The Sale Of Burmah Castrol To Bp Amoco Commerce Essay

The Sale Of Burmah Castrol To Bp Amoco commercialism EssayThis case study managementes on the detai take summary of chore surroundings, resources of the organisation, organisational social organisation and corporate p atomic number 18nting of sale of Burmah Castrol to BP Amoco case. This case study identifies different methodological analytic thinking of why Burmah Castrol sells its plants to BP Amoco.The Burmah Oil Company was founded in 1886 by Scottish entrepreneurs arouse in exploiting newly found anele depo positions in Burma. Burmah held a major function owning in BP right through and through until the early 1970s. Indeed, after a yearn period operational effectively as an inter- intermediate holding fellowship for BP sh bes, the prudence of Burmah in the 1960s used the nurse of the shargons as indirect to embark on an ambitious plan to turning Burmah into political machinedinal a fully integrated anele union and a substantial obscure group.This analy sis ordain contain a layout which will examine Burmah Castrol effect and their ultimate consequences through a step by step ap proach. An incoming has been accustomed on Burmah Castrol sale to BP Amoco, a detailed analysis on operation gap much(prenominal)(prenominal) as goals and objectives, suggestionership, culture, organisational social organization, corporate parenting, strain environment of the company. Under each structural reform in that respect in an description on what lead Burmah to sell it plants to BP Amoco, what are the characteristics of each mental synthesis and what lead to its failure. afterward the minute analysis of coordinate I will be mentioning the critical issue at Sony.In order to justify my literary argument I will be exploitation strategicalalalal prudence casts and theories such as, 5 forces model, GAP analysis, 7S matrix, SWOT analysis, blighter analysis, corporate parenting, value orbit analysis and netly triple loop learning method. A sever incision of this report will target on answering the head word is Castrol a give riseing company, and testimony that curb to be considered by them. afterward concluding the analysis I will deliver my recommendation for BP and it will be followed by a suggestion suggested for BP Amoco to buy Burmah Castrol. Fin aloney an follow up plan is phraseed for what has to be done by the companies where I restrain con centimerated on three main aspects, namely, foodstuffing, structural reforms and cost potency of the company.Critical issuesThe Burmah Oil Company is a Scottish entrepreneur company founded in 1886 with avocationed in exploiting newly found crude deposits in Burma. On bring ining winner was followed by a milestone investment in an exploration concession crosswise a substantial area of Iran acquired from the Shah. Indeed, after a long period operate effectively as an inter- mediate holding company for BP shares, the perplexity of Burmah in the 1960 s used the value of the shares as collateral to embark on an ambitious plan to turn Burmah into both a fully integrated crude color company and a substantial conglomerate group.The management ay Castrol are with skills in spotting both good managers and sound investment opportunities the combination would alter all the Groups artes to flourish and grow. There was sufficient similarity in terms of key factors for success between Castrol and the Chemicals businesses to enable senior management to add value across the portfolio.At late 80s there was an uncertainty, about where the Group was headed all over the metier to long soak up. This has led them to search for moves that might provide such balance. The opportunity arose from Foseco after taking over its management imputable to its depressed share bell.There were also other issues to sort out in the Chemicals businesses where slightly were underperforming work involve to be done to reform their overall operating eff iciency. That was a task that was successfully set about and delivered signi apprizetly improved ratios were arrive atd through cost cutting and effective focus.In mid(prenominal) 1990s Burmah Castrol consisted of Castrol, portmanteau and market lubri rout outts and Chemicals with a counterpoise Fuels retailing business effectively the final relic of the past which was in the process of being sold off. The strategic review identied an underlying theme of industrial market and building block tone profit as the core postulatences of the successful chemicals businesses. ( auxiliary 1)Castrols 75 per cent of its total profit came from rider simple machine engine crude petroleum business, face up the prospect of to a greater extent efficient engines requiring longstanding and longer gaps between oil stirs and whence of voltage long-term volume decline. It has much strengths and low-calness with is explained in appendix 2.In 1996, they had a difficult in North the States after a run of consistently good volume and prot growth and simultaneously we started to develop worries about long-run developments in the passenger automobile engine oil business in atomic number 63. A problem was that some of the areas of business were suffering because of the dominant culture of the passenger car engine oil business.Castrol share price reached 10 in the early 1990s and hadnt really moved from that aim. It moved to 13 at one point and wad to 7 at a nonher, but these were the extremes of a dull range.Having split out the industrial business from the passenger car engine oil business, it further highlighted, for example, that there might be more similarities between the industrial lubri so-and-sots business and the foundry chemicals business than there were between. Castrol its tarnish and marketing culture would represent a great prize to a number of the major oil companies because of economies of eggshell and the broader coverage of the lubricants market that it would provide.At a point they had some lack of touch sensation internally, lack of belief externally and a possibly time-limited opportunity as a head of oil exertion consolidation. In addition, one of their non-executives argued consistently at mature meetings that there was indeed a time-limited opportunity to release value to shareholders. thusly the critical issue is that Castrol should build up a model which is harmonious with environmental diversitys in the shorter and the long run.Critical evaluationIn strategic analysis it is important for Castrol to identify the current environment which the oil indus filtrate operates. In mid 1990s Burmah Castrol consisted of Castrol, blending and marketing lubricants and Chemicals with a residual Fuels retailing business effectively the final relic of the past which was in the process of being sold off. The rapid fall in the sales revenue and the profitability of the Castrol payable to poor management and sever e rivalrys the management of the Castrol induce been planning to restructure its business. They had a major drawback in management as they had some lack of belief internally, lack of belief externally and a possibly time-limited opportunity as a result of oil industry consolidation.Castrol must plan to face the rivalry and threat from other competitors such as BP which is one of the main competitors to Toyota. The dicker power of the buyers can be reduced if the supplies of Castrol merchandise are low. So Castrol should have dodge to maintain demand since it was the time of recession. The bargaining power of suppliers can be adjusted by having competitive buying from different suppliers of good subscribeed for oil industries. (Refer appendix 3)During the financial year 1995-1999 the Castrol Corporation spent a massive amount to maintain its amaze in this competitive market spending more than 1000 million euro on restructuring of its outline. even so in 1999 the profit has de cline largely comparing to preliminary year collectible to high interest payment and long term creditors to the company.The Castrol is facing numerous political, economical issues and aboutly threats from American and Dubai oil industry with score a major uncertainly of Castrol survival in the market. Castrol environment has been analgised using infestation (Refer appendix 4). Castrol is in an uncertainty position to maintain price stableness by differentiation of its own from others. Being close to the guests has also allowed them to segment the market effectively.Castrol follow an organisational structure that was significantly different from a tralatitious set about to resound the new business environment in the mid 1997s. Unlike the structure of many modern structure oil companies they have adapted to their traditional improvement because of it convenience. The Tim Steven at the companys level holds a position as the chief executive officer of senesce of Directors, and the manager was in charge of all other functions at Castrol. every running(a) heads at Castrol also hold the position of softeny monument at that function. These, to a great degree, help the coordination between the chief operating officer and management at Castrol, specially at the functional level. (Refer appendix 5)Competitor analysisThe oil industry is boiling over with changes. Deregulation, new opportunities in foreign fields and markets and environmental challenges are boot together head-on to shape the vim and utilities business of the future. Castrol is facing threats from many foreign competitors producing vehicle oil. And whilst they have been truly successful in growth world position, peculiarly in Asia Pacic, that was unlikely to offer sufficient to part the difficulties that might be going to encounter over a ve-year run absent of action in the bigger developed markets in Europe and North America. This had let to re-think what may happen to their pass enger engine oil business and how competitor may take advantage over this situation. set ahead the Castrol group must increase its quality control procedure to eliminate competitors defects in the harvest-festivalion stage to avoid losses and meet competition effectively.Managing changeThe alternative which management developed, in considerable detail, involved is breakage the Group up. This acknowledged market skepticism about the coherence of the portfolio. Although the need for radical restructuring was accepted, an issue which management did non fully resolve at this point in the process concerned how the slicing should be carried out. The restructuring would not give the expected results unless the employees are satisfied with the changes. So Castrol should take measures to create confidence in the minds of the employee with regarding to changes.The employee participation in changes will take a crap them success. In other word it should reduce resistance and increase coop eration within organisation. The management should increase 2 dash communications from the top to bottom level of the hierarchy in order to implement the strategic changes successfully.Value kitchen stove analysis (Appendix6), balance score card (Appendix7) and cultural webs (Appendix8) are given in the Appendixes, which could be integrated in to Castrol organisation system to return key better results.Financial performance of CastrolThe financial performance at Castrol during 1999 was precise poor either a lost or just break-even. This was attributed to several(prenominal) factors high financial costs, low -margin crossroad lines, poor sales, high interest rates and high procurement costs. (Gerry, n.d)ConclusionThe case study evaluated by this report concentrates on different restructuring strategy and structure processors under taken by Castrol during the period of 1995-1999. In this analysis I have taken each structure one by one and commented on factors which led Castrol to do each restructuring process, characteristics of each structure and elements which led each structure to its failure. I have the identified the critical issue that are face by Castrol as the lack of focus into future in do organizational structures for the corporation.In order to evaluate this case from a strategic management perspective I have used different models such as 5 forces model, 7S matrix, SWOT analysis, PEST analysis and Cultural web. installation has been given to each model applied and how it can be connect to Castrol Company. Future Castrol is also looking towards further development of the engine oil business, possibly restructuring its strategy or by joint venture to wear in the competitor edge. therefrom I concluded that the success of most of the businesses was based on competences to do with high levels of service rooted in localized knowledge of how their product applications could meet customer need. Success was not so ofttimes based on the practice d aspect of product as on industrial marketing and service on a local basis. An important exception to this pattern was that part of the passenger car lubricants business which involved sale of product through retail channels.After critically examining the company I will be giving my recommendation for Castrol and a proposed action plan for the required period.RecommendationThe success of these businesses was often more to do with understanding customer needs than the production of oil. Therefore moving into much greater focus on devolution of righteousness to the market-facing business units is recommended. And Castrol was using the old approach which was not going to enable them to continue to grow the business at the previous rate of strategic plan. So its recommended for Castrol to develop a new strategy for their business in order to compete in this environmental market.They should also look at the other business such as the industrial lubricants business, the marine lubrican ts business and the commercial lubricants business which can be the key factor to outlast in the market. Since their internal structure for managing the world-wide Castrol lubricants business was no longer appropriate they have to re-structure the organisational structure if they want to optimize their position in each of the four markets.To reach that to optimize performance over the whole business, and to achieve economies of scale, they have to move away from a geographic structure to one focusing on each of the four areas of Castrol as global businesses in their own right. The old structure had been immensely successful. It had enabled a very(prenominal) sanitary ethic of customer focus and a toughened esprit de corps. So its recommended to fellow as overall it benefiting the company.As an executive team they have to explore what opportunities there were for us to play a part in the process of consolidation.It concluded that the success of most of the businesses was based o n competences to do with high levels of service rooted in localized knowledge of how their product applications could meet customer need. Similar to the earlier exercise on the Chemicals businesses, the resultant was that success was not so much based on the technical aspect of product as on industrial marketing and service on a local basis. An important exception to this pattern was that part of the passenger car lubricants business which involved sale of product through retail channels.JustificationCastrol is well recognized engine oil fabricate in the world have established in worldwide counties. Since there was a management deficiencies, the performance of the Castrol have reduced. Therefore practicing traditional approach as it helps the Castrol it is recommended to above so in case of problem in future the company can adopt old strategy to withstand its position in the market.As recommended above, moving into much greater focus on devolution of responsibility to the market- facing business units as the success of these businesses was much more to do with understanding customer needs than the production of oil. And Castrol was using the old approach which was not going to enable them to continue to grow the business at the previous rate of strategic plan. So it has been recommended for Castrol to develop a new strategy for their business in order to compete in this environmental market.By having tight blood with customer can help Castrol to perform effective and efficiently by segment its product according to the need of the customers. And also having a well defined marketing strategy would increase the market share and the revenue of the company.Thus Castrol should hand a long range plan to satisfy the needs of the two segments through increased product plan, research and development.ReferencesHubbard, G. Rice, J. Beamish, P. (2005). strategical management persuasion analysis action. (3rd ed) .Pearson education AustraliaJohnson, Gerry (n.d). The sa le of Burmah Castrol to BP Amoco.Exploring Corporate StrategyKotelnikov, Vadim (Shared Values). n.d retrived January 18, 2010 from http//www.1000ventures.com/business_guide/crosscuttings/shared_values.html.Plunkett (Business Information) December 01, 2008. retrived on January 22, 2010 from http//www.alacrastore.com/storecontent/Plunkett_Research-Energy_Industry_Market_Research_and_Competitive_Analysis_2009_from_Plunkett_Research-2082-13.Viljoen, J. Dann, S. (2003). Strategic management (4th ed.). Frenchs Forest, New South Wales Pearson Education Pty Ltd.AppendixesAPPENDIX 1MC KINSEYS 7SMATRIXhttp//www.vectorstudy.com/management_theories/img/mckinsey_7s.jpgStrategyThe strategy of the Castrol Corporation was to continue to develop as a very successful global business with an increasely powerful note, impress functional managers to take part in corporate conclusions making in order to improve performance and to meet competition efficiently. It is through this mass the whole organi zation should perform and it takes the leading role in getting other elements of the 7S matrix to follow in order to achieve those targets. expressionThe structure of Castrol company had been a geographically based model, with four regional handlers, the line managers responsible for over 50 country managers who ran their country businesses, very successfully hitherto, like individual freedoms. Traditional flat structure, where there were two way communications between the top management and the functional management. However by restructuring each department was converted into autonomous cellular structure where the C.E.O of each company was responsible for his own company.SystemsSystems can be regarded as day today ongoing processors of the any company, thus these can turn from Human Resource procedures, accounting procedures, production lines, documentation etc. Castrol should try their best to make their systems more effective through innovations and management layouts. stylus Castrol company had a straight span of management with most of the decision was made at the top level of management since it was vested with CEO of that company. This be a autocratic style of loss leadership but under the restructuring Castrol can change its decision making style which was previously was under CEO and rungs can be encourage to make decision in critical situations.StaffOrganizations are made up of humans and its the people who make the real difference to the success of the organization in the increasingly dynamic knowledge-based environments. The importance of human resources has thus got the central position in the strategy of the organization. This involves the methods how businesses develop employees to shape up value to improve performance. The two way feedback introduced after the restructured programmes improved the communication between the top management and the overcome staff.Shared ValuesShared values are what engender assert and link an organization together. Shared values are also the individuality by which an organization is known throughout its business areas. These values must be stated as both corporate objectives and individual values. (Vadim Kotelnikov, nd) every last(predicate) the employees of the Castrol should be encouraged to take the in the strategic implementation process.SkillsSkills of staff member are not sufficient for Castrol since they had lack of trust internally with hindered the company performance. But after that restructuring and reconsidering strategy the company can improve its performance since present year profit have declined comparing to previous year profit.. This can be solved by training and educational programmes for the staff paradigm of operation, recruitments of young, dynamic, innovative technical staff to infuse organisational culture.Appendix 2SWOT AnalysisStrengthsThe Burmah Oil Company was founded in 1886 by Scottish entrepreneurs.Operates petrochemical businesses worldwide through th e network of its subsidiaries and retail brandsThe passenger car engine oil business, which represented 75 per cent of total pelf faced the prospect of more efficient engines oil suppliersCastrol strong brand loyalty for oilVery successful developing world position, particularly in Asia Pacic.WeaknessesCastrol had some lack of belief internally, lack of belief externally and a possibly time-limited opportunity as a result of oil industry consolidation.Some of the areas of business were suffering because of the dominant culture of the passenger car engine oil business.Reduce in share price of CastrolOpportunitiesThe strategic review identied an underlying theme of industrial marketing and quality service as the core competences of the successful chemicals businesses.Extension of strategic oil and gas acquisitions in North Sea area tack together of more flexible price policy to compete main rivals. bratsenvironmentally unsound policies due to oil and toxic spillsPossibilities for ren dering the Chemicals portfolio as a whole more substantial and therefore more able to sit comfortably alongside CastrolCeasing operations in a number of potential locations with their further re- mark (Conoco)Sale of corporate-owned stationsShare price was sliced down to 7 which was the extremes of a dull range.Since the passenger car engine oil business, which represented 75 per cent of total prots, faced the prospect of more efficient engines requiring longer and longer gaps between oil changes and therefore of potential long-term volume decline.Further lawsuits considering the companys ecological activities.Appendix 3Industrial Environment analysis of Castrol by using Porters Five Forces modelThe strongest competitive force or forces determine the profitability of an industry and rifle the most important to strategy formulation (Porter .M,2008). Analysis by Porters louver forces can be said that threat of new entrants is low due to huge capital and cutting-edge engine room. Su ppliers are weak because they are circularise all over the world and cannot easily forward integrate. Buyers are weak due to low demand for non-consumer goods and high switching costs moreover, buyers are not able to backward integrate. Substitutes are moderately strong due to different and less-expensive transportation facilities. On the other hand, intensity of rivalry is strong because of major players are dominant in the market by just about same technology and manufacturing processes, suppliers relationship and distribution systems.Treat from New seeBargainingPower of BuyersBargainingPower of SuppliersRevelry amongCompetitorsTreat from Substitutes terror of New Entrants- The expansion of foreign competitors began to decrease the market of car companies. As the world is experiencing economic downturn there is a great opportunity for the low cost customers to enter into the market. The conference of customers towards the brand is the only hindrance to entry the market.Power o f Suppliers A lot of suppliers depend on a certain oil companies to buy a majority of their products. If Castrol decided to change suppliers it could be the end of the suppliers business. Consequently, suppliers have little power.Castrol should have a tightly bound network of suppliers, and partly to hedge against the loss of key suppliers.Threat from substitutes- There are oil companies such as BP, Shell, reliance etc which are the major competitor in the oil business market. Switching cost, change in buyers preferences and qualities of supply all create threat to Castrol Company.Power of buyers Castrol bargaining power of buyers, is quiet weak for Castrol and the entire automobile industry with a large number of alternative suppliers, hence, the aggressive pricing strategy.The five forces analysis gives an improved understanding of the degree of competition within the business environment. The analysis shows that the automotive industry is highly competitive, with buyers possess ing and exerting a very powerful influence to the large number of substitute brands available to them.Appendix 4PEST AnalysisPOLITICALWorld slide fastener markets are becoming more volatile due to the threat of geopolitical instability.Greater climate destabilisations from carbon dioxide emissions are leading governments to encourage more sustainable forms of energy.World energy markets are becoming more volatile due to the growing oil requirements of a buoyant Chinese economy, creating tension between nationsECONOMIC economic system is underpinned by its energyEnergy markets will see demand increasing by almost 60 percent, with fossil fuels meeting most of this, and thermonuclear and renewable energy markets having limited relative contributionAlternative energy sources as a percentage of total energy supply are increasing and are expected to continue to do so.SOCIALKyoto Agreement, write in 1992, has led to carbon funds (World Bank,) and emission trading in Europe and around t he world, which is becoming a legal requirement.Peoples worldview is starting to change to a concern over the sustainability of the future, although this is not expected to change dramatically to justify widespread changes to energy use for some time.TECHNOLOGYThe internationalistic Energy Agency states that alternative energy markets will be underpinned by technical breakthroughs.Research shows technology is the key to competitiveness in the alternative energy industry whilst alternative energy technologies are underpinned by 48 critical success factors across technological, commercial, socio-political and organisational categories.Appendix 5Organisational structureCastrol adopted an organisational structure that was significantly different from a traditional approach to reflect the new business environment in the mid 1997s. Unlike the structure of many modern structure oil companies they have adapted to their tradional approach because of it convenience. The Tim Steven at the com panys level holds a position as the CEO of Board of Directors, and the manager was in charge of all other functions at Castrol. All functional heads at Castrol also hold the position of party secretary at that function. These, to a great degree, facilitate the coordination between the CEO and management at Castrol, particularly at the functional level.The organisational structure that created for Castrol is shown in this figure,CEOVice President (Production)Vice President (Technology)Vice President (Equipment)oil makingoil rollingProduction officeTechnology automationQuality inspectionEquipmentMaintenancePlanning AccountingMaterials Supply force-outChairmanBoard of directors50 country managersLine managerregional directorRegional directorsidentRegional directorRegional directorAppendix 6Value Chain analysisFirm alkali(Administration, Salaries and Wages, Assets of BMW, After sale services)Technology Development(New models, Development of new technological programs)Human Resource Ma nagement( Recruitment and selection of qualified engineers and planetary managers, continuous training and development/ supervision)Procurement(Increase output of new models such as mini and Road rover)Inbound LogisticGetting finish up with new supplier for back up and production of new models to draw off different groups of customersOperationCarrying out activities such as acquiring technology and employing skill workersOutbound Logisticconsumer loyalty created by qualitymerchandising and SalesMarketing is done by providing a Effective branding and establishes emotional contacts to the customers of ToyotaAppendix 7Balance score card of Castrol monetary PERFORMANCEHow should we appear to our shareholders?Vision and strategyLEARNING AND GROWTH PERPECTIVETo achieve our vision how should we sustain our ability to challenge improve?CUSTOMER counselingHow should we appear to our customers?OPERATINGPERFORMANCEWhat business processes must we excel at?The balanced poster is a performan ce measurement and management tool which is gaining in popularity and which is particularly useful for the implementation and assessment of strategy. The balanced scorecard is a countrywide framework that translates an organizations vision into a coherent set of strategic initiatives and performance measures.Financial perspectiveBurmah Castrol is in fact very much more than one homogenous business and indeed the Castrol Lubes business extends across a number of segments, each quite different in nature. Each business group is run independently from the others in Burmah Castrol and we have a strong tradition of local operating unit autonomy. Indeed, it is fair to say that we never operate as a centralized business and the size of our operating units runs right across the spectrum from the very small to the very large, as this chart of annual turnover illustrates. It have got 109 units, with an annual turnover of less than 5m and hence move down the scale 26 less than 10m 20 at less than 15m etc. And then go right up the scale and there is what we would see as mega units 1 at 100m 1 in the 200m range and 2 in the 300m range.Customer perspectiveCastrol Consumer is world leader in the supply of car and motorcycle lubricants and services, marketing to workshops and retail chains, auto accessory stores and petrol stations. Principal products are engine oils, e.g. GTX, transmission uids and bracken uids. To establish in todays market its vital for every company to establish a strong relationship between customer and the company. Complete customer satisfaction is what is needed to achieve this relationship. Castrol should build a strong relationship that reflects their values as individuals and members of the society. And they always try to build relationships with customers based on mutual trust and loyalty.Internal business process perspectiveCastrol mercantile provides products and services principally to on and off-road vehicle eets. Off-road business includes vehi