BP’s general strategy

Oil companies were the worst performing brands in the world market. There was no brand in the oil industry that had created positive perception in the public. During the late 1990’s BP has decided to change this perception for their brand. The main idea was to create a symbolic capital for BP. The definition of symbolic capital is given by (Bourdieu, 1974/1977 sited in Holt & McNulty,2008,p.

76) as “ the resources by which authority and credibility are established amongst employees, peers, customers, regulators and other organizational constituents through the capability to articulate legitimate judgments and actions from a specific institutional position”. This could be a powerful tool in certain conditions. The CEO was John Browne at that period. He was also member of Intel Company and he had influenced with the perception of Intel brand in the market. He had wanted to position BP as it’s been done for Intel. Browne made a declaration about the relation between greenhouse gases and climate change in Stanford University in 1997.

That was a big change of strategy for the oil market and for BP. An oil company was making a big shift in the market and joining the fight against the climate change as stated by Sachs (2012, p. 38) From that point, company had positioned itself as an environmental company as well as an oil company. That was a revolutionary change for the company. His service to the board of Intel Company might help him to take this radical decision according to Sachs. The company was using the positive perception of ‘being British’. Now time has changed and company has needed a new way of perception in the public.

There are three stages for a change as stated by (Lewin,1951 sited in Weick & Quinn, 1999). These are unfreeze, transition and freeze again. Browne had started to unfreeze the existing patterns both in BP and both in the market. This was a start of a big change. This would change all the market and BP paradigms. BP was the first company who had acknowledged the public and the market about the environmental policies. This became an advantage and disadvantage at the same time. It had received a lot of support for being the pioneer in that sense. But also, received a lot of complaints from the public as well.

As discussed by (Bahree, 2001), BP became the significant in criticism by the environmentalists. Although BP has an environmental strategy as explained above, their safety procedures and regulations were still missing. The CEO of Elements Investment Manager said that, BP had been pinned with around 760 safety violations when other competitors have only tents of violations as stated by Ashton(2010). There were safety issue problems in the company, but these problems or lack of regulations were never considered as a major issue. Browne was a leader of not only BP but for all the Oil & Gas market.

His moves were monitored and duplicated by other players most of the time. For example, during the Davos meeting in early 1998, Texaco CEO’s climate thinking has changed with the influence of BP. The Amoco transaction of Browne, has triggered the Exxon and Mobil’s multi billion dollar negotiation. The Arco deal of Browne, has triggered the Chevron and Texaco negotiations. After the Browne, Hayward became the CEO. He was an employee of BP for a long time. Therefore all the existing strategies of Browne were with him. As stated by Reed (2007) the new CEO Hayward had two major issues to fix.

One of the issues was the expansion strategy of the company and the other one was the safety issue. Hayward has sent a memo to all the employees about the safety regulations on May 1st. This was a sign that, Hayward would be following the Browne’s path. As discussed by Weick & Quinn (1999,p. 361), he was seeing the company from inside. Therefore most of his perception was parallel with the ex-CEO. The general understanding inside the company was BP is the best brand in the market. The consumers are very loyal to the brand. The brand is so powerful that nothing can change this.

The brand loyalty will be helping to the company all the time for every condition. This was the main paradigm inside the company and as stated by Johnson (1992,p. 32) that paradigm was shaping the general decision making inside the company. There was great trust to the brand and this trust was creating illusion inside as well. There had 760 safety violations of BP and there was only 1 violation of Exxon. Exxon had received more protest than BP. These figures prove that BP’s symbolic capital was in a good shape, but on the other hand there were serious violations of safety in the operations.

Therefore new CEO did not need a radical change in the strategy. It was much an evolutionary change for the company at that period. Hayward can be called as a good manager, rather than a leader. As explained by Weick & Quinn, the change inside the company and the change in the strategy were done by incremental changes. The entire employee and the decision makers in the company were thinking the position of BP so robust and powerful that, investing only in the PR could save the company and prevent disasters. Psychologist Irving Janis developed the groupthink model in the early 1970s.

According to Janis, if there are certain conditions exist, then intelligent people can make foolish decisions. One of the conditions was a powerful and influencing leader in a group could cause the groupthink. All the company and people around CEO did not see the realities of the world outside. The leadership of Browne after many years became a disadvantage for the company. Then the Deepwater Horizon disaster happened. Hayward left his position to Robert Dudley. New CEO had to make a major change after the failure in Deepwater Horizon. This analysis is done in detail by Weick & Quinn (p. 366).

Failures generally lead the managers and the company for a major change. This happened to BP after the Deepwater disaster. Implication of the Strategy in the Public As discussed earlier in this paper, starting from the Browne’s period thru the Deepwater disaster, there is a continuous positive increase in the public perception of BP and in symbolic capital. There have been many safety violations in BP’s operations, but none of them had draw major attraction in the market until the accident. If any of these failures or violations had been happened in other oil companies that would cause much more trouble to them.

After the year 2000, the company has changed its concept from Oil Company to a new slogan, which is called as “beyond petroleum”. This new slogan had increased the popularity of the brand in the public. Company has continued to invest in the solar energy and other renewable energy sources. This was the general trend in the market and in the consumer needs. The marketing company was Ogilvy at that period. Their main strategy was not to fool people about oil and its environmental effects. The main strategy was to increase the consciousness about the oil dependence and how to avoid its environmental risks.

As stated in Tsoukas (1999), in certain cases symbolic capital can be more powerful than financial strength. A similar case had happened to Shell in Nigeria and a small organization, which is called Greenpeace, had tremendous effects on the giant Oil Company. BP was hoping or believing that, symbolic capital that they have created over the years would be surviving the company when it is necessary. Implication of the Strategy in the Business On the other hand, there was a big conflict between what they say and how they do it.

For example, Browne did not spend more money on environmental issues his entire career long than a single year’s spend on oil exploration. It’s been stated by Sachs that by 2010, BP’s investment on alternative energy had never exceeded more than % 6 of its overall capital. Browne was cutting costs and laying-off thousands of employees, to increase the profit of the company. He was not aware that, these employees were essential part of company’s safety policies. During the Browne’s period, natural gas consumption was increasing in the world, so the importance of natural gas as well.

According to the expectations, the gas resources would be more important than the oil resources. The oil prices were fluctuating and it was not easy to be dependent just to the oil market. According to Browne, the future winners of the market would be the big players or niche players. Therefore, he had started to change BP to be a big and integrated player in the market. He successfully finished the Amoco, Atlantic Richfield and Arco acquisitions. Additional to the Oil & Gas business, BP has acquired %50 share of Solarex in April 1999.

This helped BP to be in the upper ranks of renewable energy industry. There has been a remarkable change in the BP’s financial figures. BP’s stock prices went up in 7 years. The stock price of 1992’s became very small fraction of 1999’s stock prices. The market position went up to the 2nd rank, just below the Exxon. The usual position of BP was below Shell in the previous years. As a summary, BP’s both financial strength and symbolic capital was increasing in the market. So there was nothing to worry in the future! BP’s ability to make the balance

When BP’s case is studied with resource-based view (RBV), it will be inadequate, since the environment surrounding the company is not stable or predictable. Therefore, we have to analyze the resources of BP, it’s symbolic capital, the discursive environment of BP and finally the dynamic capabilities of the company respectively. Resources of BP Oil reserves of the company, manufacturing and marketing power, organizational structure, financial strength, multinational contracts and relations, are all the powerful resources of the company. In order to react to a change in the environment, some of these resources should be easy to change.

Discursive Environment As explained in the first part, starting from mid 1990’s BP had started to work on its public perception. This was a new strategy in the market. BP had started to increase its symbolic capital in this way. When BP is developing good resources in the company and increasing its symbolic capital, there was a discursive environment around it. Tsoukas (1999) identified the four characteristics of a discursive environment. People are independent of time, place and space with the help of communication technology; therefore it is easy to all people act to a certain event.

There is a risk from symbolic capital creation activities. The media and news are not fully controllable and objectively monitored. Local traditions and norms are not stable, as they have used to be in the past. With the help of Tsoukas’s definitions and explanations, we can see that the environment of BP can be called as discursive. BP is a worldwide company so that all the information and news about the company can easily be spread. The media and news coverage is not easy to control. There are always certain filters in the company that prevents to access all of them efficiently.

BP is a multinational company, running operations in different parts of the world, so that company will be facing with different cultures and attitudes. All these conditions create a discursive environment for the company. Dynamic Capabilities As described by Helfat & Peteraf (2003,p. 999) there are two types of capabilities, operational and dynamic. We are looking for the ability of balance, between BP’s interests and expectation in the market. Since market expectations are important part of this equation, we cannot call this capability as an operational capability.

A dynamic capability is essential for this kind of ability. The dynamic capability of a company highly depends on the organization and coordination of teams. As stated by Helfat & Peteraf (2003), all kinds of capabilities have 2 routines in common: individual tasks and coordination of individual tasks. There are different teams and departments in BP with their own individual tasks. When we look at the period between 1995-2010, we can say that company has expanded, new workflows and procedures written, new policies and regulation applied, but we cannot say that any team had a dynamic response as a part of their strategy.

All these developments and changes are done either as a mandatory response for a market change or as a request from the top management. BP is highly organized and well operated company. It is a multinational company based on different locations and countries. There is a great organizational capability with high-level routines. Most of these resources of the company did not change radically. Most of the business, operation, and management had continued in the same way. There were many signs of oil crisis and disaster in the market, but none of them have triggered for a major change in the resources of BP.

For example, in 2004 MV Selendang Ayu, in 2005 Bass Enterprises, in 2006 Jiyeh power station oil spill, in 2007 Korea oil spill, in 2008 New Orleans oil spill, etc. But none of these capabilities do not guarantee the dynamic capability of the company as stated by Winter (2003). As discussed by Winter (p. 992) each change in a company cannot be called as a dynamic capability or the ability of the company. Certain changes in an environment can force the company to make a change. These changes are not the capability of the company; it is more a mandatory action to an environmental change.

And also exiting patterns and capabilities can reach to a threshold level in terms of reliability, but that does not mean a dynamic capability or the ability of balance. Strategy as a change As stated by Johnson (1992,p. 28) there is a strong link between the culture, strategy and the managerial behavior of a company. Most of the CEO’s of BP generally works in different positions of the company, then becomes the CEO. In this way, each CEO candidate knows the culture, organization very well. This helps the CEO to plan a strategy, which does not conflict with the general culture.

This fact is helpful for incremental and cultural perspectives. The managers can easily fit their strategy with the existing culture. Browne and Hayward were the employees of the company, so that they were part of the company culture. The worse was Hayward was part of the Browne’s culture and strategy. Hayward was curiously watching the Browne’s strategies and moves. When Hayward became the CEO after Browne, the existing paradigm inside the company had become the main filter. The filter prevented Hayward to see the realities of BP. This effect of paradigm’s had been studied in Johnson’s (1992,p.

29) scholar. In such cases, the top management always wants to follow the existing patterns and do not want to change their usual behavior. Although alarm bells were ringing about the safety violations and regulations, none of the decision-makers accept the realities about the risks. After the Deepwater disaster, new CEO had to find and create a new strategy. Dudley was a BP employer before he became the CEO of the company. It’s been stated in Weins&Quinns (1999), major failures in the strategy leads to another radical strategy. Dudley preferred to keep the company as humble as possible.

He knew that every move that BP try to make would be an excuse for the market to sue the company by any means. On the other hand, company has started to move in a much safe conditions than before. For example, a single Global Wells Organization drilled all the wells of BP. Many redundancies have been installed in the field to prevent new disasters. Such redundancies could stop most of the accidents that happened in the past. In Dudley’s period, BP had chosen to implement and invest on safety issues, rather than just marketing them. Conclusion

Although there were certain conditions and powerful tools of BP, none of them can be called as a part of a strategy to a change. Starting from Browne period all the strategies have been created and lived as part of Browne’s personality or part of his vision. Decisions were taken with Browne’s dominancy. His strong leadership, prevented to discover and develop certain dynamic capabilities inside the company and other team members. After his period, Hayward had run the same organization. Since the organization does not have the dynamic capabilities as it used to be, Hayward’s period was very similar to Browne’s period.

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