Case study: BP in Russia

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Introduction

Strategic management involves formulating actions to define a course of action and create linkages between internal systems of a company and its external environment (Burrow, & Bosiljevac, 2012). Strategic management occurs at various levels of business such as business level and corporate level of the firm. The business strategy of BP Russia is integrated cost leadership/ differentiation. The corporate strategy of BP Russia is creating alliances. The strategies that BP has implemented are not competitive leading to failure of most of its partnerships. The main partners of BP have expressed their dissatisfaction with the competencies of BP labeling that they do not have critical skills to move the business forward.

Analysis

BP Russia could not compete effectively with the big oil industry players like AAR that owned TNK. Moreover, BP Russia did not offer better strategies or skills that would make it relevant to new partnerships like the Rosneft and the BP-TNK merger. Often, the interests of BP Russia in the Russian oil industry conflicted with the incumbent industries in the area. For a partnership to work effectively, there should be minimal conflicts from both partners (Hitt, Ireland, & Hoskisson, 2017). Also, a company must offer competence that will benefit the partnership.

The problem of BP Russia is the lack of strategic clarity. The firm formed joint ventures with other oil companies without conducting a proper market research to understand the dynamics of the market. BP sought to form the BP-Rosneft alliance, yet it was involved in another similar partnership with AAR through the TNK joint venture. A strategy should be able to create a competitive advantage by ensuring a strategic value that has minimal risks. BP Russia posed many risks to its partners like Rosneft who went through legal injunctions. BP Russia needs to implement a comprehensive strategic management plan to minimize risks and maximize its returns in the Russian oil industry.

Recommendations

Firstly, BP should employ competitive staffs that have the desire for control and initiative to take the business forward. Such human resources can keep up with the changes in business and propose relevant strategies. The knowledge about the market concerning types of partnership to form is important the sustainability of the firm. BP Russian should then adopt the differentiation strategy in the business level strategy. Being a new entrant into the Russian market, its competitors and potential partners are interested in different provisions that BP could provide. In such, BP can demonstrate its critical skills and how it can be relevant to the market.

At the corporate level, BP should implement strategies such as an acquisition. BP should buy a company that has a substantial market in Russia oil industry which will enable it to have local market knowledge and an established customer base (Burrow, & Bosiljevac, 2012). Either, no company should have a controlling interest in the acquired firm like in the case of Sidanko and TNK.

Finally, BP could employ contract marketing to enhance its influence and competitive advantage in the industry. Because the company has many resources such as finances and the technology to explore oil, it can seek the services of incumbents like AAR to market their products rather than entering into risky alliances that cost the business.

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