Business Environment - British Petroleum

A report on British Petroleum
BTEC HND IN BUSINESS (FINANCE)

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UNIT TITLE
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Phm Th Khnh Huyn - Julie

F05-090
Unit 1: Business Environment
Organisations in their Environment
1 of 2
Jubred A. Peano
November 22, 2012
I, __________Phm Th Khnh Huyn - Julie________________ hereby confirm that this assignment is

my own work and not copied or plagiarized from any source. I have referenced the sources from which
information is obtained by me for this assignment.
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Page 1 of 38

Unit Outcomes
Outcome
Evidence for
the criteria
Assessors
Decision
Feedback
First
attempt
Understand
the
organisational
purposes of
business
LO1
Understand
the nature of
the national
environment in
which
businesses
operates
LO2
Identify the
purposes of
different types
of organisation
1.1
Describe the
extent to which
an organization
meets the
objectives of
different
stakeholders
1.2
Explain the
responsibilities
of an
organization
and strategies
employed to
meet them
1.3
Explain how
economic
systems attempt
to allocate
resources
effectively
2.1
Assess the
impact of fiscal
and monetary
policy on
business
organizations
and their
activities
2.2
Page 2 of 38
Rework
Internal
Verification
Outcome
Evidence for
the criteria
Assessors
Decision
Feedback
First
attempt
Evaluate the
impact of
competition
policy and other
regulatory
mechanisms on
the activities of
a selected
organisation
Rework
2.3
Merit grades awarded
M1
M2
M3
Distinction grades awarded
D1
D2
D3
Assignment
( ) Well-structured; Reference is done properly / should be done (if any)
Overall, youve
Areas for improvement:
ASSESSOR SIGNATURE
DATE
DATE
NAME:.........................................................................................
(Oral feedback was also provided)

STUDENT SIGNATURE
NAME :..............................................................................
FOR INTERNAL USE ONLY
VERIFIED
YES
NO
DATE
: ...........................................................................
VERIFIED BY : ...........................................................................
NAME
: ...........................................................................
Page 3 of 38
Internal
Verification
Business Environment: British Petroleum
Prepared for
Lecturer Mr. Jubred A. Peano
Unit 1: Business Environment
Banking Academy, Hanoi
BTEC HND in business (Finance)
Prepared by:
Phm Th Khnh Huyn - Julie
Registration No: F05-090. Class: F05A
No of words:
Final Submission: 20th November 2012
Page 4 of 38
Table of Contents
Table of Contents.............................................................................................................................5
Executive Summary.........................................................................................................................8
Introduction......................................................................................................................................9
1.1: Identification of the purposes of British Petroleum Corporation...........................................10
1.1.1: Legal structure:.................................................................................................................10
1.1.2: Vision statement...............................................................................................................10
1.1.3: Mission Statement............................................................................................................10
1.1.4: Objectives.........................................................................................................................10
1.1.5: Values...............................................................................................................................10
Figure 1: British Petroleums values.......................................................................................11
1.1.6: Explanation.......................................................................................................................11
a.
Vision statement..............................................................................................................11
b.
Mission statement............................................................................................................11
c.
Objectives........................................................................................................................12
d.
Values..............................................................................................................................12
1.2: Describe the extent to which an organization meets the objectives of different stakeholders
.......................................................................................................................................................13
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1.2.1: Identification of stakeholders...........................................................................................13
Figure 2: Stakeholder mapping...............................................................................................13
Table 1: Influence of British Petroleums stakeholders..........................................................14
a.
Internal Stakeholders.......................................................................................................14
b.
Connected Stakeholders..................................................................................................15
c.
External stakeholders......................................................................................................16
1.2.2: Evaluation of the extent to which British Petroleum meets the objectives of different
stakeholders................................................................................................................................17
Table 2: The extent to which British Petroleum meets the objectives of its stakeholders......17
a.
Employees:......................................................................................................................17
b.
Customers........................................................................................................................18
Figure 3: British Petroleums Castrol price in Viet Nam (vatgia.com)...................................19

c.
Local authorities..............................................................................................................19
1.3: Explain the responsibilities of an organization and strategies employed to meet them.........20
Table 3: British Petroleums responsibilities and strategies employed to meet them.............21
1.3.1: Social Responsibilities.....................................................................................................21
Figure 4: British Petroleum stock price period 2008-2012.....................................................22
1.3.2: Environmental Responsibilities........................................................................................23
Figure 5: Total energy use period 2007-2008.........................................................................23
1.3.3: Ethics and Business..........................................................................................................24
1.3.4: Management Responsibilities..........................................................................................25
1.3.5: Public relations and corporate image...............................................................................26
2.1: Explain how economic systems attempt to allocate resources effectively.............................27
2.1.1: Brief introduction of economic systems...........................................................................27
2.1.2: Labor................................................................................................................................27
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2.1.3: Land and natural resources...............................................................................................28
a.
Land:...............................................................................................................................28
b.
Natural resources.............................................................................................................28
2.1.4: Capital..............................................................................................................................28
Figure 6: Vietnams FDI from 2006 to 2011 (Coldwell Banker, 2011)..................................29
2.1.5: Summary..........................................................................................................................29
2.2: Assess the impact of fiscal and monetary policy on business organizations and their activities
.......................................................................................................................................................30
2.2.1: Fiscal and monetary policy..............................................................................................30
2.2.2: Impact of fiscal and monetary policy on Vietnams economy.........................................30
a.
Fiscal policy and its impact on Vietnams economy.......................................................30
b.
Monetary policy and its impact on Vietnams economy.................................................30
2.2.3: Global economy and its influence in British Petroleum in Viet Nam..............................31
Figure 7: Dow Jones Index in trading session on Monday, September 29, 2008...................31
2.3: Evaluate the impact of competition policy and other regulatory mechanisms on the activities
of a selected organization..............................................................................................................32
2.3.1: Industrial policy................................................................................................................32
2.3.2: Social welfare policy........................................................................................................33
2.3.3: Interest groups and pressure groups.................................................................................33
a.
Interest groups.................................................................................................................33
b.
Pressure groups...............................................................................................................34
Conclusion.....................................................................................................................................35
Reference.......................................................................................................................................36
Page 7 of 38
Executive Summary
Vietnams economy has been developing rapidly since 2006 when Vietnam became a member of
WTO. Thanks to positive trading policy of Government, Vietnam has attracted more and more
foreign investors and become a potential market for foreign companies to operate.
Establishing in 1909, up to now, British Petroleum is one of the most popular oil and gas
companies in the world. The company has nearly 80,000 employees working in over 80
countries. British Petroleum Vietnam was set up in 1989. Recognizing that Vietnam had a huge
amount of oil, the company started to explore and produce oil and gas. The main building of
British Petroleum Vietnam locates in Ba ria Vung Tau where amount of oil and gas is the most.
Being foreign company which operates in Viet Nam, British Petroleum is influenced so much by
Vietnam s economy and policies it applies for foreign companies. Therefore, this report focuses
on doing research on British Petroleum and factors affecting its operation in Vietnam.
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Introduction
The purpose of this report is to investigate and analyze British Petroleums purposes, the way
British Petroleum meets its stakeholders objectives, as well as its responsibilities. In addition,
this report is also about British Petroleum in Vietnam related to Vietnams economy and its
policies, which affect the company. The scope of this report consists of:
Scan and analyze the vision, mission statements, objectives and values of British
Petroleum
Research on the extent to which British Petroleum meets stakeholders objectives
Research on the responsibilities of British Petroleum and its strategies employed to meet
objectives of stakeholders
Research on economy system of Vietnam, its resources and the way it allocates those
resources effectively
Analyze fiscal and monetary policies of Viet Nam and their impact on British Petroleums
operation
Analyze industrial and social welfare policies of Viet Nam and their impact on British
Petroleums operation
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1.1: Identification of the purposes of British Petroleum Corporation

1.1.1: Legal structure:
The legal structure of British Petroleum is Public Limited Company. The company offers shares
to public so that investors can buy to be its shareholders. Besides, the company has limited
liability. Shareholders are not required to contribute beyond amount of money they paid to buy
share. In other words, they are not personally responsible for companys debts
1.1.2: Vision statement
According to MBA Futuris (2011), British Petroleums vision is to have the best competitive
company, operating and financial performance
1.1.3: Mission Statement
The mission statement of British Petroleum Corporation is to create value for shareholders and
supplies of energy for the world in a safe and responsible way, to be a safety leader in our
industry, a world-class operator, a responsible corporate citizen and a good employer (British
Petroleum, 2011).
1.1.4: Objectives
British Petroleum sets up two objectives associated with two periods: the year 2012 and period
from 2013 to 2014, according to BP summary review (2011)
Objective 1: Exploration drilling activity increases to 12 wells. Six major upstream

project start-ups. Eight rigs expected to be operating in the Gulf of Mexico. Completion
of our payments into the Deepwater Horizon Oil Spill Trust.
$2 billion of financial
performance improvement in Refining and Marketing since 2009. Organic capital

expenditure increases to around $22 billion.
Objective 2: Drilling up to 25 wells per year. A further nine major upstream project startups. Unit operating cash margins from new upstream projects in 2014 expected to be
double the 2011 averaged. We complete our $38-billion divestment program by the end
of 2013. Overall operating cash flow in 2014 to increase by 50% compared with 2011.
1.1.5: Values
British Petroleum focuses on five core values (Figure 1)
Page 10 of 38
Safety
Courage
One
team
Respect
Excellence
Figure 1: British Petroleums values
1.1.6: Explanation
a. Vision statement
The vision statement of British Petroleum meets elements of a general vision. Firstly, it is clear.
It sets up a super-objective to be a best competitive company, operating and financial
performance. It is easy to understand, so that people can conduct it effectively. Secondly, it is
challenging. Becoming the best competitive company is very hard because it has many strong
competitors and British Petroleum has to try much to meet it. Finally, it is a picture, a future. The
best competitive company is not easy to obtain, but it is motivation of all people working in
British Petroleum to work harder.
b. Mission statement
Being one of the leading oil and gas corporations in the world, British Petroleum put the benefits
of its stakeholders as to top consideration when making mission. This mission is easy to
understand and remember because it determines what to do (create value) and whom it serves
(shareholders and supplies, customers and community). Besides, the companys mission aims to
safety and responsibility, unlike other ones. This guarantees for stakeholders benefits, gives
Page 11 of 38

them belief to contribute to its success. That makes British Petroleum stand out compared to
other companies.
c. Objectives
Objectives show clearly British Petroleums expectation by the end of 2012 and period 20122014. However, its 2012 objective aims to Gulf of Mexico where Oil Spill occurred in 2010,
whereas period 2013-2014 focuses on developing projects and programs. The objective time is
very specific and clear, totally follows SMART criteria.
d. Values
Safety: British Petroleum believes that a good business is a safe business. Therefore, it
puts safety of its workforce and society at the top concern whenever doing anything. It
cares about environment management in a safe way, as well as promises to provide
customers safe fuels, energy, lubricants, etc.

Respect: the company shows its respect for the world by complying with law and
regulations. It also sets up ethical standard by its own so that its stakeholders can see it
as a reliable place. The company maintains the respect for both existed relationships
and new ones, treats them with responsibility.

Excellence: British Petroleum tries to keeps everything with excellence. It observes
strictly the rules, ensures outcomes with extreme precision, and offers products with
the highest quality. Any mistake is checked carefully and corrected accurately.
Courage: Strictness in work requires British Petroleums employees to be under high
pressure. Knowing exactly what difficulties that they have to face, the company tries
to encourage and support them as much as possible. Thanks to it, employees receive
motivation to continue to do their job.

One team: British Petroleum understands the strengths and effectiveness of working in
teams, and absolutely applies it. It gives project teams authorities to make decision; at
the same time makes them trust that they are appreciated.
1.2: Describe the extent to which an organization meets the objectives of different
stakeholders
1.2.1: Identification of stakeholders
Stakeholders are People or small groups with the power to respond to, negotiate with, and
change the strategic future of the organization (Eden and Ackermann 1998: 117). They have
Page 12 of 38

interest in companys business performance. The primary stakeholders of a company are usually
shareholders, customers, suppliers and employees. Meeting their requirement is the most
important determinant of enterprise. However, modern theory separates stakeholders into three
types, including internal stakeholders, connected stakeholders, and external stakeholders.
Influence of these three groups on the company is evaluated by level of their power and interest
in the company. In order to assess the influence of stakeholders, people use stakeholder mapping
(Figure 2)
HIGH
power/influence
Figure 2: Stakeholder mapping
Based on stakeholder mapping, the significance of stakeholders of British Petroleum is

illustrated in table below:
Types
Stakeholders
Key players
Degree of influence
Keep
Keep
satisfied
Internal
Stakeholders
Employees
Managers
The board of
Page 13 of 38
informed
Minimal
effort
Connected
Stakeholders
director
Customers
Shareholders
Suppliers
Local
External
Stakeholders
authorities
Community
Government
Table 1: Influence of British Petroleums stakeholders
a. Internal Stakeholders
Employees key players
They are evaluated as key players in British Petroleum. They are people who directly take part
in the companys business. Therefore, they have major impact on business success, as well as are
responsible for all stages in production process. To British Petroleum, they directly participate in
finding oil and gas, changing them into fuels and energy for market. The company cannot
produce products with high quality in order to introduce them into market without employees.
Motivation is one of them most important duties of British Petroleum to improve employees
productivity. When they are motivated, they will be more creative, innovative, as well as work
more effectively. Therefore, the company needs to support employees to develop their
performance in the future.
Managers key players
One of the most important internal stakeholders is managers. They are also evaluated as key
players in British Petroleum who have high influence and interest. Unlike employees who
participate in production process, managers are people who manage the process, set up strategies
to bring the products to customers. Managers in British Petroleum have a particular role but all
of them have the same effect on the companys business activities. In general, if employees
produce product, managers bring them to the market. They have a great influence in business
success.
The board of director keep satisfied
They are evaluated as keep satisfied in British Petroleum who has high influence but low
interest. They are people who evaluate the company and its management. Their job is ensuring
Page 14 of 38

shareholders rights in paying dividends, approving financial statement of the company, as well
as giving opinions about companys acquisitions and mergers. In British Petroleum, they are
representatives of shareholders. Having trust from board of directors, the company will find it
easy to ask for fund from shareholders. In general, the company have treat them with care if it
wants to keep shareholders.
b. Connected Stakeholders
Customers key players
Customers are evaluated as key players. They are important to not only British Petroleum, but
also all enterprise. They are people who directly decide companys revenue. No customer means
no profit, the company cannot exist. There are many enterprises, which produce the same
products like British Petroleum, and focus on the same target groups of customers like it.
Therefore, British Petroleum needs to carry out strategies in order to keep its loyal consumers, as
well as appeal to new ones.
Shareholders keep satisfied
As important as customers, shareholders belong to keep satisfied group who has low interest
but high power. Shareholders are people who invest their money in the company in order to earn
profits. The company will have to deal with many problems, even bankruptcy if they take out of
their money. In addition, shareholders hold very big amount of capital of the company, so they
are able to dilute its control when the company does not satisfy them. For British Petroleum
which is one of the most powerful international companies in the world, keeping its shareholders
satisfy is very important. The biggest shareholders of British Petroleum consist of Blackrock,
Legal & General, Standard Life, Barclay Global Investors, etc. Everything the company does
must satisfy this group.
Suppliers keep informed
Suppliers and community belong to keep informed group who does not have great ability to
influence strategy, but their views can be important in influencing more powerful stakeholders,
perhaps by lobbying (BPP Learning Media, 2010 p.41).
Page 15 of 38

Suppliers do not have influence in British Petroleum, but they are people who supply company
with materials in need. The company will have to deal with a huge trouble if suppliers do not
supply it materials.
c. External stakeholders
Local authorities Minimal effort

Local authorities belong to minimal effort group. The main concern of local authorities is local
employment and local environment. Nowadays whenever a company or its branch appears, it
also directly affect environment at the place it addresses. In addition, this type of stakeholders is
also interested in whether the company creates jobs for local people or not.
Community keep informed
Community plays an important role in business and it is evaluated as keep informed in British
Petroleum. Community is connection between company and customers. Because standing in the
middle, it can enable or prevent company from reaching target customers. Therefore, company
has to choose the right community, which provides it opportunities to reach its customers. To
British Petroleum, the community it chooses is all people living in Viet Nam using motorbikes,
cars, etc. Doing survey in community will help British Petroleum identify broad trends of using
oil and gas of customers, so that the company will have suitable strategy to meet customers
needs and wants.
Government keep informed
Government is evaluated as keep informed in British Petroleum who has high interest but low
power. It affects company through collecting taxes, subsidizing business and social activities of
the company, and passing the law to protect rights of employees and customers. To British
Petroleum, Vietnamese government also affects it through permission. When it operates in Viet
Nam, it has to register with government. Registration helps government monitor the company
effectively. In general, government does not have power in making decision about companys
activities, but influence it directly.
1.2.2: Evaluation of the extent to which British Petroleum meets the objectives of different
stakeholders
Types
Stakeholders
Objectives
Page 16 of 38
Achieved
Not

achieved
Internal
Stakeholders
Employees
High salaries
Contribution is
appreciated
Comfortable
working
environment
High quality
product
Affordable price
Promotion
Connected
Stakeholders
Customers
programs
External
Stakeholders
Local
authorities
Local employment
Environmental
sustainability
Social campaign
Table 2: The extent to which British Petroleum meets the objectives of its stakeholders
a. Employees:
BP offers a competitive salary package and rewards people for performance and career
development (British Petroleum, 2010). Employees are one of the most important parties of
British Petroleum. There are three main objectives that they want company to fulfill, including
high salary, reward, and job satisfaction. According to PayScale (2011), British Petroleum pays
their employees 9% above market, whereas other companies pay their employees 2% below
market. As PayScale pointed out, employees salary of British Petroleum fluctuates between
30,000 and 98,000.
At BP reward is much more than just your salary (BP, 2010). The company offers its
employees a reward package, including salary, allowances, bonuses and other benefits. In
order to motivate its employees, British Petroleum provides flexible time to help them balance
between working and life. Employees can work at office or at home provided that they finish
enough work proportions. All ideas of employees are appreciated that is the key way British
Petroleum to keep staff happy and motivated.
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b. Customers
Any customer put product quality, price and promotion programs at the top consideration
whenever making purchase. Knowing what customers think, British Petroleum aim to produce
only quality products that can be used safely and are accompanied by the necessary information
(BP, 2010). The company focuses on producing fuels with improved performance, and lower
emissions. In 2008, British Petroleum launched its new gasoline with excellent characteristics.
Using this new product helps clean engine parts, as well as protect means of transport from
sludge and mental corrosion. Interestingly, it decreased emissions significantly, helped drive
much faster and smoother. Besides quality, customers also concern about product prices. In fact,
prices of British Petroleums products in the world in general and in VietNam in particular are
reasonable (Figure 3)
Nht Castrol 4L Cho xe Du lich

Loi du, nht: Du bi trn / Hng sn xut: Castrol /
Dung tch(ml): 4000 /
Page 18 of 38
455.000 VN
C 1 gian hng
bn
1 mi t 455.000
VN
DU CU CASTROL AXLE OIL HYPOY 90

Loi du, nht: Du bi trn / Hng sn xut: Castrol /
Dung tch(ml): 0 /
360.000 VN
C 1 gian hng
bn
1 mi t 360.000
VN
Du hp s CASTROL ATF TQ D III

Loi du, nht: Du hp s / Hng sn xut: Castrol /
Dung tch(ml): 0 /
181.000 VN
1 mi t 181.000
VN
Figure 3: British Petroleums Castrol price in Viet Nam (vatgia.com)
In order to appeal more customer, annually British Petroleum carries out many promotion
programs such as discount 5% when buying one liter of BP petrol, or 50 vouchers for purchasing
50 liter of BP petrol to use for the next Moto outlets. This contributes to increase in both existed
customers and new ones.
c. Local authorities
Three objectives of local authorities that British Petroleum has to meet are creating jobs, doing
social campaigns, and protecting environment. Up to now, British Petroleum has created jobs for
83400 people (British Petroleum, 2010). The company also concern about society. Annually, it
donates funds to help people who are under difficult circumstances through agencies such as
China Red Cross, Hong Kong Red Cross, America Red Cross, UNICEF, World Food, Program,
etc. In 2011, the company spent $2.25 million in humanitarian aid. Besides, British Petroleum
also encourages its employees to support charity activities. They spend one part of their salary on
donating, volunteer working times. In 2011, British Petroleums employees donate for charities
over $7.6 million. Environmental sustainability is one of the biggest concerns of British
Petroleum. Emissions from motorbikes and cars cause serious air pollution. Knowing that, the
company has done a lot of research to produce products, which are familiar with environment
such as new gasoline, diesel
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1.3: Explain the responsibilities of an organization and strategies employed to meet them
There are five responsibilities of stakeholders that British Petroleum has to meet. They consist of
social
responsibility, environmental
responsibility, ethics
and
business,
management
responsibility, public relations and corporate image (Table 3)
Responsibilities
Specific Responsibilities of British
Strategies employed to meet them
Petroleum
Maximize profits for
Increase dividends paid out
shareholders
Contribute to education
Support education programs
development
matched to local needs

Page 20 of 38
Create jobs and training courses
development
Reduce environmental pollution
for local people

Invest in biofuels and wind
Restore ecological system at
Carry out reconstruction
Gulf of Mexico
Improve biodiversity in the
programs
Focus on studying diversity of
world
Obey the law
flora and fauna species

Pay tax regularly
Ethics and
Be honest to consumers
Sell products at proper quality
Business
Care about human rights
Manage human rights issues
Respect employment contract
Ensure level of workplace
safety and health

Provide customer products they
prefer
Pay high pension and provide
many support policies

Carry out many vacation
Social
Support local economic
Responsibilities
Environmental
Responsibilities
Management
Responsibilities
Serve customers effectively
Treat employees retirement with
care
Reduce employee pressure at
work to maintain good image to
them
Reach customers quickly
policies.
Develop distribution network
Table 3: British Petroleums responsibilities and strategies employed to meet them
1.3.1: Social Responsibilities

a. Maximize profits for shareholder increase dividends paid out.
Maximizing shareholder wealth is objective of not only British Petroleum, but also all enterprises
in the world. To do that, the company has to focus on increasing dividends paid out, increasing
stock price.
Page 21 of 38
(Source: Edgar online, 2011)

Figure 4: British Petroleum stock price period 2008-2012
In April 2010, Oil Spill at Gulf of Mexico happened which caused big damage for British
Petroleum. The company had to spend $30 billion (equivalent to 20% of total assets) on
punishment, compensations, reconstruction programs, etc (BP, 2010). Still in 2010, British
Petroleum stock price decreased dramatically, from $65 to $30 per share. It affected shareholders
seriously. However, the company has tried to improve that in order to earn back trust from
shareholder. Until the end of 2011, companys stock price reached $52 per share.
b. Contribute to education development support education programs matched to local
needs
In order to improve educational level in many poor countries which has British Petroleum
branches, the company invests a large amount of money for programs to improve local people
knowledge and skills about technology by providing them computers, as well as technical
courses lasting for two years. In 2011, British Petroleum spent $103.7 million on community
programs, in which one-third was for education (BP, 2011)
c. Support local economic development Create jobs and training course for local people
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According to BP (2011), on average, the company created jobs for about 20% of the unemployed
people in the countries having its branches. They were introduced and trained with modern
facilities in order to be able to catch up with British Petroleum standards and requirements about
employees skill level.
1.3.2: Environmental Responsibilities
a. Reduce environment pollution - Invest in biofuels and wind
British Petroleum has been investing in renewable energy in order to provide market sustainable
and affordable energy (BP, 2010)
Figure 5: Total energy use period 2007-2008
Wind is renewable and clean energy. Using wind to make electricity could reduce one billion
C02 eliminated each year. British Petroleum has built 12 wind farms in US with more than 1000
wind turbines in total. The company has total generating capacity of 1955MW which is enough
to provide nearly 600000 houses. In addition, the company also focuses on produce biofuels,
which are low cost and sustainable. It believes that using biofuels will helps reduce gas
emissions and bring positive influence. Despite big expenditure for this investment, certainly,
results will be optimistic.
b. Restore ecological systems at Gulf of Mexico - Carry out reconstruction programs
According to TinMoi (2012), Oil spill accident at Gulf of Mexico, which happened in 2010,
causes serious consequences for ecological systems around. Oil flooded out and covered over
9000 km2 ocean surface. All plants around gulf changed into black-yellow color. Millions of
creatures were dead. Being aware of serious level that the accident caused, British Petroleum has
carried out many programs to clean the gulf coast and repair the damage. A lot of machines and
people have been mobilized in order to clean, as well as patrol and maintain until Gulf Coast
Page 23 of 38

meet the clean-up standard of FOSC (US Coast Guards federal on-scene coordinator). Besides,
during 2011, British Petroleum carried out emergency restoration projects so as to prevent and
reduce effect on natural resources, increase capacity for bird to land up to 2400 acres of shallow
water. Total amount British Petroleum spent for this was about $30 billion.
c. Improve diversity in the world Focus on studying diversity of flora and fauna
species
In 2011, British Petroleum became a member of Tread Lightly project, which focus on
evaluating impact of biodiversity on business (BP, 2011). After that, the company began
conducting some biodiversity-related investments which can bring long-term benefit for it.
Specifically, in 2011, British Petroleum invested $5 million on Forest Carbon Partnership
Facility and Green Carbon Fund.
1.3.3: Ethics and Business
a. Obey the laws Pay tax regularly
Obeying the laws is responsibility of all citizens and British Petroleum is not an exception. The
company always tries to complete it carefully and accurately. As BP (2010) pointed out, it paid
over $1 billion for taxation. The company always pay taxes on time, never evades taxation.
b. Be honest to customers Sell products with proper quality
British Petroleum claims to be honest to customers by providing them product with real quality
and real price, no cheating. According to BP (2010), the company sells products with high
quality but reasonable price. Because of fulfilling ethical responsibility to customers, British
Petroleums products are appreciated all over the world
c. Care about human rights Manage human right issues
In the past, British Petroleum did not have any formal policy about human rights, but today the
company has established one and begun developing it. Following that, new policy is applied to
everyone working for the company in order to maintain equality among people, avoid
discrimination, as well as prohibit recruiting people under working age. Not only people inside
company, but British Petroleum also care about human rights outside because it understands that
external factors, directly or indirectly, affect its business.
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1.3.4: Management Responsibilities
a. Respect employment contract - Ensure level of workplace safety and health
Any enterprise cannot exist without employment. It is very important for British Petroleum to
give employees reason to trust it by treating employment contract with respect. Recruitment of
British Petroleum is done carefully. The company recruits graduates from a lot of aspects such as
science, technology, engineering, etc. Working at BP, they will have chance to take part in
support courses in order to help them learn more about the company, and provide them necessary
knowledge for their parts (British Petroleum, 2010). Hence, employees will not feel strange
when working here. Besides, after working three or four years, every employee has opportunities
to get promotion. The salaries are paid at fixed time.
b. Serve customers effectively - Provide customer products they prefer
It is said that Customers is God, so that British Petroleum focuses on providing customers
what they prefer, not what the company prefers. According to British Petroleum (2010), the
company tries to contact with customer as much as possible by surveys, interviews, customer
care, advertising in order to determine what they needs and wants. During 2011, there were
73,000 interviews conducted, over 43000 customers taking part in customer services programs.
The company promises to sell products with 100% quality like advertisement. Any complaint
from customers is checked carefully and corrected quickly.
c. Treat employees retirement with care - Pay high pension and provide many support
policies
British Petroleum does not only care about its employees who are working for it, but also past
employees who retired or get redundancy. Retired employees can choose one of three way to
distribute their pension, including lump sum, single life annuity, joint and survivor (BP
LifeBenefits, 2011). Lump sum is a single cash payment, which means British Petroleum will
pay retired employees all pension in only one time. Single life annuity is amount of pension paid
retirees monthly. Joint and Survivor is monthly pension payment which is reduced with a
percentage (25%, 50%, 70% or 100%). The reduced amount of pension will be accumulated and
given to retirees family if they die first.
Page 25 of 38

1.3.5: Public relations and corporate image
a. Maintain good corporate image in customers mind Combine advertisement with
supply of high product quality
British Petroleum has been around for many years and its brand has been so popular that
customers always think about it whenever purchasing fuels for transport. However, a rapid
increase in competition, both domestic and international makes British Petroleum worry about
decrease in customers. Therefore, the company focuses on maintaining its image by serving
customers with care such as deliver products on time with high quality, correct the mistake when
customers complain about products and services. Besides, the company also produces products
like no other ones, and bringing them to customers through advertisement, public relations,
internet, etc to attract more consumers. Specifically, in 2010, British Petroleum spent about $50
million on advertising in order to keep more existed customers and appeal to new ones.
b. Reduce employee pressure to maintain good image to them Carry out many vacation
policies.
According to British Petroleum Life Benefits (2004), vacation policy applied for all employees
working for it, including full-time, part-time, or temporary ones. Employees who work from one
to four year have vacation benefit of 80 hours out of two weeks, 120 hours out of three weeks for
people working from five to nine years. Besides, the company also holds many picnics, camping
to give its employees chance to communicate more with each other, which helps strengthen
company unity and make employees have good view about company.
c. Reach customers quickly - develop distribution network
Since establishing, British Petroleum has done research to find the way to distribute oil and gas
quickly and effectively because it is far away from the market where its products are sold. Today,
the company transports its oil in two ways, including pipelines and shipping. To pipelines, the
company uses specialized tankers to transport oil. To pipelines, they can be built under water,
above or under land with the length of 1760 km (BP, 2010). Besides, British Petroleum expands
distribution system, which has road trains. These trains are to provide fuels to market, which
requires a large amount of fuels at one time. This saves a lot of time and deliver customers much
more quickly.
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2.1: Explain how economic systems attempt to allocate resources effectively
2.1.1: Brief introduction of economic systems
According to Chavis (2010), economic system is the type of rules and schemes used by a
groups of people to exchange valued goods and services between different parties. There are
three main types of economic systems, including free market economy, command economy, and
the mixed economy (BPP, 2010). Free market economy indicates an economy that most
decisions are influenced by supply and demand of market. Government has very little influence
in business decision making. Command economy is an economy that government controls most
of it in order to benefit all people in the country. The last type is mixed economy. It is the
combination between free and command economy. There is a balance between market forces and
governments intervention.
Helplinelaw (2010) pointed out that in Viet Nam law the state promotes a multi-component
commodity economy functioning in accordance with market mechanisms under the management
of the State and following the socialist orientation. It can be seen that Vietnams economy
encourages the development of free market (market mechanisms) but still maintain the control of
government. Therefore, the economy system of Viet Nam is the mixed economy.
In the mixed economy, there are three factors of production, including labor, land and natural
resources, and capital (BPP, 2010, p.133)
2.1.2: Labor
Labor includes all types of physical and mental power of human beings (BPP, 2010).
According to Tradingeconomics (2012), population of Viet Nam was 87.84 million in December
2011 which increased by 870,000 people compared to 2010. Viet Nam had about 44 people in
working age (Nationmaster, 2011) and the unemployment rate was 2.3% in 2011 compared to
2.88% in 2010. The decrease in unemployment rate is the result of an increase in enterprises
established in Viet Nam.
Currently, Viet Nam has conducts many strategies with a view to allocate labor forces effectively.
It bring positive results which are shown clearly in movement of labor structure. The number of
people working in agriculture sector decreased from 67.41% to 58.15% in period 2006-2011.
People working in industry and service sector increased in order from 11.87% to 15.20% and
from 19.29% t 24.97%
Page 27 of 38
Page 28 of 38
2.1.3: Land and natural resources

Land and natural resources are very important determinants, which affect the businesss
success. And Viet Nam has both.
a. Land:
According to statistics of Indexmundi (2012), total land area of Viet Nam is 331,210 sq km.
Among that, one-third is used for agriculture (102,400 sq km), arable land accounts for 20%
of total land, and forest area accounts for 43%. Knowing as an agricultural country, the land
area for agriculture is very large. Behind Thailand, Vietnam now is the second biggest rice
exporter in the world. The profit getting from exporting rice is very high, so that the
government has to focus on using agricultural land effectively by promulgating some strict
policies. According to InfoVietNam (2010), Vietnam established policy for measures to
protect rice farming area and ensure rice output this policy required compensation for using
rice farming for other purpose. People who do that have to pay compensation, which would
be double that of normal land price. To investors who buy a lot of agricultural land to build
hotels, factories, etc, the competition would be three to four times higher. This will protect
agricultural land when there are too many enterprises established, and that means land for
farming rice will decrease which cause a decrease in amount of exported rice. Much higher
compensation will make investors think again when making purchasing, and they probably
choose non-agricultural land, which is sold at lower price.
b. Natural resources
Vietnam has a diversity of natural resources, including coal, iron, silver, oil, etc. People have
discovered about 5,000 mines of mineral belonging to 60 types. They are also very important
to economic development. In 2010, mineral rents contributed 0.31% in Vietnams GDP
which decreased by 0.43% compared to 2008 (indexmundi, 2010). The reason for a huge fall
of mineral rents is that the government has not had a clear and strict policy to protect
minerals from illegal exploitation from people. Thousands of tones of minerals are exploited
illegally, which cause a big decrease in Vietnams GDP, as well as extinction of many unique
minerals. Government needs to take action now before too late.
2.1.4: Capital
There are two main type of capital of Vietnam, including Foreign Direct Investment (FDI)
and Official Development Assistance (ODA). Taking part in WTO in 2007 enables Vietnam
to appeal to more foreign investment which lead to increase capital.
FDI helps Vietnam develop many industries and products. Nowadays, FDI accounts for
100% of oil exploitation in Vietnam.
Page 29 of 38
Figure 6: Vietnams FDI from 2006 to 2011 (Coldwell Banker, 2011)
FDI registered in Vietnam decreased significantly over the last 4 years. Amount of
investment in Vietnam fell by $51.7 billion in 2011 compared to 2008. As statistics pointed
out, the advantages of inexpensive labor force and land renting are no longer appreciated by
foreign investors. Moreover, factors such as infrastructure, transportation, water, electricity,
etc are still obstacles of Vietnam. Vietnam needs to improve competitiveness immediately if
it wants to attract foreign investors (VN Express, 2011)
Unlike FDI, total ODA Vietnam received has increased steadily over the last few years. In
2010, ODA for Viet Nam reached $8.063 billion which increased by $3 billion compared to
2009 (VN Express, 2010). However, when Vietnam escapes from low income, and become
country with medium income, ODA will decrease gradually and increase less preferential
assistance. This is not only opportunity for Vietnam but also a challenge.
The natural resources British Petroleum exploits and produces in Vietnam are oil and gas.
According to Vietrade (2011), up to now, the company has exploited about 250 million tons
of crude oil and 50 billion cubic meters of gas with total assets of $1.3 billion.
2.1.5: Summary
The mixed economy system of Viet Nam helps loose the control of government so that
British Petroleum can develop rapidly. Moreover, this kind of economy system provides fair
competition in the market, which enables British Petroleum to serve customers high product
quality. The company does not have to worry about general price setting because it is well
regulated by the government.
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2.2: Assess the impact of fiscal and monetary policy on business organizations and their
activities
2.2.1: Fiscal and monetary policy
Fiscal policy is how the government manages its budget (Amadeo, 2011). It consists of
government spending and revenue collection.
Monetary policy is the process by which the monetary authority of a country controls the
supply of money, often targeting a rate of interest to attain a set of objectives oriented
towards the growth and stability of the economy (Diffen, 2011)
2.2.2: Impact of fiscal and monetary policy on Vietnams economy
a. Fiscal policy and its impact on Vietnams economy
Fiscal policy is related to taxation and other sources of income, government spending,
borrowing whenever spending exceeds income, repaying whenever income exceeds spending
(BPP, 2010). Taxation consists of income tax, corporate tax, import tariff, quotas tax.
Based on Constitution of the Social Republic of Vietnam in 1992, which was modified and
supplemented following Degree No. 51/2001/QH10, Parliament promulgated Law of
corporate tax No.14/2008/QH12 (Chinhphu, 2008). General corporate income tax rate of
Vietnam is 25%. However, tax rate for companies, which operates in oil and gas or other
natural resources sector, will have to pay corporate tax from 32% to 50%, depending on the
project they conduct. With a very high tax level like this, it is hard for small enterprises to
pay enough taxation; even they have to go to bankruptcy. It will affect directly governments
income. Therefore, recently, many Congressmen have suggested that corporate tax should
reduce to 20% in order to remove market barriers for enterprises, which want to take part in
(Ketoanfa, 2009).
To British Petroleum, taxation up to 50% is very high, and this has a huge influence in the
company. High tax will increase its expenditure, and reduce its profit. In order to make more
profit, it has to increase product price. However, high product price will prevent customers
from spending money on purchasing. This will make British Petroleum not able to make
profit. British Petroleum belongs to both primary sector and secondary sector because it drills
to get oil, produces oil into products to bring into market. Therefore, the import tax does not
affect the company so much.
b. Monetary policy and its impact on Vietnams economy
Monetary policy is related to interest rates, exchange rates, control of the money supply,
controls over bank lending and credit (BPP, 2010). Recently, The state bank of Viet Nam
(2012) announced that in response to Resolution No.13/NQ-CP of the Government on May
10, 2012, the State Bank of Viet Nam decreased interest rate by 1% from 12% to 11%. This
Page 31 of 38
affects directly British Petroleum branch in Viet Nam. The company usually has to carry out
many projects on exploiting oil, so that it needs a lot of subsidized funds from Government.
Therefore, a decrease in lending rate helps British Petroleum save a lot of interest payment
and focus on expanding the market. In addition, interest rate decrease enables the company to
borrow which make Government income increase. One more thing is that when interest rate
decreases, customers will spend more money on purchasing goods and services, which
enable British Petroleum, make more profit. Exchange rate also plays a big role in the
companys business activities. In fact, British Petroleum exploits oil and gas in Viet Nam, but
it only uses one part to sell in Vietnamese market, the rest will be exported. According to
statistic of XE on November 16, 2012 (2012), one dollar is equivalent to 20,803 VN which
decreased by 47VN compared to few days ago. The decrease in exchange rate affects
directly British Petroleum. It will decrease profit of company, which means the company
sells products at a loss. Any change in monetary policy affects British Petroleum, so that
company has to be flexible to adapt to that change.
2.2.3: Global economy and its influence in British Petroleum in Viet Nam
The financial crisis in the United States in 2008 had a huge influence in global economy in
general and Vietnam in particular. According to Analysis and Market forecast department
(2008), right after crisis happened, stock market had the most horrible fall so far (Figure 6)
Figure 7: Dow Jones Index in trading session on Monday, September 29, 2008
Dow Jones index decreased by 7% in only one day. Stock price of other aspects of industry
fell dramatically. All economies have investment in the United States, so that losing price in
US will lead to losing price in all over the world. Crisis affects directly production because of
decrease in consumption, which makes number of product exported to US reduce. Viet Nam
is not an exception because US accounts for 24% exporting value of Vietnam. During crisis,
Vietnams budget deficit was 6%, GDP reduced by 10%. Financial crisis also affected British
Page 32 of 38
Petroleum. Sales fell, expenses increased, all business activities slowed down. The
shareholders needs to think over before making investment during this period.
2.3: Evaluate the impact of competition policy and other regulatory mechanisms on the
activities of a selected organization
2.3.1: Industrial policy
Industrial policy allow government to take an active role to support investment and
encourage a faster rate of economic growth in industry and to halt the decline of the
manufacturing sector (BPP, 2010, p.161)
There is a fact that there are not many oil and gas companies operating in Viet Nam. Two
leading oil and gas companies in this market are British Petroleum and Vietnam Petrolimex.
The reason for this is that Petrolimex belongs to Government and under its control, so that
the development of Petrolimex directly affects Government. In order to impulse its
development, Government focuses on making Petrolimex become number one oil company
in Viet Nam. However, the economy system of Vietnam is the mixed economy, so that
Government cannot monopoly oil market by letting only Petrolimex operate. It has to let
other oil and gas company come to Vietnam to attract more investment. Therefore, British
Petroleum can establish here. This brings two side advantages for Government, which allows
more investment in oil industry, and also does allow to many oil companies establishing to
guarantee Petrolimexs advantages.
There are many factors, which affect British Petroleums operation, including industrial
competitiveness policy, regional policy, training and skills policy. This report will focus on
industrial competitiveness policy, which is about infrastructure development in Vietnam.
On 3rd March, 2009, Prime Minister promulgated decision number 35/2009/Q-TTG about
approval of developing transportation until 2020 (Chinhphu, 2009). In order to develop
transportation infrastructure, Government increases investment in infrastructure up to from
3.5% to 4.5% GDP in order to build modern transportation infrastructure. Decision also
focuses on making reasonable land funds for developing transportation infrastructure,
especially urban one by building high roads, and tunnels. This policy solved effectively
transportation problems in Viet Nam. In addition, it contributes to renovation process,
industrial development and strengthens competitiveness among enterprises.
Being a part of economy, British Petroleum is also affected. With the infrastructure
development, obviously enterprises, including British Petroleum can take many advantages.
Transportation infrastructure helps the company delivers fuels more effectively and quickly,
Page 33 of 38
save delivery cost and time. Therefore, customers demands are completed quickly with high
product quality, which creates a good image in customers mind about British Petroleum
2.3.2: Social welfare policy
Social welfare policy seeks to protect and directly improve peoples standard of living.
Social welfare policy focuses on social problems, including old age programs,
unemployment, sickness or disability, social assistance or poverty alleviation, health or
medical care, and environmental policy (BPP, 2010, p.163). Social welfare policy consists of
three kinds, which are universality and selectivity, social security, health and social
protection. This report will mention health and social protection.
On January 10, 2011, Ministry of labour invalids and social affairs passed Degree No.
01/2011/TTLT-BLDTBXH-BYT about carrying out industrial hygiene and safety in the
workplace (Chinhphu, 2011). Following that, any enterprise, which has from 300 to 1000
employees, has to have one person in charge of industrial hygiene and safety. To enterprises
having more than 1000 employees, they need to establish one department of industrial
hygiene and safety. Employees are equipped with protection items, and educated about safety
in the workplace. In addition, they are provided a lot of health service. Every six months,
enterprise has to hand in the report of industrial hygiene and safety level.
This policy affects British Petroleum in positive way. The employees have physical check-up
periodically, medicine supply, and necessary information to work in healthy and safe way.
When employees feel safe about working environment, they will be motivated and focus on
working which lead to increase in productivity. Besides, employees are evaluated as key
players in British Petroleum, so that providing them satisfaction is one of the most
important determinants of the company.
2.3.3: Interest groups and pressure groups
a. Interest groups
Interest group is a group that represents the wider interests of a particular group of people
such as Trade Union, Business and Professional associations, Employees associations,
consumer associations (BPP, 2010, p.171)
In Vietnam, concept of interest groups is not popular. However, in fact, they appeared and
developed along with development of economy. There are many interest groups such as
Vietnam Association of Seafood Exporters and Producers, Vietnam Rubber Association,
Vietnam Steel Association, etc. The main interest groups, which affect directly British
Petroleum, are Petroleum Association of Vietnam, Customers association, and Employees
association. Consumers Association has a great influence in British Petroleums operation.
Recently, this association complains about petrol mixed with impurities. Petrol is a sensitive
Page 34 of 38
kind of product; so that this event will make them lose their trust in oil and gas companies,
including British Petroleum. When consumers lose the trust, it will be very difficult for
British Petroleum to make consumers continue to use its products. Profit will decrease
dramatically. Therefore, the company needs assign its people to come to the petrol resellers
to check petrol quality to make sure that this event will not happen again.
b. Pressure groups
Pressure group is a collection of people promoting some particular course or objective.
Examples are Greenpeace and Friends of the Earth (BPP, 2010, p.171). It put pressure on
British Petroleum by blaming the company for oil spill in Gulf of Mexico, making it to pay
fines, penalties, as well as to do anything to restore the environment. Due to oil spill, British
Petroleum lost so much money (about $30 billion) that the company had to sell all assets in
Vietnam to compensate people living around Gulf of Mexico and local authorities. Moreover,
it had to suffer from a decrease in customer purchasing its products, and reputation.
Page 35 of 38
Conclusion
The report has shown broad view about British Petroleum and its business in Vietnam. Being
a part of Vietnams economy, British Petroleum contributes a lot to the development of
Vietnam. Besides business achievement that British Petroleum has obtained, it also helps
Vietnams economy and community develop. Moreover, this report also identified economy
system of Vietnam, as well as the way it allocate the resources. Fiscal, monetary, industrial,
and social welfare policy were mentioned in this report, too.
Page 36 of 38
Reference2009
Amadeo, K. (2011) US Economy, [Online], Available:

http://useconomy.about.com/od/glossary/g/Fiscal_Policy.htm [4 November 2012].
BPP (2010), in Business Environment, 2nd edition, BPP Learning Media Ltd.
British Petroleum (2011), [Online], Available: http://www.bp.com [2 November 2012].
Chinhphu (2008), [Online], Available:
http://www.chinhphu.vn/portal/page/portal/chinhphu/hethongvanban?
class_id=1&mode=detail&document_id=70678 [10 November 2012].
http://vanban.chinhphu.vn/portal/page/portal/chinhphu/hethongvanban?
class_id=1&_page=2&mode=detail&document_id=84062 [10 November 2012].
http://www.chinhphu.vn/portal/page/portal/chinhphu/hethongvanban?
class_id=1&_page=1&mode=detail&document_id=99520 [10 November 2012].
Diffen (2011), [Online], Available:
http://www.diffen.com/difference/Fiscal_Policy_vs_Monetary_Policy [4 November
2012].
Helplinelaw (2010), [Online], Available:
http://www.helplinelaw.com/law/vietnam/constitution/constitution02.php [9
November 2012].
Indexmundi (2012), [Online], Available: http://www.indexmundi.com/vietnam/area.html [2
November 2012].
InfoVietNam (2011), [Online], Available: http://en.www.info.vn/society/urban-andrural/13002-land-policies-to-encourage-agricultural-use-.html [3 November 2012].
Ketoanfa (2009), [Online], Available: http://ketoantfa.com/tin-tuc/tin-tuc-ke-toan/156-thuethu-nhap-doanh-nghiep.html [5 November 2012].
LifeBenefits (2011), [Online], Available: http://hr.bpglobal.com/LifeBenefits/Sites/core/BPLife-benefits.aspx [10 November 2012].
NationMaster (2011), [Online], Available: http://www.nationmaster.com/country/vmvietnam/peo-people [2 November 2012].
PayScale (2011), [Online], Available:
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[2nd November 2012].
Page 37 of 38
Vietrade (2011), 17 November, [Online], Available:

http://www.vietrade.gov.vn/en/index.php?
option=com_content&view=article&id=1038:investment-opportunities-in-oil-andgas-industry&catid=272:investment-opportunities&Itemid=250 [4 November 2012].
VNExpress (2009), 4 December, [Online], Available: http://vnexpress.net/gl/kinhdoanh/2009/12/3ba1655b/ [4 November 2012].
XE (2012), [Online], Available: http://www.xe.com/ucc/convert/?
Amount=1&From=USD&To=VND [16 November 2012].
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