Strategic Marketing at Bp Plc Essay Example

involvement in the extractive industry. Therefore, it is crucial for BP to strategically manage the repercussions of the Gulf of Mexico incident to ensure its future viability.

The Gulf of Mexico incident occurred on April 20, 2010 when an explosion took place on the Departed Horizon oil rig under a BP-operated license. This rig was conducting exploratory drilling in the Gulf of Mexico. Investigators discovered that a fault in the oil well sealing system caused the explosion by allowing flammable gases and crude oil to leak into the main extraction pipe (Blamer, 2010). Tragically, eleven people lost their lives as a result of this incident as the oil rig sank.

In July 2000, BP implemented a strategic marketing initiative aimed at enhancing its image. However, skepticism and concerns about environmental impact and exploitation from both media and public persisted.The Departed Horizon incident was a catastrophic ecological disaster in US history, in which crude oil flowed into the Gulf of Mexico at a rate of approximately 60,000 barrels per day. This incident had devastating effects on endangered marine species and birds, as well as significant damage to the tourism industry in South-Eastern United States. BP suffered monumental consequences including financial losses, legal uncertainty, and damage to their reputation. To address these issues, BP must undertake radical strategic marketing initiatives as outlined in this report due to increased focus on corporate social responsibility and growing scrutiny from politics and media sources.

The goal of this initiative was to position the company as a responsible global corporation (Blamer, 2010). The branding strategy known as "Beyond Petroleum" (Kettle et al., 2011) played a central role in achieving this objective. During the early

sass's, BP's branding aimed to portray the company as socially responsible and environmentally friendly. This successful strategy led to BP being widely recognized as a leader in cleaner petroleum and renewable energy, consistently ranking among the top trustworthy brands worldwide.

Investors, employees, and customers believed that the company was moving in the right direction under top management's correct strategy. Despite global oil volatility, BP's market value steadily increased, making them the eighth most valuable global brand in 2000.However, doubts started to arise during this time. Academics began questioning whether BP was using their environmental and safety commitments for appearances only. There seemed to be a disconnect between the company's market positioning and its actual operations, raising suspicions that they were not genuinely living up to their green image. In 2002/2003, environmental organizations discovered that only a small portion of BSP activities were based on sustainable resources (Geyser, 2010). Furthermore, incidents like the Texas Refinery explosion in 2006 indicated that BP's safety record was not impressive (Bannered, 2010). Therefore, BP's social and environmental responsibility has been acknowledged by consumers and stakeholders. However, it is necessary for the company to implement this strategy throughout its entire operational chain (Bean, 2010).

The importance of this need becomes even more evident in light of the Gulf of Mexico disaster. This section of the report will examine the overall impact of the disaster on BP.To conduct this analysis, the PESTLE and SWOT models will be utilized. These models are commonly used in strategic planning to assess both internal and external factors affecting companies like BP.They provide a framework for conducting such an analysis.Starting with
the internal analysis,
we will use
the SWOT model
which incorporates elements

from both internal and external analyses.
The text discusses the strengths and weaknesses of BP as well as the opportunities and threats it faces. The model primarily focuses on internal aspects, such as leveraging strengths to take advantage of opportunities and mitigate threats. One notable strength is BP's reputation as an innovative company, despite setbacks like Deepwater Horizon. The company excels in innovation and research, particularly in developing advanced drilling technology regardless of location. They have pioneered efficient seismic survey technology for large fields, giving them a competitive edge over rivals. Governments operating in challenging conditions often choose BP due to its expertise. With operations in 80 countries, BP has a global presence that protects its income by compensating for losses in one market with gains in another.BP's significant size grants it considerable lobbying power with governments. Additionally, the company controls all aspects of its petrochemical extraction and refining processes, overseeing upstream, midstream, and downstream activities (BP Pl, 2012). This integration along its petrochemical and natural gas value chain allows BP to achieve notable economies of scale that benefit its financial performance. However, the Gulf of Mexico incident severely damaged BP's reputation globally and caused a decline in the company's brand position from number 8 to number 40. The incident also led to a sharp drop in share prices during 2010/2011 (Geyser, 2010). As of December 2012, BP has faced significant financial losses amounting to US$40 million in fines and compensation (BP Pl, 2012). To cover these costs, the company has set aside US$20 billion; however, recent estimates suggest that this amount may be underestimated (Preston, 2013). Any increase in payments would negatively impact the company's

finances. Despite these challenges, BP has opportunities for diversification and expansion into new markets. It can enter emerging economies to gain extraction licenses and increase its oil reserves and revenue stream. Furthermore, forming strategic alliances in different markets can help expand operations and offset losses from the Gulf of Mexico incident. Lastly, BP is investing in alternative energy sources such as biofuels.From 2011 to 2012, the company made substantial investments in wind farms in the UK and USA. They also acquired one of Brazil's largest ethanol producers for $700 million in 2011. These investments offer growth opportunities within a growing industry.

In terms of politics, the US government played a major role following the Deepwater Horizon incident. The President of the USA directly accused BP of having poor safety and operational procedures. The President addressed the nation immediately after the incident (Bean, 2010). Tony Hayward, the former CEO of BP, faced Senate and Congressional hearings and has been fined over $4 million so far (Preston, 2013).

The incident also caused damage to the relationship between the US and UK as BP management requested government intervention in managing compensation payments. Additionally, it had a devastating impact on tourism in states like Florida, Louisiana, Alabama, and Texas. It also disrupted the fishing industry and led many small and medium-sized businesses to go bankrupt due to loss of business.

This incident combined with a recessionary climate has unquestionably devastated coastal communities. Despite creating a $20 billion contingency fund for compensation, BP faced significant backlash in the US with population campaigns and boycotts in affected states throughout 2011 (BP Pl., 2012).In 2012/2013, BP's reputation was significantly damaged due to the Gulf of

Mexico incident, despite its previous efforts to be perceived as socially and environmentally responsible (BP Pl., 2013). Although known for their advancements in extraction technology in other areas, the Deepwater Horizon accident serves as a cautionary tale against using new exploratory technology. It may be necessary for BP to reevaluate safety and trial procedures when utilizing new technology in environmentally delicate regions (BP Pl., 2013). The company is currently facing multiple lawsuits from individuals and companies associated with the incident. Initially, $20 billion was set aside to cover these legal expenses and compensation claims (Preston, 2013). However, only $40 million has been paid out thus far as BP advocates for both the US and UK governments to restrict payments to valid claims (Preston, 2013). There is a possibility that the total claims could surpass the $20 billion contingency fund (Preston, 2013). Furthermore, as a consequence of the incident, BP has lost drilling rights in the Gulf of Mexico basin (Preston, 2013). The environmental consequences of this disaster have harmed endangered fish and wildlife species due to the oil spill (Geyser, 2010). Despite their cleanup efforts, many believe that BP's response was insufficient.BP, a large global company with a strong brand presence in various locations, has the resources and capabilities for global innovation. In response to the disaster, BP replaced CEO Tony Hayward with Robert Dudley. However, the ongoing issues from the incident pose a challenge for the new management team. The company has implemented structural and operational changes to prevent future incidents but still faces financial risks due to increasing costs from the Gulf of Mexico disaster. Management must recognize that relying solely on marketing

is insufficient to save the company. They need to make a focused strategic choice by prioritizing safety and risk management through global standards or consolidating their asset base to mitigate some of the financial consequences of the disaster. It may also be necessary to adjust internal risk and reward structures to prioritize safety and transparency. This report suggests using Porter's Generic Strategies and Nations Matrix as potential strategic marketing models for addressing the aftermath of the Deepwater Horizon incident. According to Porter (2008), companies can achieve competitive advantage through cost efficiency or differentiation strategies.BP, a company in the oil and gas industry, faces challenges implementing cost and differentiation strategies due to factors like fluctuating oil prices and government decisions made by organizations such as OPEC. Moreover, achieving differentiation is difficult because petrochemical companies typically produce similar products. To counteract the problems caused by the Gulf of Mexico disaster, BSP management could develop a focused strategy. This may involve implementing a public relations campaign to improve the company's image or leveraging its technological advantage to reduce costs. According to the Nations Matrix, companies can choose between developing current products in current markets or venturing into new markets with new products. In BP's case, it can utilize its geographical reach to enter new markets and compensate for losses in the US market. Diversification should also be considered as a strategy where BP uses its technological edge to extract oil from undeveloped fields like those in Siberia and the Arctic. Additionally, BP can use its size to lobby emerging economies and form strategic alliances that grant access to their natural resources. Examples of these efforts include BP's initiatives

in India and South-East Asia (BP Pl., 2012).The company should prioritize improving public relations and communications through social media as part of its marketing strategy. After the Gulf of Mexico disaster, steps were taken to address the weakness observed in senior management's delayed and unclear response. It is recommended that the company actively engage with the Gulf of Mexico community and environmental groups to ensure satisfaction. The "Beyond Petroleum" campaign initially resulted in a successful global brand, but the Deepwater Horizon explosion exposed a lack of alignment between operations and the campaign's philosophy. Strategic marketing should consistently be integrated into both corporate culture and management practices. The harmful substance (oil) associated with ecological disasters is an inherent component of BSP's core business, highlighting the contradictory nature of their operations.