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Title

Course Name

Student Name

30th November, 2020

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1. Summary

This paper addresses the challenges facing the renewable energy sector of British

Petroleum in the Americas. In the initial sections, the organization is assessed from a strategic

point of view while the latter sections look to analyze the renewable energy market in the United

States in particular through means of an external analysis. For this purpose, this paper makes use

of a series of frameworks including a PESTEL analysis, Porter’s Five Forces assessment, and a

VRIO analysis. Using the insights obtained from these frameworks, the paper provides well-

rounded, actionable recommendations to British Petroleum which would help it overcome the

challenges facing the renewable energy market in the USA.

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2. Contents

1. Summary.............................................................................................................................................2
2. Contents...............................................................................................................................................3
3. Introduction.........................................................................................................................................4
4. Main Body...........................................................................................................................................4
4.1. Current Business-level strategy and corporate level strategy.......................................................4
4.2. Ansoff Matrix..........................................................................................................................5
4.2.1.1. Market Penetration.......................................................................................................5
4.2.1.2. Product Development...................................................................................................5
4.2.1.3. Market Development....................................................................................................6
4.2.1.4. Diversification.............................................................................................................6
4.3. External environment and Competitor analysis...........................................................................7
4.3.1. PESTEL...............................................................................................................................7
4.3.1.1. Political:.......................................................................................................................7
4.3.1.2. Economical:.................................................................................................................7
4.3.1.3. Social:..........................................................................................................................8
4.3.1.4. Technological:.............................................................................................................8
4.3.2. Five Forces..........................................................................................................................8
4.3.2.1. Competitive Rivalry:....................................................................................................8
4.3.2.2. Supplier Power:............................................................................................................9
4.3.2.3. Buyer Power:...............................................................................................................9
4.3.2.4. The Threat of Substitutes:............................................................................................9
4.3.2.5. The threat of New Entry:............................................................................................10
4.4. Resources and capability audit using VRIO analysis.................................................................10
4.4.1. Non-Core Competencies....................................................................................................10
4.4.2. Core Competency..............................................................................................................10
5. Recommendations.............................................................................................................................11
6. Conclusion.........................................................................................................................................12
7. Works Cited.......................................................................................................................................13
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3. Introduction

British Petroleum is one of the world’s largest energy solutions organizations. By making

use of vertical integration the organization has acquired and created businesses in all segments of

the global energy industry. Presently, the business of British petroleum is segmented into 3

distinct business channels namely, Upstream, Downstream, and Alternative energy. Essentially,

the alternative energy segment refers to energy derived from renewable sources such as sunlight,

wind, biomass, water reservoirs, etc. In the last few decades the renewable energy market has

grown enormously as the adverse impacts of non-renewable energy as well as the idea of

environmental justice have come into focus. Despite this, there are numerous macro and micro

forces that pose a challenge to the sustainability of renewable energy investments.

4. Main Body

4.1. Current Business-level strategy and corporate level strategy

The corporate level strategy of BP is that of forward-integration as it has evolved from an

energy provider to an energy solutions provider. In this way, BP provides its customers with

energy solutions customized to their needs and takes on a key role in the value chain which was

previously left unaddressed. Offering specialized solutions provides BP a competitive edge over

rival organizations as it increased the efficiency of BP’s products and services. Another feature

of BP’s corporate-level strategy is diversification, which is accomplished by offering a diverse

portfolio of energy products such as wind power, biopower, as well as oil. This diversification

helps BP utilize the early mover advantage in products its competitors have failed to offer and

also helps it shape the future of the energy industry.

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In its effort to become more forward-looking and responsible, BP has invested

significantly in renewable energy initiatives, in the hopes of leading the energy industry towards

sustainable, eco-friendly practices. In these initiatives, BP offers its customers energy solutions

that make use of alternative fuels such as photovoltaic energy or biofuels. One example of such

an initiative is BP solar which focuses on research, development, and sale of solar panels

(Lüdeke-Freund, 2013).

To complement its renewable energy initiatives, BP is also pursuing a low carbon

approach. BP has realized the importance of conducting business in a manner that helps maintain

the ecological balance of our planet. Moreover, this approach offers an economic advantage as

well since more and more governments all over the globe have started to provide tax shields and

trade incentives to organizations that have green business practices. For these reasons, BP

announced in August that it plans to increase its low carbon investments tenfold in the next 10

years (Mufson, 2020).

4.2. Ansoff Matrix

4.2.1.1. Market Penetration

There is great potential for market penetration in the Renewable energy market. The

market itself is increasing at a scale previously unprecedented meaning that the demand for

products such as solar panels continues to surge. Previously in the US, there has been great

inertia towards these products due to a lack of confidence in the quality of solar panels available

in the market. However, with each passing day consumer distrust towards existing renewable

energy products is declining and more and more businesses are looking to make the switch

towards these forms of energy.

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4.2.1.2. Product Development

Integrating products such as Biofuels into the US market or other existing markets would

be very favorable for BP. Raw materials for such products are readily available in the country

meaning that the raw material costs are likely to be minimal. Moreover, Biofuels can be used to

generate energy in regions where adequate sunlight and wind are not available and are not suited

to utilizing solar and wind energy. Other energy products such as those harnessing tidal energy

also have potential within the US market since the country borders with both the Pacific and

Atlantic ocean.

4.2.1.3. Market Development

Much like the US, nations and markets all over the world are in the process of

transitioning towards renewable energy. Many nations have already amended their laws

according to the Paris Climate Accord and are therefore much further along the renewable

energy curve than BP’s existing markets. Moreover, BP has the resources to overcome the

logistical and cultural obstacles associated with operating in a foreign renewables market since it

is already a parent corporation to businesses in close to 100 countries. At the same time, BP is

likely to face stiff competition for nationally and privately owned competitors who have already

established themselves in these renewables markets.

4.2.1.4. Diversification

Diversification is an extremely risky option for BP. Products such as biofuels,

compressed natural gas and tidal energy would be highly profitable in certain markets. However,

a lack of experience in these industries might prove detrimental for BP as it is likely to face

unforeseen challenges. This risk would be further aggravated by the fact that BP would be

operating in markets that it is unfamiliar with.

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4.3. External environment and Competitor analysis

4.3.1. PESTEL

4.3.1.1. Political:

Numerous political challenges affect BP. BP’s current ambitions of reducing its carbon

emissions not only abide by the restrictions and protocols set by The Clean Air Act but set new

standards for it to implement. The United States government offers incentives to gas drilling

organizations that can meet its targets before it becomes a legal necessity which provides BP all

the more incentive to invest in clean energy projects (Sherlock, 2019).

Additionally, under Biden’s presidency, the political perspectives towards alternative fuel

energy are likely to be encouraging. Biden has already promised to create millions of jobs for

Americans in the renewables sector, indicating that his government is intent on creating

favorable policies for those investing in this area. Biden has also stated his resolve to enter the

Paris Climate Accord which would impose regulations on environmental polluters and create

benefits for those who meet the targets for a sustainable environmental footprint.

4.3.1.2. Economical:

Because the global market thrives on a continuous supply of Energy, the energy demand

is only going to increase from here on. This makes alternative fuel investments highly profitable.

Over the last few years, BP has fared better than most of its competitors due to its alternative fuel

products but this might change as more and more competitors invest in the renewables market.

However, the industry itself looks to be one of the more promising areas in the US economy. The

purchase intention of consumers towards a brand is highly influenced by the brand’s

predisposition towards clean energy. In fact, many businesses are willing to ignore the higher

costs associated with renewable energy as they end up gaining a greater market share.
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4.3.1.3. Social:

Social factors have an indirect effect on BP as it influences how BP’s consumers choose

to acquire fuels and energy. These factors impact the nature and extent of Political and

Environmental factors through public sentiment. BP can utilize this sentiment for its benefit by

taking part in CSR initiatives. Moreover, public sentiment towards Green Energy are highly

favorable as consumers are becoming increasingly more conscious towards the benefits of a

green supply chain. In the coming years, it is likely that people will come to value clean energy

practices even more as they see their favorite brands converging towards these practices. Thus,

investing in renewable can help utilize public sentiments as well.

4.3.1.4. Technological:

Whichever organization has the greenest and most efficient technological resources gets

to dictate how the energy market functions. Thus, technological factors are of supreme

importance for BP, especially for its renewable energy products. This is because new,

innovative, and environmentally friendly equipment and infrastructure is being produced every

day, and being negligent towards such advancements could have dire consequences on BP’s

position as market leaders.

4.3.2. Five Forces

4.3.2.1. Competitive Rivalry:

BP faces competition from both private and state-run energy companies. Each of the

other 5 major oil companies (Shell, Chevron, Total, Eni, and Exxon) are committed to investing

in renewable energy and pose the greatest threat to BP’s market share in renewable energy

(Murray, 2020). The presence of such aggressive and resourceful competitors means that there is

constant pressure on BP to maintain a competitive edge. In contrast, state-run oil companies also
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pose a threat to BP’s renewables business as these organizations have huge amounts of capital to

invest. However, these are not as active in the US market as privately run energy corporations

(Csomos, 2014). Thus, competitive rivarlry is a high force for BP.

4.3.2.2. Supplier Power:

The supplier power in the renewable energy market is relatively low. In the case of

biofuels in the USA, the suppliers are usually corn and switchgrass farmers looking to sell by-

products such as seeds. Since these by-products have little requirement in other industries, the

supply of these by-products always outweighs their demand. Thus, These suppliers as well as the

suppliers of the solar and wind energy sectors have little influence over oil and gas behemoths

such as BP.

4.3.2.3. Buyer Power:

The buyer power of individual customers in the renewable energy sector is relatively

low. BP’s business is more influenced by the purchasing intentions of its customer’s customers

than it is by its customers. At the same time, it is important to realize that the collective buying

patterns of customers are very sensitive to social sentiments about clean energy.

4.3.2.4. The Threat of Substitutes:

The threat of substitutes to renewable energy comes from energy harnessed through fossil

fuels. Due to increasing environmental awareness, this threat is diminishing. However, even if

the demand for fossil fuel energy stops increasing, it is unlikely that it will decrease in the next

decade. Thus, the threat of substitutes is currently a high force expected to diminish in the future.
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4.3.2.5. The threat of New Entry:

Given that renewable energy is still a relatively new industry, there is always a concern

for new entrants. In particular, state-run oil companies may find these avenues lucrative in the

future. The legislation on renewable energy looks to be keen on eliminating barriers to entry,

which should be a concern for existing organizations in this market. Thus, this is also a high

force.

4.4. Resources and capability audit using VRIO analysis

V R I O
Diversity of Renewables Products   
Strong Bargaining Power with Suppliers  
Low Carbon Footprint Model    

4.4.1. Non-Core Competencies

BP’s Non-Core competencies include its diversity of Renewables Products. This

Diversity is quite valuable as clients in different geographical locations have different

preferences and is currently rare as well. However, this resource is imitable as major competitors

have the capability to diversify their product lines as well. A Strong Bargaining Power with

Suppliers is another non-core competency since it is valuable, and BP has the ability to capitalize

on this resource. However, it is not rare and can be imitated by competitors. Both these non-core

competencies help BP capitalize upon its core competency.

4.4.2. Core Competency

A low Carbon Footprint Model is the core competency of BP. It is valuable because it

conveys that BP is not just selling renewable products for profitability. Rather, it shows BP is

going the extra mile to make their supply chains Green and wants their clients to be able to do so
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as well. This resource is rare as very few organizations have been able to converge to such a

model. Moreover, it is very difficult to imitate as it requires substantial flexibility in the supply

chain design. Lastly, BP has the organizational means to capitalize on this resource and can use it

to get a substantial competitive advantage in the renewables market of the US.

5. Recommendations

To further integrate itself as a market leader in the renewable energy sector of the

Americas market, BP should continue to invest in technological aspects such as R&D of new

equipment.

BP should also look to converge towards a sustainable business model as effectively as it

can. This can be done through vertical integration with suppliers and buyers. Additionally,

acquisitions of other stakeholder firms can also help BP take the early mover advantage in

various segments of renewable energy, whilst also allowing it to benefit from tax and other

economical incentives offered by the government.

BP should also be wary of the fact that the renewable energy sector is still in its

adolescence and BP can play a key role in shaping its future. In in the initial stages, BP should

look to shape the public opinion regarding BP as an organization that aims spearhead the Green

Wave in the US rather than an organization that is simply abiding by changing governmental

policies. For this reason it is vital that they take part in CSR initiatives which would enable them

to develop long term relationships with the community.

At the same time, BP must also realize that soon the market is likely to be flooded by

new entrants who may have the means to offer products very similar to BP. Thus, it must keep
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one eye towards differentiating itself at all times. This can be done by providing the best training

to its employees so that the value chain of BP surpasses that of its employees.

Both local employees as well as current BP employees from other markets should be

hired so that the workforce brings forward a diverse set of expertise and insights.

6. Conclusion

In conclusion, BP, like most organizations in the oil and gas industry finds itself at a

crossroads. Insights drawn from BP’s corporate level strategy, BP’s Ansoff Framework,

Porters’s Five Forces Analysis, PEST Analysis of the US Renewables Market, and VRIO

framework show that the benefits of doing business in the renewables market outweigh the

challenges. Increased legislation and restrictions on the oil and gas supply chain mean that

avenues such as Biofuel and Solar Energy are becoming more and more lucrative with each

passing day. Moreover, social sentiment is also driving the demand for fuel for renewable

energy. To sustain itself, BP needs to continue its evolution towards an environmentally

sustainable organization, for which it is necessary to make the most out of its renewable energy

initiatives in the Americas.

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7. Works Cited

“BP Global| Our strategy”. Retrieved 30 November 2020, from

https://www.bp.com/en/global/corporate/what-we-do/our-strategy.html

Csomos, G. (2014). RELATIONSHIP BETWEEN LARGE OIL COMPANIES AND THE

RENEWABLE ENERGY SECTOR. Environmental Engineering And Management

Journal, 13(11), 2781-2787. doi: 10.30638/eemj.2014.310

Lüdeke-Freund, F. (2013). BP's Solar Business Model - A Case Study on BP's Solar Business

Case and Its Drivers. SSRN Electronic Journal. doi: 10.2139/ssrn.2269852

Mufson, S. (2020). BP built its business on oil and gas. Now climate change is taking it apart.

Retrieved 30 November 2020, from https://www.washingtonpost.com/climate-

environment/2020/08/04/bp-built-its-business-oil-gas-now-climate-change-is-taking-it-

apart/

Murray, J. (2020). How the 6 major oil companies have invested in renewable energy projects.

Retrieved 30 November 2020, from https://www.nsenergybusiness.com/features/oil-

companies-renewable-energy/

Pallardy, R. (2010). Deepwater Horizon oil spill | Summary, Effects, Cause, Clean Up, & Facts.

Retrieved 30 November 2020, from https://www.britannica.com/event/Deepwater-Horizon-

oil-spill

Sherlock, M. (2019). The Value of Energy Tax Incentives for Different Types of Energy

Resources. Congressional Research Service. Retrieved from

https://fas.org/sgp/crs/misc/R44852.pdf
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Vaughan, A. (2017). BP returns to solar power with $200m stake in Lightsource. Retrieved 30

November 2020, from https://www.theguardian.com/business/2017/dec/15/bp-returns-solar-

power-stake-lightsource