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BBA 3b (080670)

Submitted to:

Sir Manzoor Iqbal Awan, Col (R)

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Abstract
PSO is the largest oil company of Pakistan and the most successful in Pakistan as well.
British Petroleum is the 3rd largest company of the world and is most successful petroleum
company in the whole world. The strategies, management practices, marketing, etc of both
MNCs differ quite significantly.

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Table of Contents

Abstract........................................................................ 1
Ô

 
In this project, I have compared the management practices of two multinational
companies i.e. Pakistan State Oil and British Petroleum. A lot is common
between these two companies because both belong to same industry. The main
difference between both is that PSO only operates in Pakistan but BP operates
throughout the world. PSO is the market leader in Pakistan but BP is the market
leader in world. Both companies are doing well and are successful.
I have compared the MNCs in a way that firstl y I have written the details of
PSO and then I have written the details of BP in the same order which shows
the comparison of both MNCs.

In this project, I have tried my level best to compare and contrast both MNCs .

Pakistan State oil

D



The creation of Pakistan State Oil (PSO) can be traced back to the year 1974, when on
January 1st; the government took over and merged Pakistan National Oil (PNO) and Dawood
Petroleum Limited (DPL) as Premiere Oil Company Limited (POCL).

Soon after that, on 3rd June 1974, Petroleum Storage Development Corporation (PSDC)
came into existence. PSDC was then renamed as State Oil Company Limited (SOCL) on
August 23rd 1976. Following that, the ESSO undertakings were purchased on 15th
September 1976 and control was vested in SOCL. The end of that year (30th December 1976)
saw the merger of the Premier Oil Company Limited and State Oil Company Limited, giving
way to Pakistan state Oil (PSO).

After PSO¶s inception, the corporate culture underwent a comprehensive renewal program
which was fully implemented in 2004. This program over the years included the revamping
of the organizational architecture, rationalization of staff, employee empowerment and
transparency in decision making through cross functional teams. This new corporate renewal
program has divided the company¶s major operations into independent activities supported by
legal, financial, informative and other services. Inorder to reinforce and monitor this
structural change, related check and balances have been established by incorporating
monitoring and control systems.
Human Resource Development became one of the main priorities on the company¶s agenda
under this corporate reform.

It is due to this effective implementation of corporate reform and consistent application of the
best industrial practices and business development strategies, that PSO has been able to
maintain its market leadership in a highly competitive business environment.

  

To excel in delivering value to customers as an innovative and dynamic energy company that
gets to the future first.

  

We are committed to leadership in energy market through competitive advantage in providing

the highest quality petroleum products and services to our customers.

  

Values of PSO are as follow:

ëc Excellence
ëc Cohesiveness
ëc Respect
ëc Integrity
ëc Innovation
ëc Corporate responsibility

à
 

PSO caters to POL requirements of a wide spectrum of customers comprising

the retail consumer, various industrial units, government, power projects,
aviation, and marine sectors of Pakistan. We are truly the drivers of economy of
this country.
A network of 3612 retail outlets enables us to reach Pakistanis from
Nagarparkar to Sost. We are proud to cater to the fuel and non fuel needs of
approximately 2.8 million customers per day.

PSO industrial consumer dominance in the government sector can be judged by

the fact that all the major government entities like OGDC, Pakistan Army,
Pakistan railways, Navy, NLC, PAF Wah and HIT have entrusted PSO to meet
their POL needs.

Besides supplying fuel to national power utilities like WAPDA and KESC, PSO
is the sole furnace oil supplier to all Independent Power Projects (IPPs) in
Pakistan with a share of over 80% in furnace oil market. Moreover, PSO is also
playing its due role in meeting the growing energy demand of the country.

PSO also supplies fuel to industrial units like textile, cement, agriculture,
transport etc. Our industrial consumer base includes prestigious entities like the
Presidency and the Prime Minister Secretariat, where PSO has developed
consumer outlets for timely refuelling of their fleets.

Furthermore, PSO also serves the fuel needs of both national & international air
carriers. We also provide jet fuel into-plane refuelling facilities at 9 airports of
Pakistan i.e. Karachi, Lahore, Islamabad, Peshawar, Multan, Faisalabad, Turbat,
Pasni and Sialkot.

We also supply fuel to ships at Karachi Port, Korangi Fish Harbour & Port
Qasim. Moreover, we cater to the fuel requirements of Pakistan Navy, Maritime
Security Agency, Karachi Port Trust, PNSC, Faisal Marine Oil Services (Pvt .)
Ltd
à



The modes used for product movement of POL products by PSO include tank lorries, tank
wagons and pipeline. We have a fleet of around 6,000 tank lorries. Around 1200 tank lorries,
equipped with tracking and pilfer proof system, have been upgraded as per international
standards which are engaged in delivering quality fuels across the country.

With the inception of white oil pipeline (WOPP) from Karachi to Mehmood Kot via
Shikarpur & MFM (Mehmood Kot / Faisalabad / Machikey) pipeline, the pattern of supplies
from Karachi have been drastically changed as the entire white oil movement from Karachi
has been switched over from tank lorries to pipeline.
Ô 
  

Alongside its retail and non-fuel retail business, PSO also caters to the fuel demands of
industrial consumers that include power generation, railways, sugar and the textile industry.
The company has also been meeting the fuel needs of the armed forces of Pakistan. PSO also
provides refueling facilities at 9 airports in Pakistan as well as marine ship fuel at 2 ports.



 à

Competitors of PSO are Caltex, Shell, and Total.

 
  

 

The company has the largest distribution network comprising of 3,620 outlets. Out of which
3,384 serve retail customers, 53 outlets cater to agriculture sector and 183 outlets serve our
bulk customers. Out of a total number of 3620 outlets, 1,735 have been upgraded as per the
New Vision Retail Program with most modern facilities.

Moreover, there are 37 company owned and company operated (Co-Co) sites to serve our
retail customers. The idea of setting CoCo sites was to make these stations flagships under
maximum supervision and intense scrutiny to maintain the highest level of efficiency, service
and customer care.

PSO serves 2.8 million customers every day. Our leading retail brands include environment
friendly fuels - Premier-XL Green-XL. Moreover, the company also was a pioneer in
introducing an array of cards for the convenience of our customers. These cards include
corporate, fleet and pre-paid cards for individuals. These cards are well-established and have
received an overwhelming response from the corporate world and from the masses

à
  
 àÔ 

 
 

The industry in which Pakistan State Oil (PSO) is doing business is highly competitive.

Being a national oil company has its advantages but the company still has to face pressure
from different sources. The following five key factors highlight this fact.

 
 !



The threat of new entrants in the industry that PSO is associated with is small but it cannot be
eliminated. There are already four players in the market other than PSO itself, namely Shell
Pakistan, Caltex, Total Parco and Attock Petroleum. New companies will not have a large
market segment to capture therefore starting business in this industry will be far from
lucrative. This can be portrayed with the help of new entrants like Admore and Zic which
haven¶t been able to pose a threat to the already present players

 




à

As alternative of fuel, Pakistan State Oil is developing Ethanol which will eventually be
available at reasonably less price. Other than that, CNG is already available at most PSO
outlets. It is evident that world oil will eventually run out and alternate sources of fuel will be
required hence PSO has to keep up with technology and be prepared for this eventual
repercussion to avoid being wiped.

2    à! 

It can be assumed that being an oil company, the bargaining power of suppliers would be
fairly high for PSO. However after some research it has been determined that this is not the
case. Firstly as Pakistan has to import oil, PSO has maintained a 47-year mutually-beneficial
business relationship with Kuwait Petroleum Corporation (KPC). This protects PSO from
frequent price fluctuations in the international market. The transport fleet consists of 5777
tank Lorries which are equipped with state of the art technology to keep them monitored, thus
there¶s no real threat from them either.

2    à!2
 

PSO has a wide customer base which includes retail customers, various industrial units,
government, power projects, aviation, and marine sectors of Pakistan including Pakistan
Army, Pakistan Railways, Pakistan Navy, NLC, WAPDA, KESC and many more, All these
buyers combined from a formidable force which can have the power to influence PSO,
however nothing like that has materialized to date. PSO enjoys the advantage that the
government regulates the prices of its various petroleum products. PSO only allows a small
discount to large organizations on its own behalf.

" 
  

 

The petroleum, oil, and lubricants industry in Pakistan is composed of two major players,
PSO and Shell Pakistan. Caltex and Total Parco were the third and fourth entrants
respectively. Last but not least Attock Petroleum has the smallest share of the market. All
these companies in essence are competing for the same customers. Even though PSO has an
80.1 percent share of the Black Oil market and 51.0 percent share of the White Oil market, it
still faces fierce competition from its competitors which are vigilant in launching their
advertisement campaigns according to the prevalent conditions of the market. This can be
portrayed with the example of Shell that was the first to highlight the longer mileage with its
fuel when oil prices were soaring around the world.

# 
 

SWOT stands for strengths, weaknesses, opportunities, and threats. Strengths

and weaknesses are internal factors. For example, strength could be your
specialist marketing expertise. A weakness could be the lack of a new product.
Opportunities and threats are external fact ors. For example, an opportunity
could be a developing market such as the Internet. A threat could be a new
competitor in your home market.
STRENGTHS

ëc PSO is having good competitive skills.

ëc It has adequate financial resources as it is a public sector organi zation and
is having support of the government.
ëc It is a well-recognized market leader as it has top oil market in Pakistan.
ëc PSO petrol pumps are computerized
ëc PSO is having product innovation as it frequently introduces new products
according to the require ments of its consumer.
ëc It has well conceived functional area strategies.

WEAKNESSES

ëc The organization is falling behind in research and development.

ëc Sometimes the organization is unable to implement strategies in front of
its competitors.
ëc Although the services of PSO are quite well but it has weak market image
as compared to Shell.

OPPORTUNITIES

ëc Diversity into the related products i.e. creating some unique features in the
products to attract their consumer.
ëc Add some complementary products in the future.
ëc It is likely in the future that the organization is going to expand the
business and enter into the new market.
ëc Ability to move with the better strategies i.e. applying some new ways to
cover the losses, increase the financial resources or increase the market
share.
ëc Introduce the new product with features that are new in the market i.e. not
in any other product offered by competitors.

THREATS

ëc Likely entry of new competitors that are having new technology and are
going to provide better services.
ëc Rising sales of the substitute products offered by the competitors.
ëc Adverse government policies i.e. government may increase the taxation
rate on the products offered to the customers.
ëc Growing competitor pressures can be proved as threat to the survival of
the organization.
 ëc Buyer¶s needs and tendencies may change and they are not fully satisfied
by the existing products and may switch to the other products offered by
the competitors.
ëc Adverse demographic changes.


 "  

 à

Every business has its social dimensions, CSR ± or Corporate Social Responsibility- has
become an integral part of businesses today. Having become the largest oil marketing
company in the nation, PSO has not overlooked the expectations of its stakeholders, and
realizes its national and moral obligations ever so strongly. With a strong sense of corporate
social responsibility, we at PSO believe in making a difference in lives - a difference that is
able to permeate the very fabric of society towards uplifting the economic well being of the
people wherever they are.

PSO has come a long way from being a government department in early 1970s to where it is
today as a major corporate heavyweight on Pakistan Stock exchanges. It has now made itself
synonymous with community contribution. Our main CSR thrusts are Education, health care
and community building which entails activities for women empowerment, children welfare
and relief efforts during and after natural calamities have emerged.

$  
 




PSO has implemented a health, safety and environmental management system and related
standards to carry out operations and activities in a manner that is protective of human health
and the environment. This environmental management system at PSO is designed to make
health, safety, and environmental care an integral part of all company projects and a
responsibility of all employees.

So far five PSO facilities (Mehmmod Kot, Machike, LMT Korangi, Keamari
Terminal ± C and Central Lab) have third-party verification of the environmental
management system according to the ISO 14001 standards. At these facilities, all the
processes have been designed in such a manner that they not only remain environment
friendly but their performance is measured and continual improvement targets are set for
performance improvement. ISO 14001 assist our managers in analyzing the environmental
and safety risk involved within the total business system through review of all the
organization¶s activities, products, and services.

à% D"  &

ëc We value people of PSO as our greatest Resource

ëc As a partner in Business we undertake to achieve business goals through people
ëc We aspire to create a good working environment for our people where they are
motivated to reach PSO goals



2
 à


D


British Petroleum is the UK¶s largest corporation. It is among the largest private-sector
energy corporations in the world. It is a vertically integrated cartel that operates oil and
natural-gas exploration, marketing, and distribution all over the globe.

BP, however, goes beyond petroleum, indeed, beyond business. The mess we have
today in the Gulf of Mexico is not the first time BP has committed crimes against the
environment and against people. This is a proverbial drop in the bucket for BP. This
outfit has been cheating humanity since its inception.

Many people do not know that BP was born, named after, and committed many crimes
against the people of Iran. For nearly 80 years, it seized the wealth of that nation,
interfered in its politics, and destroyed its future.

The history of crude-oil exploration and production in the Middle East began with William
Knox D¶Arcy (1849-1917), a British subject living in Australia who became very rich very
quickly²twice. D¶Arcy, a lawyer, invested in gold mines in Rockhampton, Queensland.
After becoming a millionaire by the end of 19th century, he and his family returned to
England.

In 1901, D¶Arcy obtained a concession from the government of Iran to drill for mineral
resources, with the exception of the five northern provinc es the Russians wanted. This
concession, called the ³Green Document,´ was written on a page of green paper signed
by the Shahanshah, king of kings, of Iran. D¶Arcy was to pay the government of Iran
£20,000 in cash and £20,000 in stock in the proposed opera tion, plus a royalty of 16%
of net profits from all enterprises formed under the agreement.

D¶Arcy founded the First Exploration Company in 1903. He never set foot on the land
that made him a wealthy man. D¶Arcy conducted business through representatives and
later through the UK government. He hired G. B. Reynolds, an experienced geologist -
engineer, to oversee the drilling. Reynolds had worked in India and been drilling in
Sumatra.

Reynolds had visited Baghdad frequently and had paid close attention to loca l legends,
especially the stories about Zoroastrian temples built on eternal fire and tar pits in
southwestern Iran. He hired scouts from local nomadic tribes. These were akin to Native
Americans guiding Ponce de Leon to the Fountain of Youth.

He had two areas in mind. The very first attempt at drilling in western Iran, in Qaser
Shirin, near the border with the Ottoman Empire, was disappointing. A third well was
drilled near Masjid Sulaiman, 80 miles northeast of Ahvaz, the capital of Khuzestan
province. There was no oil here either.
D¶Arcy had spent more than £225,000 to no avail and was ready to sell his precious
Green Document. He mortgaged his remaining gold holdings but was still running out of
money. D¶Arcy telegraphed Reynolds and told him to close do wn the operation.

But Reynolds was sure he would find oil. He telegraphed back and asked for written
confirmation to be sent by mail. While waiting for the mail, which normally took two
weeks, he and his scouts followed their noses day and night, searching for that rotten-
egg smell. Reynolds ordered drilling for a fourth well where he had found traces from a
natural seepage in the same vicinity as the third.

This one was a gusher. The crude shot 50 feet over the derrick from a well that was
1,180 feet deep. On May 26, 1908, the most significant chapter in the history of the
Middle East²if not the whole of mankind²opened.

By its 100th anniversary, this well had produced more than one billion barrels of light
crude oil. Reynolds had struck one of the world¶s r ichest oil fields on the edge of the
Persian Gulf basin. With 314 wells, the Masjid Sulaiman field was still producing about
7,000 barrels of oil per day in the early 1980s. And this was only the first of many
productive Persian Gulf reservoirs.

In 1909, D¶Arcy formed the Anglo-Persian Oil Company (APOC). Britain¶s First Lord of the
Admiralty, Winston Churchill, had been following the progress of the burgeoning
petroleum industry because he was thinking of converting the British navy¶s ships from
coal to oil, which he implemented in 1911. In order to protect its supplies of this now -
crucial military resource, the British government became part owner of APOC in 1914,
acquiring 50 percent of the voting stock, reimbursing all of D¶Arcy¶s expenditures, and
granting him £900,000 worth of shares. D¶Arcy remained a director until his death in
2000. In 1923, the company secretly paid £5,000 to Churchill to lobby the UK
government to grant APOC a monopoly on Iranian oil resources (Myers 2009).

The rush was on. Western oil companies eventually attained total control over the
middle-eastern oil industry. These companies often became de facto rulers of these
semi-colonial territories. All aspects of exploration, production, refining, and marketing
were controlled by these multinational corporations. The owners not only discouraged
but prevented native populations from obtaining the skills and education to manage their
own resources, and workers were treated no better than slaves.

In 1935, the Iranian government sent a memorandum to all foreign embassies in Tehran
to address the country by its correct name: Iran²not Persia. Persia, or Pars, is only one
of 30 provinces in Iran; Greek historians mistakenly assumed that all people in Iran were
Persians, and the British and others kept repeating this mistake (Kamiar 2007). APOC
was forced to change its name to Anglo -Iranian Oil Company (AIOC).

Oil concessions generally covered very large areas and were for long durations. They
paid a small, fixed, non-negotiable royalty. Until 1953, AIOC was paying Iran a 16%
royalty. The government of Iran was not even allowed to check AIOC¶s records.

More importantly, these oil imperialists were supported by the full military might of their
respective governments. Iran¶s shah, who was installed by the Allies in 1941, headed a
corrupt dictatorship. There is no telling what or how much he stole from his people. With
the help of these corrupt shahs, first backed by the British then by the US, AIOC
appropriated the lion¶s share of Iran¶s wealth.

By the post-WWII era and the beginning of decolonization, educated people in Iran
realized the country was in effect occupied and controlled by AIOC. They¶d had enough.
Coinciding with the growth of a new nationalist fervor in the region, the shah was f orced
aside, remaining primarily as a figurehead, and a new prime minister, Mohammad
Mossadeq, was elected in 1951. Mossadeq, with the approval of Majlis (the Iranian
parliament), nationalized Iran¶s oil industry. The British government contested the
nationalization at the International Court of Law, but its complaint was dismissed.

The British had, in effect, been kicked out of Iran.

AIOC responded with a boycott of Iranian oil, but that was not enough to bring the
country to its knees. The British then approached Washington for help. Nothing much
developed during the remainder of the Truman presidency, but the incoming president,
Dwight D. Eisenhower, was a very close friend and ally of Churchill¶s and did not ignore
his comrade¶s pleas for assistance.

In 1953, the year Eisenhower took office, the CIA went into action, in partnership with
the British. Eisenhower approved the plan, called Operation Ajax, of instigating a
counter-coup designed to return the shah to total power. The director of the operation
was Theodore Roosevelt¶s grandson, Kermit Roosevelt, who headed the CIA¶s Middle
East division. The CIA paid out $1 million to hire demonstrators ²mostly gang members,
prostitutes, drug addicts, and thugs (Gelvin, 2005, p. 279; Fayazmanesh, 2003, p.4).
This same tactic had been used successfully in Italy in 1948 to prevent the communists
from winning the elections. Operation Ajax, mostly planned by Donald N. Wilbur, an
architecture expert, was also supported by few ayatollahs, powerful landlords, and big
merchants. The riots and chaos that ensued did the trick, and Mossadeq was forced to
resign.

When the shah triumphantly returned to Tehran on August 19, he personally expressed
his gratitude to his savior, Kermit Roosevelt, for putting him back on his Peacock Throne.
Upon returning to the US, Roosevelt accepted a job with Gulf Oil. He remained in
demand as a consultant and liaison between American oil companies and Middle Eastern
governments.

The shah¶s return opened a reign of terror, funded by the US, in Iran . Mossadeq was
found guilty of treason, spent three years in solitary confinement, and was put under
house arrest until his death in 1967. The majority of his supporters, however, were
turned over to firing squads. Mossadeq¶s foreign minister, Hossein Fate mi, was taken
from a hospital to be executed.

In return for US help, AIOC agreed to share its Iranian concession with US oil
companies. American victory in Iran resulted a newly formed oil consortium, expansion
of the right of extraterritoriality (meaning US and UK nationals could not be tried in
Iranian courts), and the establishment of SAVAK, the shah¶s secret police. SAVAK was
created in 1957 with CIA assistance and US tax dollars. Its primary mission was to
eliminate threats to the shah. Its tactics included censorship, ³disappearances´ of
dissidents, torture, and execution.

The shah showed his gratitude to US foreign -policy makers. During the wars of 1967 and
1973 between Israel and its Arab neighbors, the shah provided cheap fuel for the Israeli
war machine even as Arab members of OPEC decreased oil production and created an oil
embargo directed at the western nations, causing oil prices to quadruple in two months.
By 1975, as the world¶s second-largest oil producer (after Saudi Arabia), Iran was
earning nearly $20 million per hour. Much of this money went to the US as Iran became
the largest purchaser of American weapons.

In 1954 AIOC changed its name to British Petroleum. In 1959, BP expanded beyond the
Middle East to Alaska and in 1965 it was the first company to strike oil in the North Sea.
Today, the oil company that began in Iran has gone global. It has oil wells and gas
stations on all continents.

At $1 million, the counter -coup in Iran seemed like a bargain for the US. But was it?
Drawing a straight line from the overthrow of Mossadeq¶s government in 1953 to the
Iranian revolution of 1979 ²and perhaps to the events of September 11, 2001 ²we begin
to see Operation Ajax¶s ultimate cost in terms of money and lives. From 1953 to 1979,
Iran was a BP prison, polluted and poor, run with an iron fist by the company and its
puppet, the shah.

Now it is drilling offshore near the US in the Gulf of Mexico. Many Americans in the
region are beginning to feel the pain and outrage Iranians endured for 70 years²getting
a small taste of how BP goes Beyond Politics.

  

BP operates at the frontiers of the energy industry. We use world-class assets, technology,
capability, and know-how to meet energy needs and deliver long-term value.c

The ingenuity and determination of our people have brought new resilience to BP. From deep
beneath the ocean to complex refining environments, from remote tropical islands to next-
generation bio fuels± a revitalized BP is driving greater efficiency, sustained momentum, and
business growth.

  

BP wants to be recognised as a great company ± competitively successful and a force for

progress. We have a fundamental belief that we can make a difference in the world.

We help the world meet its growing need for heat, light, and mobility. We strive to do that by
producing energy that is affordable, secure and doesn¶t damage the environment.

BP is progressive, responsible, innovative and performance driven.

  

BP wants to be recognised as a great company ± competitively successful and a force for

progress. We have a fundamental belief that we can make a difference in the world.

We help the world meet its growing need for heat, light, and mobility. We strive to do that by
producing energy that is affordable, secure and doesn¶t damage the environment.

BP is progressive, responsible, innovative and performance driven.

à


 
 
ëc BP Bio fuels
ëc Gas and fuel cards
ëc Gas and petrol stations
 ëc Motor oil and lubricants
ëc Route & journey planner
ëc Gas and petrol station locator
ëc Target neutral - a non-profit carbon offsetting initiative
ü
 
ëc Liquefied Petroleum Gas (LPG)
ëc Solar powered energy


ü   
ëc Air BP
ëc ARCO Aluminium
ëc Aromatics & Acetyls
ëc Asphalt and bitumen
ëc BP Crudes
ëc BP Franchising
ëc BP Shipping
ëc Gas and fuel cards
ëc Gas and power energy
ëc Industrial lubricants
ëc Invoice tracking system
ëc Liquefied Natural Gas (LNG)
ëc Liquefied Petroleum Gas (LPG)
ëc Marine fuels and lubricants
ëc Natural Gas Liquids (NGL)


2   
 

$'
  à
 
BP¶s exploration and production segment accounts for eleven percent of BP¶s
total sales. Sales in this sector increased twenty-two percent from 2003 to 2004 mostly
due to increased production and higher oil and gas prices (BP 2004 Annual Report).
BP¶s focus in this area is to invest in large, lower-cost natural gas fields with a great
potential for a strong return on capital. In order to provide opportunities for growth, BP
has been developing new profit centers including ones in Trinidad, Angola, Azerbaijan,
deepwater Gulf of Mexico, Asia Pacific and Algeria (BP Online).
BP currently has three main strategies for the exploration and production sector.
BP believes it is imperative to search out new profit centers with large oil and natural gas
potential. They plan to explore these areas successfully and pursue the best projects for
development. BP plans to manage their producing assets by only investing in the best
opportunities and maximizing operating efficiency (BP 2004 Annual Report).
"    
 
Refining and Marketing is BP¶s largest operating segment, as fifty-six percent of
sales are accounted for in this segment. There was a seventy-eight percent improvement
in sales from 2003 to 2004 (BP 2004 Annual Report). In the marketing division,
competitive sales growth is maintainted by increasing investments and focusing on
operating excellence. In the retail business, BP has been expanding the number of sites
that carry the BP helios, thus promoting their new environmental friendly image (BP
Online). The refining business has had record performance due to the strong product
demand and availability of resources. BP¶s focus in the marketing division is to generate
customer value by providing quality products and offerings. They do this by offering
differentiated fuels at convenient locations.
BP has five major strategies for improving their refining and marketing division.
They plan to focus on refining locations where scale, configuration and operational
excellence can contribute to large returns. They plan to capture retail market share in
areas where BP has a supply advantage. They want to focus on automotive-related
markets, by leveraging the BP brand name and technology. BP wants to build strong
strategic relationships in the business-to-business sector (BP 2004 Annual Report). And
they want to enhance their strengths in emerging markets, particularly China.
à
   
Petrochemicals are chemical substances produced from petroleum in refinery
operations. BP production of petrochemicals mostly includes Acetyls, Aromatics,
PTA/Polyester intermediates, and Naphthalates (BP Online). BP¶s petrochemicals
segment resulted in a $900 million loss in 2004 (BP 2004 Annual Report). BP claims
this is due to higher exceptional and non-operating charges. In 2004, BP closed down
many of their petrochemical business that did not meet strategic and financial criterion,
and they continue to close down more of this business today. BP plans to divest this
operating segment enough so that is will no longer be required to report it as a separate
segment in the financial reports . More specifically, they plan to divest the Olefins and
Derivatives business with an initial public offering (BP Online).
The main strategy of the petrochemicals sector is to restructure this division. Less
profitable areas will be sold and higher profit areas will be expanded. The Aromatics and
Acetyis businesses will be integrated within the Refining and Marketing segment in
attempts to gain operational and organizational synergies (BP 2004 Annual Report). BP
will look for areas where they have a competitive advantage and will restructure assets to
these areas.
( )à! " !  
The Gas, Power and Renewables segment has four main revenue producing
business areas; liquefied natural gas (LNG), natural gas liquids (NGL), gas marketing and
solar. All alternative energy businesses are also included in this segment. This segment
accounts for twenty-six percent of total sales, and experienced a sixty-five percent
increase in sales from 2003 to 2004 (BP 2004 Annual Report). The largest sales increase
in this sector came from the solar business with an increase of thirty-five percent (BP
Alternative Energy Online). 2005 was the first year the solar business has been able to
achieve a positive operating profit (BP 2004 Annual Report). The strong sales growth in
the solar business was due to strong industry demand and becoming more customer
focused.
BP¶s strategy for this sector includes three main goals. To capture world-scale
market positions ahead of supply; to expand gross margin by optimizing the gas and
power value chains; and to provide original products to selected customers. Their final
strategy goal for this sector is to build a sustainable solar business and continue to grow
their renewable and alternative energy sources (BP 2004 Annual Report).


$ 

BP intends to invest $8 billion into this industry in the next ten years (BP
Alternative Energy Online). Recently, BP¶s main advertising campaign has been focused
on their renewable and alternative energy businesses. These include solar, wind,
hydrogen, and natural gas power. The following is BP¶s view on renewable and
alternative energy: ³We believe that solar, wind, hydrogen power and gas-fired power
technologies have reached the tipping point and that we can create a profitable, highgrowth,
global business in the course of the next decade´ (BP Alternative Energy
Online). BP has been taking many steps to try and become the leader in the alternative
energy market.
BP is currently one of the world¶s top solar power companies, and has entered this
market in 160 countries (Newswire, 2005). The company is marketing their solar electric
systems to residential and business sectors. To reach the residential customer, BP has
joined forces with Home Depot and is offering BP Solar Home Solutions, a complete
installed solar home power system that can be bought at selected Home Depot stores (BP
Alternative Energy Online). To reach the business sector, BP is advertising that their
solar products are ³[F]or companies that care about environmental stewardship, [and that]
switching to solar power is a logical fit, reinforcing company values´ (BP Alternative
Energy Online). BP also claims that solar energy offers companies the following
financial benefits: Cost savings, protection against rising energy prices, energy
efficiencies, revenue for solar power, and government incentives.
Wind power is a growing business for BP. It is currently the fastest growing
source of low-carbon power. It has grown twenty percent per year, over the last five
years (BP Alternative Energy Online). Wind is one of the most cost-completive regimes
in low-carbon power. In the right location, wind can cost less than conventional power
generators. Wind has the potential to provide about eleven percent of the world¶s power
needs (BP Alternative Energy Online). BP currently has two wind farms in the
Netherlands, and plans to grow their position in this industry.
BP is also working on hydrogen power as an alternative energy source. Hydrogen
power is a new technology that creates low-carbon electricity. Using hydrogen power as
a fuel produces virtually no greenhouse gas emissions and the main byproduct is water.
Hydrogen has the potential to generate large amounts of clean electricity using existing
fossil fuels. BP has the technology for hydrogen power and is working to develop and
commercialize this new clean energy (BP Alternative Energy Online).
BP is also making significant investments into natural gas plants. Natural gas is
the cleanest fossil fuel available, and it produces fifty-five percent less carbon dioxide
than traditional coal-fired power (Purdy, 2004). BP believes that ³natural gas is the ideal
lower carbon solution to help bridge between a world once wholly dependent on fossil
fuels and a future where renewables and alternatives are among the primary source of
energy´ (BP Alternative Energy Online). BP currently has interest in a series of gas-fired
power stations with enough generating capacity to power ten million homes. These
plants are located in the US, Spain, Vietnam, and South Korea (BP Alternative Energy
Online).




 

The competitors of British Petroleum are Shell, Chevron, and ExxonMobil.

 
 

The final value-creating activity is BP marketing and sales. The company

markets its oil and gas through its global retail network, which is primarily comprised of
its BP Service Stations. BP has excelled in sales due to its advertising campaign, which
markets BP¶s commitment to sustainability and cleanliness in the biotic community. The
company has re-branded itself, as to appear more green-friendly. It has done this by
changing its name from British Petroleum to BP, inferring but not asserting that it stands
for ³Beyond Petroleum´. The ³Beyond Petroleum´ campaign includes BP¶s new logo, a
green and yellow helios, which asserts the company¶s commitment to sustainability. No
other oil company has re-branded itself in the way in which BP has. Thus, the advertised
commitment to sustainability and green energy has created a competitive advantage for
BP.


à
  
 2àÔ 

 
 

 



The threat of new player entering into the renewable energy market is low.
Alternative energy industry is, by its nature, capital intensive industry and recoverability of
that cost is low at its current stage. Favourable government policy for existing players
also creates barriers for a new player in the market. However, this should not be
underestimated as the business climate and acceptability of alternative energies change.

2   !  
There are no definite suppliers in alternative and renewable industry by its
definition. Players in this industry will be in the mercy of its major supplier±nature.
2   !
 
Buyers of alternative energy also threaten the profitability of the energy providers,
but this bargaining power will be in the short-run, and will decrease in the long-run. Due
to current high capital requirement and geographical limitation of alternative energies,
players in the alternative energy industry will be dominated by consumers who are highly
sensitive to price changes and substitutes in the early stage. However, the continuing
evolution of technology in generating alternative energy and favourable political climates
will enable firms to gain control over the buying power of consumers.
 
 


 
It is premature to determine which alternative energy will dominate future energy
industry, but one can say with absolute certainty that fossil fuel based energy is the most
sought after and cheapest source of energy right now. No one can accurately predict
when fossil fuel domination will end. Therefore, fossil fuels pose as a significant
substitute to renewable energy.
" 
  '
 

 
Trends show that nearly every super-major oil firm recognizes that fossil fuels
will eventually be exhausted and alternative energy will become the way of the future.
Nearly all of them are investing large amounts of capital in developing alternative energy.
Firms in the energy industry not only use investment to position themselves as early
starters in emerging alternative energy markets, but they also use this market to promote
positive images of themselves. Due to geographical limitations, competition in the
alternative energy industry will come from whichever company successfully positions
itself to provide energy from the different sources of alternative energy.


!
 


Strengths

BP is ranked at the world¶s 3rd largest energy company and is positioned as a multinational oil
company headquartered in London that:
ëc Operates petrochemical businesses worldwide through the network of its subsidiaries and retail
brands(Amoco; ARCO; BP Express, BP Connect; BP Travel Centre; ampm; Burmah Castrol etc)
ëc Participates in London Stock Exchange, IPO in New York Stock Exchange. and is listed in the
FTSE 100 Index;
ëc BP Amoco strong brand loyalty for oil;

ëc Strong brand management driven by the µBeyond Petroleum¶ slogan.

ëc BO Q3 net profit increase by 83% due to record oil and gas prices. The indicator amounts to $53.43
per share compared to $21.27 during the same period in 2007.

Weaknesses

ëc Launch of controversial business with the Baku-Tbilisi-Ceyhan pipeline;

ëc Increase in petrol prices in the UK;

ëc Explosion of BP refinery in Texas that caused 100 injuries and 15 deaths in 2005;

ëc Criminal charges due to the spread of 270.000 gallons of crude oil in the Alaskan tundra in 2006;
ëc Toxic spill of 2,000 gallons of methanol in the oil field (Prudhoe Bay) managed by BP.

ëc Closing of Alaskan oil wells.

Opportunities

ëc 8 b. USD investment in the research of alternative fuel methods, including hydrogen, natural gas,
wind and solar over the forthcoming decade;
ëc Expansion of frontier areas suitable for BP¶s future reserves (post-Soviet Union territories);
ëc Extension of strategic oil and gas acquisitions in North Sea area;

ëc Launch of more flexible price policy to compete main rivals;

Threats

ëc Environmentally unsound policies due to oil and toxic spills;

ëc Occasional refinery explosions;

ëc Corrosion in pipelines;
ëc Competition from Shell and Chevron
ëc Ceasing operations in a number of potential locations with their further re-branding (Conoco);

ëc Sale of corporate-owned stations;

ëc More than 5.000 shortages within coming months;

ëc $66,71 per barrel creates considerable tensions for running oil business;
ëc Further lawsuits considering the company¶s ecological activities;

"    
)*    +
 

As BP is committed to research and development for the purposes of making their
oil and gas operations more efficient, the company can also shift many resources over to
alternative energy for the purpose of developing that business to its full potential. One
way in which BP could grow its research and development for alternative energy is to
continue to merge with or acquire alternative energy companies. One of BP¶s core
competencies is its ability to manage corporate culture and create a learning organization.
For this reason, it would be entirely possible for BP to purchase a smaller solar, wind or
hydrogen alternative energy ± producing company for the purpose of learning from this
organization. Knowledge from a company that specializes in alternative energy
combined with the global power and leverage of BP could create amazing synergies that
would greatly benefit the company.

( 
"


Similar to the need to work with governments in the field of oil and gas
operations, it is still necessary to work closely with governments in alternative energy as
well. With operations such as electricity production from hydrogen and natural gas, it is
still necessary to procure the hydrogen and natural gas. For this extraction, it may be
necessary to work closely with governments, especially in regions where private
ownership of resources is not allowed. BP already has a global network of government
relations managers that are employed for the sole reason of working closely with
governments. This management team can easily begin to persuade green-friendly
governments to create sustainable energy plants that use wind, solar or hydrogen. BP
must also work closely with governments in order to isolate energy demands so that it
knows where and when to build large facilities.

Environment management system

Wherever we operate, we will strive to minimize any damage to the environment arising from
our activities. In addition to fully complying with all legal requirements, we will constantly
strive to drive down the environmental and health impact of our operations through the
responsible use of natural resources and the reduction of waste and emissions. These challenges
apply to all parts of our business and to all facilities, plants, refineries and offices ± wherever
we operate in the world. Working to protect the natural environment and the health and safety
of the communities in which we operate is a core commitment of our company. For this reason,
the group reports externally on our environmental, health and safety record.

D" 
The elements of HR Strategy that form part of this backbone are:
‡ Operational Excellence (through value -added infrastructure)
‡ Business Partnering and Support (business-differentiated HR)
‡ Governance, Policy & Coherence (through small Corp. Centre)


   &

From the above details of both companies it is quite clear that the practices, philosophies, and
theories of both MNCs differ significantly.

Both are doing exceptionally well and are successful. There is always a margin for
improvement and both companies are facing some environmental issues like oil spilling
which they should control to save the atmosphere.

Both companies are market leaders in their respective markets.

Hence it is concluded that the international management of both companies is entirely

different from each other
Bibliography

1. www.bp.com

2. www.psopk.com

3. www.scribd.com