BP’s Internal Factor Evaluation Essay Examples

Performed BP’s internal factor evaluation (IFE) completely correlates with the company’s current state of business and shows that BP’s recent activities could be characterized as internally weak business. According to the analysis, the company’s main strengths are entirely mitigated by the company’s weaknesses. This fact further exposes BP to unfavorable risks in the future unless the company finds a solution to take a full advantage of its current strengths and learns how to control its weaknesses.
In BP’s IFE Matrix each factor was assigned with a rating from 1 to 4 to indicate significance of such a factor. Thus, the company’s major strengths obtained the rating of 4 and major weaknesses received the rating of 1.
According to the analysis, the overall weighted score of BP's internal factors equals to 2.35, which signifies the company's quite weak internal business environment. Should necessary actions in such a situation not be taken by the company, BP may go bankrupt or be taken over by a stronger rival in the nearest future, especially taking into account a drastic fall of oil prices in the past six-month period.

Strength 1. Diversified global operations

It is vital for every enterprise to diversify its business activities as diversification provides the enterprise with a possibility to maneuver in unpredictable threatening-to-business circumstances. Thus, the more diversified are the company’s activities, the stronger the company is.
BP’s activities are sufficiently diversified and not all of the company’s activities directly depend on the oil price, including oil and gas transportation, as well as generation of low carbon energy (BP p.l.c.). At the same time, the company’s market presence is also diversified. Thus, despite the fact that BP’s “Russian joint venture was hit by a tumbling rouble” (Bawden) in the recent past, the company’s Russian venture may generate extra income in the gas sector in the future, while profitability of BP’s other assets will continue to depend too much on the oil price.
Taking into consideration the current situation in the oil and gas industry, it is difficult to find a western company that has such a rare strength as presence and readiness to continue business activities in Russia while it is facing difficulties in other markets. That’s why the strength received the score of 3.

Strength 2. Attractive conditions for investors

One of BP’s major strengths is the company’s commitment to pay dividends to its shareholders. According to the company’s management, BP “will absolutely protect the dividend payment. That is the number one priority” (Barnato).
Such a decision seems to be reasonable, valuable and costly, taking into account the current state of affairs in the oil and gas industry. Otherwise, the capital may start running out of the business even faster than the fall of oil prices. That’s why the strength was assessed with the rating of 4.

Strength 3. Business refocusing process

It is the company’s strong feature that it decided to allocate its assets into lucrative and costly projects, and “sell assets to raise cash and reduce costs” (Carroll). It is a smart decision for the business to solely refocus on profitable activities and to cut off risky ones.
It seems that the company is also preparing for hard times and has already decreased its capex plan, as it might “be difficult for companies like BP to allocate more capital to new projects” (Barnato).
Such company’s actions certify BP’s ability to use its current strengths to survive during the hard times ahead. That’s why the strength obtained the rating of 3.

Strength 4. Safety enhancement

The company as a representative of the oil and gas industry has been frequently criticized for its hazardous activities (BP p.l.c.). Indeed, there have been several severe safety incidents at the company’s premises and sites. Thus, in my opinion, it is crucial for BP to pay extra attention to safety enhancement.
It is BP’s major strength that it managed to introduce “enhanced automated monitoring for many remote sites” (BP p.l.c.) in 2014 despite recent financial problems. Such a project consumed a lot of the company’s funds but at the same time was very needed to be put in place to ensure better safety of BP’s operations. All of the above provided grounds to evaluate the strength with the rating of 4.

Weakness 1. Oil price sensitivity

The company’s financial figures indicate BP’s sensitivity to the oil price fall and underline the company’s unreadiness for such a scenario. Despite the company’s diversified activities, the biggest portion of BP’s revenues comes from activities that directly depend on the oil price. This was the company’s strategic mistake.
Consequently, now there are chances for BP to be taken over by one of its rivals according to Rowell’s analysis. This fact certainly demonstrates that not all of the company’s competitors suffer as much as BP does from the financial standpoint due to the oil price fall.
Thus, the oil price sensitivity is the company’s major weakness that has to be immediately got under control to prevent further negative outcomes of the current situation in the oil and gas industry for the company. Therefore, the weakness received the score of 1.

Weakness 2. Reduction of labor costs

The company’s poor financial results forced its management to find ways to cut costs. In this regard, the management, in particular, decided to rationalize its labor costs.
Indeed, in January 2015 BP’s chief executive of oil group “sent a memo to staff outlining his decision to hold pay for the group’s 84,000 staff at last year’s levels because of the harsh trading environment, just weeks after announcing 300 job cuts at BP’s operations in Aberdeen” (Goodley). Nevertheless, the chief executive of oil group simultaneously “enjoyed a 25% pay rise” (Goodley).
The above-described situation, in my opinion, completely identifies BP’s weakness relating to its internal labor issues. There are risks that the company may lose its qualified labor force due to the planned staff reduction and sometimes unfair and intransparent promotion system. Thus, quality of the company’s future work and services could be at risk.

This weakness was graded with the rating of 2.

Weakness 3. Extensive and at times unproductive bureaucracy
After analyzing posts left at Glassdoor.com, I came to the conclusion that the company as many multinationals has problems due to corporate extensive and at times unproductive bureaucracy. One of BP’s weaknesses is that there are “many policies that are not possible to apply in a field environment” (BP Reviews). Unless the company improves its bureaucracy, it will not be able to keep up with rapid market changes.

That’s why the weakness obtained the rating of 2.

Weakness 4. Affected brand by the Deepwater Horizon Explosion
It is a well-known fact that the Deepwater Horizon Explosion in the Gulf of Mexico irreversibly affected BP’s brand in 2010. Despite the company’s attempts, aimed at public disclosure of its “supporting economic and environmental restoration efforts” as part of BP’s “ongoing commitment to the region” (BP p.l.c.), negatively associated brand will be BP’s weakness for a long time that could always affect the company’s relations with investors, contractors and clients.
That’s why the weakness was assessed with the score of 1.

Works Cited

Barnato, Katy. “BP’s Dudley: Oil May Stick at $50 ‘for Some Time”. CNBC.com. CNBC LLC, 3 February 2015. Web. 5 March 2015. <http://www.cnbc.com/id/102389444>.
Bawden, Tom. “Shell Puts Rival BP in the Shade after Profits Jump despite Fall in Oil Prices”. Independent.co.uk. Independent.co.uk, 30 October 2014. Web. 5 March 2015. <http://www.independent.co.uk/news/business/news/shell-puts-rival-bp-in-the-shade-after-profits-jump-despite-fall-in-oil-prices-9828296.html>.
BP p.l.c. “Gulf of Mexico Restoration”. BP.com. BP p.l.c., n.d. Web. 5 March 2015. <http://www.bp.com/en/global/corporate/gulf-of-mexico-restoration.html>.
BP p.l.c. “Our Key Performance Indicators”. BP.com. BP p.l.c., n.d. Web. 5 March 2015. <http://www.bp.com/en/global/corporate/about-bp/our-strategy/key-performance-indicators.html>.
BP p.l.c. “What We Do”. BP.com. BP p.l.c., n.d. Web. 5 March 2015. <http://www.bp.com/en/global/corporate/about-bp/what-we-do.html>.
BP Reviews. “Terminal Manager”. Glassdoor.com. Glassdoor, Inc., 2 March 2015. Web. 5 March 15. <http://www.glassdoor.com/Reviews/Employee-Review-BP-RVW6031349.htm>.
Caroll, Joe. “Chevron Seizes Gulf Opportunities from Rout-Squeezed BP”. Bloomberg.com. Bloomberg L.P., 28 January 2015. Web. 5 March 2015. <http://www.bloomberg.com/news/articles/2015-01-28/chevron-seizes-gulf-opportunities-from-rout-squeezed-bp>.
Goodley, Simon. “BP's Bob Dudley Got 25% Pay Rise as Company Salaries Were Frozen”. TheGuardian.com. Guardian News and Media Limited or its affiliated companies, 3 March 2015. Web. 5 March 2015. <http://www.theguardian.com/business/2015/mar/03/bps-bob-dudley-got-25-pay-rise-as-company-salaries-were-frozen>.
Rowell, Andy. “Exxon to Eat “Bite-sized” BP?”. Priceofoil.org. Oil Change International, 16 February 2015. Web. 5 March 2015. <http://priceofoil.org/2015/02/16/exxon-eat-bite-sized-bp>.
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