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    Presentation BP

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    Asif Islam
    The document discusses the strategic management of Burmah Castrol prior to and following its sale to BP Amoco in 1997. Prior to 1997, Burmah Castrol consisted of two business units - Castrol and Chemical - and had grown through acquisitions. In 1997, it restructured into business units rather than geographic units due to forecasted issues with demand. At the time of the sale, two alternative strategic options were considered: a joint venture to enjoy economies of scale while making cuts, or breaking up the group to unlock more shareholder value but risking not recouping the sale value if income from business units was lower than the offered price. The recommendation was that Burmah

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    Presentation BP

    Uploaded by

    Asif Islam
    153 views7 pages
    The document discusses the strategic management of Burmah Castrol prior to and following its sale to BP Amoco in 1997. Prior to 1997, Burmah Castrol consisted of two business units - Castrol and Chemical - and had grown through acquisitions. In 1997, it restructured into business units rather than geographic units due to forecasted issues with demand. At the time of the sale, two alternative strategic options were considered: a joint venture to enjoy economies of scale while making cuts, or breaking up the group to unlock more shareholder value but risking not recouping the sale value if income from business units was lower than the offered price. The recommendation was that Burmah

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    The document discusses the strategic management of Burmah Castrol prior to and following its sale to BP Amoco in 1997. Prior to 1997, Burmah Castrol consisted of two business units - Castrol and Chemical - and had grown through acquisitions. In 1997, it restructured into business units rather than geographic units due to forecasted issues with demand. At the time of the sale, two alternative strategic options were considered: a joint venture to enjoy economies of scale while making cuts, or breaking up the group to unlock more shareholder value but risking not recouping the sale value if income from business units was lower than the offered price. The recommendation was that Burmah

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    153 views7 pages

    Presentation BP

    Uploaded by

    Asif Islam
    The document discusses the strategic management of Burmah Castrol prior to and following its sale to BP Amoco in 1997. Prior to 1997, Burmah Castrol consisted of two business units - Castrol and Chemical - and had grown through acquisitions. In 1997, it restructured into business units rather than geographic units due to forecasted issues with demand. At the time of the sale, two alternative strategic options were considered: a joint venture to enjoy economies of scale while making cuts, or breaking up the group to unlock more shareholder value but risking not recouping the sale value if income from business units was lower than the offered price. The recommendation was that Burmah

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 7
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    The key takeaways from the SWOT analysis are that Burmah Castrol had a very strong brand name but faced issues with environmental costs and declining oil production. Opportunities existed in growing fuel markets but it faced threats from increasing environmental regulations.

    The strengths included a very strong brand name and high quality products at relatively low costs. Weaknesses included the costs of environmental hazards and a decline in crude oil production.

    Between 1997 and its sale, Burmah Castrol was restructured into business units rather than being organized geographically. It also forecasted issues with declining demand for passenger car engine oils and realized its business model was unsustainable. This restructure aimed to achieve economies of scale.

    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.

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