Challenges faced by the BP firm - Free Essay Example

The Anglo-Persian Oil Company, produced in 1908, was renamed The British Petroleum Company, shorten to BP, in 1954. In 1998, British Petroleum merged with Amoco and drops the name British Petroleum to turn into known as simply BP.3 One of the worlds biggest integrated oil concern; BP would accept a unexpected re-positioning strategy in 1997 when Lord John Browne, group chief executive, acknowledged that BP required to address the threat of global warming. Characteristic itself as of other oil companies, BPs status benefited from this novel situation and had been able to carry on this differentiation ever since. Even though the oil industry is generally consider the bad guy, BP lead the list of Fortune magazines worldwide 100 companies on corporate responsibility with the tagline Beyond Petroleum, BP created the subsidiary BP Solar International that focused on solar energy. Due to the current achievement of BP Solar, in 2005 BP invested $1.8 billion in BP Alternative Energy, w hich focused on hydrogen, solar, and wind power generation. BP is a worldwide oilÂÂ  andÂÂ  gasÂÂ  company head office inÂÂ  London, United Kingdom It is the third-biggest energy company and fourth-biggest company in the world calculated by revenues and one of the six oil and gas super majors.ÂÂ  It is energetic in all regions of the oil and gas industry, as well asÂÂ  explorationÂÂ  andÂÂ  production,ÂÂ  refining, distribution and marketing petrochemicalsÂÂ  powerÂÂ  and trading. BP has operation in more than 80 countries, produces around 3.8 millionÂÂ  barrelsÂÂ  per day and has 22,400 service stations worldwide.ÂÂ  Its biggest division is BP America, which is the largest manufacturer of oil and gas in theÂÂ  United StatesÂÂ  and is head office inÂÂ  Houston,ÂÂ  TexasÂÂ  As at 31 December 2009 it had total proven commercial reserves of 18.3 billion barrels of oil equivalent.]Âà ‚  The name BP derives from the initials of one of the companys former legal names, British Petroleum. BPs path record ofÂÂ  corporate social responsibility has been mixed. The company has been concerned in a manynumber of major environmental and safety incidents and received analysis for its political influence. Its primary listing is on the London stock exchangeÂÂ  and it is a constituent of theÂÂ  FTSE 100 index. It has a secondary listing on theÂÂ  New York Stock exchange Literature review Porter five forces model Entry At the present the solar cell industry position is very different across geological market sectors. The U.S. Market- The solar industry has not been promoting greatly in the United States due to the short of enthusiasm of the national government. Hard work for solar panel installations, such as giving tax credits and property tax exemptions, are intense at the state level in certain states such as California and Arizona. Overall , the U.S. market is spread so it is not easy to get a successful national business. There are a lot of small and self-governing companies, but a small number of major domestic players. As a result, the U.S. does not have a big market share in solar energy. Presently the market is unbeneficial and does not support many new entrants. Even overseas companies that have experienced victory in Japan and Germany are uncertain to crack into the U.S. market; lack of familiar in U.S. operations and uncertainty in demands put off them from devote money for the high shipping costs and tariffs. However, BP already has a familiar base in the U.S. owing to its increasing petroleum market; it has the possible to enter and build up a localized monopoly over the solar industry In addition, the Bush government has just recently accepted the require to dedicate research and development into renewable energy; this provides expect that U.S. will be more interested to solar energy in the future. Marke t in Germany is more energetic and quickly growing. The solar energy business is a novel and rising industry and is one that has the possible to support entrants willingly. German government is completely support of this technology, especially with the Renewable Energy Act (EEG). As the place for the biggest trade fair for Europes solar technology, Germany can be confident to keep up with the innovations. As a consequence, there are a lot of opportunities for entrants to approach in with better innovation and succeed above the market. The potential for product separation is great because the technology has many far-reaching consequences: the products can mark a variety of consumers, from manipulative large-scale solar panel systems used to create electric energy for firms focus on the each day consumer that can buy little solar appliances to use for the home. The main players in the market are just opening to emerge, other than no one has yet a big adequate corporation and manufactu re capacity to drive out minor competitions by economies of scale. BP Solar has its base in the European market and can use its situation as a big business to prevent entry. Japanese market is close to its infiltration point and that discourages entrants to the market. The requirement for the product has rising every year, through installations of solar panels in residential homes becoming more prevalent; so a lot of companies have been involved by the profitability. Main players have developed in this market, mostly Sharp and Kyocera Solar, with sharp controlling the market share. A more common difficulty to way in all three market sectors is the shortage of silicon. There is a worldwide shortage of ultrapure polysilicon (the raw material for silicon wafers), which is a main element in the creation of solar energy Buyer and Supplier Bargaining Power The solar energy technology is not very well understood so there is a small focus of consumer base. However, due to the sl ow and narrow manufacture of the technology, consumer demand still outpaced the supply. In 2005, 24 publicly traded solar companies sold out. As of now, buyers do not have a lot of bargaining control due to the infrequency of the product, but this will modify as companies increase their manufacturing services and work towards mass production to carry down costs. On the other hand, the suppliers for the solar companies have a more bargaining control. The number of companies entering the solar industry business is increasing quickly while the availability of supply is scarce. Even big companies have to wait up to 6 months for modules. As the firms anxiously try to get bigger the product to meet the demand, they are faced with a shortage of silicon chips and modules, which lead to doubling of prices Companies such as BP, should give over research into using the silicon resources more efficiently to counter supplier bargaining power and lower manufacturing costs. Substitutes The m ajor substitute for solar energy business right now is the standard electricity created by coal and natural gas. The risk from this substitute is great because it has been the main source of energy for household devices. The standard electricity is still lower in cost than the solar wind energy so there is very small incentive for customers to switch to solar technology. However, with improvement and research, companies are wounding the cost per watt of the solar energy by 5% a year and can regularly to get better the cost to watt ratio significantly until it is equivalent to that of standard electricity. Since natural gas and coal are limited in supply, their prices will finally increase, causing demands for energy sources such as solar energy to increase. However, solar energy technologies are not the only alternative source for generating electricity. According to Energy Information Administration, solar only accounts for 0.2% of the renewable electricity produced in the United States. The largest sector in the renewable energy area belongs to hydropower (75.2%). Hydropower plants, although more prevalent and not expensive, have its shortcomings, including decreased water quality and negative effects upon natural wildlife habitats. Solar energy technology can play upon that weakness as one of the cleanest renewable energies currently known. Rivalry The present main players in solar energy industry are Sharp, Kyocera Solar, Shell Solar and BP. cost rivalry is not significant amongst the companies, because solar energy is already a costly technology to produce. It will damage the industry to undercut prices, as the technology is not inexpensive and well understood sufficient that an increasing but little consumer demand will not compensate a reduction in cost. In addition, the main players in the industry have separate geographical markets and not much overseas establishments. The high price and the segregated consumer base reduce competition. Only wit h mass-production and increased popularity can price rivalry happen. Synergies Most important trouble with solar energy technology is the lack of electronic device compatible with the cells. Synergies can comprise selling adapters that permit the use of household appliances. The solar company can also team up with other electronic corporations such as Sony to make appliances that operate with solar cell. Other possible synergies are to integrate service with the product. Access to technical assistance is often a key for solar cell installations. Since it is a novel technology, consumers will require a lot of guidance in installation and maintenance. BP has already included service by given that installation and free check-ups with each purchase of its solar panels. SWOT Analysis Strengths BP main strengths is that it is a major corporation with a lot of financial resources to back up its alternative energy research. In 2005, BP had returns of $22.341 billion. BP, virt ual to the little expert alternative energy firms, has a big gain as far away as financial backing. BP has the potential to invest a large deal in research to develop alternative energy technology. BP newly signed a strategic joint venture to way in Chinas increasing solar market and provides local built-up capacity. Since BP has been in the solar energy business for thirty years; it has the understanding and is acquiring the technology it requirements to be a main player in the solar energy business. In 2004, the BP Solar business first became profitable. BP, amid its Energy Max solar electric ground systems technology, which follows the pathway of the sun from east to west, maximize the performance of the cells, provides for a good solar technology opportunity to its customers. BP has provided a number of different firms and groups solar cells. In 2004, BP Solar provided the solar panels to an entire Foods Inc. store in Edgewater, NJ, which became the first main retailer in the Northeast to use solar energy as a power resource. BP provided the solar panels to the United States Marine Corps Air-Ground Combat centre. Some projects built-in the Lufthansa Terminal in the Munich, Germany airport and the Tennessee Valley Authority in Chattanooga. BP has produced a number of programs to boost public awareness of involve for solar energy. BP formed the BP Solar Neighbours Program, anywhere each time a celebrity has BP solar panels installed into their home, and BP will contribute a solar system to a low-income people living in South Central Los Angeles. BP has the opportunity to join with celebrities to encourage the use of solar cells. It also has the BP Solar Connection Program, which is intended to raise awareness in schools the huge reimbursement of clean alternative energy. During programs like these, BP is growing the awareness and as a result the demand of solar energy. BP Solar even donated panels to ABCs Emmy award-winning reality series Extreme-Makeo ver: Home Edition. Weaknesses Compared to different energy firms not in the oil industry, BP is at a difficulty by its unhelpful dirty oil image. In March of 2006, a main BP pipeline ruptures on the North Slope of Alaska spill thousands of litters of crude oil into the Arctic marine. Accidents like these are harmfully impacting the firms attempts to re-brand its reputation to a more environmentally friendly oil company. Environmentalists are calling BP out on the re-branding as now a method to green wash-giving a helpful public reputation to unsafe environmental practices-their public reputation. The BP brand is very well-built for oil, but not almost as much as it is for its other energy segment. The average person does not essentially know that BP has entered into the solar energy market. One more main weakness of BP Solar is that the photovoltaic company very little in general with the petroleum company. BP has perfected the capability to refine able to create chips, sto re energy in batteries and such. In entering the solar energy market, BP had no competitive benefit over other firms to be able to use its vast knowledge in petroleum. Thus, it is very hard for BP to make synergies between the oil side of the company and the solar side. Opportunities With its income from oil, BP has an amount of opportunities to invest and gain more in the solar energy segment. BP has also begun to sell its photovoltaic cells and modules that provide power for homes at Home Depot. At present, BP Solar has teamed up with Home Depot in offering a BP Solar Home Solutions in California, New Jersey, and Long Island, New York. The BP Solar Home Solution offers free of charge in-home discussion, specialized installation, and free of charge six-month checkups. The solar systems purchased include a five year full service guarantee and a twenty five year inadequate guarantee on the panels, which helps to assure consumers on switching over to solar energy. BP can also se ll to other home development stores such as Lowes and Ace. BP has an amount of opportunities through the government to boost its income. One such thing includes passing legislature that provides tax breaks to those and corporations that opt for energy as a means of electricity. It can also encourage states like California, Arizona and Florida to pass a permission that homes built after an unsure year should be necessarily to have some solar energy tool. Though this would also be serving its rivals, it would still advantage BP Solar as well. BP has a few opportunities to make synergies among the petroleum side of the business and the solar side. It can very well use solar energy to power its operations such as its business offices, plants, and even gas stations. If BP Solar improves the technology to create photovoltaic cells extra cost efficient, it can very well produce connections between the two sides of the company. Threats A lot of people realize the requirement for energy sources in the futures, there are a number of firms specialize in exact energy, including particularly photovoltaic solar cells. BP, however, is very expand and has its resources in a number of dissimilar products, with the obvious being oil, but in other another energies as well. The extreme diversification could perhaps pose trouble to BP in the future. Shell, another doing well oil company has entered into the solar energy market, and it is at present one of the four major solar energy leaders along with BP Solar, Sharp, and Kyocera. Competitor review Solar market will be more competitive with BP because of their comparable attachments to petroleum. Any act that BP will take to create synergy between solar and petroleum can be copied by solar market. KSI and Sharp Solar will be more aggressive with every one because both have electrical division close. KSI and Sharp Solar have an additional benefit over solar market and BP due to their electronics division. If custo mers desire to install solar systems from Sharp, they would also be confident to buy electronics from Sharp in order to get the fully integrated discount. In addition, if a family were already using Sharp electronics, it would be cheaper to get a solar system from Sharp Solar than from any other farms. Getting a entire set from one firm is all time cheaper than getting the individual components from different firms. KSI and Sharp strive to attack different markets. KSI has a individual technological advantage because its structure Integrated Photovoltaic incorporates PV modules into the structure architecture, which create a unique architectural market for KSI. On the other hand, Sharp Solar is developing transparent PV that can serve as windows, providing extra options for customers. Sharp Solar concern design and give the families the freedom to selection, thus putting main importance in the market of homes instead of the market of industries. Generally, industry would care mor e about cost and performance than the artistic beauty of the solar modules. Because of this market distinction, the competition between KSI and Sharp is reduced. There is not a understandable market division between BP and Solar market Both create modules for residential and commercial use; therefore, the competition will be fierce. One possible way to decrease competition is to make a separated market. The solar PV market has both technology and quality competition. Any major technological advance will give firm a aggressive benefit. BPs competitors are strong firms that place pressure on BP to find its own secure market.