Assignment 2: Individual Report - Challenges Faced by British Petroleum in Perspective of its Organisational Structure

Assignment 2: Individual Report

Executive Summary

This study sheds light in identifying the challenges faced by British Petroleum in perspective of its organisational structure. For this, the study analysed its business environment with the assistance of different analytical frameworks like porter’s five forces model, SWOT framework and PESTEL analysis. It also employed CVF model for analysing the best organizational culture corresponding to the organisational structure of an organisation. Correspondingly, the challenges faced by BP is elaborated with it impact on organizational productivity. Besides this, recommendations are suggested for improving the organisational structure of the oil and gas manufacturing organisation.

Table of Contents

1. Introduction

Organisational culture plays a significant role in analysing the behaviour of people working in an organisation. It aids organisation in streamlining its workflow and making effective decisions for undertaking adequate decision-making procedure. This report aims to identify the challenges faced by British Petroleum (BP) in perspective of its organisational structure. In this regard, a CVF (Competing Value Framework) is utilised for evaluating the organisational culture of BP. Furthermore, environment analysis of the organisation is performed with the assistance of Porter’s Five Force’s model, SWOT analysis and PESTEL framework. Apart from this, the challenges faced by BP are described with an emphasis on its impact on the overall work process of the organisation including recommendations for overcoming the same are mentioned.

2. The Company

2.1 Profile

BP is one of the leading oil and gas companies headquartered in London. It aims to deliver an extensive range of energy products and services to its target market throughout the globe. The oil and gas company undertakes manufacturing of energy products ensuring conservation of environmental resources to a great extent. The size of the oil and gas providing company can be identified from its number of employees and annual revenue generation (Bp.com, 2021). It employs around 73,000 people and generates approximately 3.06 billion pounds as per the records of 2019 (Bp.com, 2021). Besides this, the financial statement of BP showcases its profit margin to be 7.30 billion pounds during the year 2019 (Bp.com, 2021). Alternatively, it has been encountered that there has been a declination in the profit generation of BP to 7288.45 million pounds during 2019 compared to 9282.38 million pounds in 2018 (Bp.com, 2021).

Analyses

SWOT

Table 1: SWOT Analysis

(Source Created by Learner)

Porter’s Five Forces

Table 2: Porter’s Five Forces Model

(Source: Created by Learner)

PESTEL

Table 3: PESTEL Analysis

(Source: Created by Learner)

2.2 Management Approach from CVF

Numerous management styles are present with the assistance of which different business organisations undertakes their business operations. According to Al-Kurdiet al. (2020), effective management in an organisation assists in controlling the functions within a business establishment by directing the employees with their respective tasks. In this respect, the management style implemented by BP is democratic style where the managers offer their employees with the opportunity to present their experiences and opinion about a specific topic. This management style is consideredto be beneficial for encouraging employees and motivating them for putting more efforts in accomplishing business objectives. Besides this, the behaviour of employees towards their work depends on the type of organisational culture.

In the context of Competing Value Framework(CVF), the organisational culture is categorised into four segments like “hierarchy, market, clan and adhocracy” (FarhadiMahalliet al., 2017). The hierarchy culture is considered to be a standardised work culture where tasks are completed with coordination and efficiency. This thereby helps in enhancing consistency, efficiency, uniformity and timeliness among the people of organisation. Additionally, market culture puts focus on accomplishing its objectives and ensures to maintain a competitive spirit among its people (Kunert, 2018).Alternatively, in clan culture the work environment is friendly and leaders assist their subordinates to overcome the challenges faced. Moreover, in adhocracy culture, the leaders offer a creative and innovative work environment and encourage the employees to uptake risks for completing their professional goals (Wiersma, 2017).In this regard, it is identified that the management of BP undertakes adhocracy and market culture for accomplishing their business objectives and enhancing their profit margins. This corresponds to the matrix organisational structure where the employees need to report to two separate managers.Concerning this, it can be mentioned that BP follows matrix organisational structure for overseeing the activities of its employees.

3. The Business Challenge

3.1 Description of Challenge

It is analysed from the management approach of BP that it follows matrix organisational culture which reflects a complexity among the operations carried out in the business. This is because it might happen that employees reporting to the managers might provide them with different commands. In this regard, it has been learnt from different new releases that BP has confronted several scandals like oil spills for which its management was pleaded guilty (Rascoe, 2011). Corresponding to this, it can be stated that the employees of BP were unable to identify the procedure they need to follow for avoiding the oil spill at Gulf of Mexico (Rascoe, 2011). It can be stated that it was due to communication gap among the management and its employees. This can again be related to the organisational structure of BP which makes it difficult for the employees to get acknowledged about the instructions to be followed.

The cause of oil spills is also considered to be the poor decision making practices of the management of BP. Its management was inadequate in identifying the internal gaps in interpreting the existing situation of the company and making adequate decisions. In this regard, it can be stated that the complexities due to matrix culture adopted by the oil and gas manufacturing organisation is one of the reasons behind the unleashing of millions of oil barrels.

3.2 Impact of Challenge on Company

The oil spills at Gulf of Mexico due to the inadequate decision of the management of BP has resulted in deterioration of its reputation. It is also identified that the company has faced loss in generating adequate revenue. As per the annual report of BP, it is evaluated that the company faced a net loss of 6.7 billion dollars compared to 2.8 billion dollar profits in the year 2020 (Bp.com, 2021). After the incident of oil spill at Gulf of Mexico, the energy products and service offering organisation faced a declination in its financial performance. This is because it loses its market share due to the scandal. However, in the existing period, the oil and gas manufacturing organisation has been able to recover its financial performance and attain a competitive position in its industry. Besides this, the management of BP was required to pay approximately 4 billion dollars for replenishing the natural resources. Alternatively, as penalties and court fees, the company was charged for around 61.6 billion dollars (Bp.com, 2021). This reflects the financial loss faced by the oil and gas manufacturing organisation.

4. Recommendations

Concerning the existing organisational culture of BP and the deficit in making adequate decisions, it can be recommended that its management might adopt clan organisational culture in accordance with the adhocracy culture. In this regard, it can be mentioned that the oil and gas producing company would be able to engage its employees in effectual decision making procedure. This can be considered helpful for the management of BP in enhancing their decision-making session. the clan organisational culture enable the management of the oil and gas manufacturing organisation to hire skilled and creative people for interpreting situations and generating effectual decisions. With this approach, it is believed that BP would be able to overcome challenges like oil spills and make productive decisions for acquiring better outcomes.

5. Conclusion

This study concludes that BP has been undertaking matrix organisational structure in which excess rate of complexities is present and affects the decision making procedure of its management. It is evaluated from this study that BP has faced numerous scandals like oil spills in Gulf of Mexico due to lack of communication among the employees and their management. Apart from this, the internal analyses of the oil and gas manufacturing organisation presents that it acquires a heightened strength and can capture the identified opportunities for enhancing its business productivity. Additionally, the study further deduced from the porter’s five forces analysis that it attains a competitive advantage over its competitors and acquires a medium competitive rivalry from its competitors. Furthermore, the analysis of external environment showcases that BP face challenges in aspects of politics and economics. However, the other aspects of external environment provide opportunity to escalate its business output.Correspondingly, the challenges faced by BP concerning its organisational structure have also been concluded in this study. Moreover, recommendations for overcoming the recognised challenges are also highlighted in this report.

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