Market Forces and Business Environment of British Petroleum

Question:

Scenario:

The UK business environment remains positive, forward-looking and one of the most attractive places open for business in Europe. The UK government is committed to creating a supportive business environment that encourages a private-sector-led economic growth. According to the World Bank ranking, the UK is one of the easiest places to set up and run a business in Europe, and more overseas companies have their European headquarters in the UK than in France and Germany put together.

Today, the UK is the world’s sixth-largest economy and one of the world’s top ten manufacturers (six of the world’s top ten vehicle makers are based in the UK). It is also the world’s second-largest services exporter (after the U.S.) and the world’s sixth- largest trading nation. Green industries are at the forefront of the UK government development initiatives, making it one of the leading global players in wind energy and the development of offshore wind. More opportunities are reflected in UK’s low-carbon solutions, engineering design, cost consulting, education, research & development, financial and professional services.

British competitiveness remains forward-looking through lowering of corporate tax rate and investing in infrastructure development. The UK government’s current strategy is based on key themes that include:

attracting investment to the UK; strengthening the multilateral trading system; enabling developing countries to benefit from trade and investment as well as identifying and maximising the benefits offered by the opportunities for UK businesses to trade and invest. As a result, the UK is among the top three destinations globally for inward investment. The UK Trade & Investment continues to support high-growth and innovative small and medium-sized enterprises (SMEs), while strongly encouraging them to export and seize opportunities in high-growth and emerging markets – Brazil, Russia, India, China and South Africa (BRICS).

Outside of the UK national environment, the government continues working to expand the EU single market, defending the multilateral trading systems, helping the World Trade Organisation (WTO) to defend protectionism, supporting the European Commission in negotiating ambitious free trade agreements while working with businesses to identify and remove regulatory barriers to trade and investment.

[Adapted from Danny Lopez (2011) ‘UK Business Environment: Positive and Forward-Looking’, The Metropolitan Corporate Counsel Special Report, UK Trade & Investment)]

Based on your knowledge and understanding of the Business Environment module, your role is to produce a report that can be used to provide advice to a company of your choice on how it can survive in changing and highly competitive UK local, national and global business environments.

1. Discuss how market forces shape the way in which your chosen organisation responds in the business environment in which it operate?

2. Discuss the significance of international trade to UK business organisations?

3. Analyse the impact of global factors on UK business organisations?

4. Evaluate the impact of European Union (EU) policies on UK business organisations?

1. Market forces play an important role towards the development and success of any business making it important for the manufacture to observe the aspects closely. To better understand this strategy and how it can be used to deliver on consumer demands, British petroleum shall be taken as an example. British petroleum has grown to become among the largest Petroleum m distributors globally and the company has achieved this by delivering high quality petroleum products. Today British petroleum refiners and sells all petroleum available on the market but the company also offers a wide verity of qualities within each of the products thus catering to people of different budgets.

Attractiveness of the UK for Starting a Business

The company is also constantly developing new petroleum products and improving each to deliver higher quality products to keep the brand competitive in the market. Product quality has grown to become an important force linked to retaining customers since they have a wide verity of choices to select from and this makes them compare products more aggressively. British petroleum therefor works hard towards ensuring their product meet the highest quality standards and deliver on consumer expectations.

Price is another important aspect linked to any products competitiveness and success in the market. British petroleum may be the biggest Petroleum Company globally but the company has also emphasised on delivering fair prices to its consumers even when petroleum products are governed internationally. Product price plays and immense role towards brand market capital success since consumers are always looking to save money on all their purchases including petroleum products. An example of this can be observed among the wide verity of petroleum products offered by British petroleum (Miles, 1992). The company has developed all types of lubrication to cater for a; consumers. In addition to this factor, British petroleum also offers a huge verity of products within each category which cost differently resulting in lubricants affordable by each consumer.

The United Kingdom remains as the most attractive destination to start a business due to the many benefits associated to the UK. The UK offers the most attractive terms linked to opening new businesses and encourages investors to starting their own businesses in the nation. Low Taxation and the ability to get funding to start new businesses in the UK all contributeimmensely towards investor sentiment.This is because 90 of all UK based businesses are classified as small and cottage industry. This makes it important for the investor or entrepreneur to have attractive terms linked to the region they start the business so as to improve the chances of success which would ultimately result in benefiting the host nation.

But on the other hand this strategy tends to work with certain products and not all especially the petroleum processing sector. To remain competitive in the market and deliver products for affordable prices British petroleum must turn to manufacturing purchasing the petroleum from cheaper sources and using state of the art equipment to refine the petroleum. This helps lower the manufacturing, material and labour costs thus ensuring the products remain competitive on the international market. Unlike most other products which can be manufactured in other regions petroleum must be shipped in its raw state so as to be refined in the destination country

The UK may offer attractive benefits to their citizen or resident investors but the region does offer some challenges linked to inflated product costs due to the Sterling pound having a high currency value. This results in the value of the products being manufactured in the UK to cost high making them non-competitive in the international market.

Globalization is gripping and affecting every global market in different ways. While globalization is proving to be highly beneficial for certain global markets such h as China and India, its having a negative effect in once major global industrial players. This is observed clearly in the UK iron are industry which has virtually ceased operation due developingcountries like China ability to supply the UK with iron ore for almost half the cost of mining it in the UK. This makes the mining for the UKs iron of too expensive despite the nation having its own depositsresulting in the collapse of the industry.

Impact of Market Forces on Petroleum Industry

Besidesproduct competitiveness there are other aspects such as climate and environmental concerns, competition from emerging economies (BRICKS) and natural disasters, war and conflict. Each of this aspect has its own effecting on each of the UK business organisations thus making each one require close assist. These factors not only affect the UKS businesses organisation but also internationally based organisations and businesses such as Samsung which does the majority of its manufacturing in ASIA.

This is directly associated to the lower manufacturing costs in Asia but certain of the factors also greatly affect the brands market position in certain regions. Although companies like British petroleum are present across the globe and continue growing due to the increasing demand for the petroleum products some regions continue to pose expansion problems. British petroleum is experiencing this problem in Africa where certain African nations remain untapped due to constant conflict in those nations. Somalia, SouthernSudan, the Congo and several other countries in the region remain undeveloped due to war and conflict making that market inviable for British petroleum establishes their businesses.

The EU plays and important part towards influencing the business and investment opportunities in the UK thus making the EU and direct facilities towards investment opportunities. Due to the UK being located within the EU it’s important for the regulations the be regulated so as to offer fair opportunity to all nations in the region and failing to deliver fair business opportunities and regulations could lead to seriously affecting business operation in the UK (Aldrich, 2007). Some policies which would require regulation to maintain business competitiveness include:

Employment opportunities in the EU and UK are abundant and see large number of skill professionals applying to visit Europe on work visa with the sole intention of seeking employment. But the regulations differ considerably in the EU and UK thus resulting in the UK employment costing more than most EU nation. This is due to strict limitations linked to hiring immigrant who require fulfilling many professional and financial requirements before entering the UK while in most other EU nations work visas are relatively simple and cheap to acquire (Cashore, 2002).

A major source of employment in many countries like the UK comes from students undergoing their education but working during their free time or as training programs. The UK limits the number of hours the students can work while they are mainly unregulatedin most EU nations. This results in employment wages reducing considerably in EU nations as compared to the UK which also affects the UK business environment in a negative manner.

The EU allows for most members to trade freely between each other resulting in a regulated form of trade, taxation and distribution across the EU. With the UK, regulation is different as the nation is not part of the EU thus triggeringseveral trade policies with its European counterparts. This result in import and other taxes further increasing the UKs export Product to the EU and other nations.

All these factors play a huge role in the international market today since the consumer has grown very cautiousregarding price and quality. Unlike the past when products made in the UK were said to be the best, consumer have realizedthat even developing nations deliver high quality products. It has even reached an extent that most EU, UK and USA companies are not manufacturing in Asia and still delivering quality but at much more competitive prices.

References:

1. Aldrich, H. (2007).Organizations and environments. Stanford University Press.
2. Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management.
3. Snow, C. C., & Miles, R. E. (1992). Causes for failure in network organizations.California management review,34(1), 53-57.
4. Knight, G. (2000). Entrepreneurship and marketing strategy: The SME under globalization.Journal of International Marketing, 8(2), 12-32.
5. Cashore, B. (2002). Legitimacy and the privatization of environmental governance: How non–state market–driven (NSMD) governance systems gain rule–making authority.Governance, 15(4), 503-529.