International trade

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Table of context

1.      Market  Structures                                                                              page 3

2.      Market Forces                                                                                     page 4

3.      Environmental scanning                                                                      page 5

4.      International Trade                                                                             page 7

5.      Impact of Global factors                                                                     page 8

6.      Impact of EU policies on UK                                                             page 9

7.      References                                                                                          page 10

                                                            Market Structures

1.      Perfect competition: you can see this kind of market structures when customer by a standard product from small business, nobody can control price so both customer and sellers accept ongoing price and the access to raw material it is the same. So in my opinion company who offers the high product gain more customers.

2.      Oligopoly: here there are a limited number of firms depends on each other, oligopoly has a differentiated and undifferentiated firms,  undifferentiated when companies are selling same product like BP and shell, in opposite differentiated when the same product sell by different company with different features.                                               

3.      Monopolistic competition: here many firms are offering substitute products, they’re differentiated on the physical attribute, image and company service. Monopoly over competitors can be gained by provide superior products or better service                                    

4.      Pure Monopoly: in this case there are no competitors because only one industry provide product.  All controls and resource and technology are controlled by this firm, beside it has ability to block other competitors to enter market.                                     It could be public or private, public goal is not to maximize profit like Water Company, in opposite private firm primary goal to maximize profit also private monopoly companies are large and has a lot of power.

Price Discrimination

Monopolies can be involved with discrimination of price that means set a different price for different consumer segment. Companies in a monopoly has the power to choose which customer will have discount on goods and service or will not, monopoly can maximize profits and reduce  loss by price discrimination. Business use price discrimination because the large number of sellers in industry, so the use this tactic to gain target customer and make large market share.    

Demand & supply Law

Supply and demand are basic part of market economy and economics generally, we can see the relation between two fundamental clearly in price decision of an item and the number of product will produce to allocate resources in the most effective way on cost and most efficient ways.  

Demand: the ability and willingness to buy specific quantities of a good at alternative prices in a given time period

Supply: is the quantity of a product that sellers are willing to sell at various prices. The quantity of a product that a business is willing to sell depends on its price. Businesses are more willing to sell a product when the price rises and less willing to sell it when prices fall.

As we see in diagram when supply of product goes up then price will fall beside demand will increase because the law cost of product. Too much of demand will end the product from suppliers, another point sellers will react and raise price to maximize their profit, so price will raise and product will be expensive, then demeaned will fall because the high price and price will fall again. When the quantities of supply meet the same number of demand we will have equilibrium as we see in the diagram.

BP forecasts indicate that by 2030 demand for OPEC’s oil will rise above its historic high of 32 million barrels a day while its share of the increase in oil supply is expected to rise above 40%                              this increase in demand will benefit BP and suppliers will benefit too, However Bp should consider that point that oil will be ends some days, beside people are going to alternative energy that will reduce demand in another hand.   

In this case, the equilibrium price is $20 per hour, and 39 hours is the equilibrium quantity.  At above-equilibrium prices, a market surplus exists—the quantity supplied exceeds the quantity demanded. At prices below equilibrium, a market shortage exists.

                                                            PESTLE

·       Political Factors

Plays a major role in any market, Political condition of UK market has direct effect on the company outcome. This changing in policy from time to time affects BP.                                                                                                                           Governments of UK encourage companies to create jobs for the domestic population, if BP employee more people then BP will produce more product, in another hand it will pay more salary and wage and the UK governments have increased the import tax by 3% which is affecting BP negatively. The new conservative government change several policies after post-election to the oil and gas industry such as petroleum revenue tax (PRT) at 50% on the top of corporation tax if the business established before 1993.    

·       Economic Factors:

Has significant impact on how easy or difficult it is to be successful and profitable at any time because they affect capital availability and cost, and demand. Supply of money has adverse effect on UK economy.                                                                              Banks in UK raise interest tax to gain more clients, most of oil industry projects are stopped due to insufficient supply.                                                                                     Higher inflation has major effects on people income. Instead of using own transport, people will be travelling in public transport which will have effect on BP oil sales.

·       Social Factors

Demonstrates demand and tastes of customer, which changes with fashion and   disposable income which can provide opportunities and threats for BP.                              Population of the UK will increase in the near future due to high immigrant rates and ageing population. Further investigation analyzed the population structure and energy consumption in UK has gone down nearly 20% due to ageing population which will have a major impact to the oil and gas industry in the UK especially BP because of larger market share

·       Technological Factors

Plays a major role in every organization to gain advantage over competitors.                 UK oil and gas industry is going through very challenging environment due to innovative technologies to gain maximum resources.                                                                            BP can provide more services and product in faster ways, also it can distribute goods by technology, in addition it can communicate with target market in efficient way.                New technology is the key aspects of innovative resources. The government is spending on alternative energy technology; this is an opportunity for BP to achieve economics of scales.

·       Environmental Factors

With increased pressure on companies to address environmental issues and to adopt ways of operations which what would benefit society.                                                                      BP refining and operation process required large amount of chemicals and finally extraction of gas and petroleum produce air pollution.                                                       The UK Environmental Management System (EMS) is associated with different law relate to oil and gas operation in a specific location to control the risk factors                                                                                        

·       Legislative Factors

Legal Factor: Health and safety is the first concern with the people linked with oil industry.                                                                                                                                UK health and safety policy is regulated by the government which helps to protect the personal health of the workers in oil exploration, drilling, distribution, consumer disposal and industrial factors, also Product safety is another important factor in oil and gas industry, because product impact environment.                                                                                                                         The average number of injuries for the previous five years was 42.                                             BP provides equal opportunity for employees also take care about customer right by CRM department.

                                                  International trade

Economics is that the proper allocation and effective use of resources. In the international trade to UK business organizations, the products are produces and sold in competitive market. Production efficiency is to provide quality and lower price of products to the peoples of world. The international trade to UK business organizations is that buys goods and services from a country which provide the lowest price and sell goods and services to a country which provide the highest price.

The United Kingdom`s economy is dependent on foreign trade, the British have few restrictions on foreign trade and investment, 60 of the largest UK Corporation are American, UK`s main trade partner is the EU, 58 percent of the kingdom`s exports go to EU its main EU partners are Germany, which accounts for 12 percent of exports, France, with 12 percent, and the Netherlands with 8 percent. The United Kingdom`s largest single market is the United States, which accounts for 13 percent of its exports, in another hand 53% of UK import is from EU.

The strength of the British pound and the state of the economy has made the UK an attractive investment area for foreign investors which BP can utilize this advantage to gain more capitals and investment that reason can explain that about 30 percent of all foreign investment going into the EU is directed at the UK. In 1997, US investment in the Amounted to US$138.8 billion, this is a big opportunity for BP because US may deal with BP and as a lot of people think that US control the Globalization so BP can gain technological staff and experience people to develop their industry while US invest in easy way, beside the US will not only lose the economic battle but all Americans and neighbors will be affected by the decision of BP to use one of the most toxic products ever made for which there is no cure or dispersant to neutralize it.

Another factor that affects BP is SWOT and we will talk about it

  Impact of global factors

When we look at global factors we will see a lot of it, so we’ll talk little bit about it.

The first thing jump to mind is globalization but is not all things, there firms like culture, trade regulations, competition and economic development.

First firm will talk about is power of buyers, oil company is not a lot different from other oil companies that means buyers will pay product from company who offer less price or better contract conditions.

Seconded factor will be threat of substitutes what I mean here not competitor’s product  what I mean is the natural substitutes like solar power, wind power and wave power this factors developing so fast and people are going to it because is friendly for environment and cost no money when people use it.

Last factors will talk about is SWOT which is a study about strength, weakness, opportunity, threat point that company has            

Strength:  first of all it’s a brand known in a lot of areas in the world, top in the market and the goods it produces has a high quality, beside is one of the biggest petroleum company.

Weakness: first thing we’ll see is the damage BP makes on environment specially when the pipe in the sea damaged and this pipe was transferring the ocean that was very weakness point.

This problem was followed by dishonest from executive director and he didn’t handle it in right ways which crack the image of company and led to massive penalties and fines on BP.

Opportunity: when we see the increasing in full and oil price we’ll see opportunity for BP to make more profit because this increase is international not local and by new technological machines the oil discover nowadays is more than past, in addition BP can to make a stronger company it can make joint venture to benefit in all ways and method.

Threat:  we talked about substitutes threat above that was on thing, another threat factor is increasing cost of operation and raw material.

“The company also faces competition from the emergence of specialized alternative energy companies that are offering the technology and affordability to encourage greater migration away from the reliance on fossil fuels, which could decrease BP`s customer base”

 http://www.businessteacher.org.uk/guides/business/swot/swot-analysis-of-british-petroleum.php#ixzz3cf6cmPOY

                                                 Impact of EU policies on UK

UK is a member in EU customs union, with no tariffs on goods moving between Member States, and a common tariff applied to goods entering from outside the EU.

UK and member state can’t independent on their trade policy; they have to follow EU policy and regulation which mean that BP has to apply treaties too.

Free trade in services and goods between EU member states enshrined in the EU treaties.

The structure of UK economic and their competitive advantages in many firms push the Government to put particular emphasis on the full implementation of the Services.

Another matter the effects of policies are established to avoid harmful effect that seeks positive benefits in the UK business organization. Business acquiring policies provide organizations to avoid negative effects.

We’ll try to estimate the effect of EU law to the UK using the Impact Assessments (IAs)

“IAs is usually produced in response to Directives where the Government will have some discretion over how EU requirements will be transposed into national law, but not Regulations or Decisions, which do not trigger a new piece of domestic legislation. The potential costs in question arise from administrative burdens on companies and the public sector and from the additional practical obligations of putting the policy of the regulation into practice”

www.acdmea.eu

Finally and the most important thing that UK is a member in EU union with considering the trade Blocks the union is applied, don’t allow UK to deal with other country like also if it’s near   from UK but in EU union  in same condition. This also gives BP advantages to increase market size, exploitation of economic of scale and increase result in a more efficient allocation of resources.  

References:

http://www.businessteacher.org.uk/guides/business/swot/swot-analysis-of-british-petroleum.php

http://www.mbaskool.com/brandguide/energy/393-bp.html

http://www.slideshare.net/FaysalAlam1/global-business-strategy-29270246

http://www.csmonitor.com/USA/Foreign-Policy/2010/0611/International-sensitivities-What-if-BP-oil-spill-heads-for-Cuba

http://www.academia.edu/466110/BP_Market_Analysis_and_Strategic_Marketing_Recommendations_In_the_USA_after_the_Gulf_of_Mexico_Oil_spill