Task 1 – Key Management Theories, Concepts and Practices (LO1) Discuss how management theories, concepts and practices are currently adding value at BP. Explain, with evidence, what these management

2.Assessment Brief

This module is assessed through one graded element worth 100%. You must achieve at least 50% to pass the module. For this assignment you will produce a 5000-word management report on British Petroleum (BP) including a skills development plan and a reflective statement, in an academic style.

By completing this assessment, you will achieve the following learning outcomes (LOs):

LO1 – Apply knowledge and understanding of the key management theories and concepts/practices to contemporary organisations.

LO2 – Critically analyse and highlight the key principles and functions of management including planning, organising, leading and controlling.

LO3 – Evaluate the dynamics of global business environment, and the need for effective management as a value adding universal activity at global, national and local levels.

LO4 – Critically reflect on their own management competencies to design a skills development plan, which is aimed at their future career aims and objectives.

Assessment Scenario

Acting as a business consultant, you are required to analyse the management functions and practices and write a business report for the senior management team of British Petroleum (BP). You must utilise the techniques and concepts you have covered in the module. You must also provide a skills development plan and reflective statement.

BP – world’s fourth largest oil and gas producer

The company

In 2023, BP was the world’s fourth largest oil and natural gas producer (after ExxonMobil, Chevron and Royal Dutch Shell), with over 66,000 employees. The company is an ‘integrated’ oil company, in the sense that it has both

‘upstream’ (exploration and production) and ‘downstream’ (refining and marketing) operations. In this respect it is like ExxonMobil and Total. This case is about the company’s upstream activities.

The company is registered in Britain, but 40 per cent of its assets are in the USA, and it is that country’s largest gas producer. It does 80 per cent of its business outside the UK, and is inherently engaged in international business, needing to succeed in many diverse political, economic and technological environments.

Safety

The company’s reputation has suffered from major safety failures in the inherently hazardous areas of exploration and production. The most damaging of these was in April 2010 when the Deepwater Horizon – a production rig – exploded in the Gulf of Mexico while taking oil from the Macondo well which BP owned. The safety arrangements intended to cap the well in such circumstances failed to work, and oil flowed into the sea for many months, polluting it and the nearby coastline. The explosion killed 11 workers and the ensuing pollution caused economic damage to fishing and tourism, and widespread public criticism of the company in the United States. The company neither owned nor operated the production rig – but agreed to pay compensation to businesses and communities affected by the accident.

To meet these costs and the fines for breaching US safety and environmental laws, BP suspended dividend payments to shareholders (which resumed in 2011) and sold several oil fields and refineries. By 2018 the disaster had cost BP

$65bn.

Joint ventures and governments

The company’s most significant joint ventures have been with Russian companies, including a 2012 deal in which it secured a 19.75 per cent share in Rosneft, a state-owned Russian oil group. This gave access to Russia’s immense oil reserves, and an important source of revenue. Bob Dudley, CEO at the time, acknowledged that US and EU sanctions against Russia had complicated the relationship, but not derailed it. 

“Mr Dudley knows all about the pitfalls of doing business in Russia … but insists the country is worth the risks. It is one of the lowest-cost resource nations of the world. It’s a natural place for us to be.”

When Russia invaded Ukraine early 2022, the BP Board had to consider its position – and decided that it would immediately sell this stake and cease all other operations in Russia.

Culture and structure

During John Browne’s tenure as chief executive (from 1995 to 2007), the company became decentralised, in the sense that managers responsible for a business unit faced tough financial targets but had considerable autonomy in how they met them. Senior managers believed this helped to reduce administrative costs and enabled unit managers to use their local knowledge and contacts to the best advantage.

When Tony Hayward replaced Browne in 2007, he began to change the style, requiring managers to develop common working processes across the business, to reduce complexity and cut costs. This continues, and unit production costs have fallen 40 per cent since 2013, bringing the company’s break-even point (the oil price needed to cover costs, dividends and capital investments) to below $50 a barrel. Savings came from selling older assets and working more efficiently. Design has been simplified, equipment in all new developments standardised, and digital technologies make operations faster and more reliable.

While acknowledging that oil demand will eventually decline because of electric vehicles, Bob Dudley, a former CEO, said in 2017 that the switch would take decades because of the difficulty of replacing oil in trucks, ships, aircraft and chemicals. 

“There will be a need for oil well into the second half of the century. There will be 2bn more people in the world by 2035 … Every kind of energy is going to be needed.”

Mr Dudley’s views were unexceptional at the time, when the company’s stated aim was to secure access to sufficient oil reserves to at least replenish what it extracts, and to meet growing demand. It invested heavily in reserves of shale oil – in 2018 it paid $410.5bn to acquire another company’s American shale oil business – and in gas, which accounts for 60 per cent of its production.

From oil and gas to integrated energy

In 2021, the company began the huge task of changing its nature from an integrated oil and gas business towards being an integrated energy company. The existing oil and gas business will continue for many years, and in the meantime the company aims to make it more efficient, and to reduce operating emissions. It has identified five ‘transitional growth engines’ which will gradually replace the fossil fuel business on the way to becoming an integrated energy company. They are:

  • bioenergy, including aviation fuel;
  • convenience retail sites;
  • electric vehicle charging points;
  • renewables – wind and solar;
  • hydrogen.

These will be delivered through three ‘reporting segments’ (distinct business units):

Gas and low carbon energy – (led in 2022 by Anja Dotzenrath) 

  • Integrating gas and LNG businesses
  • Renewables – aim to be leader in onshore and offshore wind, and in solar
  • Biopower and biofuels, including aviation fuel our 50 per cent stake in Burge Bioenergy
  • Hydrogen – capturing 10 per cent share by 203

Production and operations – (led in 2022 by Gordon Birrell) 

  • Finding and developing carbon resources with selective exploration, mostly focused near existing hubs
  • Operating oil and gas production assets
  • Operating refineries, terminals and pipelines
  • Deploying technical capabilities across hydrocarbon and low carbon businesses

Customers and products – (led in 2022 by Emma Delaney) 

  • Differentiated convenience and fuel offering at our 2000 retail sites, including snacks, ready meals and coffee. The company hopes to expand these to 3,500 by 2030.
  • Electric vehicle charging business – planning to grow to 100,000 charging points by 2030.
  • Castrol and e-fuel brands, sold through numerous outlets. 
  • Acquiring Achaea Energy, a leading US producer of renewable natural gas, accelerating the growth of our bioenergy business
  • Tripling the number of EV charging points from 7,500 in 2019 to 22,000 in 2022.
  • Adding over 750 strategic convenience sites.
  • Establishing new businesses in offshore wind and hydrogen.

Adjusting the pace of transition

In BP’s Annual Report for 2022, chair Helge Lund and chief executive Bernard Looney reminded shareholders that they are required by the Paris agreement to disclose the strategy that the board considers in good faith to be consistent with the Paris goals. 

“We believe the world is on an unsustainable path, and the carbon budget to meet these goals is running out. BP’s strategy is informed by all these considerations. It is designed to create long-term value for shareholders while enabling delivery of our net zero ambitions – to become a net zero company by 2050 or sooner and to help the world to get to net zero.”

The war in Ukraine had caused oil prices to rise sharply, and all oil companies reported higher profits – BP’s almost

doubled to $27.7bn ($12.8bn in 2021) after a sharp increase in gas prices.

However, total shareholder returns from BP are roughly half those from Exxon and Chevron over one year. This partly reflects shareholder unease over renewables investment – which takes much longer to return a profit than investing in oil or gas. It will use $8bn to invest in today’s energy systems – oil and gas – to make up the loss of Russian supplies, and the same amount, $8bn, in addition to an amount set earlier, to accelerate the energy transition before 2030.

Shareholder dissatisfaction may explain why BP’s directors decided to slow down their transition and will produce more oil and gas over the next seven years than the earlier plan. Kate Blagojevic, Greenpeace UK’s head of climate justice:

BP’s green plans seem to have been undermined by pressure from investors and governments to make even more money out of oil and gas.”

Bernard Looney, BP’s chief executive: 

He acknowledged that BP expected carbon emissions from its oil and gas production to fall by 20–30 per cent by 2030, compared with 2019. Its previous target had been for them to fall by 40 per cent.

The company’s financial performance affects many stakeholders, as most pension funds hold shares in the company, using the dividend income they receive to pay their pensioners. The Annual Report also shows how stakeholders fared in 2022. 

This case study can be found in the core textbook on the following reference:

BP: Boddy, D., (2024) Management: An Introduction, 9th Edition, Page 174. Available at: https://online.vitalsource.com/reader/books/9781292727974/epubcfi/6/318[%3Bvnd.vst.idref%3Durn_pearson_ma nifest_53d1e9f2-2466-4737-8d5d-dfc545f8599c]!/4/2/2[urn:pearson:entity:38e89117-4174-4ed1-a5a8- e3f8de464977]/2[urn:pearson:entity:38e89117-4174-4ed1-a5a8-e3f8de464977:001]/1:9[%20CA%2CSE]

List of useful link related to BP: www.bp.com

It is recommended that you should carry out a substantial amount of independent and individual research to strengthen your understanding of the business context and the preferred style of management practice

Assessment Tasks

You are to critically analyse and evaluate the current management practices at BP. You must recommend changes based on your evaluation that BP must implement to improve its success.

Task 1 – Key Management Theories, Concepts and Practices (LO1)

Discuss how management theories, concepts and practices are currently adding value at BP. Explain, with evidence, what these management practices have contributed to the success of the BP brand.

Support your arguments with reference to appropriate academic literature, case study materials and your independent research.

Task 2 – Management as a value adding universal activity (LO3)

Evaluate the dynamics of the global business environment. Discuss how the management at BP have adapted their strategies and methods, at global, national and local levels adding value to the subsidiary.

Support your arguments with reference to appropriate academic literature, case study materials and your independent research.

Task 3 – Key Principles and Functions of Management (LO2)

Critically analyse the management approach taken by the management at BP to address the key challenges. Highlight the key principles and functions of management (planning, organising, leading and controlling) with supporting evidence.

Support your arguments with reference to appropriate academic literature, case study materials and your independent research.

Task 4 – Critical Reflection and Skills Development Plan (LO4)

For this task, you are required to produce a Skills Development Plan (700 words) PLUS a 500-word Reflective Statement. You are required to reflect on your own management competencies, in line with your career goals.

Support your arguments with reference to appropriate academic literature, and your independent research.

Assessment Guidelines

Introduction:

  • Introduce BP and explain the context of your management report.
  • Briefly discuss the current issues at BP.
  • Explain how management is contributing to adding value.
  • Discuss the four philosophies of the Competing Values Framework and identify ONE other relevant management theory that is driving the management approach at BP.
  • The relevant management theory must be appropriate to your answer. You may choose to consider the following theories: Scientific Management Theory, Bureaucratic Theory, Administrative Theory, Contingency Theory, TQM Theory etc. NOTE: This list is not exhaustive, and you should choose the most appropriate theory in your answer – DO NOT attempt to apply all theories.
  • Consider applying the LoNG-PEST framework, or Porter’s 5 forces to evaluate what BP should do differently at global, national and local levels.
  • Based on the above analysis, identify and evaluate one global factor which can create opportunities and one which can pose threats to BP.
  • Refer to specific details of where the management of BP can add value.
  • Keeping in view the current/expected environmental changes from your findings in Task 2, identify and critically analyse one internal challenge faced by the management of BP.
  • Highlight the key principles and functions of management including planning, organising, leading and controlling, which can be applied by management to address this challenge.
  • In your answer, you should justify your choice of one internal challenge with reference to the appropriate application of an academic models (for example: Value Chain analysis or VRIO, Mendelow’s matrix etc.).
  • Complete your Personal SWOT below:

Task 1 – Key Management Theories, Concepts and Practices (LO1)

Task 2 – Management as a value adding universal activity (LO3)

Task 3 – The key principles and functions of management (LO2)

Task 4 – Critical Reflection and Skills Development Plan (LO4)

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