Case Study on British Petroleum

Question: Describe about British Petroleum, what is its factors of production, macro environment and business sustainability? Answer: Introduction The name of company selected is British Petroleum. It is one of the biggest and vertically companies for oil and gas in accordance with its strong presence within 100 countries. There are three business segments within which it operates. This is what would explain the type of the business. The business operations include the production and exploration of crude oil and gas emulated by trading and marketing. It is headquartered in London and that is why, the country that has to be targeted here is the UK. The company has a workforce of around 92000 people and even more than that since this figure is estimated figure of 2013. It has a significant network worldwide which consists of 22600 locations branded as ARCO, Aral, Amoco, and BP. They serve customers through a wide range of market sectors. The first segment of the customer is related to general and business aviation which incorporates aircraft, business jet operators and helicopter operators, general aviation airfields, FBQs and private pilots. The second segment of the customer includes commercial airlines. For this particular segment, they have the presence and the people around the globe to meet their needs. The third segment of the customer includes the technical services which incorporates airport authorities, national oil companies, and JV operators. And, the ultimate fourth segment of customer is related to military segment(Ethan, 2008). According to their website, they claim that they have the presence, and individuals throughout the globe to facilitate military and humanitarian operations. Since BP is a global company, the competitors to be listed here would also be in accordance with the global coverage. The names of the competitors include Exxon Mobil Corporation, Royal Dutch Shell Plc. and Chevron Corporation. Exxon Mobil Corporation is also one of the significant and well known oil company ahead of BP and Royal Dutch Shell. Royal Dutch Shell sits on the throne of gas and oil but is slightly below the company Exxon Mobil. It also produces chemicals and refined products at almost 30 refineries. Chevron is also ranked as number 2 integrated oil company within the US i.e. behind Exxon Mobil. It also owns 50 percent of the chemicals concern Chevron Philips Chemical. BP owns more than 50 percent of the biggest oil field in the US(Genova, 2010). The bottom line is, globally, these three companies have acquired the major dominance within the industry capturing their respective market share. According to the author, the market for this particular business would be oligopoly because it incorporates some of the large sellers where they have a great dominance within the market. And that each of them produces products that are quite identical or a slightly different product. This information was quite necessary to be known because without this information, it could have been difficult to asset the characteristics of the market. In order to analyze the demand for this particular business, we can specify one example of petrol. It is considered a necessity in almost every country. Demand can be found to be inelastic because with a slight increase in its price, people will still not stop to utilize because of the fact that people would need it to drive cars for travelling purposes. With the dominance of such companies within the market, they can set price with the market power and hence the prices would be set as a markup over marginal cost(Psarras, 2000). Therefore, it can be s aid that the companies within this market have the ability to do so. Factors of Production Basically, land, capital, labor and mainly entrepreneurship envelop the greater part of the inputs expected to result in the production of a service or a product. Land indicates to all of the natural resources regular assets, for example, timber and gold, utilized in the production for any commodity, product or good. Labor is the majority of the work that workers and specialists perform at all levels of any particular company, with the exception of an entrepreneur. The entrepreneur is the person who tool an idea and endeavors to make an economic benefit from it by consolidating all different production. The entrepreneur likewise assumes the majority of the rewards and risks of the business. The capital is the greater includes the machinery and tools to produce a service or a good. For this particular market and business, if the factors of production are to be taken for oil sector, the first factor of production will be land that would be used to get the oil, Labor would include the w orkers in the hardhat that would be responsible for cleaning service and for white coats, they would be giving the responsibility to refine the oil(Fare, 2011). The capital factor of production would include the oil rigs, big pipelines, refineries, fuel trucks, and big oil ships. It would also include the refinery plants, and other gas stations. The fixed costs are related to the land while other capital items can also have the fixed costs in accordance with their maintenance or service charges. Macro Environment A macro environment is a type of environment that cannot be under the control of any company because it include uncontrollable factors. These factors cannot be gained control upon by any particular organization. Moreover, it can also be said that these factors can prove to be beneficial or detrimental to the company. We can take an example of inflation which can be quite high or low, and if it is high, then the manufacturers would have to bear the burden of high costs of purchasing the products for further processing and manufacturing but when the inflation rate is low, it can benefit the manufacturers with the cheap prices of inputs. Another example of the uncontrollable factors could be the political instability which can result in the shutdown of organizations. Therefore, any particular company cannot do anything about this because they occur within an external environment. That is why, a macro environment can prove to be threatening for the company or even beneficial for the comp any. Political and social stability are variables that are tricky to define and measure in a way which can be utilized as a part of econometric work. When there is a political instability, it incorporates instability of governments, administrations and groups inside a country. A compelling case is the pressurized overthrow, or a high likelihood of automatic evacuation, of existing power, from non-constitutional overthrows dtat, fruitful or otherwise. Regularly, changes take place intrinsically. For the UK, non-constitutional oust may appear a remote probability(Guseva, 2011). On the other hand, the bottom line is that a high intensity to executive changes is connected with uncertainties within the policies and, in great cases, with risks connected with the property rights. In reality, property rights are much of the time propelled as foundations of extraordinary significance to the economic development, bringing down instability and transaction costs connected with the activities within t he economy. Till now the inflation rates have fluctuated a lot. The details are as below: Lower prices for energy and cheaper fuel for energy brought the rate of inflation for UK to a record that is low and equal in the month of December in accordance with the authority figures. Inflation that is determined by the CPI i.e. consumer price index declined back to 0.5 per cent from 1 percent within November in accordance with the Office for National Standards. The retail price index i.e. RPI inflation which is to be figured in an unpredictable that has already proceeded within a pattern that is already descending and falls back from 2 per cent to 1.6 per cent. There are several major changes within the rate of inflation recently. Within 2008, with the global financial crisis, the costs and expenses were increasing at a face pace. With 1 per cent of CPI measure, there is also an effect on the CPI that would climb till 5.2%. RPI rose to 5.6%, the most astounding yearly rate since June 1991. Since then both measures have fallen back once more, with CPI now underneath the Bank of England's 2 per cent target rate shockingly since November 2009. The exchange rate will prove to be imperative for those firms which export or products and import crude materials. Basically A depreciation or devaluation will let the export to become less expensive and trading firms will advantage. Moreover, trade is easier with the appreciation of the currencies and lessens the competitiveness of the firms that are exporting. On the off chance that there is a deterioration in the depreciation in the value of GBP, it will make the exports of UK less expensive, and it will make imports into the UK more lavish. For example, the exchange rate in 2012 was 1 = 1.50. By Jan, 2013, the Pound had reduced in value so 1 was currently just justified regardless of 1.10 (a 26 per cent devaluation). In order to explain the impact of exchange rate and exports, assume a British car costs 4,000 to manufacture and gets sold for 5,000 in the UK. In 2012, the European cost of this particular car would be 7,500 (5,000 *1.5) In 2013, the European cost of this auto would be 5,500 (5,000 *1.1) The 26% devaluation implies that European purchasers now discover British products much less expensive(Greenlees, 2010). The expense of producing the car continues through to the end, yet the powerful market cost in Europe has fallen. This ought to build demand for the goods on British. Business Sustainability The target of BP is to develop value for investors and energy suppliers throughout the world in a capable and responsive way. They strive to be a world-class administrator, a mindful corporate national and a decent employer. Their main focus is on safety which is characteristically imperative for them. An in depth management of risks helps in securing the individuals at the main focus, the areas in which they produce the quality and within which they work(Bonn, 2012). BP comprehends that working in politically unpredictable locales and other geographies that are technically demanding, for example, oil sands and profound water, obliges specific sensitivity to nearby environments. They are always in an attempt to improve their frameworks, methods and norms that includes as to how they deal with the risks that can be made by the activities of their operators and contractors of joint ventures in which they take part. They value trust to be developed both inside and outside the organization. This would mean that they dont want to create any kind of disturbing environment that could lose trust and avoid any conflicts around the organization. They must gain individuals' trust by being reasonable and capable in all that they do. They screen their performance nearly and expect to report in a straightforward manner. They give a significant importance to an open dialog communication and they are the key components in the event that they are to meet the desires of their representatives, clients, shareholders and the nearby communities in which they work. They make attempts to turn into business that is less complex while they concentrate where they can make a valuable production. They also focus on reinforcing their arrangement of more life upstream resources and that fabricates a great proximate organizations. They are likewise putting resources into lower-carbon choices that can possibly help in taking care of developing demand of the energy over the long haul(Yuan, 2010). The greater part of this is underpinned by their technology, mastery and relationships. Strong performance in accordance with the financial indicators is imperative on the grounds that it empowers them to make the ventures important to make a production of energy that society obliges, while remunerating and keeping up the support of their shareholders. By supplying energy, they help financial advancement and help to enhance personal satisfaction for a large number of individuals. Such activities likewise create occupations, speculation, governmental revenues, infrastructure and nearby groups. There is one evidence of the negative externalities from the operations of British Petroleum. It happened in June 2010. British Petroleums oil break off the Lousiana shoreline develops a significant number of issues that are pertinent from an economic viewpoint. On the first side, it is extremely difficult to find out as to what is the genuine measure of oil spilling into the ocean. It is claimed by BP that it is Forty thousand barrels per day. Furthermore, how is it possible to make a determination of the level of the inclusion of negative externalities? A negative externality is basically an expense that is not passed of to consumer and producer, rather guiltless outsiders who are not directly to be involved in this particular burden. The fishermen within that extensive area have been out of their vocation, the oil exploration on the coast got halted - so the laborers of oil from other than the BP firms have been out of their vocations, and that there has been a great influence on the tourism industry of Florida. The environmental harm is colossal. This rundown gets going on. This incongruity has occurred recently and British Petroleum was not aware of the externalities that developed and was getting prepared to pay 10 billion GBP as a pro fit to shareholders(Gary, 2014). Thus, it is securely possible to infer that the profits of British Petroleum are high on the grounds that its costs related to production do exclude the negative externalities it makes. Furthermore normally the general population are the ones that pay for all this, for the provision of benefits to the shareholders of British Petroleum, with reductions in their services since the money from tax can be used up for operational cleaning. This is quite identical to the banks bailout quite some time before. More than this, one of significant reasons for this incident could be an inadequate regulation and the dire need to create reduction in expenses. Health and safety regulations have been regularly reprimanded with the increase in the expenses of production for firms. Yet the individuals who have a great confidence in the market structures keep on demanding minute regulations for oligopolistic market structures. One of the best thing is that the mischance occurred at the coast within the US and constrained President Obama to pay heed. There was the worlds largest mechanical catastrophe within Bhopal, India created by Union Carbide which is a now wound up US firm. Those dead, in hundreds, were paid insignificant payment, the company's holders have gotten away and the spot is as toxic as ever. The Indian government has been preferred and bought by the MNC, which was found to be cheaper rather than paying for the externalities. References Bonn, I., 2012. Sustainability: the missing ingredient in strategy. Journal of Business Strategy, 32(1), pp. 5-14. Ethan, S., 2008. Who Owns [Will Own] British Petroleum?. Oil, Gas and Energy Law, 14(2), pp. 12-28. Fare, R., 2011. Essential and Limitational Production Factors. Journal of Economics, 40(2), pp. 225-232. Gary, D., 2014. Addressing Global Environmental Externalities. Journal of Economic Literature, 52(2), pp. 424-479. Genova, A., 2010. Nigeria's Nationalization of British Petroleum. The International Journal of African Historical Studies, 43(1), pp. 25-31. Gordon, R. J., 2010. Consumer Prices, the Consumer Price Index, and the Cost of Living. Journal of Economic Perspectives, 12(1), pp. 3-26. Greenlees, J. S., 2010. Addressing misconceptions about the Consumer Price Index. Journal of Economic Perspectives, 5(2), pp. 11-21. Guseva, K., 2011. Evaluation of some business macro environment forecasting methods. Journal of Business Economics and Management, 7(3), pp. 111-117. Psarras, J., 2000. Market modeling for assessment of demand side programs using the marginal cost. International Journal of Energy Research, 24(10), pp. 887-900. Yuan, G., 2010. A Modified Consumer Price Index. Scientific Research - An Academic Publisher, 1(2), pp. 25-31.