1. Advantages of BP as a possible take-over target?
2. Disadvantages of BP as a possible take-over target?
3. Political Issues faced by the bidders?
4. Problem of managerial style faced by the bidders?
5. Would low price of oil accelerate bid or another barrier?
Britain Petroleum (BP) is one of the most important international oil as well as gas companies in the world. They provide customers fuel for transportation, lubricants for moving of engines, energy to generate heat as well as light and products for petrochemicals that is used to daily items such as paints, packaging as well as clothes. BP, first sell its oil in Britain, it is known to others and become popular because of its good quality selling of gasoline. It is unique from other oil company because of the selling of better energy. The aim of BP is to be a company of oil and gas that will grow above the long term. They always enhance both risk management as well as safety, earn the trust of the people and give values to their shareholders (Chan, 2011). It will simplify their organization as well as bitterly turn the portfolio. They mainly focus in executing their company’s operations and the use of capital.
The companies dealing with oil as well as gas company like BP generates a huge turnover for all industries. It can also be found that $25 billion cash flow was delivered by BP in the year 2005. The cash to be proceeded is $8.3. Thus the past record of BP is attractive for the bidders to takeover. The advantages for the bidders are the following:
Reduction in cost: The dividend quarterly payment is suspended by BP with a percentage of 9.5 per share that amounted to $2.6 billion to the shareholders. It causes reduction in the cost as well as maximization in the profit. Moreover, Bp agrees to sell nearly $7 billion assets in North America as well as in Egypt (Hou, Ko and Lin, 2011). It has cut down 20% of the employees for maintaining capital expenditure as well as established escrow fund of $20 billion for victims of oil spreading. All theses strategies attract the bidders towards their business.
Marketing and Sales: BP deals with the energy resources and for dealing with those resources BP has spent $1.4 billion. But the industry is facing some financial problems and due to this it has dividend alternative energy budget into $1 billion as well as $500 billion.
Innovation of Process: The innovation approach of recovering oil to boost out the process significantly was done by going into deep sea shores that utilized polymer popcorn technique as one of the most important innovative method done by BP (Kadiri, 2011).
The government of British has told BP that it would be against the potential takeover of the company. Over the last 10 years the share market of BP decreases nearly one-fifth. It differences the stock market that shows some growth of about 20%. The returns of dividend are negative that becomes a tension for the shareholders. It remains still attractive but BP is quickly flattering a potential take-over target (Klykov, Alushkina and Abrosimova, 2015). BP transforms its strategy between the leadership of cost to the differentiation as the reducing of cost practices leads to fall in oil price as well as oil leakage.
Higher Payroll: The salary and wages for the employees in China are lower than US. If Petro China takeover BP, then they have overpay the employees than usual (Kolosova, 2011). It results in disruption in cost, insufficient cost management as well as workforce risk from top to bottom.
Overlapping management: The combinations of assets needs to be downsized if Exxon Mobile takeover Bp. They have different process as well as system. This overlapping of management will create dissatisfaction among the employees that may happen to lose their jobs and others may need longer time to familiarize with the new system that again may incur loss (Shever, 2010).
BP challenges the political risks in those countries that are producing oil by doing partnerships as well as signed an agreement with the country. BP signed a contract with a Russian oil company, Roseneft. The indecision of BP faces over the final cost based on the drop of oil price in the year 2010. Its disclosure to Russia through its stake in the state controlled oil company Rosneft would discourage the group of US. The oil energy market becomes more unstable due to instability in the geopolitical (Uhr, 2012). The deterioration in the climate from the emissions of CO2 leads the government to support more sustainable form of energy. The market of oil as well as gas becomes volatile due to the growing requirement of oil in the market. The company which is thinking of bidding for the BP to takeover find that if their takeover includes the penalty then it will be huge loss for them. Another issue is that BP is conducting their business unethically at that country so there was a big chance of getting a ban for that company. It is also a risk for bidding the company (Zubailov, 2015). As it is expected that US politicians including Barrack Obama was not in favour of the company that forced them to cut off their business in the market of US. This kind of political situation forced to increase the liability of the company in the Gulf of Mexico that contributes to the continuous drop of their share price in the market.
Above the past ten years the business of British petroleum is rapidly decreasing in term of their sells and market share. Due to this factor the prices of British petroleum are decreasing day by day. There are some problems related to the management of the company that are facing the potential bidders of the company.
Quick decision of management: Some situation arises when the management needs to take quick decision about the business. Quick decisions are made for getting recovered from the losses occurred (Brondoni, 2015). The decision of executive committee of British petroleum is impaired. Executive committee of this company take decision under pressure in order to take decision quickly. It has been from that there is 20% loss of senior executive manager after the process of merger.
Lack of necessary skills: The management of British petroleum face a lack of skills in their members. It lacks the ability to face the problem lead to spill that the company is facing.
Inability of recovery: The management expert of British petroleum became unable of face the dynamic changes of market. These problems are faced by the potential bidders of the company. Potential bidders are not getting attracted b their managerial style. The management of this company is showing their inability to fix problem of lowering the prices of oil. So they are in turn unable to take decision about solving the problem.
Inability of planning: The management of British petroleum is not able to take right decision at right time. They have faced a failure in anticipating the disaster of low market share for the company. Each management should start with planning. The government have not checked the magnitude of the problem and believe the information provided by the management of British petroleum.
Lack of coordination: One of the core management problems that the potential bidders of British petroleum are facing is the information of media provided by the management of this company. The problem is about the public image of the company. The management of the company wanted to hide their financial status and public image from the media. So they have provided wrong information to the media. The potential bidder of the company gets wrong information about the company in the media (Chanysheva and Biryukova, 2015). It creates a problem to the potential bidders of the company for not getting the right information about the company.
Lack of resources: The management of British petroleum lacks resources to mitigate the problem of low price. It hampers the interest of potential bidders of British petroleum. The management of this company lacks the resources to cop up with the competitive advantages of the market.
Unethical practice: One of the big problems that the potential bidders of this company are facing in the unethical practices of the Management of the company (Peterson and Peterson, 2015). The Government of US are charging huge amount of penalty from this company. The potential bidders of the company are thing that if take over the company It will be a loss to them because of giving too much penalty charge to the government.
Loss of profit: Any company who will go for taking over a company would think about the profitability of take over. Bt the British petroleum is now facing low market share and low price, so it would be harder for a management team of a company about taking over the company.
According to research it has been found that the economy of united state is the popular and largest consumer of oil. Most of the cases show that the management are now focused on reducing the relative price of the oil in order to reduce consumption of energy. At first the cartel needs to be restart the authority over the oil prices so that value of crude can be varied between the nations. This case implies that relative production cost should be varied between the nations. The nation should increase the spending in order to reduce the unemployment. The nation should push the prices of the product in order to adjust the cuts in prices. Research shows that the nation is trying to develop the some aspect of the business in order to make the prices of the oil higher (Mohajer, 2015). The company is planning to induce the prices of the oil at breakeven point in order to meet the demand of the customers. This will not only lead to increase in prices of oil but also increase the growth of economy. In this way geographical risk can be minimized. It can be observed that market segmentation of oil has been changed and demand and supply for oil are changing rapidly. It would hurt the producing of countries, at the same time will also reduce the prices. The aim of the government would be to push the prices of the oil, at the same cheaper cost of the oil can be made.
The suppliers of energy are resisting on the gases. The fuel price not only hurt the consumer but also hurt the farmers and manufacturers. Many cases show that it has also been hurting the government as well as the economy of the country (Vladimirov, 2015). Government professionals have been discouraged in many ways and many cases. Low price level of fuel decreases the carbon as well as decreases the economic perspective of the country. Low cost of British petroleum will reduce the market share of the company. It will lead to take over of the company by the bidders at low cost (Murto and Välimäki, 2015). Due to managerial and political problem it is very tog to regain the market value. So it is better to take over the company by another company. The low price of British petroleum will ultimately reduce the market value of the company. For this the company will lose its competitive advantage in the company. Supermarkets are also facing the problem of price cutting (Zeeb et al. 2015). Low gas and oil price of British petroleum will also decrease the economic level of this country.
Conclusion
It is being concluded that BP provides their customers fuel for transportation, lubricants for moving of engines, and products for petrochemicals. It is the most focused Oil as well as Gas Company with an opportunity to grow in the future. Its strong financial structure offers the base for their long-term strategy. They are aiming to generate an increase in the net cash by 50% offers by operating activities by 2014. It aims to utilize half of the incremental operating cash for reinvestment and half for any other purposes. Over the last 10 years the share market of BP decreases nearly one-fifth. It differences the stock market that shows some growth of about 20%. The returns of dividend are negative that becomes a tension for the shareholders. It remains still attractive but BP is quickly flattering a potential take-over target.
Reference List
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