The Case Study of BP oils anticipating Mexican Spilling Issue

1 Managing Market. KCB ID:14719

ASSIGNMENT SUBJECT: MANAGING MARKET

TOPIC: CASE STUDY OF BP

PRESENTED BY: YATIN BHANDARI

TUTOR: JAS NAIDOO

KCB ID: 14719

DATE: 28/02/2011

WORD COUNT:3300


TABLE OF CONTENT:

CONTENT PAGE NO.

1.INTRODUCTION(PART-1) 3

2.MACRO ENVIRONMENT 3

2.1.ECONMIC FACTOR 4

2.2.POLITICAL FACTOR 5

2.3.TECHNOLOGICAL 6

2.5.LEGAL 6

2.6.SOCIAL 7

3.RECOMMENDATION 7

4.INTRODUCTION(PART-2) 9

5. MARKETING STRATEGY 9

6.SWOT ANALYSIS 9

7.MARKETING MIX 11


8. ASSUMPTED MARKET. MIX.BP 14

9. BP’S MARKET ANALYSIS STP 14

10.CONCLUSION 17

11.REFERENCES 18

PART-1

Introduction:

Analytical review on Macro Environmental factors that impact the future marketing decision

of BP the organisation who first did sale in 1920’s in Britain whose market value now is

$120 billion and having the sale of asset value is $30billion, after considering the oil spill

issue of BP into gulf of Mexico that leads to bad prestige and image of the company into US

market and also in other countries of the world which leads to plunged in market value by

$72 billion.

The macro environmental factors consist of Political, Economical, Social, Technological,

Legal, Ethical and with the help of these factors and considering its theoretical concerns the

practical applicability of the same into the case of BP would be highlighted in order to plan

the future marketing decisions of BP in this report study.

Macro Environment:


Macro environment is the environment that deals mainly with the External factors that impact

the opportunities and threats of the firm, these are the factors that cannot be controlled by the

firm for example forces like Suppliers, customers, competitors, marketing intermediaries,

government etc.

Example(correlation with BP’s Case):

Claim settlement payment by BP to the US government for making things correctly.

All the Macro Environmental factors mentioned above can be affected on the case of BP after

the incident of spilling into gulf of Mexican as it has impacted almost all the external factors

that is economical, social, Ethical , Technological, Political, Legal and Legislation.

Hence it can be drawn from the case that all the external factors got impacted and its

consideration is must in order to frame future marketing decision to regain its marketing

position in the US market.

Economic Factor:

It deals with the economic factors which are external to the firm such as GDP growth,

Purchasing power of the people and its factors like current income, prices, savings , debt

position and Income Distribution.


For BP to create more market in US need to study the economical position of the country

including purchasing power of the people which is currently very low due to the recession

caused because of collapse in American economy due to lehman brother being declare

bankrupt and BP also need to drawn attention towards the income of the people into different

classes as their product is petroleum which can be bifurcated into class like vehicle linked

and manufacturing linked customers the companies. And along with all those BP also should


consider the Income distribution pattern of the country, as such its equal into American

economy but needs to bifurcate their customers accordingly.

Economic study can be helpful for BP to decide on:

Analysis of Change of GDP and Income Distribution helps BP:

To Decide

*) Target Market: Through analysis of Income distribution BP can segregate the market on

the bases of income flow into each of the areas of US and can target the specific sector where

the purchasing power of the people is more like age group between 20 – 21 years.

*) Product Pricing: It can help BP in deciding the pricing of the various products on the bases

of income flow of the people residing into America and from their purchasing power.

*) Product Designing: This can help BP in designing of product on the bases of segmentation

that is age group between 20 – 21 years so BP can bring innovation into Castrol products

which can be highlighted with the feature of speed so as to attract the specific Age Group

people into American economy and it can even focus the sporting customers who remains

unaffected even at the time of recession by highlighting the same feature.

Political Factor:

This deals with the political concern that impacts the marketing decisions, so the study of the

laws and the norms of the governmental bodies into America will help BP in taking certain

marketing decisions after considering these factors.

Target Market

Product Pricing

Product Designing



Consumer protection act in US according to which consumer has got certain rights like rights

of choice, rights of bargaining, right to be informed, etc.

Even changes into political structure of the country in this case US needs to study well in

advance so as to take certain marketing decisions as there can be changes into certain

economy governing factors like interest rates, reverse repo rate, cash reserve ratio which

impacts the money flow into an economy which can directly impact the savings and the

purchasing power of the country.

In the case of BP hence it is therefore very important in the case of BP to look after the

political concern to predict in advance like after the changes of the government what can be

its impact on business for instance the American foreign trading norms became more lenient

after the arrival of Obama and even the FDI increased that is Foreign Direct Investments so

its very important for BP to critically analyse each of this concern in order to make strategic

marketing decisions so as to create more market in America.

Technological Factor:

This deals with the technological advancement concern that impacts the market stability

including study of current technology and the prediction of future advancement it also

emphasis on current market trends and the innovation of the same in future studying

consumer expectations.


*) Change of technology: BP needs to change the technology for easy fractional distillation

*) Eco friendly measures with respect to technology: BP needs to consider some environment

concern and can bring some technology to preserve the environment so nature can be taken

care of and can even succeed in creating more market as they are currently facing problem of

reputation in US due to gulf of Mexico spill.

*) Alternative technology and Production cost: BP can go for some alternative technology

especially for the extraction of crude and for the fractional distillation so cost can be reduced.


Hence it is very important for BP to make consideration of technological factors as listed in

the example section to look for technological alternatives with respect to production and for

production of new technology products as it has got strong competitors like Shell and Exxon

into American market who are the leading players into same sector. And BP also needs to

accelerate the change of pace in order to sustain its equity in the American market and will

also help in framing future marketing decisions as its reputation is already spoiled.

Legal and Legislation :

This deals with the legal concerns including societal laws, antipollution legislations, excise

regulations, power of buyers, consumer rights, regulations on sales promotion etc that

impacts the business and also the marketing decision of the firm.

Example (correlation with BP’s Case):

*) Changes in antipollution legislations after Mexican spill.

*) Increased Energy cost after the gulf of Mexico spill in US.

*) Changing Role of government in US.

It is analyse from the above instances that BP needs go for some alternative products for

petroleum products as the cost of energy is increases and even pressure of antipollution

legislations which are been made more stricter by the American government.

Hence it is very important for BP to critically analyse all these legislations that are getting

changed in US and will be in change in future so good marketing strategies can be framed.

Social Factor:

This deals with consideration of values, faith, tradition, taste and preference, habits etc. that

impacts the business and marketing decision.

Example(correlation with BP’s Case)

American culture consist of colonization and immigration from British isles and major

Christians in demographics.


Hence it is very important for BP to critically analyse all these demographical factors and

considering US market as a Flexible one with respect to culture and needs to operate

accordingly and also needs to take decisions in future accordingly.

RECOMMENDATIONS:

Hence it can be recommended to BP that while framing the marketing strategies need to

consider all the above factors and its impact in future as in the case of the oil spill it could

have been avoided by BP doing some of these listed below:

*) BP needs to go for alternative technological inventions like wind or solar based products.

*) BP needs to manufacture Corrosion free tubes need to be placed to avoid incident like

Mexican spills.

*) BP needs to make more innovations in oil products.

*) BP also needs to study American demographics.

*) Segmentations can be done more precisely.

*) BP needs to study existing reputations of theirs into the minds of US people so that future

planning can be done accordingly.

*) Target market needs to be analyse on the bases of the income distribution slab into the

sector which is applicable for the BP’s products for example youngsters lying in age group of

21-30 years.

Hence the above listed are the points which can be considered in future by BP to gain its

market position in US.


PART- 2:

Introduction:

Here the analysis will be drawn on BP after the oil spills of gulf of Mexico on its future

marketing decisions in order to recover from the marketing disaster that BP is facing because

of the same is done with the help of various marketing tools like SWOT analysis, Marketing

Mix , SMART analysis, STP etc. that is applicable on the practical case of the BP. Under this

section of the work even the actions that BP should take in order to stop the incidents like

Mexican spilling is highlighted and also the group companies of the BP is taken into

consideration so as to frame the strategic future marketing actions that leads to preserve the

prestige of BP and that helps BP in increase its sales.

Marketing Strategy:

According to (schnar’s 1991) the marketing strategy is the most important factor to focus

since 1980’s. It helps the firm in deciding the certain aspects of the business including market

expansion, withdrawing the products, determining high value added products etc.

SWOT analysis:

Strengths:

*)Having the Market value now of $120 billion, having the sale of asset value of $30billion,

BP is running in 160+ countries from last three years and 3 % of American production’s

contribution is made by BP and also having the employee strengths of 2000 employees in

America it also has strong group companies like ARCO, ARAL, CASTROL, AMPM, Wild

Bean Cafe etc, having multiple products like home relating, Road users relating and for

Business Relating. BP has got good technological innovations with respect to products and

production relating for example: refineries.

Weaknesses:

The oil spill issue of BP into gulf of Mexico that leads to bad prestige and image of the

company into US market and also in other countries. plunged in market value by $72 billion.

Declining in profit margin in Us and as a whole. Dividend reductions to the share holders.

Sales decline in the United states of America’s Market.


Opportunities:

The product diversification into below listed different user aspects can be made:

Product diversification:

Seismetic Technology can be brought up. BP can also target Russian and African market by

making some product innovation. Can meet up the total requirements of fuel into US market

as it governs the 3 percent of total production. More mobilisation of resources can be done.

Threats:

Shell and Exxon the leading market players are the major threats for BP ,Shortage of raw

materials, energy crises, changing government role for example 20bn $ claims fund to US

government, spoilage of brand reputation after the gulf of Mexico spill issue, technological

concern with respect to environmental care.

Recommendation on SWOT for BP:

BP can make use of these factors including strengths, Weaknesses , Opportunities, Threats so

as to take some productive and effective marketing decisions in future that can help BP in

generating its stake throughout the place where it operates.

Road Users related

Products for Home

For Business


Marketing Mix:

It is the most vital concept in the era of modern marketing. It is defined as “ the set of

controllable, tactical marketing tool that the firm blends to produce the responds it wants in

the target market.”(International Journal of Marketing Studies 2011)

BP’s Marketing Mix:

Product:

This deals with the product relating certain issues like:

*) What is the product function?

*) What is the cost of production?

*) How to source the raw materials?


For BP product function is product that have different functions like road users, product for

home, and business related for instance:

Products for home: 1) LPG

2) Solar Powered Energy

For Business: 1) Air BP

2) ARCO Aluminium

3) Marine fuels and lubricants etc.

For Road Users: 1) BP Bio fuels.

2) Gas and fuel cards.

3) Gas and Petrol Stations etc.


BP needs to check their products life cycle so that elimination can be done accordingly. BP

also needs to consider the cost of production factor as it can bring the production cost done

by making some technological innovations and can bring better efficient machineries

especially for refineries. Source of raw materials is also a factor as the product of BP is non

renewable which is exhaustive in nature.

Hence it is very important for BP to consider the product related factors as their main

product is petroleum and it is scarce by nature so it has to be judiciously produced and its

functions has to be placed accordingly.

Price:

This deals with the price relating certain issues like:

*) On what the product be priced?, Demand Analysis, Competition Analysis, what could be

the Substitute products?


*) For BP pricing can be fixed the brand for instance Castrol products.

*) For BP the demand can be from the industrial sector and from the domestic consumers.

*) For BP the competitors can be Shell, Exxon, Chevron , ConocoPhillips etc.

*) For BP the substitutes can be non conventional sources of energy like wind power, solar

energy etc.

Hence it can be drawn that BP needs to frame its pricing policies only after critically

considering their rivals and the current demand of their various products and its substitute but

from the study it can be said the substitution is quite tough in the case of road users products.

Place:

*) Defining the Retailers ?

*) How to distribute products to the retailers?

*) Defining the distribution method.



Retailers for BP is BP petrol stations in US and the top retailers of the US and its group

companies ARCO, Castrol and BP etc.

The main sector for BP is road users so it can target the rural market as well, and the Castrol

products are sold in more than 150 countries throughout the world.

Hence it can be drawn that place helps BP in selling its products according to its potential

market and also helps in distribution.

Promotion:

This deals with the price relating certain issues like:

*) what can be the media for promotion?

*) Ways of promotion

*) Defining the promotional campaign.


Advertisements and the other media for promotion , focus on luxury for example high

performance Castrol heavy oils that is especially made for Cars like BMW, Audi and VW

etc.

BP needs to promote on the bases of the segmentation of the value of product.

People:

It deals with mainly two things:

*) Service of retail outlet

*) Service station for rural people.



The self operated petrol pumps for the better convenience of the customers and the facility of

wild beans the coffee shop where the customers of petroleum products can rest.

Service stations and petrol stations at almost every region of the country for the better access

of the customers.

Physical evidence:

It is the internal service and the sophistication a kind of feelings that customer gets after

entering the centres or the channels where the products are sold, for example the service

station and the petrol stations where they have cafe named as Wild beans where the customer

can have snacks and coffee and also the other drinks.

The marketing mix can help BP in deciding the value additions of the products, the service

relating aspects, the pricing strategy, and also will help BP in promotion aspects and will help

in distribution. This study will also help BP in deciding their target market.

BP’s market analysis and STP:

Market analysis is the study of services and the products that the firm offers considering both

the aspects demand and the supply. BP should not only analyse the customers but should also

focus on the potential service providers like shell and Exxon whom it can supply capital

intensive products for example: Refined crude.

Segmentation:

This refers to identifying a potential segment of market from where the earnings can be

gained it can be a users of the products. The market segmentation is done by most of the

firms to make the specific strategies of marketing.

For example: Road Users of fuel and oils, Domestic users for energy and gas, and industrial

users for crude, aluminium, Industrial lubricants, Asphalt, Solar power, Marine foods etc.

Targeting:

This refers to specified actions over the market that is been segmented, to target the specific

customers of the product and the services.

For example: High performance oil especially for the adventurous youngsters lying under the

age group of 20-30 years, the feature of the product is speed.


Differentiation:

This refers to production of some unique products that draw a comparative analysis with its

competitors and leads to gain advantage over the competitors.

For example: Cold protected engine fuel for Russian customers and heat protected engine

fuel for African Customers.

Positioning:

This refers to design of products and services that create better impact(competitive position)

in the minds of customers and reflect better result so that better productivity can be

accomplished.

For example: Highlighting the attributes of the product Cold protected engine fuel.

Assumed Marketing Mix for BP post case analysing:

Products:

(BP can create bio fuels that delivers high performance)

( Industrial Lubricated Products)

(Seismetic Technology, )

Price:

BP can raise its price in future by gaining competitive edge over its competitors by producing

distinct products and can charge high by adding higher values into it. For example

unconventional fuels.


Place:

BP can use distribution channels as the existing players of Russia and Africa for selling its

products or it can go for offering franchise to those players of Castrol. It can even supply

directly into the market of producers for example energy service.

Promotion:

BP can ask for reputed sports personalities of the respective regions to advertise for their

products in the respective markets.

SBU BCG analysis that helps BP in taking some of the marketing decisions for future:

1 2 3

The diagram indicates the various SBU’s Strategic Business Units of BP like ARCO, Castrol,

Aral, AMPM, Wild beans etc.

Here the analysis of various SBU’s is done and on the bases of market assumptions the

strategic decisions relating to marketing is done like parenting the SBU’s which are least

effective.

For example: It is been predicted that by 2030 the number of users of vehicles is going to

increase from 900 million to 2.1 billion so BP can focus more on BP as a main unit and can

increase its production of petroleum products along with the values of the product so that it

does not divert from the corporate objectives and “remains stuck in the middle” by (Michael

porter)


Conclusion:

This study along with the help of various marketing tools could draws many propositions

which BP can take as a future marketing decisions like Refineries with lower environmental

impacts to preserve its brand equity considering Mexico spilling incident it can focus on

producing clean transportation fuel so as to being kind with the environmental concerns. The

various marketing tools helps BP in recommending product innovation, technology updating,

focussing target markets, Competitor analysis and also recommend BP regarding new

marketing mix analysing future potential market.


References:

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some preliminary thoughts, Managerial Decisions, pg.39-50.

2) Corporate Strategy and Global strategic partnership (2002), Global marketing

management, prentice hall., pp 262.

3) How marketing communication works? Context – Strategy and marketing

communications, Global marketing management, prentice hall (2005),pg no. 177.

4) http://www.bp.com/sectiongenericarticle.do?

categoryid=9020660&contentid=7038001 [access date: 08/02/2011]

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date:19/02/2011].

6) http://www.thetimes100.co.uk [ access date: 08/02/2011]

7) Integrated marketing communication, Consumer communication ,BPP professional

education(2004), aldane palace London.

8) Kotler P, et al (2007), Other Macro Environments, marketing management ,12th

edition, Pearson Education.

9) Kotler P, et al (2009), The Changing Marketing Environment and information

management, Marketing Management,Pearson Prentice Hall.

10) Kotler P (2001), Marketing environment, Marketing Management, prentice hall ,

millennium edition inc, pg.9-10.

11) KNPC , International journal of Marketing studies.

Webadddress: http://www.csenet.org/journal/index.php/ijms/article/view/9272/6837 [

accessed date: 20/02/2011].

http://www.csenet.org/journal/index.php/ijms/article/view/9272/6837

http://www.thetimes100.co.uk/

http://www.marketingteacher.com/lesson-store/lesson-marketing-mix.html

http://www.bp.com/sectiongenericarticle.do?categoryid=9020660&contentid=7038001

http://www.bp.com/sectiongenericarticle.do?categoryid=9020660&contentid=7038001

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The Case Study of BP oils anticipating Mexican Spilling Issue