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Company History

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British Petroleum (BP) is one of the worlds leading oil companies, and one of the United Kingdoms largest corporations. The company, which was the pioneer of the Middle Eastern oil industry, having discovered oil in Iran before World War I, is now engaged in all aspects of oil exploration, production, refining, transportation, and marketing. It has significant interest in chemicals and plastics, including a range of specialty products- mostly detergents, advanced composite materials, and advanced ceramic engineered materials.

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The new BP

The new BP has a long and exciting history that goes back more than a century. The company is made up of four companies, each with its own proud history: BP, Amoco, ARCO and Castrol. These histories are so often intertwined, that coming together as one company makes a great deal of sense. It’s the power of one.

BP

BP’s origins date back to May 1901, when a wealthy Englishman, William Knox D’Arcy, obtained a concession from the Shah of Persia to explore for and develop the oil resources of that country. As exploration continued, costs mounted, stretching D’Arcy’s resources to the point where he sought outside financial assistance. This came in 1905 from the Burmah Oil Company, which provided new funds for D’Arcy’s venture. In May 1908, he struck oil at Masjid-i-Suleiman in southwest Persia. It was the first commercial oil discovery in the Middle East.

In 1909, Anglo-Persian Oil was formed to develop the oil field. Later renamed as British Petroleum, the company’s name was shortened to BP to reflect a continuing global expansion. Over the years, BP made many important discoveries, including fields in the North Sea near Scotland and at Prudhoe Bay in Alaska.

Amoco

Amoco began its life as a part of John D. Rockefeller’s powerful Standard Oil Trust. Incorporated in 1889 as the Standard Oil Company (Indiana), the company’s first challenge was to build a refinery in Whiting, Indiana, specially designed to handle high-sulphur crude oil from a field near Lima, Ohio.

In 1912, a year after dissolution of the Rockefeller Trust, company scientist William Burton and his colleague, Robert Humphreys, received a patent for the thermal cracking process that doubled the yield of gasoline from a barrel of crude oil, while also boosting its octane rating. Headquartered in Chicago, Illinois, Standard Oil of Indiana remained the company’s name until April of 1985 when it became Amoco, reflecting a growing international presence.

Arco

The oldest of the four companies, ARCO was founded in Philadelphia in 1866 as the Atlantic Petroleum Storage Company. At the time, Atlantic’s business was simply to store and ship crude and refined oils. In 1870 the company built a refinery that could process 3,000 barrels a day, a record for that time. Only four years later it was sold to John D. Rockefeller’s vast Standard Oil Trust (of which Amoco was also a part), where it remained until 1911, when a federal court dissolved the Trust. It merged with the Richfield Oil Company in 1966, and was known as Atlantic Richfield, or ARCO. Like BP, ARCO made discoveries in Prudhoe Bay, Alaska, including the biggest strike ever in the Western Hemisphere.

Castrol

Burmah Castrol, as it was originally known, traces its roots back to two companies founded toward the end of the 19th century – Burmah Oil Company Limited, registered in Edinburgh in 1886 (the same company that came to BP’s early aid), and London-based CC Wakefield & Company, which was formed in 1899. In 1909 it launched the Castrol brand name, committed to premium quality specialty lubricants, high performance and leading-edge technology. The company played a key role in the developing transport industries and the pioneering days of record achievements.

In those early days, Castrol worked hand-in-hand with the pioneers of the aircraft, motorcycle and motorcar. Thus, Castrol was the chosen brand for breaking world speed and endurance records on land, sea and in the air. The land speed record alone has been broken 21 times by cars using Castrol lubricants.

Stakeholders

The board’s governance policies regulate its relationship with shareholders, the conduct of board affairs and its relationship with

the group chief executive. The policies recognize that the board has a separate and unique role as the link in the chain of authority between the shareholders and the group chief executive. In addition, they acknowledge the dual role played by the group chief executive and executive directors as both members of the board and leaders of the executive management. The policies therefore require a majority of the board to be composed of non-executive directors and delegate all aspects of the relationship between the board and the group chief executive to the non-executive directors. The policies also require the chairman and deputy chairman to be non-executive directors; throughout 2002 the posts were held by Mr Sutherland and Sir Ian Prosser respectively. Sir Ian Prosser acts as the senior independent non-executive director as required by the Combined Code on Corporate Governance. Finally, the company secretary reports to the non-executive chairman and is not part of the executive management

Pest Analysis (Technological issue)

Technology is possibly one of the greatest competitive advantages. It unlocks steady gains in productivity and enables the business to develop new products and processes.

They estimate that new technology has allowed them to cut the costs by 40% in the last decade. They have also used technology to significantly reduce there emissions to the environment and to make the operations five times safer than they were a little more than a decade ago.

The company currently spend more than $1 billion each year developing and applying new technologies.

Technology is vital to BP’s business. It underpins the search for oil and gas. It stimulates innovation. Through technology, they can make more efficient use of the resources the company have already found. It helps to create new chemicals and find new sources of energy, and makes it easier to control costs, protect the environment and improve safety.

Social and Environment issues

Swot Analysis (Social issue)

There goals and expectations related to social and environmental issues are clearly stated within BP’s business policies, which focus on:

1. ethical conduct

2. employees

3. relationships

4. health, safety and environmental performance

5. control and finance

6. policy implementation and assurance

There new brand symbolizes the commitment to performance in all these dimensions, while the business policies set out there aspirations in detail. They include commitments on each of the areas listed above. They apply to all BP employees, and every BP business, throughout the world.

Integrity in there business dealings, respect for the law and for the rights of individuals is the central themes of the company ethical conduct policy commitment. This includes a statement of support for the principles set forth in the UN Universal Declaration of Human Rights.

Financial performance must be accompanied by high standards of environmental and social performance.

Environmental and social reporting is itself key because it is needed to ensure that BP’s declared policy of openly reporting its performance, good or bad is actually carried out. To provide local as well as corporate disclosure of performance, BP is publishing independently verified environmental statements for major sites.

Swot analysis (Threat issue)

It is impossible to have an oil company whose products create no pollution whatsoever. BP tries, however, to minimise pollution and has a clear goal of preventing any harm from the pollution. Arguably the largest step to reduce damage to the environment so far has been the substitution of oil and now gas for coal as the fuel of choice. BP has a continuing programme to reduce the impact of pollution from its products by developing cleaner fuels but for many years its focus has been to reduce pollution from its operations.

Even more important to the environment than the reduction of pollution from BP’s own operations is to help reduce those from its customers through BP’s development of cleaner burning fuels and renewable energy resources.

Swot Analysis (Strength issue)

Last year, BP announced that they had succeeded in reducing the greenhouse gas (GHG) emissions by 10% from 1990 levels, and that the company were setting a new target to manage the future impact of there emissions at or below 2001 levels until 2012. In 2002, and after taking account of portfolio changes, this was achieved through a combination of energy efficiency and venting and flaring projects which have contributed to sustainable reductions and which have more than offset emissions growth from new facilities and increased utilization of existing facilities.

Some of the things BP are doing to reduce greenhouse gases:

* Controlling there greenhouse gas emissions;

* Engaging in research and policy on climate change;

* Promoting flexible market instruments to ensure reductions of greenhouse gases are met cost-effectively;

* Growing renewable businesses such as BP Solar

The strength of the new company will be judged not just by its financial results, but also by the way in which the company conduct business – by the aspirations BP set and the manner in which it is engage everyone with whom they come in contact. A good business should be both competitively successful and a force for good.

BP’s Strategic Management Policy

The past two years have seen the development of a new team. Individuals from British Petroleum, Amoco, ARCO, Burmah Castrol, Mobil in Europe and from numerous other businesses which are now or will soon be combined in the new BP have come together to build a great new business.

Each individual in the teams that form the new company comes from a background in which values matter. These values may have been manifested in different ways, but they have much in common: a respect for the individual and for the diversity of mankind, a responsibility to protect the natural environment, a belief in honest exchange and awareness that a strong reputation is essential for business success.

Pest Analysis (Political issue)

In April 2002, we joined the UK government-sponsored emissions trading scheme, the world’s first scheme to cross industry sectors. Rodney Chase, BP’s deputy chief executive officer, chaired the industry-led group that helped to develop the UK scheme.

Climate change is a global issue for BP but it also needs to manage the local environmental impact from its facilities. The company requires all major sites to manage environmental performance against the ISO 14001 international standard and to publish periodically externally verified statements describing their environmental impacts.

Competitive Environment

BP uses a variety of top inspection companies such as Lloyds Register, det Norske Veritas and AEA Technology to ensure that the verification or ‘audit’ is genuinely independent. Dozens of environmental statements are published within BP environmental and social often giving more operating detail than the group supplies in its financial and operating information booklet.

Even more important to the environment than the reduction of pollution from BP’s own operations is to help reduce those from its customers through BP’s development of cleaner burning fuels and renewable energy resources.

Now, in a new company, they have the opportunity to express what they believe in on a broader scale. Just as in commerce, where the key advantage of a large enterprise is reach and the ability to apply skills and experience across a wide canvas, so, in terms of there aspirations to be a power for good in the world, the new base gives them the opportunity to apply the values and diverse experiences in a wider range of circumstances. More important, they can keep learning from there extensive range of activities, and can apply this learning to everything that they do. The spreading of knowledge is the true secret of progress.

Five Forces to the Organisation

According to Porter’s model, the structure of competition in an industry can be described in terms of five major “forces”, including:

* The intensity of rivalry among existing firms (Amoco, Castrol and Arco)

* The threat of entry

* The threat of substitutes

* The power of buyers

* The power of suppliers

* Each of these forces is in turn determined and influenced by a number of different factors, which require separate analysis. The interaction of the five forces taken together gives an impression of how attractive the industry is to the firms within it.

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Kylie Garcia

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