BP have been around for a long time, they specialise in the sale of petroleum to the public, but also have a wide range of several other goods and services, as they have diversified, to gain a larger market share. This is where most of BP’s income comes from.
As a PLC BP can sell their shares publicly on the stock exchange BP can raise extra funds relatively easily, since they have a lot of potential buyers of their shares.
BP can also borrow large sums of money in the form of loans, form banks. A bank is more likely loan a large company like a Public Limited Company, money, as they are more likely to pay it back. Banks would be very reluctant to lend money to small companies, such as sole Traders or Partnerships, as these companies could easily lose the money and declare bankruptcy.
In the case of a company not paying back money it borrowed, the lender has the right to sue the company for repayment of the loan. If the firm owes more than it owns, and cannot pay back it’s debts in time (insolvent). The lenders, providing it has permission from the court may have the right to sell the company’s assets, and in some cases, the personal assets of the borrowers to pay off the amount borrowed.
But there are a few rules that govern this:
If a firm has unlimited liability, such as a sole trader or a partnership, then the creditors may sue the firm for the amount it owes. This means that the company assets, and if required the personal assets of the person that owns the firm may be sold to repay the amount it owes.
If a firm has limited liability such as, a private limited company, a public limited company or a franchise, then the creditors are limited to taking only the company assets. Members are only liable up to the limit of their investment in the company.
If a firm owes more than it owns, and cannot pay back it’s debts in time it is insolvent.
In the case of a firm being insolvent, and cannot pay back its debts, a creditor can apply to the court for the firm to be wound up.
The owners of Plc’s are the shareholders who provide the money for the business, but do not take any part in the management. Management is left to the directors who don’t often own share. BP pays its shareholders dividends. This is like a reward for their shareholders, it is paid quarterly. Last year BP paid its shareholders 13.791 per share, a very big margin from the 1996 figures. In 1996 BP was paying its shareholders 9.750pence per share.
Shareholders usually elect about 10 representatives to sit with the board of directors. The representatives the shareholders and attend the meetings in which they vote against the directors’ recommendations or vote out any particular director on behalf of the shareholders. Even so this hardly ever occurs, as the representatives aren’t professional in this field.
Eighty percent of the shares in BP are held by organisations such as pension funds and insurance companies. BP also try to encourage their employees to buy shares.
It is the element of shares that also make public limited companies relatively easy to be taken over by another company.
A company that are interested in taking over another company must have a lot of shares in the company already, and then they must also make it clear to the current owners that they want to take over the company. Offers will be made by the external company to buy the necessary amount of shares needed to take over the company, but the owners who may or not be willing to sell their shares, the company will then raise the cost of the company shares they will be getting as much as they can out of it. Normally when people see the cost of sharing rising they decide to buy them, as they feel it might rise a little more, for them to make a little profit out of it.
With all these advantages, there are also disadvantages, the disadvantages is, if a major shareholder, holding a lot shares in the company decides to sell them, it might scare other shareholders into selling too, causing a chain reaction, and making the price of the share plummet. This cause the value of the company to fall, and can really cost the company millions, and in some cases billions of pounds.
Additionally, another disadvantage is, the more shareholders, the more risk you have of losing your company to them.
Sole traders and partnerships don’t need to bother about shares, and companies taking over. Any external entity want to buy a sole trader or partnership company, must have the permission of the owners before any deals are made.
When accompany takes over (known as acquisition) or merges with another company, it first gets larger, as there are double the amount of employees etc. But then it streamlines, or shrinks in size, as the double functions are got rid of, many people do lose their jobs in the process.
A merger is similar to an acquisition apart from the fact that it is the joining of two equal companies. An acquisition is when a larger company takes over a smaller company.
BP recently merged with Amoco, and made acquisitions of two smaller companies, ARCO and Burmah Castrol. When a merger takes place, the name of the companies is usually changed as you can already see from BP and Amoco’s merger which changed their names into BP Amoco.
Bp, just like any other Plc, makes millions of pounds a day, and has several different branches and head offices around the world. But this simple fact could pose a major problem to any company, as there will be so many managers and offices, it can be difficult to communicate policy decisions effectively. That is why in a large organisation like BP, appropriate communication methods, is absolutely vital.
One of the ways BP practices this is by electing team leaders every month out of the employees, to help motivate other colleagues to certain goals which are set monthly.
Other advanced communication methods will be discussed later on in this report.
BP makes a high profit, and a lot of it goes back onto the company. Big advertising campaigns would be a frequent thing for BP, as they are Intertional Company, and need to get their image across the world.
Last year BP ditched their shield logo for a new logo based on the Helios mark, with the letters ‘bp’ in lower-case type. And on this logo alone BP spent well over $45 million to create it. BP is now spending a colossal amount of money to redesign and rebrand all of their service stations around the world.
Bp employ about a million people world wide, and have to pay each and every one of them salaries or wages. Money must also be spent on safety precautions for the employees, this runs into millions of pounds.
BP also has a lot of external entities they owe money to. Example is the government, separate companies etc. these debts probably amount to hundreds of millions of pounds.
As well as being a public limited company, BP is partly a franchise, as it lends its name out to small private owners. BP’s only concern with its franchises should be monitoring its performance, keeping it up to date with the company corporate image, and selling products to it.
BP splits itself into different companies, which deals with different areas, one of these smaller companies, is BPconnect, which deals with the franchises.
Chapter 3.3
BP’s FRANCHISE
A Franchise is not just the lending of a company’s name, it is also the granting of one company to another company, the right to supply its product or/and service. A franchise agreement is made by contract, and can only be held for a limited period of time. The franchisee must pay the franchisor royalties for the right it has been given.
Once the agreement has been made, the franchisee is entitled to the logo, motto and right to supply the franchisor’s product or/and service, the franchisee must also keep the franchise’s corporate image.
The franchisor supplies things that are needed for the running of the franchisees can only buy its supplies of the franchisor itself, or off registered suppliers.
The franchisee does not need to choose the business, as it is the responsibility of the franchisor. But the franchisee is responsible for the employment.
If the franchisor is unhappy with the performance of any of its franchise branches, that is there is no profit coming in from a might be unlawful if it is within a two year span. It all depends on the type of agreement made.
In some cases, franchises are used as launching ramps, to help shoot off another company. Once the contract agreement is over, the franchisee ditches the franchise name and image, and starts her own new personal company name.
Franchises are under the limited liability act, and owners can only lose what is invested in to the company.
The fact that BP lend out their name to different individuals, mean they have to be extra careful. To avoid silly embarrassments, BP frequently organise quality checks for ach of their outlets, to ensure everything is up to standard and no individual outlet are soiling their name.
BP earn about $6.4billion a year, with about 27,000 service stations around the world, 15,500 of those being in the USA. To be able to maintain such business performance, and to hold unto their market share, BP can’t afford to slack. New objectives must be set, and if need be, aims revised and changed to fit the new schedule of work, for the company.
Aims and objectives are similar to each other; aims are the general direction of the company. Objectives are targets designed to meet the aims. A business can succeed in its aims through the achievement of its objectives.
Chapter4.1
BP’s OBJECTIVES
After BP’s merger with Amoco, new objectives had to be set for the new structure of the company
BP believe that to be effective in their line of business, targets and objectives must be,
Challenging but achievable.
Enduring but responsive to change
Enduring but responsive to change.
Clear and unambiguous to all, both within and outside the company.
Agreed and accepted by all whose performance is measured against them.
Capable of measurement yet encompassing aspects that may not have a clear financial or operational benefit.
Capable of delivering the company’s long term strategic and performance goals.
BP being such a large company also has influence on the things around them, like the environment. So they must take them into consideration. BP will not have time for the type of objectives a sole trader would have, BP’s objectives will have to cover more areas. Whilst a sole trader’s objectives would be more centrally based on making profit and surviving, BP would have to be more open-minded, and think about making their customers happy, no matter the circumstance, and also looking after the environment. BP have to be very careful in the actions they decide to take, as they are very much under the public eye, and can easily lose a lot out of carelessness.
This is BP’s main aim:
“To get the right product to the right customer, at the right price, in the right place, and at the right time as efficiently and profitably as possible.”
Here are a few of BP’s objectives for year 2000:
To play a positive role in society by making a distinctive and constructive contribution to the communities in which it operates.
Increasing involvement in solar energy.
BP will:
Consult, listen and respond openly to customers, neighbours and public interest groups.
Work with others- partners and suppliers, competitors and regulators- to raise the standards of the industry.
Openly report its performance, good and bad.
Recognise those who contribute to improve HSE performance.
Drive down the environmental and health impacts of its operations by reducing waste, emissions and discharges, and using energy efficiently
BP’s health, safety and environmental (HSE) goals are simply stated- no accidents, no harm to people and damage to the environment.
Following today’s trend, towards larger service stations selling greater volumes of fuel and offering more facilities (especially shops) to motorists.
Providing customers with the best service, by training their staff.
Maintaining a high level of communication between operating activities and business units.
Analysing strengths and business units.
Analysing strengths and weaknesses, so as progress in their business performance.
Developing better and reliable means of energy for their customers (diversifying).
Chapter 4.2
BP’s OBJECTIVES AGAINST S.M.A.R.T
Most large companies usually measure up their objectives to meet the SMART criteria.
SMART is an anonym that represents: Specific
Measurable
Achievable
Related
Time framed
Specific
BP’s objectives should be linked to the aim, and meaningful to the stakeholders.
MEASURABLE
The changes that the objectives bring about must be measurable.
ACHIEVABLE
The objectives must be realistic in setting measurements and timelines.
RELATED
The objective must push the BP towards its goal.
TIME-FRAMED
Objectives must be sub-divided in time, so they can be checked. Like a check point.
Chapter 4.3
HOW WELL BP ARE MEETING THEIR OBJECTIVES
BP has set out to meet their objectives by purchasing the Solarex solar energy corporation for $45million, not only increasing their involvement in solar energy, but putting them above the rest of their competitors as the largest producers of solar energy.
BP has now diversified into natural gas, supposedly the cleanest burning fossil fuel around, which means environmental problems will be decreased. BP are now said to also be the global leader in production of the fuel.
Oil and Gas fields have discovered
BP invested $400 million in a Chinese company called Sinopec Corporation. Agreements were the company to revamp or build 500 new service stations in eastern china. Thus providing more jobs for the unemployed and offering more facilities to motorists.
BP are now supporting research and investing in hydrogen fuel cell technology, which in the long-term holds the promise of anon-polluting alternative to our current reliance on fossil fuels.
BP seems to have worked very well to meet their objectives. Looking at their finance reports, its seems they have made a lot of profit, compared to figures of the previous years.
Different departments (functional areas) in BP would deal with the objectives in their own way, but on a whole, all the objectives must be achieved. Management will ensure that the functions operate smoothly, and in a co-ordinated manner, to achieve the objectives.
Following the tragic events of September 11th, BP have found themselves in a downward spiral, although they have made claims that state they were immune from the events, it is obvious they and the industry is slowly sinking.
BP have reduced their petrol prices by a penny, selling at 76p per litre (Guardian unlimited ‘01, 25 Sept). This move comes after fears that military conflict breaking out would disrupt oil production.
Chapter 4.4
UNDERSTANDING BP’S BREADTH OF SUCCESS
BP has met most of the objectives they set themselves, over the past years. The recent mergers and acquisitions that have taken place have been very beneficial, raising them above the level of most of its major competitors. An aim BP have recently set-up is also to dominate the world, as the world’s largest single oil company.
Chart of BP’s growth in recent years
BP are now embarking on a scale operation, called Northstar. This operation is to create an offshore production oil field in the Arctic Ocean. This will be the first of its kind in such harsh conditions. John Browne wants to spend $4 billion to open up new oil fields in the Artic.
BP have operations in more than 100 countries in six continents, their Oil and Gas exploration takes place in 29 countries. BP now has 150 business units strategically placed around the world, to meet certain performance targets.
After the merger with Amoco, BP’s financial results have improved, profits more than doubled in 2000 to £9.8billion. Cost savings from the acquisition of ARCO amounted to £1.4billion. Return on capital employed, an oil industry benchmark of efficiency, rose to 25% in the fourth quarter, from 17% in 2000.
It is true BP is a successful company, especially when it comes to meeting their objectives, but there a few external organisations who feel BP are doing so, unfairly.
Although BP had reached a £14billion record breaking profit, the city were unimpressed, as BP only managed to attain such profit, by raising petrol prices ridiculously high (independent ’01, 11th April) and (independent ’96, 11th April).
Germany’s federal cartel vowed to block BP move to acquire Veba Oil, the owners of Aral, who in turn are Germany’s biggest petrol retailer. The acquisition would give BP 25% of the German Market (Guardian Unlimited ’01, 30th Nov).
BP’s new investment in Tibet is under fire, as it is such a poor country, and BP’s presence there could leave a lot of the inhabitants homeless. (Independent on Sunday “1, 22nd April).
Corporate Watch, a watchdog organisation, clam:
- BP Amoco spent 588 times more on buying the oil company ARCO fro $26.5 billion than it has for Solarex.
- BP Amoco spent $100 million, more than double this solar investment on legal/advisors fees buying ARCO.
- BP Amoco has stated that the merger company will spend $5 billion in the next five years on exploration and production in Alaska up from the combined $4.5 billion that the two companies spent in the past five years.
- For every $10,000 BP Amoco spent on oil exploration and development in 1998, $16 was spent on solar energy.
Chapter 5.1
FACTORS OF PRODUCTION
All businesses have what you would call, ‘factors of production’. These are a series of resources that are utilised to produce goods or services. The resources are divided into categories known as the ‘factor of production’.
I will list a number of factors of production;
LAND
This is everything on or under the earth, such as coal, rivers seas, and other natural resources. It is more or less, natural resources that are to be extracted and used.
LABOUR
This refers to the people that produce the goods or services in a company. It is the people that provide the physical or mental work.
CAPTIAL
These are the things that help to produce the goods or service, such as machinery, offices, factories, etc.
ENTERPRISE
These are the people who have the ideas, experience, and are able to bring together the other factors.
These are the four basic factors that all businesses have.
For an effective turnover in production, the firm have to consider the way in which they are going to combine the factors of production to obtain the right balance. To certain the right balance, there has to be a factor the company are going invest in more, as it is suited to them.
The costs of employing factors of production are:
LABOUR = wages
LAND = rent paid
CAPITAL = interest
ENTERPRISE = profit
BP obviously also has its own factors of production that it has to think about. All these are combined into the different functions to the company.
Chapter 5.2
BP’s FUNCTIONAL AREAS
There are 6 different functions in BP:
Board of Directors
Exploration and Production
Refining and Marketing
Chemicals
CFO
Regions and Policies
Each function consists of different jobs which must be completed, but all still work towards achieving the same objective. I am going to run through each of these functions, briefly explaining the part they take in BP.
BOARD OF DIRECTORS
The board of directors (BoD), the bodies that represent the company, are set up primarily to represent the interest of the shareholders. The bod consists of six managing director including the group Chief Executive (GCE), and eight Non- Executive Directors, including the Chairman.
BP’s GCE John Browne BP’s chairman, Peter Sutherland
The BOD’s tasks are:
- To understand the shareholders’ requirements and be accountable to then for performance,
- To set directions, goals and Executive limitations,
- to monitor the performance of the executive against the Board goals and executive limitations,
- To maintain the Board-Executive linkage.
As you may have already noted, the BoD are split up into Executive, and Non-Executives. The Executives are the ones that are actually responsible for the proposal and deliverance of goals, in reality, they run the company.
The Non-Executives, represent the Board to the shareholders, ensure the integrity and effectiveness of the Board Governance process. The Non-Executives don’t run the company, but they make sure that everything is running smoothly in the company, setting up meetings when required. There are two head figures in the divisions, the Group Chief Executive, and the Chairman. The GCE is mainly responsible for the Executive tasks. The Chairman makes sure the Board-Executive Linkage through the Group Chief Executive is operating effectively, the chairman is mainly responsible for the Non-Executive Tasks.
EXPLORATION and PRODUCTION
BP, being not only a secondary company, but a primary one too, doesn’t really have to look for suppliers of their raw materials as they have their own department that deals with all of that work.
BP have teams that travel across the world as representatives, in search of natural resources, that may be of any use to BP, such as oil fields. If the representatives find a wanted site of natural resources already owned by another smaller company, to offer some lucrative deals. On the whole, Exploration is an upstream function that searches and extracts oil and gas.
Once the raw materials have been obtained they are sent to production that must process them into a usable state that would benefit the customers that will purchase the goods. The method in which the raw material will be processed must be put in mind, as production needs to be very quick, with quality in mind. This is also the main area where the factors of production must be well considered, before any production style may be employed.
BP manufacture petroleum products, the manufacturing process will have to be controlled in a strict manner to keep to production targets. BP develops new techniques by developing modern technology.
The Exploration and Production function is split in two, there is the primary side, and the secondary side. It is very rare for a company’s function to be split in two, in that manner.
REFINING and MARKETING
This function of BP concentrates on customer satisfaction, it is not just about selling and advertising. BP’s marketing Department must try to match the Product to customer needs, determine its Price, decide where and how the product or service should be placed or distributed in the market, and also think about its Promotion through publicity, advertising and sales technique.
As you can see, emphasis is put on the four words, product, place, promotion, and price, these are called the ‘4 Ps’. These are the four things every firm have to consider for their marketing strategy.
- Product, to help customers recognise buy and recommend a product to someone else. It must have an image that is different from its competitors. It has to be differentiated by the creation of a brand image.
- Place, is deciding on where and how the product should be distributed and also keeping the costs of distribution down to a competitive level.
- Promotion, is telling customers about the type and quality of product or service available and to ensure they use it.
- Price, is a promotional tool, but is also the main source of income to a firm. If prices are lowered for promotional purposes, the cash flow within the company, and its long-term profitability, could be affected seriously.
Marketing is also the function where lots of research and investigation is paramount. A Swot analysis is a simple, subjective tool for gathering information on the four Ps, it stands for strength, weaknesses, opportunities and threats. The SWOT is not only used for marketing but is mainly for the company as a whole, in which all functions must take part in.
The process which converts crude oil into the hundreds of invaluable products we make use of is a downstream function called ‘refining’ and takes place in an oil refinery. BP has lots of oil refineries around the world, which require a lot of energy to produce the products from the crude oil, which the world needs. The fact that BP’s oil refineries use up a lot of energy means that a lot of waste products and emissions are produced, which have an BP put much effort into making sure that its activities have as little effect on the environment as possible. BP have reduces the amount of energy its refineries use to make products.
CHEMICALS
This is the function where research and development of oil takes place. BP need to able to improve on its products, making them more efficient, and environmentally friendly. Experiments are carried out in BP’s own laboratories, new products that can boost petrol performance are also invented and produced in these labs. The chemicals department manufacture and market chemicals.
Since the merger with Amoco, cost reductions have been applied, and production in this department has risen by 6%. This entire taking place in 1999.
FINANCE
BP being a limited company will have to produce their financial statements for the government, the finance department deals with this part. Finance also deals with the payment of wages and the company’s managing account, this is the account that helps to tell compared with the budget that was prepared earlier.
Generally, all Finance really deal with, is the money aspect of BP.
REGIONS and POLICIES
This is the department that deal with ethical conduct, the hiring and firing of employees, and health safety, and environmental issues.
Human Resources is part of this function, this is where employees are either hired or fired, it also responsible for staff training, and development.
Chapter 6.1
MANAGEMENT STYLE
For any organisation you find management is compulsory, the main role of management in a company is to plan. Organise, direct, and control.
- Management must set objectives, and makes plans that will help achieve the objectives
- Management must set up structures and procedures that will help make output better, therefore meeting more objectives.
- Management must co-ordinate the work force and direct them in what they are doing
- Management must also control activities taking place, this means monitoring and measuring what is being achieved.
Ultimately, the aim of management is to motivate employees to meet the objectives of the company. But different companies use different managing styles, the type of management could also determine the managing style adopted by a company.
There are three different styles of management. These are, Autocratic, Democratic and Laissez-faire:
AUTOCRATIC STYLE
This is where the management makes most or all of the decisions and all the power is in his/her hand.
DEMOCRATIC STYLE
This is where the management relates more closely to the group and also gives them a greater say in the decision making.
LAISSEZ-FAIRE
This where the group works independently of the manager and simply calls upon the manager as a resource when needed. The management more or less tells them to get on with it, but there is a risk with type of management as it could lead as it could lead to non-leadership.
BP’S MANAGEMENT STYLE
BP claims they operate under the democratic style of management, but I still think they are more or less autocratic, as there are too many employees that work under them. It would not really be an ideal idea, for BP to seek advice from the lower levels of management.
Chapter 6.2
ORGANISATIONAL STRUCTURES
Businesses are structured in different ways according to the way they operate, and according to their culture. An organisation’s structure can affect the way it works and performs. Even though an organisational structure can affect a lot of things in a business, the market in which the business operates in can mould and shape the organisational structure that develops in the business. There are three different types of organisational structure:
Hierarchical,
Flat,
Matrix
HIERARCHICAL STRUCTURE
A hierarchy is a series of levels of people, each level controlled by the level above it. An organisation with a hierarchical structure includes different levels of authority and responsibility. The hierarchical structure is in most cases much taller than the other structures, and can be used by companies which own thousands of employees. The hierarchical structure can be viewed as a pyramid, because the lower you descend down the pyramid, the larger number of staff you are likely to find employed. Each horizontal level of the structure represents a step in the level of importance and responsibility of the staff.
As the top of a hierarchical structure, you will usually find the managing director, who communicates company policy. Then you would find the other directors, who are responsible for making decisions affecting their own functions. After the directors come the managers, who carry out or delegate their director’s decisions. The next level would be the supervisors who are in charge of the day to day running of the functions. And at the bottom are the productions, administrative and support staffs, which carry out the day to day work of the company.
Communication within a hierarchical structure goes up and down. Policy decisions decision taken
At board level by the directors are communicated downwards, within the pyramid. The directors instruct the relevant managers to see that the policy is carried out, the managers brief the supervisors, and the final stage in the process is the communication between the supervisors and the lower staff.
Communication can also pass from the bottom, upwards. Staffs provides feedback to their seniors, this usually takes the form of complaints. A disadvantages of this structure is, only in extreme circumstances is it likely that an issue from the bottom of the pyramid will pass right back to the top for consideration and decision. As an organisation grows, it is obvious that the communications have much further to travel, but as a organisation develops their communication methods should also develop alongside.
A company that uses the hierarchical structure is very likely to have a autocratic management style, as the most appropriate. A democratic or laissez-faire management style in which the employees got to choose how they wanted to run the company, or got to do whatever they wanted would cause chaos within the company. The companies that use the hierarchical structure are way too big for slip ups to occur, so direct control must be initiated to achieve any progress at all.
Example of a hierarchical structure
BP’s overall structure is likely to be considered hierarchical than anything else. Even though BP claim to have flattened out their structure, but it is obvious they are still operating under the hierarchical influence.
BP has many levels of management, ranging from chairman, to the many business units, and from a managing director of a department, to an managing assistant.
Downward communication is always received, but upward communication is usually much harder to receive, the higher it is meant to go up.
FLAT STRUCTURE
A flat structure is horizontal in shape, and generally has a single level of management. Except for the smallest organisations, very few will have a fully flat structure. A company would opt for a flat structure if they wanted to avoid a cumbersome hierarchy, and keep management levels down.
A flat franchise is an example of a flat structure. There aren’t many levels of management. The employees are very close to the managers, and at the most, there would only be three levels to the flat structure:
- The owners of the franchise.
- The managers.
- The staff under the managers.
Upward communication from the lower staff to the managers or owners can be direct and quick too. Also, more opinions from the lower staff are more likely to be considered.
MATRIX STRUCTURE
Another form of structure is the matrix. It operates in two directions, to the project management, and to the departmental management. Sometimes a company will find that it to operate more effectively it has to remove people are then placed in teams, to work on different projects. The people that make up this structure are usually expected to get on with their work with minimum control.
BP is a very large organisation. It is also split into many different parts. Although it is difficult for the whole company to be summed under any one organisational structure, the smaller companies within it can be. BP tries to make they seem to the public, that they now have a flatter structure all-round, but that doesn’t seem to be accurate.
BP has 150 business units in which it operates through, each of these units are made up of small number of small number of people. The individual units specialise in a specific area of BP and are assigned with different projects to work on and complete on their own. The business units use the matrix structure to operate, and they are also under the laissez-faire management.
Although the business units are designed avoid authoritative management, business unit leaders, and managers are designated to each unit. The business units report primarily to the GCE.
Chapter 6.3
FACTORS FOR MEETING OBJESTIVES
This part of the report shows how BP’s organisational structure, culture, and management style affect its performance and help to meet its objectives.
BP has changed from what it was 3yrs ago. The mergers and acquisitions have ensured this. After the merger with Amoco and the acquisition of ARCO, more than 14,000 people have been kicked off the workforce. A process of getting rid of duplicate functions to increase efficiency in the company (Independent ’99, 2nd April). The restructuring in the company has been criticized by many, because of BP’s overall management still remains very efficient. Employees are encouraged to get involved in the company’s activities, such as buying shares. BP also set up programmes and targets for their employees. BP’s employment policies and practices include specific requirements for compliance with the law and for selection, training, placement and advancement of employees on the basis of merit. This can help introduce a feeling of individuality to the workforce, thus increasing staff performance and helping them meet certain goals.
The different areas in BP have different structure that they work with BP’s business unit’s work with the matrix structure. This is best suited for their tasks, as they are specifically distributed around parts of the world. It would not be easy to monitor their every move so they are left to carry out their tasks. A group of business units with related tasks usually meet up periodically to review common issues. The meeting up of peer groups helps to eliminate central decision making, and also serves as a effective method of transferring experience across business units.
The responsibilities that each business unit have in common are:
- Business performance/results
- Creating strategic options
- Aligning and empowering people at all levels
- Specific and implementing integration priorities
- Supporting and implementing integration priorities
- Supporting and implementing priorities set by executive management
- Delivering assurance as determined by regional directors and the CFO
Chapter 7.1
QUALITY CONTROL
BP devotes a lot of individual relationships, management processes and strategies to understanding and meeting the needs of customers. BP uses a range of different market research techniques to obtain data on how it is perceived by customers and opinion formers around the world. Focus groups, and one on one interviews are held, to collect in-depth feedback.
In year 2000 a global brand-tracking program was carried out in 27 countries. BP had to do this to understand their brand’s strengths and weaknesses and identify whether they were meeting the needs of customers.
All of BP’s oil products are tested at refineries to make sure they meet manufacturing standards. Further key tests are done elsewhere to ensure quality. BP is governed by its ISO 9002 accreditation, which means it has protocols in place to meet the international standards for quality for quality management.
Another quality insurance technique that BP uses is sending fake customers to their service stations. BP calls the fake customer, the ‘mystery motorist’. The mystery motorist is to look at standards on the forecourt that is, checking whether the station is well lit, whether the station is in good conditioned, health and safety hazards etc. the motorist is also assigned to look at standards of service are also checked. These are mostly based around the staff, behaviour, appearance, and knowledge. Ultimately, through the surprise visits, BP produces league tables of service stations district by district. The top sites are reward and the worst expected to improve.
BP’s merger with Amoco and acquisition of ARCO and Burmah Castrol has helped them to increase efficiency and quality. This was achieved by scrapping duplication of functions. The disposal of non-core assets has also helped BP to reduce costs and maximise revenue. Focus is now being placed on the activities and geographical areas where BP has a competitive edge.
A major factor in the quality that can be attained by any company is actually the employees. As employees are hired, they should be inducted into training schemes, which would be a crucial part of their development, and would help them to improve their skills and capabilities. As learning company, BP see development as part of a programme covering a whole career in the company at whatever level of seniority the employee may reach. BP’s development techniques involve on-the-job experience, discussions with line managers, and coaching. These help to identify and improve various skills. Additionally, BP are now using their intranet to allow employees to view what training courses are available and applying for them. As well as training courses, assessment programs are carried out to identify the high potential employees.
BP have 150 business units, each focused on an asset or market and each of which is charged with meeting rigorous performance targets. Each unit is given the freedom to decide on which organisation it will use to meet these targets.
The business units are put into four major operational business areas:
- Exploration and production
This ensures the business units are uninterrupted in their focus on quality.
Peer groups are also set up. This helps transfer relevant knowledge and experience, across different business units
BP is increasingly making use of e-business to improve quality and customer service and reduce costs.
Information technology is increasingly important, especially in transferring information globally and enabling people with BP to share best practice. BP has also set up electronic workrooms called HIVEs (Highly Immersive Visualisation Environment). These rooms give teams of people the capability to manipulate data and pictures of oil reservoirs and give them a rapid and common understanding of something they will never see. New drilling technology now means that BP can now explrore for oil and gas offshore in water depths of more than 2,100 metres. (Independent ’00, 12th July)
In recent years BP have ‘outsourced’ a number of services. Outsourcing is when a company hires another company to supply it’s services for the daily running of the business. This can help increase efficiency in a company, as concentration can then be placed elsewhere.
Since 1991, the development, production, marketing and distribution of BP’s publications for education have been contracted out to a company specialising in producing materials from industry for education. To avoid scrutiny from others BP will seek to influence partners such that the joint operation adopts similar commitments. BP is now trying to develop closer partnerships with its suppliers, so that both BP and its supplier can combine skills for greater effectiveness.
One of BP’s most recent outsource deals was with Pricewaterhouse
Coopers in a $ 1.1 billion 10 year deal. The transaction being made in 1999 was to transfer much of BP’s U.S accounting and back office operations to Pricewaterhouse Coopers.
A very important factor in quality control is how gets its products to the customer. Different transaction methods must be used to get products to their different destinations on time, and in good condition.
BP uses a variety of methods to transport its oil products, BP uses:
Pipelines,
Road,
River,
Rail,
Sea,
Canal.
Each method of transport is used for the different types of journeys the product is to make, e.g. overseas destinations can be transported via pipelines, or the sea etc, during the journeys, the state of the product should be maintained as much as possible.
Chapter 8.1
USE OF ICT
For any large organisation, communication will be paramount, organisations will need to be able to communicate effectively with staff at all levels for it to function smoothly and efficiently. Communication outside of the company is also overly important. These two communication areas are called external and internal communication. Within these, are several different methods in which communication can be carried out.
BP have a modern, and also a traditional approach to communication.
Modern techniques include the World Wide Web, video conferencing, and mobile phones.
BP have internet site, which they use to communicate information externally. The World Wide Web has made possible new ways for a business to communicate with its customers. BP’s have a ‘brochure’ site, it is simply another way of promoting its image.
Electronic Mail is used for sending messages. It proves a more conventional method of communication than sending a hand written letter, or making a telephone call. As the email has been composed, it can be sent to a destination, and received almost instantly, no paper is required either. BP frequently uses email to communicate with outside organisations.
An even quicker and more reliable method of communication is via video conferencing. Communication through a video conference is where two or more groups of people can communicate using a computer with attached video cameras, microphones and speakers. The audio and video signals are carried over the internet for real time display as the meeting takes place. The participants of the meeting can see and hear themselves at the same time. BP does use this method of communication not just with external entities, but within the company too. Video conferencing is used for long distance meetings, when people who to partake in a meeting a too far away, they video link comes into play, to avoid the long distance that will have to be travelled.
Mobile phones today, are the most popular and mostly used form of modern communication. They can be carried, and can communicate from virtually anywhere, BP use all types of phones for their communication i.e. Land phones, facsimiles, and mobile phones. Apart from voice transmission, mobile phones can be used to transmit text messages and those that support WAP (Wireless Application Protocol) can be used to access internet services.
Traditional methods BP use for external communication is advertising. Advertising is a means of communicating a product to the customer. It can also communicate a company’s image. BP advertise on the television, and on billboards, they also use brochures, and articles in the newspaper to boost their image.
Letters to inform the shareholders on BP’s performance are also sent. If people keep their share rather than sell them, this keeps the share price higher, and the overall value of BP higher. This makes it cheaper and easier for them to raise money for investment. By sending the shareholders lots of information in the post, which is favourable to BP, and suggests they will be a good company to the owners, BP is using traditional external communication to meet its overall objectives.
Another area of communication is the internal side. This is the communication within the company. Memos, agendas, and letters are usually used as a form of communication, between the staff.
More modern internal communication methods involve LAN (local Area Network). This is the installation of a network for all the computers in a small area. All the computers are linked together in a network, and are sharing the same information. It is not exactly the LAN that provides the communication. A MIS (management Information System) has to be integrated into the network. A MIS is designed to make useful management information, it is available to anyone with access to the network. For security purposes, passwords are required to access the networks.
Additionally there is the intranet. If BP ha `ve a LAN they will have an intranet, which is a sort of private internet within the limits of the LAN. The intranet provides useful information and website links to the employees with access. Employees are usually familiar with the web, and require little training to access the resources they need on the company intranet.
BP might want to practise the use of Emails rather paper based letters. Emails would be sent to staff on any issues that may arise.
CONCLUSION
This business report is created mainly from extracted secondary information, mostly provided by BP. To avoid a bias evaluation of BP, and to keep the report balanced on different opinions, information is collected from other sources. Wherever appropriate I have related the evidence to the theory as set out in the textbooks.
This report handles the different subjects of BP sequentially. Each subject is presented as a chapter, and additionally, a sub-chapter. You will have found as you delved into this report, the overall picture of BP became clearer.
All the different issues that may cloud BP have been evaluated carefully, and with an open mind. These are the main points: BP is amongst the world’s largest companies, so it has to be judged from all areas that surround it. It can not be simply against doing good things, but from what we expect from such a prominent organisation. This business report includes the history of BP, which shows how BP got to where it is now. As well as the past, the report looks into the future too.
BP is not a easy company to judge, as it is constantly changing. Every time it acquires a new company, or merges, it takes on a different shape. An example of this is in the change of objectives in 2001, where they state that they should be judged by whether they grow fast in the future.
Fluctuations with companies like BP are the norm, as oil prices rise and fall all too frequently. But this is only in the short term. Over the long run there is more stability. After the tragedy of September 11th, BP has been going through a difficult period, there position in the next 5 years is under speculation, as rumours of the world’s largest oil company, Exxon Mobil going bankrupt have surfaced.
This report is roughly 50 pages long, therefore it could not cover all the issues of BP, even the things covered in this report could have been dealt with in much more detail. The most important omissions are in areas where information is very sensitive, where BP is reluctant to make it public, and etc. I have not really been able to get fully into the organisation structure of neither the 150 business units, nor the extent to which, they are bound by common rules rather than fully allowed to do their own thing. More time would have allowed me to purpose some aspects of this further but I only had 3 months to do all the research and writing up.