Swot analysis of BP

The fuel sector is the foundation of Russia's economy because it is the largest producer of natural gas and ranks second in terms of oil production. A British corporation, British Petroleum (BP), entered the Russian market in 1997 in order to increase its gas and oil production and to take advantage of Russia's investment in the fuel business. Their decision to enter the Russian market was opposed strongly, and a joint venture with the Uneximbank group also failed. Subsequently, it started a second joint venture that was 50/50 with the Tyumen Oil Company. implementation have recently presented difficulties for the TNK-BP cooperation."the employment policies and its expansion.

The problems arose because of the Russian shareholders of the company who sought to expand so as to gain greater control over operations by employing many Russian nationals while the BP shareholders who have significant stakes in the global oil and gas wells want to maintain the status quo. These problems have resulted in a state of unrest causing the involvement of the Russian and British governments. It also led to the Russian president Vladimir Putin to enact laws that demanded that for any investment made by a foreign company the Russians should have majority ownership (Papiryan 184). The British prime minister as well offered his services and support for future negotiations that would be conducted by the British government. The biggest problem with the TNK-BP is not even employment, but it is the different long-term goals between them. This has manifested itself in the tussles over control like expansion and employment disputes that have become too much that the media and public have gotten to know about it.

For the Russian BP to be able to mitigate these widespread problems, it is vital to investigate the external and internal forces that are affecting their operations and their long-term goals. It should also consider the risks that are related to their activities in Russia so as to get a long-term strategy that will ensure BP will continue to enjoy success in the future. The external forces that are affecting the decisions that are made by TNK-BP include social forces, technological forces, environmental forces, economical forces, and the political forces. In October 2012 BP sold its fifty per cent share of TNK-BP to Rosneft. In March 2013 a deal was reached between BP and Rosneft where BP received close to $12.5 billion and 18.5% of the Rosneft’s shares (Hitt et al. 228). In the end, BP held 19.75% of Rosneft stock.

The SWOT analysis conducted indicated the internal forces that affect the operations of TNK-BP.

Strengths

The BP-TNK and BP-Rosneft are vertically integrated companies which make them efficient in the sharing of resources and activity.

It has a high production and oil refining technological capabilities like the seismic technology and the BP International Centre for Advanced Materials (BP-ICAM).

They have a continuous increase in the number of reserves through the advanced technology.

The partnership with Rosneft-BP has created a stable growth and profits.



Weakness

The TNK-BP has a high dependence on the pipeline system of Transneft, an oil company that monopolizes pipeline system in Russia.

The brand has been damaged because of incidents that happened in the past like the massive oil spills also known as the Deepwater Horizon Oil Spill and the violation of an alliance with AAR

Opportunities

Demand for oil in the world is continuously growing.

The alliance with Rosneft is strategically advantageous and favorable as it expanded into new regions like the new joint venture in Siberia, Yermak, and Neftegaz which are all exploring the Area of Mutual Interest regions in Russia.

The construction of a combined cycle gas turbinc plant.

Threat

The increased awareness and importance for the need of green or renewable energy all over the world.

There are increased fluctuations of the prices of natural gas and crude oil prices.

The interventions and corruption by the Russian Government.

Competitive Advantage

The partnership with Rosneft allows the BP to benefit from the existing and potential projects that are diversified in the oil and gas sector of Russia (Hitt et al. 236). Russia has the deepest experience of all oil major in the world as well as the best and only remaining hydrocarbon territories.



Potential Risks

The negative operational activities of an organization can result in the loss of property and capital. The BPs expansion into Russia was a highly risky operation because of the large amounts of financial and nonfinancial resources that were invested. The main risk that BP faced was the currency risk which is as a result of loss because of fluctuations in the exchange rate. The dissemination risk which is the leaking of confidential information and operational practices to unauthorized personnel and the last is a political risk which is explained as the political changes in the country that may affect the operations and activities of a company (Hitt et al. 250).

Strategies

If BP wants to continue operating in Russia, it should consider adopting like maximizing the use of its technical expertise in the recovery of reserves from the Arctic Circle through deepwater operations (Papiryan 200). It should manage the political risks in Russia by getting involved with the board of state-owned business Rosneft. The BP should put measures to ensure they prevent corruption issues that interfere with activities of the firm.

Conclusion

Even with all the challenges that BP has been facing in Russia its financial return on the cooperation of the TNK-BP was ten times more that their initial investment. Risks and returns are fundamental principles in any business. The use of strategic alliance might have the ability to provide a tighter control to the BP. The success of the BP-Rosneft greatly depends on the political risk and the BP’s ability to suitably mitigate it.



Works Cited

Hitt, Michael A., Ireland, Duane, & Hoskisson, Robert. " Strategic Management: Concepts: Competitiveness and Globalization." Cengage Learning, 2014.

Papiryan, Gevork. "Settling the Joint Venture Dispute." Economic Policy, vol. 1, 2010, pp. 184-203.