Corporate Marketing: British Petroleum

Corporate Marketing: British Petroleum

Table of Contents

 

Table of Contents. 1

I. Introduction. 2

II. Corporate Identities Using the AC2ID Test 2

A. Actual Identity. 2

B. Communicated Identity. 4

C. Conceived Identity. 5

D. Ideal Identity. 6

E. Desired Identity. 6

III. Misalignment Assessment Using the REDS2 Process. 7

IV. Strategic Recommendations for British Petroleum.. 8

V. How to Use the Budget 9

VI. Conclusions. 10

References. 10

 

 

 

 

 

 

 

 

 

 

 

Corporate Marketing: British Petroleum

I. Introduction

            Headquartered in London, British Petroleum plc is considered as one of the world’s largest energy companies which provide consumers with fuel and energy as well as petrochemical products. Evidently, British Petroleum is one of the six “supermajors” or the International Oil Company (IOC) along with ExxonMobil, Royal Dutch Shell, Chevron Corporation, ConocoPhilips and Total SA. Since operating an oil company is too risky a venture, British Petroleum embarked on a frenetic growth strategy through continued divestiture and merger and acquisition. The year 2000 also marked a major change for British Petroleum into becoming BP plc. This change was intended to help the company from its longstanding identity as on “oil company” and reposition itself as an “energy company” which will operate in oil, natural gas and solar power.  Today, there are three core strategies that British Petroleum commits itself such as exploration and production, refining and marketing and alternative energy.

            With the changed identity comes various identities that are associated with BP plc and these identities will be explored in this essay using the AC2ID test and REDS2 process.

  

II. Corporate Identities Using the AC2ID Test A. Actual Identity

            Balmer and Greyser (2006) noted that actual identity is shaped by different elements such as corporate ownership, leadership style, organisational structure, business activities, markets covered, quality of products and services as well as the values held by the management and the employees (Balmer and Greyser, 2006). BP plc therefore transformed from being a local oil company into a global energy group wherein over 80,000 people are employed to main its operation on more than 100 countries worldwide. Currently, there are six brands that make up BP plc namely BP, Castrol, Arco, Aral, am/pm and Wild Bean Café (BP online, 2010).

            BP plc, as an organisation, also claims to be structured for success through the two key business segments which are the exploration and production and refining and marketing and the alternative energy business known as the BP alternative energy. In line with these strategies are different business activities that include finding, extracting and moving oil and gas, making and selling fuels and products, generating low carbon energy and working responsibly. Of all these activities, working responsibly embodies BP plc’s commitment on the betterment of communities where it operates. Roughly, BP plc is operating in Africa, Asia, Australasia, Europe and North and South America (BP online, 2010).

            Further, corporate social responsibility is also extended on its utilisation of technology. BP plc commit to meeting energy demand efficiently, developing more efficient products, investing in low carbon future and supporting research pertaining to development of efficient consumer products. At Bp plc, an energy mix is developed which makes use of different technologies, enabling a safer, more efficient extraction, refinement and distribution of oil. The mantra is: “From energy diversity comes energy security” (BP online, 2010). The process is considered as building blocks of a more secure, stable and low carbon energy future.  

            Throughout the operation, nonetheless, the activities employed by the BP plc are consistent with its values, code of conduct and the BP brand. BP brand, for instance, is a global brand that is typified by its logo of a sunburst, reflecting the goals of the organisation. The code of conduct embodies BP plc’s commitment to integrity. The code is about helping the BP people to do the right thing through the five key areas of health, safety, security and the environment; employees; business partners; governments and communities; and company assets and financial integrity. BP plc, moreover, is progressive, responsible, innovative and performance driven (BP online, 2010).          

B. Communicated Identity

            Communicated identity encompasses “controlled” corporate communications but can also include the performance effects of products and services as well as of commentaries made about the organisation, as according to Balmer and Greyser (2006). Apparently, BP plc is positioning itself to be a frontrunner in the future pertaining to the need to meet the world’s continued demand for fuel, energy and petrochemicals. BP plc intends to play a central role in creating long-term options for the future in new energy technology and low carbon energy businesses. Likewise, BP plc is enhancing its capabilities in natural gas which is regarded to be a vital source of relatively clean energy. This is more so because the goal is to transition to a lower-carbon economy and beyond.

            Having said this, BP plc also approached sustainability through diverse and affordable energy. BP plc responds to energy challenges by addressing climate change. BP plc believes that the government and the industry are both responsible in resolving climate change. As such, the government shall set an appropriate policy framework and the companies shall invest within that framework for the purpose of delivering a sustainable energy mix. BP plc particularly support a price for carbon provided that there will be uncertainties in the continued planning and making investment in low-carbon solutions unless the consumers and producers will recognise a pay a carbon price. In this way, carbon pricing will make energy conservation more attractive and alternative energy more cost competitive (BP online, 2010).

            Oppositely, BP plc was caught and perceived to be involved in “greenwashing” when in July 2006, after the media had discovered a 270,000 crude oil spill in Alaskan tundra, the company admitted that it is facing criminal charges. Relative lack of press coverage regarding the spill is a proof that BP plc had successfully greenwashed the image it is communicating with the public. BP plc was also subjected to criticisms after it was proven that it is involved in environmentally unsound practices. While BP plc is publicly affirming its commitment to investing in alternative energy sources minimally, in reality, majority of its investment is devoted to fossil fuels (Monbiot, 2006; Frey, 2007; Milmo, 2007; Green, 2007).        

C. Conceived Identity

            As Balmer and Greyser (2006) put it, conceived identity refers to the main perceptual concepts of corporate image and corporate reputation. While criticisms are surmounting following the oil spills in the Gulf of Mexico, BP plc continues to project a revitalised image that takes responsibility of its actions including its mistakes. BP plc is named as the responsible party and government officials have committed to hold BP plc accountable for all cleanup costs and other damages. BP plc stood up to strategically harness all of its resources to combat the oil spill as well as the impacts that it may have. BP plc is spending $7 million daily in attempt to contain the spill. Further, BP plc commits itself to produce a $20 billion oil spill response fund to be administered by Kenneth Feinberg (Frey, 2007; Milmo, 2007; Green, 2007).

            While funds are acquired externally, BP plc also mobilised financially in the inside. BP plc decided to cut the capital spending budget, sell $10 billion in assets and drop its dividend. Brenner (2010) reported that the fund will be used for natural resource damages, state and local response costs and individual compensation. BP plc, in addition, will set aside $100 million to pay offshore oil workers who are unemployed due to the six-month moratorium on drilling in the deep-water Gulf of Mexico. Cuts on capital spending will come from upstream projects, and which will continue until next year. The oil spill disaster also prompts the UK supermajor to revisit the contingency plans as its spill liabilities become clearer. Divestment will target noncore upstream assets (Frey, 2007; Milmo, 2007).        

D. Ideal Identity

            Ideal identity, as said by Balmer and Greyser (2006) is purely a conceptual construct about the optimum positioning of the organisation in comparison with the general business environment. In recent years, the ideal identity of the BP plc is conceived through its initiative to transform the business into a sustainable one. For BP plc, sustainability will largely determine the company’s capability to renew assets, create and deliver better products and services, attract successive generations of employees, contribute to a sustainable environment and retain trust and support the customers, shareholders and the communities in which BP plc operates (BP online, 2010).

            In approaching sustainability-related issues, BP plc depends on both internal standards and external benchmarks to balance the operation. For instance, BP plc claims responsibility for the operations as well as being accountable for setting and observing consistent high standards within these operations. On wider issues, BP plc supports relevant external standards such as the UN Global Compact which sets series of compliances on corporate responsibility. The reason behind this is that BP plc not only aims leadership in what they do but also how they do it. The ‘how’ of the operation, as stated in the company’s sustainability report is considered to be central to building trust and accountability needed for long-term success (Sustainability Report, 2010; Global Climate Coalition, 2008).

E. Desired Identity

            While ideal identity is based on current knowledge about the organisation’s prospects, desired identity lives in the minds of the corporate leaders ((Balmer and Greyser, 2006). Put simply, the desired identity is the vision of the leaders for the organisation. Desirably, BP plc wants to be recognised as a “green” company which consciously puts initiatives to eradicate climate change at the center. In essence, BP plc is currently operating through environment-friendly technologies. Aside from its solar, wind and hydrogen research and development projects, BP plc is investing on the utilisation of carbon capture and storage (CCS) technologies to reduce emissions through decarbonising fuel sources such as coal, oil and natural gas (Global Climate Coalition, 2008). BP plc, moreover, is using combined cycle gas turbine (CCGT) technology which is a process more efficient than the standard gas turbine because the leftover heat is changed into steam and used in another turbine to produce more electricity (BP online, 2010).

            To recognise the efforts of BP plc, investing is renewable resources is rather costly compared to oil and with limited returns not even comparable on returns from oil production. Nonetheless, the initiative had created shareholder value and elevated the public confidence. BP plc finds it difficult to continuously invest on renewable energy assets because of the fact that investors want the company to better capitalise on the short-term benefits of high oil prices. However, there are also climate conscious investors with interest in selling oil at a small premium price where some of the energy for oil production comes from renewable like wind and solar power (BP online, 2010). The basis of this is marketing oil with a lower carbon footprint and not based on greenwashing.      

III. Misalignment Assessment Using the REDS2 Process

            By virtue of the REDS2 process, the four identities aside from the desired identity seemed to be aligned. Identities unique to BP plc is opposing, however, wherein on one hand BP plc is recognised to be a key figure in addressing climate change and on the other hand BP plc is also accused of greenwashing because of its less environment-friendly operations. What is clear though is that BP plc is responsible and accountable for serious oil scandals in the history with the Gulf of Mexico oil spill as the most recent despite the ongoing initiatives to achieve sustainability. With the oil scandals that are glooming the confidence of the consuming public as well as the investors, BP plc can only rebuild its image while focusing towards becoming a green oil company. The last may seemed to be impossible for an oil company to green its entire operation. This may be also the reason why BP plc is likely to greenwash the media and the general public.     

IV. Strategic Recommendations for British Petroleum

            There are different strategies that BP plc can ponder on. First is to conduct a materiality analysis so that the company can define its priorities and work from there. BP plc can address the areas that needs attention such as the decision whether to stop investing on renewable energy resources or not or to further capitalise on such since the company is faced with an ethical blunder. Through the last, BP plc can revive its image if it will continue to invest in environment-friendly resources especially when it is advocating the fight against climate change. BP plc could also determine whether there are areas that are limiting their performance as an organization and then arrive at future plans that concern its main operation. Decision-making must pass through consensus so that they will acquire reactions and responses from their stakeholders regarding their future plans that concern core operations.

            To continue, BP plc should also engage in both local materiality analysis and international materiality analysis so that the needs from business levels to corporate level could be consolidated and actions could be based in the findings of the analyses. The materiality could clarify issues on how recent strategies could drive long term business value, identify and address risks surrounding the strategy and build and maintain a strong brand and reputation further.

            The second option for BP plc is the evaluation of the internal environment through the MOST framework where M is the mission, O is the objective, S is the strategy and T is the tactic. Importantly, the international market environment is continuously changing and so the company must not settle in employing a single strategy especially in combating the negative impacts of the recent oil spills. BP plc should continuously assess the basics of the organisation, and modify them to appropriately address the problems.

            BP plc should also develop a contingency plan, which is a proactive process, considering the nature of the operation. Contingency planning is used if possible foreseen risk event becomes a reality. It would be necessary for BP plc to assess the potential impacts of the spills so that to understand the extent of potential loss short term and in longer term. Operational conflicts or dilemmas could be address by reconsiderations and restructuring and only appropriate processes and business practices will be left then.

            Further, it would be also strategic for BP plc to conduct a reputation risk management as part of the image rebuilding process. BP plc is currently under a reputation loss list and a formal strategy to manage the brand and reputation would be a plausible solution. In this way, BP plc can still alter the damaging effects of the reputation lost such as brand value, share price, strategic relationships and regulatory relationships.  

V. How to Use the Budget

            There is a total allotted budget of HK$30 million for the reputation risk management. As a disclaimed, quantifying reputation risk management is not an easy task. The timeframe for the campaign is for less than two years although the result may go beyond the period of two years onwards. Roughly, the budget will go into the following activities:

Major Activities

Budget

Assessing the existing reputation capital

$1 million

Strategic planning for reputation risk management

$2 million

Identifying important stakeholders group where damage will be most evident

$2 million

Identifying events that may eventually lead to reputation  damage

$5 million

Assessing likelihood and severity of damage arising from oil spill events

$10 million

Mitigating the damage through loss control

$260 million

Communicating with the internal and external stakeholders

$20 million

  Note: As of July 10, 2010, BP plc is spending US$1.7 billion for the spill response initiative.

VI. Conclusions

            In sum, BP plc is currently having two opposing identities - one is affirmative which is sustainability through becoming a green company and the other is negative by virtue of accusations of greenwashing and recent oil scandals that prove unethical practices. There are strategic recommendations for BP plc including a materiality analysis, MOST restructuring, contingency planning and a reputation risk management. As attempted, the initiative to quantify reputation risk management is conducted following the oil spill scandals.     

 

References 

 

Balmer J. M. T. & Greyser, S. A. (2006) Corporate Marketing: Integrating Corporate Identity, Corporate Branding, Corporate Communications, Corporate Image and Corporate Reputation, European Journal of Marketing, 40(7, 8):730-741.

BP. (2010). About BP. Retrieved on 19 July 2010, from http://www.bp.com/marketingsection.do?categoryId=2&contentId=7013628.

BP. (2010). Environment and Society. Retrieved on 19 July 2010, from http://www.bp.com/sectionbodycopy.do?categoryId=2311&contentId=7060022.

BP. (2010). Investors. Retrieved on 19 July 2010, from http://www.bp.com/investorhome.do?categoryId=132&contentId=2004195.

Brenner, N. (2010). Hayward says spill ‘never should have happened. Upstream Online NHST Media Group.

Frey, D. (2007). How green is BP? New York Times.

Global Climate Coalition. (2008). Global Climate Coalition Cools Down.

Green, J. (2007). BP: The Big Polluter. Green Leaf Online.

Milmo, C. (2007). The Biggest Environmental Crime in History. The Independent.

Monbiot, G. (2006). Behind the spin, the oil giants are more dangerous than ever. The Guardian, London.

http://researchkorner.blogspot.com/2013/12/corporate-marketing-british-petroleum.html