Introduction To Strategic Planning
For a company to establish itself in the market, it is important for it to have specified goals and objectives. It needs to frame policies and framework that is a part of strategic planning. Formulation of strategies is an important part of organizational planning. The present report is going to consider strategic management at British petroleum, a leading international Oil and gas company (Midttun and et. al., 2007). British Petroleum opened its trading functions as an Anglo- Persian company in 1909 that further developed into British Petroleum through various mergers and alliances and became British Petroleum from Anglo- Persian Oil Company in 1954. In present, it is at fifth position in the largest energy companies in world. It has its headquarters at London, England. It operates in various functions like exploring, producing, refining, distributing and marketing of petroleum and in generating and trading power. This report is based on understanding requirement of coordination between Corporate, strategic and functional policies. This study also involves a brief analysis of environment include STEEPLE analysis and prioritizing importance of those factors for British petroleum (Muralidhar, 2010). The final part of report is going to consider few recommendations that could be better for British petroleum and help in establishing a better strategic management.
Task 1: Compatibility between corporate, strategic and functional management policies
British Petroleum (BP) has risen in its position and achieved one of the top positions in Oil and Gas industry. This serves as reason to undertake study of strategic management on British Petroleum. British petroleum has been an excellent example of management organization that has reached a position of recognition in brands for Oil and petroleum Industry (Sadler, 2003). It has been actively involved in development of renewable energy. It has its operations in more than 80 countries and has its largest share in US market. Although company faces a lot environmental and safety suspects, it is increasingly working to support development of environment. It has well established information sources that prove that demands are going to increase in next decades and BP has been putting efforts to meet the expectations of the market and industry.
Strategic management requires a company to set several decisions and actions to achieve organizational goals (Sekhar, 2009). This involves formulating mission and vision that are statements of purpose and objectives. Further organization sets a definite structure and culture to support these planning and therefore helps company in achieving its set goals. For this purpose company carries out an environmental analysis that helps company in determining possible threats and opportunities and estimates resource requirements for company. British Petroleum is also involved in the same (Furlonge and Kaiser, 2010). The mission and vision statement of BP states to present a long term commitment towards achieving a strong customer base and emerge as an international company. It also aims at developing its technology as world’s best. Its long term vision is aimed at improving its performance continuously and setting a uniform growth of company in industry. BP relies very much on its employees and is dependent on them for its growth and improvement.
There are there levels of strategies that any organization considers and are also followed by BP (Salama, Holland and Vinten, 2003). The topmost hierarchy consists of corporate level that is responsible for important decision making and formulation of mission and vision statements.
The board members and directors of company are involved in corporate level. They are responsible to identify key competencies of their firm, employees and technology that can serve them to raise high in industry. These board directors of BP are involved in identifying strategic goals of an organization. British Petroleum’s strategic plans till 2020 are aimed at increasing its growth as an average of 2% per annum. BP also plans to improve and strengthen its potential to sustain its growth up to year 2020 (Freeman, 2010). The key sources of growth that are identified by company are expanding its deepwater base, gaining better expertise in development of its Gas plans and managing its large oilfields across the world. They are ready to adopt every latest technology that is possible. For this they require efficient planning to determine what can be done to proceed for these objectives. Also there is a requirement of analysing the environment and possible conditions that may pose threat to the company in achieving its set of objectives. They involve various people at lower levels to work upon, in order to achieve these plans. These goals and strategies are long term perspectives of organizations and thus involve making plans for future years that is a period of Five to ten years (Hitt, Ireland and Hoskisson, 2012). The corporate level managers are involved in planning key purposes for their organization and thus develop a clear understanding of these goals for employees.
The middle level or strategic level managers are involved in planning of tactics or plans. After understanding various key objectives both short term and long term, they analyse various factors and identify roles and responsibilities for people to make organizational plans. It is therefore necessary part of decision making. These managers at BP are key people who decide on the side of company where to invest and improve its operations in order to achieve set standards of performance (Findlater and Noel, 2010). These have an important role in translating typical business statements into smaller and SMART goals and objectives that are plans and targets to be achieved by these managers and employees in coordination. The upper and middle level management are interrelated as they are responsible to make a clear understanding of these goals and objectives in order to make sure that goals and mission are achievable and beneficial or not (Ibrahim, 2008). Also these managers create plans and analyse feasibility of plans in terms of availability of resources and funds from the organization that are useful in generating sufficient benefits and does not add to cost for company.
The lower or operational level is the most important part and parcel of an organization. They are a key to achievement of success in organization as they help in achieving organizational goals and objectives by their efforts and activities. The strategic level managers while making plans also divide these plans in terms of certain activities that are to be performed by functional management (Jeffs, 2008). These managers establish their own objectives and standards against organizational key goals and try to achieve them at their own functional level. The different functional departments identify their own role and responsibility for contributing to success of organization as a whole. While corporate and strategic level managers at BP focus on doing right things, functional level managers are focussed on doing all things right as to ensure effectiveness of their company’s policies. They are always action oriented and move forward in achieving numerous short term goals that are aligned to organization and ultimately are capable of getting their mission and objectives fulfilled (Harrison and John, 2013).
Task 2: Environment analysis of British Petroleum that may affect its policies
This aspect of report is concerned with analyzing environment of BP, and finding out what are factors that would affect the company most significantly. The environment here is analysed using STEEPLE analysis that is Social, Technological, Economical, Environmental, Political, Legal and Ethical analysis of an organization. It is helpful in determining the various factors of external environment that can influence corporate or functional level strategies.
Social factors: The factors of social aspect include several concerned with cultural factors that include a number of points. The increasing health consciousness among people is a key cause that affects company’s operations (Bryant and Hunter, 2010). The rising growth rate of population, distribution of age, attitudes, beliefs and culture of diverse people in society affect BP in its operations. As it is fact that petroleum or gas industry is harmful for health of people and so society and its people greatly protest such an operating environment with no safety of health ensures. Also the factors like ageing population are important as they enable company to outsource workforce that again increases costs of company (Sage, 2010).
Technological: The advancements in technology coming up day by day are reasons that enable BP to focus on technological factor also. These include continuous Research and Developments that are to improve efficiencies of workforce as well as operations. Automation in wok processes that is required in today’s scenario to be faster and accurate in productions. Also R&D determines changes that are prevalent in the technology and thus helps in determining various barriers for BP’s entry in new markets. It also helps in identifying gaps in technologies that in turn are responsible for its present position and lagging behind from its competitors (Pest Analysis on British Petroleum, 2010).
Economical: Economy of a country is greatly determined by its energy resources and supply. The energy markets are expected to increase in demand by about 60% and it is expected that most of its requirements would be fulfilled by Fossil fuels leaving behind nuclear and renewable energy resources. The factors like Economic growth, interest rates and inflation have a major impact on BP. The interest rates can affect firm’s capital investments and cost and may change extent to which it grows and expands (Honnungar, 2011). These factors can prove beneficial as demand for alternative resources in increasing and is expected to increase further that can prove as an opportunity for British Petroleum.
Environmental: The major threat to this industry is that it is a cause of pollution to environment that is harmful for the people as well as society. There have been new laws from government regarding environmental safety. Government has raised standards of pollution according to European Union. In 1992, The Kyoto agreement was signed that led to carbon funds and trading of emissions in Europe that had become one of legal requirements (Vassiliou, 2009). The depletion of environment will ultimately affect many industries like tourism, farming and insurance etc. Different cases of oil spills and refinery explosions have created a negative impact on BPs image that has further led the company to plan efficiently and take precautions to manage risk on the environment.
Political and Legal: The petroleum and energy industry has been facing higher politics since industrial revolution. BP requires having better relationship and compliances wit government laws as political environment has a direct effect on this industry (Bairi, Manohar and Kundu, 2013). BP needs to portray itself such that it complies with the laws and regulations of industry as well as all the environmental laws. Due to political instability in whole world threat to these industries is increasing day by day. BP also needs to ensure government about its reduced CO2 emissions as government is looking forward for more sustainable sources of energy now. Due to growing Oil demand in the market global markets are expected to raise their demands that are ultimately going to increase pressure of international trading between countries. The legal terms include more strict laws and regulations that are concerned with environmental safety and that affect the company in framing many plans. In case BP neglects any law or legal issue it has to suffer heavy losses in terms of money to be paid for damages (Doukas and et. al. 2013).
Ethical: British Petroleum has a set of defined rules and regulations that define a framework for complete organization to work under certain situations. The ethical policy of BP plays an important role to protect the organization and its employees. They have a well established code of conduct that is constantly required to be followed.
Significant ranks can be allotted to each of the factors of the above STEEPLE analysis that have an effect on British petroleum.
Task 3: Recommendations
The British petroleum has been excellent in formulating its strategies and plans and thus keeps in mind its mission and long term objectives to ensure effectiveness of the firm. Although it faces numerous environmental effects and requires establishing flexibility in its terms and policies to better facilitate company to save itself from its consequences. There can be certain recommendations related to economic and environmental issues that would help the company to comply with laws and manage its strategic planning efficiently (Vassiliou, 2009). These recommendations are ranked according to their importance for the company.
Developing better and clear standards and goals for performance so that the company can achieve its predetermined goals and objectives till 2020 as it specifies. These processes must have a clear understanding and involve all the activities ranging from Deep Sea drilling, testing for better performance and well capability to manage risks effectively. This recommendation is important as it covers all aspects of better strategic planning for company and therefore it will help it in managing flexibility in its terms (Muralidhar, 2010). These set targets would help the company to play better in industry and acquire a good market share.
It must also adopt a practical approach in dealing with the different environmental issues that it is facing. It must have well settled standards of health and safety of the people and environment and most importantly must ensure its enforcement (Salama, Holland and Vinten, 2003).
British Petroleum at the third level must also concentrate on its all stakeholders that will ultimately help it to cover interests of all sectors of business that a company must concern about. Under this it can manage to work on established standards that are set for the industry this will ensure better functioning of BP in whole industry and help in maintaining a level in its operations and achieve satisfaction of all its stakeholders (Bryant and Hunter, 2010).
The undertaken report is based on finding relationship of coordinating various levels of planning and decision making that is corporate, strategic and functional level. It includes a study of British Petroleum that is involved in Oil and gas industry and studies the structure of company that manages strategic decision making (Ibrahim, 2008). The other part of report is concerned with analysing environment that is necessary for evaluation of factors that can pose threat and influence strategic management. The final part of report is dealing with providing suitable recomanced strategic management system.
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