight and guidance of the company in the interests of the shareholders. The company’s executive management has several branches that include, Finance, Refining and Marketing, Exploration, Safety and Operational Risk, Production, Strategy and Regions, Corporate Business Activities, Human Resources, and the Upstream department. Various subsidiaries have leaders who report to the main offices in London (BP p.l.c., 2013). There are various external factors that can affect British Petroleum’s success. These include the global economy, natural environment, wars, politics, currency devaluation, infrastructure, customers and the relationship between the company and the local communities. The most important external factors that can affect the company’s success are the global economy and the natural environment. The global economy has a strong influence on the success of British Petroleum as seen during the recession in 2008, when the company recorded falling profits. The profits had declined from eight billion dollars to three dollars. If the recession continued the company would have started to make losses, which would affect its success negatively. The natural environment can also affect the success of British Petroleum significantly (Steffy, 2011). Since the company depends on a natural occurring substance, geological changes can alter the location of the oil, therefore, resulting into displacement of the raw product. This would mean that the company would have to look for new oil wells, which would affect production output, therefore, affecting the success of the company (BP p.l.c., 2013). 2. Examine three (3) salient stakeholders of the chosen organization based on their key roles and relationships with the company. British Petroleum’s stakeholders are the numerous organisations, communities and people affected in different ways by the company’s operations in its function as an employer, an energy provider, a source of revenue or in helping various communities around the globe. British Petroleum has formed relationships with governments and regulators, franchisees, shareholders, non-governmental organizations, local communities, customers, partners, suppliers and contractors. The three salient stakeholders who have the greatest influence on the company include governments and regulators, shareholders, and the customers (BP p.l.c., 2013). The governments and regulators play a vital role in ensuring that the company conducts business. British Petroleum has operations in over eighty countries. The company must maintain meaningful relationships with these countries to ensure that they grant it permission to conduct business. The company must adhere to the different rules and regulations laid down by the governments in bid to maintain a healthy business relationship with them. Regulators usually enforce laws concerning the environment or business operations, and they ensure that the company follows the right channels in its dealings. Failure to observe the rules established by the government and the regulators would translate to fines, disrupted business operations or even prohibitions (Steffy, 2011). Non-Governmental Organisations are crucial in the company’s dealings as they analyse and assess the impacts of various projects and activities carried out by British Petroleum. Issues concerning energy policy, climate change, human rights, biodiversity, and revenue transparency are discussed with the organisations. Therefore, Non-governmental organizations situated locally or internationally play an important role in the company’s transactions (BP p.l.c., 2013). Customers make the most important element of a business. Without customers, the company would have no market for its products resulting to losses. A survey conducted in fifteen countries showed that British Petroleum had more than one hundred and twenty five thousand customers (BP p.l.c., 2013). 3. Suggest five (5) ways in which the primary stakeholders can influence the organization’s financial performance. Provide support for the response. The Government and regulators can influence an organisation’s financial performance in various ways. The government can enforce laws that would increase or lower taxes. If a high taxation scheme is implemented, the organisations would have to give a larger amount of their profit to the government and the vice versa would happen if a low taxation scheme was to be adopted (Steffy, 2011). In the event that a company breaks some laws, the regulators can fine the organisation an amount of money that is in accordance with the stipulated punishment. Since the regulators are stringent with the organisations to ensure that the established rules are followed as required, they usually fine rogue organisations heavily. A lot of money is usually paid to the regulators so that they can allow the company to carry on with its dealings. Take the example of British Petroleum, which was fined an excess of twenty billion dollars by various regulators for the Deepwater Horizon oil spill in the Gulf of Mexico (Griggs, 2010). Non-Governmental organisations ensure social responsibility on the part of the organisations. They reveal information to the appropriate authorities or the public if the organisations do not follow stipulated rules and regulations. They are mainly concerned with environmental or human rights violations. They can cause boycotts and protests against an organisation’s products, which can only lead to losses for the company. Non-Governmental Organisations are important in ensuring that appropriate measures are followed and that corporations uphold social responsibility. Non-Governmental Organisations also initiate projects in various societies for the organisations. These projects are funded using the profits made by the organisations. Therefore, the organisations cannot maximize profits when there are projects to be funded and other organisations to be paid for assessing them (Griggs, 2010). Customers have a direct impact on the financial performance of an organisation. Customers can decide to buy from rival companies if the products are of low quality or the prices are set too high, thus causing a decline in an organisation’s profits. On the other hand, quality products and good pricing can attract customers to an organisation’s products, therefore, increasing the financial performance of the organisation (Steffy, 2011). A company’s reputation will also determine if customers will purchase an organisation’s products. Take the example of British Petroleum following the Deepwater Horizon oil spill. Customers boycotted the organisation’s service stations leading to a decline in sales, which affected their financial performance. The company had to offer incentives that are meant to attract customers. These incentives include lower prices and points accumulation for free products and they may prevent the company from maximizing its profits, thus affecting the financial performance (Steffy, 2011). 4. Specify one (1) controversial corporate social responsibility concern associated with your selected organization. The most controversial corporate social responsibility concerning British Petroleum was the Deepwater Horizon oil spill, which is also known as the BP oil spill. It occurred in the Gulf of Mexico on 20th April 2010. It is regarded as the largest oil spill in the Petroleum industry’s history and it claimed eleven lives and still has a vast effect on marine and human life to date. It happened after the Deepwater Horizon oil rig exploded and sunk, thus allowing for the oil gusher to spill thousands of oil gallons into the ocean every day. The situation continued for eighty seven days resulting to about five million barrels of oil being spilt into the Atlantic Ocean. Although the British Petroleum reports say that the gusher was completely sealed by 19thy September 2010, reports show that a small amount of oil continues to leak out. The incident has caused vast damage to human and marine life with the tourism and fishing industry being adversely affected. British Petroleum has come under much scrutiny for the disaster and it has been reported that the company has lost over forty two billion dollars on law suits, fines and payments. The company has also lost many customers who decided to boycott its products (Griggs, 2010). 5. As the leader of the most influential stakeholder group, outline a plan to form a stakeholder coalition to force the organization to address your chosen controversial issue. The most influential stakeholder group would be the regulator. The regulator has authority from the government and can also work with the Non-Governmental organisation to assess and mitigate the disaster. The key steps used to identify the members for the coalition group are as follows. Firstly, as the regulator I would recognise the opportunity where change is needed. Secondly, I would assess the situation and research on the organisations that have interests in the field. In this case it would be the environment-related non-governmental organisations and the government departments dealing with disaster management and the environment. Thirdly, I would assess their resources to see if they will be helpful in mitigating the disaster. Fourthly, I would contact and coordinate meetings with the organisations and the government departments to discuss partnership and the goals required to mitigate the disaster (SCRA, 2010). There are various reasons why I chose to work with the government and the Non-Governmental Organisations. Firstly, the government can easily implement policies that would force the company responsible for the oil spill to clean up the disaster and pay fines for the damaged ecosystem. The Non-Governmental Organisations have the ability to assess the damage caused by the disaster, therefore, assisting in estimating the costs required to clean up the ocean. They also help in lobbying other global organisations that will ensure that the people are aware of the environmental damage caused by the company. The regulator can enforce laws that would prohibit the company from doing any business in other governments or organisations (Steffy, 2011). In order to foster collaboration between the stakeholders I would create a consortium of agencies, which would gather all the stakeholders together and collaborate as a single unit. Leadership would be shared between the regulator, Non-Governmental Organisations and the government departments. It would ensure that all the stakeholders make equal contribution and it would foster a healthy working relationship (SCRA, 2010). 6. Indicate three potential challenges that you may face in encouraging stakeholders to form a coalition to help you achieve your goals. The first potential challenge would be decision making in the consortium. The process of decision making would present quite a challenge if all the members of the consortium wanted to make different decisions. This will be solved by selecting leaders from each organisation or department and they will present their organisation’s ideas and members will vote for the best (SCRA, 2010). The second challenge would be communication barrier. Since the incident involves a number of organisations from different countries that share the same water resource, there might be language barrier, which will hinder effective communication. The participants would refrain from using jargon in their language and translators would be hired to ensure that all the organisations are at per with each other (SCRA, 2010). Different organisations use different strategies to enable them make significant contributions. The consortium may hinder creativity by defining the strategy used when brainstorming or contributing to certain issues raised in the meetings. This might prevent some organisations from making significant contributions. The only way to solve this issue is by asking every organisation to utilise the method that works best for them. This will ensure that significant contributions are made and trust will be fostered among the collaborators (SCRA, 2010). References BP Plc (2013) BP magazine issue 2. London; Pureprint Group Limited. BP Plc (2013). BP magazine issue 3. London; Pureprint Group Limited. Griggs, W. J. (2010). ‘BP Gulf of Mexico Oil Spill,’ Energy Law journal, (32) 57-78. Society for Community Research and Action. (2010) How to help your community recover from disaster: A manual for Planning and Action. Society for Community Research. Steffy, L. C. (2011). Drowning in oil: BP and the reckless pursuit of profit. New York: McGraw-Hill. Read More