SDSU Mkt710SDSU Mkt710Dr. Don JungDr. Don Jung

Lord John Browne Lord John Browne and BP’s and BP’s

Global ShiftGlobal Shift

Andy Ku, Jason Chen Mavis Lin, Sean Yeh

• QuestionQuestion• BackgroundBackground• ActionAction• Analysis and Analysis and

IssueIssue• And Next…And Next…

What’s your perception What’s your perception about Oil Concern?about Oil Concern?

•Dirty•Pollute •Scarcity•Dangerous•Trouble Maker

•Clean•Green Concerned •Future hope•Safety

Can Oil Company Can Oil Company change?change?

DirtyPollute ScarcityDangerousTrouble Maker•Climate warming •70%result from oil production•Exploration•Leaking

CleanGreen Concerned Future hopeSafety

ImageImage ImageImage

• QuestionQuestion• BackgroundBackground• ActionAction• Analysis and Analysis and

IssueIssue• And Next…And Next…

John BrowneJohn Browne• an iconic figure in British business • Born: Feb 20, 1948 Hamburg, Germany• Education: Cambridge, Physics / Stanford Busines

s School• Occupation:

– Join BP in 1966 / still in university– CEO of BP (resigned on May 1, 2007 )– Chairman of the board of Apax Partners – one of the most highly paid executives in the U

K(£5.7 million)• Interests:

– fine cigars, antique furniture, opera and the arts

• Social Status:– President of the Royal Academy of Engineering– knighted by Queen Elizabeth II (1998) – a crossbencher in the House of Lords – a trustee of the British Museum and the Tate G

allery– a vice president and member of the board of th

e Prince of Wales Business Leaders Forum

BP BackgroundBP Background

• A British company• 3rd largest oil concern in the world• Over 100,000 employees in 100 countries• Core business: discovery the earth’s n

atural resources( locating, developing, marketing)

• Depend on global communication, technology innovation and intellectual human capital

• QuestionQuestion• BackgroundBackground• ActionAction• Analysis and Analysis and

IssueIssue• And Next…And Next…

Lord John Browne’s Lord John Browne’s LeadershipLeadership

• 1995, took the helm• To increase revenue through 2 ways

– Finding more reserves– Re- Branding

BP’s Expansion Map BP’s Expansion Map Before Before

Gas-15.81%Oil-10.55%

(AIOC)

Gas-3.33%Oil-1.63%(Sohio)

North SeaPrudhoe Bay

(Chigach)

AcquisitionAcquisition• 2003, 240BN USD revenue( 400% growth)

Company

YearPrice

(BN USD)Country

Opportunity

Amoco 1998 57US/exploration in 20 countries

international

Arco 2000 27US/ west coast based/exploration to Far East

China/ Russia

Bumrah-Castrol 2000 4.7 UK/motor oil

international

Veba Oel 2002 4Germany, Poland, Netherland/ Gas station

Europe

TNK 2003 7Russia/Kovykta gas condensate field

Asia/ Europe

BP’s Expansion MapBP’s Expansion MapGas-27.36%Oil-5.67% (TNK)

Gas-3.33%Oil-1.63%(Sohio/ Amoco/ Acro)

Gas-0.87%Oil-1.24%

North SeaPrudhoe Bay(Chigach)

Azerbaijan-developing

Angola-developing

Ger/ Pol/ Ner/ (Veba Oel)

Extend to Russia Extend to Russia • Target: Securing position in Russia for the long-term• Method: acquisition

Company Year Function

Sidanco 2001 Oil producer

TNK 2003Vertically

integrated oil company

Slavneft pending approval

Oil Refinery• Result: TNK BP

– holding 50% share– added 105M to BP’s net income for a quarter due to rising demand– accounts for 1/5 of BP's global reserves, 1/4 of BP's production,

and nearly 1/10 of its global profits

• Focus on the environment and social issues.– In 1997, announced its support Kyoto Protocol – In 2000, developed 300 international environment

programs– Started “Plug in the Sun” program by 2001, install

solar panels in gas stations– In 2002, stopped all corporate political contributions

in US

• New Corporate logo and slogan– New logo with a sunburst of green, yellow and white– New slogan that BP stands for “Beyond Petroleum”

• Desire to change to a culturally sensitive & knowledge-based company

Re-BrandingRe-Branding

Balance btw Growth and Social Balance btw Growth and Social ResponsibilityResponsibility

• New Marketing strategy worldwide– emphasizing social and environment responsibility.

• Renewable energy– wind, solar, and hydrogen– In 1999, BP purchased Solarex, a solar-power devel

opment firm• Shareholder value and social responsibility

can support each other– Should view all related environment issues as anot

her form of opportunity

•What’s your perception about Oil Concern now?

Revenue - Revenue -

2002 2003 2004 2005 2006

Sales

Profit for theyear

　 2002 2003 2004 2005 2006

Sales 180,186 236,045 294,849 249,465 265,906

Profit for the

year 6,845 10,267 15,961 22,341 22,000

Financial data in millions of US$

Bring BP into the second largest independent oil company

Stock PriceStock Price

BP vs Exxon MobileBP vs Exxon Mobile

Jan/03/’95 (USD)BP: 4.97Exxon Mobile: 15.19

May/02/’07 (USD)BP: 67.96Exxon Mobile: 79.82

• Question• Background• Action• Analysis and Issue• And Next…

Leadership Style of Lord John Leadership Style of Lord John

BrowneBrowne • Participative style

Participative

Leader

Subordinate Subordinate Subordinate

Continual interaction and exchange of information and influence between leaderAnd subordinates

1. Change logo2. Upgrade the working

environment3. Acquisition : culture change “they are in the right direction”

The analysis of RussiaThe analysis of RussiaShort- term• Pros

– Adding revenue– More reserves

• Cons– Tough action of

TNK– Margin and returns

lower than expected

Long-term• Pros

– Close the door to other European peers

– Exporting opportunity to Asia and EU

• Cons– Could lose all assets (Iran’s disaster)

The New York Times MOSCOW, June 22. 2007

TNK-BP, sold the field after Russian authorities threatened to revoke the company’s license to develop it.

Social ResponsibilitySocial Responsibility• Alaska- October, 2007 Prudhoe Bay Spill

Arctic National Wildlife Arctic National Wildlife RefugeRefuge

• Background– From the late 1960s the company expanded beyond th

e Middle East to the USA (Prudhoe Bay, Alaska) – In 1969, BP acquired the Valdez oil terminal, Alaska, f

rom the Chugach for $1. • 1997, Re-branding • 2000, back to Bush’s administration's plan to op

en up Arctic National Wildlife Refuge to oil exploration

• August, 2006, shut down operation Prudhoe Bay – due to corrosion in the pipeline. BP had spilled over o

ne million litres of oil in Alaska's North Slope

Conflict Im

age

In the FutureIn the Future• Maintenance

– Repair Oil Transit Lines

• Focus on developing alternative energyIn 2007/Feb. spend $8 billion over 10 years– Natural gas– Hydrogen– Solar panel– Wind

• Question• Background• Action• Analysis and

Issue• And Next…

ScandalScandal

ScandalScandal• homosexual scandal • misused company

assets– tapping company assets

for his own personal use

• Perjury– made false statements to

the court– will face charges for lying

•This disaster badly tarnished BP's public image, again.

ScandalScandal

• John Browne commented: "In my 41 years with BP, I have kept my private life

separate from my business life. I have always regarded my sexuality as a personal matter, to be kept private.

Comment: 5-02-2007 @ 12:42AM Cin said...Who cares!!! If he did his job and made money for his stock holders, who cares who he slept with. The world should get real.

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