The Sale of Burmah Castrol to BP

Amoco

Yuke
Asif
CJ
Michael
Fradio

SWOT
Strength
Very Strong Brand Name
-Expand the retail activity using strong brand name and high quality compared with
relatively low costs among the industry.
Weakness
Cost of environmental hazards
-Decline in crude oil production
Opportunity
Increasing fuel/oil market
-Reduce possibilities of decreases in the domestic demand and maintenance
activities and marketing operations which would strengthen the companys
competitive position on the market.
Threats
Environment Regulations
-Longer to achieve an appropriate return on the investment than originally plan

Question 2a Explain the Strategic Management of Burmah Castrol prior to 1997

The business consisted of two prongs Castrol and Chemical.

Over time, the company had continuously made acquisitions in order to increase the
size of Chemical.

They acquired Foseco, to give themselves a third prong and increase the stability of
the organisation.

Question 2b Explain the Strategic Management of Burmah Castrol as it

changed in 1997 until the sale to BP Amoco

From 1997, the company was restructured into business units, rather than geographically.

They forecasted a major issue regarding demand for the passenger car engine oil sales, and
realised that their business model was not sustainable with such reduced demand.

This restructure achieved economies of scale, as the country managers no longer only looked
after their own market, and the business unit could achieve economies of scale for that whole
arm of the organisation.

Question 2c Explain the Strategic Management of Burmah Castrol being

considered at the time of the sale as an alternative to that sale

Option One Joint Venture

Option One Break the Group Up

Benefits:

Benefits:

Company can make cuts

Large cost savings by depleting

support functions

Can make cuts

Can enjoy economies of scale
Align Castrol with a major brand

Drawbacks:

Drawbacks:

A gamble, that the income from sale

of business units may not recoup the
offered 16.75 per share

Could unlock more value for shareholders

through sale

Recommendation
(If the BP offer were not available)
There needs to be a drastic change to shape up the corporation
involving the some aggressive new business initiatives
They need to explore the market and find out what opportunities they
have in the market
They need to re-structure the organisational structure

Recommendation

Product line is too wide

Castrol was dabbling in too many industries that a lot of industry could not bring the
benefit like they expect and they will occupy a large number of vigor and resources
of Castrol.

Focus in few industries

There main profit came from two or three products like car engine oil business was
occupying 75% income.

So they can cut down some sub-products line, and focus in the high-revenue
products to keep going their business.