BUSINESS ENVIRONMENT Assignment 1

BP - the world leading oil and gas company - is one of them.Founded in 1908, today BP operations in over 100 countries around the world, with 29 facilitiesexploration and exploitation of

Prepared for: Lecturer, Mr Jubred A Peñano The unit 4: Business EnviromentThe Banking Academy

Prepared by:

Phạm Hải Yến - AliceStudent No: F05-261 Class: F05A

No of words: 8890 Submission date: 23 November, 2012

Executive summary

After joining the WTO, Vietnam expanded integration with other countries in the region andthe world As a developing country, Vietnam offers many opportunities for multinationalcompanies to invest in Vietnam BP - the world leading oil and gas company - is one of them.Founded in 1908, today BP operations in over 100 countries around the world, with 29 facilitiesexploration and exploitation of oil and gas, 17 oil facilities with a total staff of up to 92,000people Before, BP had oilrigs in Ba Ria Vung Tau, in 2009, after the oil spill BP had to sell50% stake to TNK Their business now Vietnam is focused on the production and distribution

of lubricants through Castrol BP Petco The purpose of this report is providing someinformation about BP and their operations in the world and in Vietnam Furthermore, it alsofocuses on the economic environment in Vietnam that influences BP’s business

Executive summary 2

Introduction 6

1.1 Identify the purposes of different types of organization: 7

1.1.1 Type of organization: 7

1.1.2 The vision, mission, goals, values and objectives of BP 7

a Vision, mission, goals, values and objectives of BP: 7

Vision 7

b Explanation: 8

c Summary: 10

1.2 Describe the extent to which an organization meets the objectives of different stakeholders: .13

1.2.1 Overview of stakeholders and stakeholders mapping: 13

1.2.2 The influence of stakeholders: 14

1.2.3 The extent to which an organization achieves the objectives of three stakeholders: 18

1.3 Explain the legal responsibilities of the BP and strategies employed to meet objectives of stakeholders: 23

1 Social responsibility: 24

a Creating jobs for residents: 24

b Social Education: 24

c Social welfare: 24

2 Environmental responsibility (Tung, 2007): 25

d Prevent pollution and impact: 25

e Protect environment: 25

f Environment conservation: 25

3 Ethnic and business responsibility: 26

g Obey the law: 26

h Transparency in operations: 26

4 Management responsibility: 26

j Ensure staff development: 26

k Meet customers’ expectations: 27

l Engage with the local community in Ho Chi Minh City in Vietnam: 27

5 Public relations and corporate image 27

m Build up a corporate image: 27

n Social media: 27

o Protect the rights of employees: 28

2.1 Explain how economic systems attempt to allocate resources effectively: 29

2.1.1 Overview of the economic system and identify Vietnam’s market system: 29

1 The economic system: 29

2 Vietnam economy system: 30

2.1.2 The allocation of resources within Vietnam: 30

1 Land and natural resources: 30

2 Labor: 33

3 Capital: 35

2.2 Access the impact of fiscal and monetary policy on business organizations and their activities: 2.2.1 Macro- economic policy: 36

1 Fiscal policy: 36

2 Monetary policy: 38

2.3 Evaluate the impact of competition policy and other regulatory mechanisms on the activities of a selected organization 40

2.3.1 The industrial policy: 40

a Overview of industrial policy in Vietnam: 40

b Situation of Vietnam’s industrial policy: 40

c The impact on BP Vietnam 41

2.3.2 The social welfare policy: 41

a Overview of the social welfare policy in Vietnam: 41

b Situations of Vietnam’ social welfare policy: 41

c The impact on BP Vietnam: 42

Conclusion 43

Reference 44

List of table

Table 1 The influence of stakeholders 14

Table 2 Stakeholders’ objectives 18

Table 3 the legal responsibilities of the BP 23

List of figure Figure 1: Stakeholders mapping (BBP Learning Media, 2010) 13

Figure 2 BP employees by region 15

Figure 3 BP employees by ages 15

Figure 4 The employee satisfaction index 16

Figure 5 average salary in BP 19

Figure 6 Dividend payment 20

Figure 7 Money spend on social campaigns 21

Figure 8 Land use 31

Figure 9 Labor force from 15 years old 33

Figure 10 Percentage of trained employed worker at working age 2011 34

The economic growth of Vietnam has increased markedly in recent time Besides that, Vietnam

is also a potential market with the unlimited demand After joining WTO in 2007, Vietnam has more incentive policies to attract foreign companies investing in Vietnam BP came to Vietnam

in 1989 and after 23 years, BP has some particular achievements in Vietnam that meets their worldwide purpose

The aim of the report is to show the vision, mission, value, goals, and objectives of BP

worldwide and how it meets them in Vietnam Then, writer indicated the influenced of

stakeholders in BP and how BP satisfies them Following this, the responsibilities of BP in Vietnam and in the world is described In the second part, the writer gave information about theeconomic system and the allocation resources in Vietnam Last but not least, the impact of fiscal, competition policy and competition policy on BP was evaluated

Source of information comes from the course book BBP Learning Media and Internet

This report still has shortcomings because the limited knowledge and experience of writer, thelanguage barriers

1.1 Identify the purposes of different types of organization:

1.1.1 Type of organization:

The legal structure of a business decides the way it operates There are three types oforganization, which are sole trader, partnership, company

According to case study [ CITATION BRI12 \l 1033 ], BP is a multinational public

limited company whichcompany, which is owned by a large number of investors from all over

the world They have more than 83,000 employees in 70 countries Their upstream andmidstream are active in 30 countries Additionally, BP is FTSE 100 listed on London Stock

exchange with the ticker BP PLC [CITATION Lon12 \l 1033 ] Therefore, its shares can be

acquired by anyone When buying shares from a public company, shareholders are notresponsible for company’s debts or liabilities so they only possible lose all money that they payfor shares The more shares they hold, the more power they have They also receive dividendsaccording to number of shares The dividend paid to shareholders in 2011 was $4,072

1.1.2 The vision, mission, goals, values and objectives of BP:

a Vision, mission, goals, values and objectives of BP:

Vision :

“To be a stronger and safer company”.[ CITATION BP12 \l 1033 ]

Mission:

“To deliver energy to the world, to be held to high standards in what they do and

to be a safety leader in their industry, a world-class operator, a good corporate citizen and a great employer”[ CITATION BP \l 1033 ]

Goals:

“No accidents, no harm to people and no damage to environment”[ CITATION

- The vision of BP is brief, clear and concise It describes what company intends to be in

the future In each period, company can change it vision to be suitable with the situations at thattime For example, Lord John Brown (1995) set his vision in restructuring BP and making it tobecome one of the most profitable companies in the world [ CITATION Ene \l 1033 ].However, at that time, British Petroleum was considered as one of the worst companies related

to environment Therefore, when Tony Hayward replaced the former CEO, he set out his visionincludes intensifying safety efforts, improving performance and adhering “even more strongly

to BP values”[ CITATION She07 \l 1033 ] In 2012, because of the consequences of the oilspill in the Gulf of Mexico happening in 2010, the vision of BP focus on change the bad image

in public’s eye and want to be considered as a safe and strong company With this vision likethat, the management system of company must be concentrated on safety Furthermore,employees of company have to put the safety of themselves and their colleagues on the top Theemployees also determine to contribute to make BP stronger

- The mission of BP is specific, focused and easily to understood BP's mission focuses on the

need of customers They understand that energy is essential for everyone, every process andeverywhere for heat, light and mobility Therefore, they provide energy products such as fuel,which are affordable, secure, and does not damage to the environment Their main strength isoil and gas They also supply renewable energy sources Their target market of BP is the wholeworld It is a big market that needs a lot of effort to carry out Besides, BP put a high standard

for them to operate to be the leader in the industry This also requires a great performance fromtheir workers to meet the world standard, Moreover, BP continues to aim to be safer so it isrelated to the vision In the mission, British Petroleum also shows their concerns to thecommunity, environment that they run in.

- The goal of British Petroleum is short and concise There is three clear parts in the goal.

The first one is “No accidents” for their employees They committed to ensure the safety, thesecurity and health of their people The next one is for the safety of community The final one isthe commitments to the protection of environment To achieve this goal, BP runs their businesscompliance with HSSE system (Health, safety, security and the environment)

- The value of BP is detailed It is also the environment that company runs, the interaction of

the boss and the attitudes for customers BP set its value with 5 elements as follow:

 Safety: They want to create a safe working environment for their worker They also

care about the safety of the communities around company Their product must meet the saferequirements

 Respect: All of their operations follow the respect They respect the community so their performance must be ethical and trustable They respect the world in which they operate so they obey the laws and regulations They respect their partners and their employees’ thought Finally, they respect the environment by caring about their decisions’ consequences.

 Excellent: Because of the hard conditions, BP’s operations are following the system

and disciplined They are willing to learn and do not mind to correct mistakes

 Courage: They are not afraid of difficulty and dare to express what they believe BP

wants to be creative and ready for asking for help They accept their own mistake and want the feedback from other to improve them because they want to run the business lastingly.

 One team: They try to run a unified whole They put the benefit and success of

company ahead

Firstly, their success comes from safety and excellent They put safety on the top and try

to protect employees and the community They also make effort to protect the environmentwhere they work Furthermore, because of the hard conditions, British Petroleum’s employeesmust be excellent and follow the discipline They are always willing to learn and correct themistake Secondly, their behaviors base on how they respect each other and are they courage to

do the right thing? Every one trusts each other The basic of equality is respecting people’s

right and no discriminations Everybody is protected by laws Most importantly, they work as ateam The strength of company contains individual capability

- The objective of BP is to pass several milestones by setting a 10- point plan for 2012 and to

have greater financial investments in 2013 – 2014:

Three of their objectives [CITATION bp \l 1033 ] are:

 Drilling 12 exploration wells double the 2011 total in 2012.

Specific: Carry out to explore more wells

Measurable: 12 exploration wells double 2011

Attainable: attainable by implementing their main projects in Angola, Gulf of Mexico andthe North Sea

Results – oriented: to find more energy

Time – bounded: in 2012

 Completing payments into the Deepwater Horizon oil spin trust.

Specific: pay compensation money for the oil spill

Measurable: No specific number

Attainable: by selling business or earn more revenue

Results – oriented: to earn back the trust and show the responsibilities

Time – bounded: 2012

 Completion of $38 billion divestment programme by the end of 2013.

Specific: to reduce the capital

Measurable: $38 billion

Attainable: selling business

Results – oriented: to have capital for other programme

With the first priorities, BP sets their mission to be a safer company Their missionalso related to safety when they want to be a safety leader in their industry Toimplementing these vision and mission, their goal direct to the safety of their employeesand the communities that they operate in

The second priority shows clearly in the value of company To earn back trust, theymust show their respect to other people Their performance must be ethical and trustable.They also have to be courage to accept their mistake and fix it Additionally, they need toshow the responsibility by completing the payment for the oil disaster

The last priority can be seen in the vision “to be a stronger company” To make itcome true, BP has set several objectives to earn more profit such as explore more wells,carry out some major project

As a part of BP worldwide, BP in Vietnam has been following the vision, mission, goal, value and objectives BP arrived Vietnam in 1989 and after 23 years investing in

Vietnam, their operations focus on exploring and exploiting oil, gas; producing andconsuming lubricants, crude oil They also contribute to Vietnamese power industry

In recent years, BP in Vietnam has implementing some business activities to meet the

BP worldwide purpose

BP creates a safety working environment for their workers They prohibited all the

illegal behavior or activities that are hostile, fighting and doing harm with each other Toprotect workers in drilling platforms, BP put safety instructions everywhere Workershave to follow the strict rule and wear protective clothing

Additionally, they have many programs to protect and conserve environment For

example, they have program to train their staff how to minimize, recycle and reuse waste.They also helped to replant 20-hecta of trees for the environment conservation

Moreover, they also earn trust of customers in Vietnam by producing and supply

high quality products and good services Their products have been accredited ISO 9001

quality standard Beside this, their image in Vietnam is good when they contribute to the

social education or social heath BP cooperated with UK's Foreign and CommonwealthOffice and Leeds University to award scholarships for Vietnamese student andgovernment employees In 2012, they sponsored 1 billion VND for cancer patients

However, in 2010, BP sold its assets in Vietnam and Venezuela to TNK – BP (a

Russia‘s third largest oil company) It was a part of BP objectives to earn $38 billion divestment and have money to pay for the oil spill.

In conclusion, all of activities of BP in Vietnam are not separated from theirworldwide purpose

1.2 Describe the extent to which an organization meets the objectives of different stakeholders:

1.2.1 Overview of stakeholders and stakeholders mapping:

Stakeholders are individuals or groups who have an interest in how the enterprise

performs because it affects them in some ways – that is they have a stake in the organization.(BBP Learning Media, 2010)

There are three broad types of stakeholders: Internal stakeholders, connected

stakeholders and external stakeholders

Each stakeholder has different influence and interest in the company The purpose ofstakeholders mapping is to identify the impact of stakeholders on the company

Low

Minimal effort Keep informed

Figure 1: Stakeholders mapping (BBP Learning Media, 2010)

 “Minimal effort” stakeholders have low influence and low interest It is expended in

this segment

 “Keep informed” stakeholders are who have high interest but low influence Their

views can affect more powerful stakeholders

 “Keep satisfied” stakeholders have low interest but high power They must be treated

with care

 “Key players” have high power and high influence The strategy must be acceptable

with them [ CITATION BBP102 \l 1033 ]

Interest/aspirations

Power/influence

1.2.2 The influence of stakeholders:

Types Stakeholders

Stakeholders mappingKey

players

Keepsatisfied

Keepinformed

Minimaleffort1.Internal

a Management – key player:

Management plays an important part in the company First of all,management is the person who makes decision Each of their decision influences directly onevery aspect of the company and staffs at all levels A good decision can lead to the success ofcompany However, the bad decision may push the company to bankruptcy and other terribleconsequences For example, Mr Hayward, the former CEO of BP had to leave BP because ofhis missteps His mistakes made an oil disaster in the Gulf of Mexico which destroyedecosystems in Horizon and killed 11 people[ CITATION BBC11 \l 1033 ] Secondly, the leaderstyle may decide the success of company A positive organization culture can encouragecreativity and innovation which is necessary to employees’ satisfaction and productivity It isvery important for company Last but not least, the manager cares a lot about company Aresponsible leader is the person who can understand that all business operations belong to them

In BP, there are more than 83,000 people Therefore, CEO has to be responsible for the jobs ofthem

b Employee – Keep informed:

BP has more than 83 million employees in over 70 countries with different ages

Figure 2 BP employees by region

Figure 3 BP employees by ages

Source from [ CITATION BP11 \l 1033 ]

Employees are the necessary part of company; however, their influence is quitelow They do not have any power to make decision, just follow the guide of manager and getthe job done On the other hand, employees have high interest in the company Employees areinterested in the success and growth of the company If the company went bankruptcy, theywould lose their job Additionally, they care about their wages, their salary, their satisfaction,security BP takes the job of managing their employees seriously by training them, providingsafety working environment, promoting their strength BP keeps their employee informed andengaged by internal communications channels such as employee survey, targeted email or face

to face communications and so on For example, BP conducted the 2011 survey to understandthe levels of employee engagement and identified where to improve The survey includes 10questions asking about the satisfaction of employee and showed that their employees

understand BP standards and procedures [ CITATION BP11 \l 1033 ] The below chart giveinformation about employee satisfaction index:

Figure 4 The employee satisfaction index

Source from [ CITATION BP11 \l 1033 ]

2 Connected stakeholders:

a Suppliers – minimal efforts:

Because BP’s materials directly comes from their work in exploring and exploitingoil, gas, suppliers seems not be important for BP Therefore, suppliers have a low influence on

BP However, the price and the quality of materials can affect the price and quality of products

If suppliers put the price high, the price of products must increases If the quality of materials isbad, it affects the quality of products On the other hand, supplier has low interest in thecompany They only care about the quantity and the price that they would gain

b Shareholders – keep satisfied:

Shareholders do not care much about the company The only thing they care is thedividend they have In BP, shareholders have two options to receive dividend: by cash or byscrip dividend program On the other hand, shareholders impactaffect strongly on business’soperations They are the ones who invest money in BP Although they do not have power tomake decision but their influence is strong If they do not invest money anymore, perhaps thecompany cannot operate Therefore, BP needs to communicate with investors by providing

information through annual report or sustainability review or through BP’s websiteswww.BP.com BP also holds the roadshow for shareholders sending feedback to the companyand host investors briefing sessions and webcasts.

c Customers – Keep satisfied:

Customers are one of the key points of any company A business can live withoutcustomers Thus, customers have a strong influence on company Customers’ choice can affectthe direction of the company BP said that “Our customers’ satisfaction with our products andawareness of the BP brand are key indicators of whether we are going in the right direction as agroup.” [CITATION Placeholder1 \l 1033 ], When the bargaining power of customers is high,

BP has to sell their products at any cost If products cannot be sold, there is no revenue,following this, no profits Therefore, BP needs to satisfy customers and meet the demand BPcommunicates with customers through interviews, surveys, feedback tools or marketingprograms and so on The feedback of customers is important because it points at what BP need

to improve On the other hand, their interest in company is low because they just care abouttheir need, want If they do not find them in BP’s product, they will buy from competitors

d Bankers – Key players:

Bankers play an important part in BP because they lend BP money for investment

in projects They also care about BP’s business because they want to make sure that BP is able

to pay back the money Therefore, before borrowing money, BP needs to send all theinformation about projects and their ability to pay back the money Banks depend on that todecide whether they lend them or not

3 External stakeholders:

a Community – keep satisfied:

Every operation of BP impact directly or indirectly on the community around them.This impact can be positive or negative Therefore, community cares about what BP does andthe impact of it Community has high impact on BP If community sees that BP’s operationimpact negatively on them, they can force and make them stop working Therefore, BP has to

care about the community In Vietnam, BP had done a lot of work to satisfy the community.When first coming to Vietnam, BP talked to the local community what they intended to do inVietnam to have the right to run their business.

b Government – key player:

BP is a multinational company so it runs in many different countries Each countryhas a range of policies that BP must follow if they want to run there Company must care aboutthe monetary policies, fiscal policies that have in Vietnam such as the cooperate tax, VAT orthe exchange rate Government makes policy for company to follow On the other hand,government also pays attention about what company contributes to the economy, society, theirbusiness legal or illegal For example, BP created jobs for many people so it helped to reducethe unemployment rate

1.2.3 The extent to which an organization achieves the objectives of three

stakeholders:

achievedInternal

c Continuation of business External

stakeholder

s

b.Reduce unemployment rate 

c Social campaigns 

Table 2 Stakeholders’ objectives

1 Employees:

a Training and developing – achieved:

There are many programs for training and developing employees in BP BP focuses

senior management in Massachusetts Institute There are also engineering course and projectmanagement training in University of Manchester, UK 11,800 managers, superiors, techniciansattended in Operations Essentials programme to train about the process of safety and managersfor front line leaders Furthermore, there are also 35,000 ELearning modules [ CITATIONBP10 \l 1033 ] According to that, BP aims to build capabilities of its employees

b Job security – achieved:

Being a multinational company with 83,400 employees, BP takes job securityseriously In 2006, Dan Sajkowski, BP Whiting Refinery Manager and Vice President of BPProducts North America Inc., invested $3 billion to expected creates jobs for approximately2,500 workers and 60 to 80 permanent full-time employees.[ CITATION BP06 \l 1033 ]

c High salary - achieved:

The average salary of BP employees is around £55,000 per yer This is a high salarycompared with other companies The bar chart gives information about the average salary ineach function:

Figure 5 average salary in BP

Source from [ CITATION Pay12 \l 1033 ]

2 Shareholders:

a Dividends – Achieved:

In the third quarter of 2012, the quarterly dividends for shareholders increases by

12, 5% to a 9c a share Although, in 2011, BP lost profits, in 2012 with the strong process, the

right management, BP can increase the dividend again It is dividend payment in September2012:

Figure 6 Dividend payment

Source from [CITATION Placeholder2 \l 1033 ]

b Increase profits – achieved:

According to annual report [ CITATION BP121 \l 1033 ], Total revenues and other income in 2012 was $388,463, increasing in profit of $79, 535 and $142,325 in 2010 and 2009 respectively Therefore, the profits also rise following revenue In 2010, because of the oil disasters, BP lost profits of $3,324 and shareholders lost $ 3,719 However, in 2011, BP earns profits of 26,097 and shareholders earn $25,700

c Continuation of business– achieved:

With the increase in profits and revenue, there is no doubt that BP continues togrow in the future Therefore, shareholders no need to worry about this

3 Government:

a Protect environment – not achieved:

Deepwater Horizon was considered as the biggest oil spin in the world so far Morethan 19 million to 39 million gallons of crude oil leaked from the oil rig of BP in the Gulf ofMexico spreading out, threatening the mangrove ecosystem of Louisiana, along the Gulf ofMexico Furthermore, 11 worked died in this disasters This oil spill lasted 87 days with anestimated volume of oil to 4.9 million barrels The consequence of this disaster affect was huge.Thousands of birds, fishes, trees were destroyed Commercial services, local industry wasstagnant People were threatening health and life BP had to pay over $40 billion for thisdisaster

Picture 1 Oil spill in Mexico Gulf

b Reduce unemployment rate – achieved:

The number of workers in BP is over 83,000 people This contributed to reduce theunemployment rate in many countries BP continues to create jobs for many other people allover the world It also raises the living standards for many people

c Social campaigns – archived:

In 2010, BP spend $115,2 million[ CITATION BP121 \l 1033 ] to do social andcommunity campaigns It is divided into different countries:

Figure 7 Money spend on social campaigns

All of these money for building business skills, supporting education and othercommunity needs There are also programs Analysis of Resource – Rich Economies to teach

countries use their resources of oil and gas for successful development and VoluntaryPrinciples Security and Human Right

In summary, BP has different stakeholders with different interest and influence “Key

players” group includes: management, bankers and government “Keep satisfied” group contains: shareholders, customers and community “Keep informed” group consists of employees and the rest is suppliers belonging to “minimal effort” each stakeholder have a

range of objectives

1.3 Explain the legal responsibilities of the BP and strategies employed to meet objectives

of stakeholders:

Specific responsibility Strategies employed to meet them

1 Social

responsibility

a Create jobs for residents Provide a large number of jobs for local

force, especially in Ba Ria Vung Tau and neighborhoods.

b.Social education Open international training program in Da

e Protect environment Implement environment programmers.

f Environment conservation Plant trees, establish a national marine

environment center and conserve Cuc Phuong National Park.

3 Ethnics and

business

h.Transparency in operations Public statement of operations

i Protect health and safety for employees

Forbid illegal behaviors.

Provide health service.

Talk to local community

o.Protect the rights of employees Applying HSSE

Table 3 the legal responsibilities of the BP

1 Social responsibility:

A lot of companies understand that doing business not only earn profits for themselvesbut also enrich for country They earn money from society so they need to be responsible for