The Concept Of The Value Chain

The Concept Of The Value ChainThe notion of the time prize reach encompasses the activities that companies perform to achieve that belligerent utility, where the competitive advantage is having the competency to create higher-up think of to its customers and at the same time superior value to themselves. Value fibril analysis together with supply and essential chain analysis ar staples of Modern Business Management. An effective military control strategy must encompass each(prenominal) separate of the value chain configuration which includes both immemorial and secondary activities.The value chain concept was first set outed by Michael Porter (1958) in his work on Competitive Advantage in which he analyses the basis for competitive advantage and presents the value chain as a framework for diagnosing and enhancing it. more(prenominal)(prenominal) either all everyplace since then there has been a considerable amount of work by means of to expand on Porters origi nal concept. Today more and more Managers are using value chain analysis part of strategic planning.The carry through with(predicate) of globalization incorporates the interaction and integration amongst people, companies and governments of different nations. According to Black 2002 globalisation is defined as-..process by which the whole knowledge base becomes a sensation trade. This means that goods and services, capital and labour are exchanged on a world wide basis and information and the results of research flow readily in the midst of countriesThrough globalisation economies both domestically and internationally have been candid up. Governments have adopted a free market economics systems whereby change magnitude their own productive potential in addition to creating opportunities for international trade and involvement. There is alike the controversial aspect of globalisation where prop integritynts argue that through globalisation poor countries and their citizen s are allowed to grow economically. On the new(prenominal) conk opponents of globalisation cl reckon that internationals of the western world eudaemonias at the expense of local anaesthetic enterprises, cultures and the common people.BPBP is a multinational crude oil go with with it headquarters found in the linked Kingdom, London. It is one of the worlds conduce 10 private sphere of influence energy corporations in the world today. BP is engaged in oil, essential turgidness and alternative elicit exploration in addition to the marketing and barter of pet mappingum products. They are likewise at the forefront of delivering diverse, material and sincere solutions to meet the worlds needs for more, cleaner and affordable energy. Bp operates worldwide with branches in Africa, Asia and the meat East, Australasia, Europe, North America and South America with acts in over 80 countries. Their largest division is BP America, which is the biggest producer of oil and scre w up in the United States of America. bps operating income in 2009 was USD $ 26.43 billion with a revenue of USD $ 246.1 billion. As at Dec 2009 they employed 80,600. In 2000 BP Amoco changed their name to BP and introduced a impertinently slogan Beyond Petroleum. They also replaced their Green Shield logo with the Helios symbol, a green and yellow sunflower pattern representing energy in its many forms. (Wikipedia 2010)BPs rapid growth in world trade and investment is a direct result of the globalisation process in which multinational companies increasingly target parts of the globe as their domestic market. Since value chain is utilised to develop an organisations sustainable competitive advantage, it has become a mogulful tool for Managers. The ability of any organisation to identify depict activities and by extension perform activities along the line of value chain would create that competitive advantage that Michael porter spoke about.Through its fib Bp has invested in c ountries abroad such as the US, Middle East, Iraq Egypt, Indonesia and Trinidad and Tobago. In doing so they have been able to secure large oil reserves and be identified as one of the largest oil and gas exploration company ion the world today. Being true to their values of being progressive, innovative and execution driven they have integrated the key activities of the value chain to the benefit of their customersBPs global strategy in their surgical operations has assisted in their objective for being cost competitive through the securing of various economies of scale. Their sedate investment in the U.S. is testimony to this, since the U.S. remains one of the most mercenary markets in the world for energy and energy re after-hoursd resources. They consume over 1.2 billion litters of oil per year an this figure is constantly growing. This together with political stability, infrastructure and transport mechanisms are vital ingredients towards BPs investments there.Through merge rs and acquisitions over the years, Bp has managed to receive that competitive advantage. With the acquisition of Valdes oil terminal in the late 60s, Standard Oil of Ohio in the 70s and the merging of Amoco in 2000 they captured most of the US. market share. By maintained this by continuing to sell Amoco branded products through their service stations although they were already converted to reflect the BP brand, as Amoco was rated surmount petroleum by consumers.Today BP continues to seek mergers and acquisition s worldwide in an effort to bring in additional revenue, increased profits, inappropriate assets and Human resources. Using an appraisal system based on the porters quintette forces which key elements include Threat of potential entrants,(2) substitutes, (3) bargaining power of suppliers and (40 power of buyers, together with an exploration of (5) degree of competitive rivalry, BOP appears to be exceedingly competitive in their area of production.Through increased explo ration in new territorities such as Asia Pacific, Azerbaijan, Angola, Trinidad Gulf of Mexico and in more new-fangled times Russia, BP is able to increase assets and by extension establish lead position in these areas.With the liberalisation of markets, advancement of technology and new regulative regimes that stress greater competition international competition has increased. As a result Multinationals are forced to become more efficient in areas of production and marketing to achieve that sustainable competitive advantage. All organisations live of activities that link together to develop the value of its business. Together these activities form the organisations value chain. Bps value chain over the years has become more complex. One of the ways they have addressed this is by diversifying their operations of petroleum exploration and refining system into retailing in cafes, bakeries and convenience stores. Their aim is not only to ensure customer satisfaction but also to be a n attraction to prospective customers by marketing differentiated products, thence creating a competitive edge and becoming more effectively line up to its customers needs.As mentioned earlier all organisations consist of activities that when linked together develop the value of the business and form the value chain. These activities are referred to as the primary and secondary activities, where primary is related to production inclusive of inbound and outward-bound logistics, operations, marketing and sales and service. The secondary or support activities assist in the effectiveness and efficiency of the company.Bp to date has effectively utilised both logistic and value chain strategies in its overseas operations. In doing so, they have achieved competitive strengths and core competencies in the market place, ultimately creating value for the customer.Inbound logisticsA substantial part BPs production is derived from a number of oil and gas fields worldwide. The oil and gas are transported via a serial publication of pipelines and ships to various conversion facilities like refineries, power stations and industrial facilities at different locations. The use of BP shipping, a subsidiary of the BP group also provides the logistics to give way oil and gas cargoes. The BP management fleet consists of Very Large unmannerly Carriers (VLCCs), liquefied natural gas (LNG) carriers, liquefied petroleum gas (LPG) carriers and coasters. Bp has also shifted slightly of their exploration activities from Alaska and the North Sea since leaks were discovered in the pipelines and represent a threat to the environment. Explorations are now concentrated in the Soviet Union, Rumaila and The Gulf of Mexico. Through pioneering new technologies such as digital imaging of reservoirs there is also the potential to discover additional oil and gas out of some of their mature fields. BPs interest in the Canadian Oil sands also provides a unique opportunity for creating a balance in upstream production and downstream conversion.OperationsThe operation of BP is spread over six continents. As at 2004 there were 23 refineries of which 5 are in the US, 12 in Europe and 6 in other parts of the world. At the refineries crude oil is lithe through a process called cracking during which it is cleaned and purified, separating gasoline, fuel oil and other hydro carbons.Over the years the demands for energy has been on the increase and as a result Bp has invested heavily in the promotion of alternative energy in addition to improving energy efficiency in their operations.Safety has also become a top priority In BPs operation and is viewed as fundamental to their success. Consequently, they are constantly upgrading their refineries to improve guard. This has resulted in lesion rates reducing by close to 75%.Outbound logisticsBPs transport network criss-crosses the globe. They control an international tanker fleet of more than thirty-five vessels, either fully owned o r on long charter . Finished products such as fuel lubricants and chemical products are transported to various destinations through different methods. Fuels, for example are transported domestically through a vast truck and rail system, which is then stored in tanks at service stations to be retailed to the consumer. For the international market the finished product is transported via carriers which are then loaded onto trucks and rail cars for distribution. In the case of natural gas, depending on the location of the field it is transported through pipes to local distribution companies (LDC), or shipped using LNG carriers.Marketing and SalesThis departments main strategy is to operate in markets where they can get the largest share and ensuring that it is kept well supplied at all times by supply advantage. The introduction of retail sites with convenient stores is one of the strategies adopted to achieve thisEnvironmental issues such as global calefacient have forced BP to addre ss the issue of climate change. Their initial meter was the changing of its brand image and logo. Being true to their values, BP is continuously pursuit to increase energy efficiency throughout their operations. They also work alongside vehicle and equipment manufacturers, towards improving overall efficiency in the use of their fuel and lubricants. Bp has also differentiated themselves from their competitors by playing a leading role in the growing low carbon energy sector, focusing on bio fuels, wind and solar energy and carbon capture and storage.ServicesThe habituation of oil, gas and energy related industries from unstable and or difficult parts of the world have always been a concern for many countries. Although the charge volatility over the past few years has softened some of these concerns, they continue to exist. Terrorism in particular has become a top priority since September 11 20011. Consequently, Bp has taken steps in securing all activities along its value chain . Additionally, it is quite evident that BPs commitment towards safety and climate change is constantly growing.