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From the last ten years BP has got much support and acclaim for its proactive stance on environmental issues. The role of BP is usually highlighted in stark contrast to companies that have been accused of lobbying intensively against efforts to mitigate the risk of global warming. we will also debate about global environmental issues and corporate responsibilities in that respect the last ten years has also witnessed the emergence of much bigger and vast social agenda sometimes framed by the concepts of corporate social responsibility. the discussion start off with the brief overview of BP history with the current problems facing BP in the gulf of Mexico following the deepwater rig explosion which has caused what has been described as the worst U.S ecological disaster ever, the company share price has fallen steeply. this is also being said that could trigger at take over of the business by one of its big competitors such as Exxon Mobil, Shell, or even petrochina.we will also discuss the conventional reasons for the take over such as extracting cost or building extracting costs or building economies of scale along with the very real disadvantages, including those special to an acquisition of BP at this time
Company profile :
The merger with Amoco in 1998,BP Amoco plc entered the scene among the world top three oil companies. Judging by merits such as market capitalisation of 203 billion dollar revenues of 148 US billion dollar and earnings 8.4 US billion dollar.BP was in year 2000 surpassed by the other oil majors Exxon Mobil and shell group.BP also rank top three in terms of discovered oil and gas reserves amount of 15.2 billion barrels of oil equivalents.BP products are on sale in about 100 countries and it has well established operations in six continents. The company is active in 29 countries with production operations in 23 countries.BP is the biggest producer of oil and gas in U.S and the second largest marketer of gasoline.BP got gas sales contract in more than 25 countries, refineries in 23 countries and more than 28000 service stations.BP is also a major player in chemicals 58sites world wide and solar power revenues of 200 million U.S dollar in 2000
Analyze The Five Forces Acting On Bp. Which Of Them Is The Greatest Threat To The Company? Threat of new entrants (High)
The threat of new entrants in the oil industry is strong. BP is a market leader, but the strong growth of the industry, combined with the low costs and easy access to buyers are tempting for new comers.
Rivalry (Moderate)
Even though there is a strong rate of growth within the industry, rivalry remains moderate due to the switching costs, size of competitors (oil companies) and similarity of those competitors. There is a high price competition, as well as any other industry. Nevertheless, there are few major market leaders and there is no place for small companies, which can not offer the same low prices.
PESTEL Analysis OF BP
One way of planning your business is to undertake a PEST analysis.1 PEST analysis involves looking at the Political, Economic, Sociocultural and Technological factors that could affect your business.
Social Forces
Social forces include, for example, changing demography and education, etc. The population in Western Europe is relatively static, but the age bands are changing. The number of older people, for example, is growing rapidly.
Technological Forces
Technological forces are changing dramatically quickly. What effects will this have on your production, marketing and distribution plans? Depending on your market, technology might either raise or lower entry barriers for competitors - or completely change the industry. As the new technology and machinery has been introduced in the oil and gas industry to get benefit, improve the efficiency and give healthy competition to the rivals.
Economic Forces
Economic forces include the effects of inflation, interest rates, tax rates, exchange rates and the euro. Even governments have difficulty predicting what is likely to happen to these - and they try to control them! Nevertheless, they will have a major impact on your business, especially if you need to borrow a large proportion of your working capital, or if you are selling overseas
Environmental Forces
Environmental forces are becoming increasingly important as more people consider the consequences of continually interfering with the ecological balance of nature. As a result, governments are legislating more to protect the environment and demanding less pollution
Political Forces
Political forces most obviously include government legislation forcing businesses to comply, for example, with health and safety, or employment, or data protection requirements. These impose costs, but often also provide opportunities.
Takeover benefits :
According to commentators like Brealey and Myers (1991) have commented that if takeovers, took place then companies have to targeted to create synergies in the form of economies of scale and of vertical integration, complementarity of resources, enhanced efficiencies and improved free cash flows. The others observers like Jensen and Ruback (1983) said about the takeovers by arguing that takeover will play as an external control mechanism by ensuring managers to not deviate from ensuring the maximisation of shareholder wealth. A sum up of this argument is that the intent to increase shareholder value, for shareholders of the target and the firm, who acquires can also drive the actual takeover activity. During the 1980s and after that the globalisation has gained pace, takeovers have been happened as a means of increasing the influence, brand name, and globally presence for corporations. In real, as the example of too many Japanese companies has been formed, and many of them became well-known more for their takeover activities than products and services (Kester, 2003).
Some relative examples of this are Mobil acquiring Marcor (retailing), Exxon taking over Reliance Electric and Vydec manufacturing and office equipment, respectively, and Amoco buying Cypress Mines Mining. However, the theory further describes, using the substantive evidence of the earlier examples, that very often, these takeovers may fail to create or may even destroy value, reflecting a breakdown of internal control processes and prevalence of organisational policies that are wasting resources. In such a scenario, these firms may themselves become takeover targets for an acquirer aiming to provide better economic purpose and enhance shareholder value. Hay and Morris (1991) refer to this as allocational takeover and hold that the acquirer would aim to reallocate resources and make better use of them, thus improving the performance of the target company post-merger.
The main disadvantage that is evidence for the acquirer after the takeover is to assuming all the liabilities of the target firm, which can create a plethora of potential exposures and a need for adequate coverage (Hollyday, 1995).so that It has been, therefore, suggested that risk managers should perform rigorous pre-acquisition due diligence into the target companys operations including regulatory compliance, legal, tax, and accounting issues. Beyond the implication of liability claims for the current attractiveness of the target company, there can be long-term adverse impact on the companys profitability or it may have inadequate reserves and insurance coverage. Areas of liability can include first party exposure, third party liability, statutory liability and regulatory compliance.
Following the disastrous explosion on its rig in the Gulf, as the oil spill continued, shares of BP took a severe blow. By 3rd June, the company had lost almost US$62 billion in market value and its m-cap stood almost one-third lower than that of its European counterpart, Royal Dutch Shell, stoking speculation that the latter may be contemplating a takeover once again (The Economist, 2010) given the sharp erosion in BPs share and an attractive acquisition price of ~US$6/barrel for its proven reserves. Further, given the strong conventional rationale of creating synergies and new growth opportunities rapidly and increasing shareholder value, arguably, there exists a lucrative opportunity for an industry rival like Shell or any large oil and gas company looking to consolidate and strengthen its position globally. The question that arises is: what problems and disadvantages may exist for the acquirer? In answering the question honestly , one has to think about the immediate, short-term, and long-term implications of the oil spill for BP. Understandably, the easiest to predict and assess but of limited utility in deciding about a takeover, has been the immediate term impact. The company has announced on August 9th, BP agreed that they had already spent US$6.1 billion, including in oil spill response, and in cementing the damaged well, and settling initial claims and federal costs. In the short run , company forecasts, bearing the various results of the disaster it would cost US$32 billion, and this amount will be gained by selling US$30 billion of non-core assets in the next eighteen months. It is also estimated , BP will be liable to pay ~US$18 billion, at a rate of US$4300 per barrel, in fines according to the federal law for causing the spill. But , according to analysts and industry observers it is quite early to determine the extent of liability and related damage claims, which can also be rise sharply .
CONCLUSION
We have discussed about the BP and the current problem faced by the company as a result of deepwater rig explosion in the gulf of mexico because of this problems there is talks and issues been raised of the take over of the company by its rivals like shell . Exxon mobil and petrochina.The talks of take over started beause of different reasons.the main reason is that there is huge amount needed to stop the leakage and to clean the water The huge and indeterminate cost of the oil spill clean-
up, as well as damages, fines and compensation - analysts' forecasts of the cash cost to BP have ranged up to about $20bn - could spiral into tens of billions of dollars and due to that lost BP share price has been fallen
References
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Gerstein, J. (2010) The Gulf of Mexico oil spill by the numbers, The Daily Green News blog, April 30. Available at http://green.yahoo.com/blog/daily_green_news/333/the-gulf-ofmexico-oil-spill-by-the-numbers.html. UPI (2009) BP-Alaska deals another spill, December 31. Available at http://www.upi.com/ Science_News/ ResourceWars/2009/12/31/BP-Alaska-deals-with-another-spill/UPI92901262277000/. Urbina, I. (2010a) In Gulf, it was unclear who was in charge of oil rig, June 6. Available at http:// royaldutchshellplc.com/. Urbina, I. (2010b) Despite moratorium, drilling projects move ahead, New York Times, May 23. Available at http://www.nytimes.com/2010/05/24/us/24moratorium.html?hp.
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