Globally Oil and Gas prices recently reached highs due to increases in world population as well increase the consumption of crude oil and petroleum products in developed and developing countries. The oil and gas industry, attract the attention of world population towards the problems like environment changes, economic climate, human rights, trade advocates, demand, supply and pricing of natural gas. Energy companies such as British Petroleum (BP), Shell, Mobil and Total are forces to change in their policies and diversify their products range.
In this context, present research report articulated that corporate governance, changing regulatory requirements and corporate social responsibility are the beneficial for the company in price competitive situation. It is required for oil corporations to enhance their investment in new alternative like liquid natural gas and ethanol etc (Coombs and Holladay, 2011). They can improve performance and boost up operational effectiveness by recruiting and retaining skilled workforce and expansion their business into new emerging markets. Research report focused on creating a high-performance culture by improving behavior with employee.
Corporate governance is the framework of rules and practices to ensure the accountability, fairness and transparency in business operations. It provides the direction to corporate and maintains good relation with financiers, management, employees, customers and government to boost its performance (Ernst & Young, 1994).
Example: India gas leaking Problems.
In India, Bhopal gas tragedy was the world worst industrial disaster. Dow Chemical Company was responsible for that incidence and it given explanation that incident was the result of water sabotage. It shows that firm was ignoring the safety norms and prevents the intrusion of water in place. More than 500,000 people were affected from chemicals and methyl isocyanate (MIC) gas. That situation was raised due to Corporate Negligence and other reasons behind this disaster were government has poor legislation & ignorance of safety policies, weak attitude towards safety, ineffective security policies, deferred maintenance and absence of properly working safeguards (Fernando, 2009).
British Petroleum: BP focused on standardized of its product and introduces streamlined internal reward system to improve performance management processes in effective manner. Firm deliver energy to the world by set clear priorities that include competitive project execution and focused on high value upstream assets (Kotler and Lee, 2011).
Establish firm developed the management system to conducts the business fairly and manage associated risks. CG concepts helps firm to make strategy planning, improve in performance management, effective utilization of natural resources and capital allocation in significant way. For that clear framework is designed to managing and reporting risks effective manner (Hawkins, 2006). Legal and regulatory plans are developed to reduce risk and efficiently handle the environment related problems and provide health, safety and security to the employees and stakeholders. By doing this it increase sustainable performance. Firm adopted corporate governance in business to clear priorities and managing a quality portfolio by effective manage safety and risk at work place (Suitability report, 2014).
BP Corporation effectively handles the challenges by adoption of corporate social responsibility in business model. Hydrocarbons can utilize to make fuels, lubricants and petro chemicals and it used in pipelines, truck and trains to increase their efficiency.
They will invest huge amount of funds bio-fuels and operate wind business t balance between production and consumption. It focused on the brand, technology and make good relationships with stakeholders to cover the growing business markets like Brazil, Russia, India and China. In UK company joint ventures with other firms to produce Ethanol and operate a bio-fuels technology. Reputed oil firm renew its portfolio and discover new resources of produce oil and gas. Company has collaborative culture and it helps in develop personality and accomplish their professional career goals with organization objective (Johnson and Whittington, 2005).
BP Corporation put employees in forefront of innovation and helps them to achieve growth in their career. It helps in design right employee portfolio and increases the capabilities of them. It provides expert advice and support lubricant-related services and used LPG in numerous business applications to improve its business performance. BP adopts an effective talent management strategy to enhance the organization culture and values. It introduces personal assessment and development programs to increase the efficiency of employees at work place. It launches structured career planning approach to help the worker and enhance their skills. Establish firm identifies their current and future capability and appoint them respective position.
Shell Company: It focused on customers' business by providing leading innovative technology and improves its business operations. Corporate governance helps the company to preserves value and invests set of capital expenditure and manages activities. It offer safety and reliability in operations and protect welfare of workers or employees. To meet energy needs it adopting concept of corporate governance and corporate social responsibility to fulfill the desire of society and expectations of Shareholders’ (Shell, 2014). It improves the lifestyle of people by providing lean water, food and health care. Reputed firm collaborating with others and invest in low-carbon technologies and safety to make its business profitable with managing global energy challenges effectively. Establish firm inspire its young engineers to design, build and test ultra energy efficient vehicles that will increase fuel efficiency and fulfilling the world’s rising demand (PWC, 2014). Company should use wind farms to produce clean energy and mix of energy resources with advanced technologies to unlock new resources and boost up its production. It balance funds between shareholder distributions and create healthy situation for investors to invest in future.
Shell is finding innovative ways to improve the life style of people and provide people safely. It works on new approach to develop excellent infrastructure, smarter mobility and develops environment friendly products. To improving performance and operational effectiveness firm adopt new technology and focused on other sources of energy (Glenlake Publishing Company, 2000). It motivates it employees and motivates them to give sparking creative ideas to overcome energy challenges and secure supplies of energy. Establish company unlocks the energy with use of human ingenuity and new innovation & technology (Colley, 2003). It follows safety and environmental regulations and adopts optimistic forward-thinking strategies in business and increase investment opportunities all over the world.
Shell Company recruiting and selecting best employees for key position and retaining a skilled workforce by give training on new technology. It motivates its staff member by offers attracting promotion and compensation policy. It designs and implements flexible benefits plans. It appoints employees which are multi skilled, flexible, intellectually and qualify in specialist areas. Systematic workforce planning is done by reputed firm to solve out the emerging issues related to recruitment, development and succession of their employees (Gosden, 2012).
Sustainability report is used to measure the performance basis on carbon, water, waste and safety provided by the firms. With helps of this reports examine the relative efficiency of business. Companies can reduces wastage and adopt cleaner production methods to improve its long term health.
Basis on Carbon efficiency, GHG matrix is defined. It shows that Shell is improving its position year by year through reducing CO2e so it revenue will increase. Figure shows that both BP and Shell more efficient in year 2012.
Above figure describes that BP has more water withdrawal intensity as compare to Shell. Revenue generated by shell is decease year by year (Suitability report, 2014). It shows BP is more water intensive company compare to shell. It is used recycling technologies to reduce the water consumption per unit with generated revenue year by year.
Fatal Accident Rate is measured on basis on of safe working environment and worker safety provide by reputed companies at woprk place. It shows that in year 2011 and 2012 Shell employee suffer more at the work placed as compare to BP. Both firm appoint qualified and technical staff members to increase the safety and security of employees at work place.
Threats of New Entrants: It is low in oil and gas industry because there is high barrier of entrance. BP used heavy and costly equipment at sites so it is not possible for any other firm to bear this kind of expenses easily. Firm require development of infrastructure and huge capital investment to expand the business. Economy of scale factor is also considered with availability of human resources in industry (Wit and Meyer, 2010).
Bargaining power of the suppliers: It is medium because few suppliers are present in market. It provides inputs or materials for production and BP is vertical integrated and it bear huge amount of expenses in its R&D activities and improves its business operations.
Bargaining power of buyers: Buyer is free to choose any company because there is not much difference in quality of oils. Demand of buyer is medium and they can go in favor of low prices. Individual decision taken by buyer not impact on company and industry.
Threats of substitute: It is low because larger consumption of oil presently and not research done on other energy resources and they are in are in developing phase like coal, solar, power, wind, hydroelectricity and nuclear energy etc (Wit and Meyer, 2010). Transportation still mainly depends of oil & gas so BP takes the advantage of this, it has a capability to invest huge amount in production and grasp the opportunity presents in market.
Competitive rivals: It is high because Big Company produces low differentiation products. Less competition present in market due to low threat of new entrance and suppliers in market. There is little competition in market after than firm involving merge and strategic alliance so its create monopoly for larger Oil & gas producing companies (Wit and Meyer, 2010).
As emergence of Globalization and Privatization concepts in market, competition is increases in market so natural oil companies are forces to adopt changes in business processes and strategies. They are focused to penetrate wide areas and increase their participation in the global marketplace (Cronin and et.al., 2011). Energy demand will increase as increasing the population of world. Business Petroleum Company signed on Kyoto Agreement to emission of carbons and led to generate funds for that. They follow new laws and European Union pollution standard to clean the environment. For future they focused on innovative technology such wide energy and solar (Tricker and Tricker, 2012). BP and Shell company together deals with china to supply liquefied natural gas and rive to reduce its carbon emissions.
Merger of BP and Amoco: In this activity two same sector or business giant firms are combining with each other. The company offers the securities to other acquiring company. By doing this, they take the advantage of diversification of business operations, enhance their market share and reduce the competition and capture larger geographic area.
The British giant British Petroleum merge with Amoco US oil company. They jointly planned to create Britain’s biggest company. Now it will become a leading company in petrochemicals and natural & oil gas. It comes in top three international oil producers. Share prices increase after the announcement of deal between them. After the merger they start job cutting process and 6000 employees affected form this. The Amoco Company is detains 60 % of BP shareholders and remaining 40 % held self. The new joint organization is run by head of BP. The deal is importance and economic beneficially for them because it will increase pre-tax profits. It will spread the business of firm at global level and covers large geographical area. It give strengths to firms they can serve better worldwide customers and better compete with other competitors in well planned manner (Stahl and Mendenhall, 2005).
That deals increase the investment opportunity for companies in form of size and financial strengths to handle larger scale projects. Company adopts retrenchment techniques and reduction the size of staff members and reduces cost. Both company make future strategy and invest their saving in exploration and streamlining the business activities.
Economic opportunities: Expansion of business in wide area, it helps in increase the production and exploration of company resources. Increase the productivity and easily financing new projects. Firm will overcome the impact of country specific inflation and economic down turn. By restructuring and regulation both firms better competition with other rivals. It increases the economic growth and generates new employment. It takes the benefits of talent work force to get the result in significant way. Establish company diversification of its product and successfully run the business in long term perspective. It adopts Alternative energy technology (AET) to improve performance and reduction in carbon emissions and focused on sustainability of future business (Sistare and et.al. 2008).
Global opportunities: It helps firm to expand their business in cross nation. Reputed firm tried to fulfill the demand of developing and developed countries by effective utilization of resources in well planned manner. Firm come in position to capture wide customer base and increase their market share. By reducing extra expenditure, they concentrated on research and increase competitiveness in oil gas & natural sector (Suitability report, 2014).
Technical opportunities: Merger operation provides the chance to use of innovative technology in business and improve their product quality. It focused on the uniqueness of products and increases the flexibility. It gives benefits to individual as well as industry customers by offering quality of goods. With help of technology firm focused on other alternative energy sources like winds, bio-fuels and solar panel. The firm is in position to invest larger amount of funds in R&D activities, use their existing asset proper manner and increase its production. It provides the opportunity of improve the distribution facilities and segmentation of market to increase performance. They encourage climate de-stabilization from CO2 emission. Use their talented work force jointly to generate new innovative ideas and focused on other alternative of energy sources.
Competitive opportunities: They can reduce competition and costs through sharing the infrastructure and budget that results comes in form of increase purchasing power of customers. They will concern on other energy sources like wind and solar energy. Reputed corporation buys the intellectual property rights of other firm so service or product price will decline. By merging activity both companies take the advantage of business and eliminate duplicated facilities in department hence respective cost will reduces (Gorcum, 2001).
BP and Rosneft, Russian Company creating the strategic alliances in which Rosneft has 66.7% stake and jointly they creates world-class exploration program at the South Kara Sea. They will create “Arctic technology center” to develop new technology for safe extraction of hydrocarbons. BP formulates the Mobile Emergency prevention and Rapid Reaction Centre for environment safety. Initially they focused on reinterpretation of historical seismic data. BP reduces exploration risk by providing finance (Gosden, 2012).
BP has changes the way of doing business and it partnership with Reliance to finding more hydrocarbons that would be beneficial for Indian energy sector. It developed the infrastructure for transporting and receiving natural gas (PWC, 2014).
They can distribute products or services with each other easily without any problems of licensing. Join forces is use to develop product and sharing infrastructure and technology. Work on common agenda and two associations are working together to capitalize the individual strengths of organization which participate. It provides opportunity to develop the links with local communities/stakeholders. It involves share responsibility to formulate program and successfully execute it in well planned manner. Strategic Alliance provides the opportunity of reduced cost and expertise in their business areas. It increases the cash balances of company and expands their business activity in global era (Gosden, 2012).
Oil and Gas Company develops strategy to improving employee behavior and motivate high-performance culture. Reputed oil & gas firms take some steps to expand their share and increase profit margin. By adopting concept of corporate governance in businesses they improve strategic decisions and increase shareholder value by empowering them. BP can used effective monitoring technology to minimize risky incidence. It follows legal regulation and provides safety & security at work place. Establish firm can reduce their risks by diversify the products and make quality of portfolio. They can improve the performance of their organization by low the cost of compliances. Establish maintain good relationship with stakeholders and transparent flow information at right time at right person (Solomon, 2007).
To make BP a simpler and more efficient organization, BP’s Group Chairman focused on improving employee behavior. Following steps are taken to improve performance culture that is described as follow:
Tracking performance: It focused on safety management programs to prevent incidents at workplace. It includes the inspections & tests, maintains the records about previous incidents like oil spills and other losses. Firm can managing the process safety events to protect member of the workforce from any harms. BP board appoint independent expert for organizational and culture effectiveness (Salcines and Walters, 2013).
Mange Safe environment: Operating and maintenance practices apply in organization to create healthy working environments. Operating management system is developing by BP organization to manage their operations in systematic manner. Leadership inspections are conduct in every region to communicate with o frontline employees and contractors. It is supported by safety, ethics and environment committee.
Capability development programs: Leader is capable to handle all the programs related to safety, risk management and OMS all levels. Around 8000 attendees participated in Operating Essentials programs in 2013. BP use the performance improvement cycle to improve the performance of their employees and making good relationship with shareholders. Coaching programs run at 15 sites in country. Providing tools and guidance prioritized risks and handle effectively safety and operational risks.
BP used three line of defense approach to conduct self verification audit that are describe as below:
First line defense: In this line, they continuously visit the site, verify the requirement of equipments and check they are properly in working condition or not, compliance and reliable operation are performing to measure the conformance. Audit finding are mage clearly (Laroche and Rutherford, 2007).
Second line of defense: In this level deployed teams provide tools to execute the business function effectively. OMS team provides guidance and support for conformance so enhance their performance. It helps to understand personnel roles and responsibility to well control and monitoring in effective manner.
Third line of defense: In this step group is developed and independent audit is conducted to provide safety and reduce operation related risk. Management teams review and correct processes. Company is committed to manage ethical, safe and sustainable at work place and maintain good relation with co-ventures and other employees.
BP organizes Health and wellness safety programs and control over noise, fatigue, and stress type occupational risks.
Main Aim of BP is to provide Security and handle crisis management by monitoring over emerging threats and vulnerabilities. Research report articulated that the demand of crude oil, gas and petroleum products are decreasing in developing and developed countries. So Oil and natural organizations will focus on other energy resources like wind, solar and hydroelectricity etc. The giants companies such BP, Shell, Mobil and Total are diversify their product mix and tried to make price competitive by gaining their interest to generate other fuel areas. BP and Shell Company get the benefits of corporate governance and corporate social responsibility in business processes. Petrochemical suppliers should invest funds in R&D activities and used other sources like liquid natural gas and ethanol in place of oil & gas. Company can take the advantage of Strategic Alliances and Mergers and Acquisitions to improving in performance and enhance operational effectiveness.
As changes occurring in market uncertainty and risk are arising so company change in current approach and ensure financial and operational for long term period.