Sociocultural Factors Affecting BP Petrol Filling Stations in the UK
‘Sociocultural influences on organisations include changes in the age and structure of populations, the manner in which populations behave and the way in which the culture of a population or country changes and develops.’
Source: ‘Understanding Organisational Context’ – Claire Capon
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Sociocultural factors affect BP petrol stations in both the micro and macro environment. Within the microenvironment factors affecting petrol stations are directly linked to factors that affect the need for transportation, where as in the macroenvironment there are factors that affect the need for petrol in general.
Factors within the Microenvironment:
There is an ageing population as well as a growing population, all requiring transportation. Two car families are more common as both parents work, as well as having children in school. Increased pressures in life lead to more car use, as public transportation is not flexible enough for many lives. Larger catchment areas for state schools increase car usage as many pupils are too far from school to walk. Increased centralisation of public services within cities creates a large car use from the suburban areas.
The amount of commuters is rising, requiring more car usage. Increases in disposable income allow the population to spend more on shopping and entertainment, which may require transport. Due to global conflicts more UK holidaymakers are staying in the country and thus requiring transportation. There are more 17-year-olds with cars responding to the growing demand for transport. Failing public transport systems, like late buses, prompt more car use. More people use supermarket petrol stations due to convenience.
These are mostly local and national factors within the LoNGPEST, global factors can be found within the macroenvironmental factors.
Factors within the Macroenvironment:
The introduction of alternate fuel sources will have a global affect on BP. Biofuels and Hydrogen fuel cells are currently being researched by car manufacturers because they are potentially much less harmful to the environment than petrol and other fossil fuels.
Figure 1: Table Showing Fuel Cell Emissions in Comparison with Petrol Engine Emissions
Renewable Hydrogen Cell
This table shows just how much better for the environment a fuel cell engine is, and Mercedes have developed one. The only stumbling block is the ï¿½300,000 price tag, which is a lot compared to the petrol engine A-Class at nearer ï¿½15,000.
Economically, the external environment in which BP operates in can be affected by both micro and macro influences. Some of these issues are discussed on a local, national and global scale and affect petrol stations and the price at which petrol is sold.
Over the past three years BP has seen significant improvements in its profits (2001 saw record profit of ï¿½2.8bn, due to lower petrol prices on the wholesale market) and has made major changes in its image and operations. However, the company has had its critics as they heavily spend on their new image, as customers still face the challenge of rising petrol prices. Every day BP serves 13 million customers around the world and yet UK prices are the highest in the EU.
An economic factor, which affects everyday customers, is not only the price of petrol but also the location of petrol filling stations. Some may argue that petrol prices are high in the UK due to a better standard of living, however, the cost of running a car can be considerably more expensive for someone who say lives in an out of town area. This isn’t because they necessarily have less disposable income but have to travel further to find a petrol station.
This may however; affect a very small number of the population (micro-environment) but demonstrates the adverse affects that a petrol station has economically on the local environment.
National issues can be linked to both local and even global situations. The main issues relating to a local situation is the fact that BP is selling around 5,000 petrol station sites, 50 of which are in the UK. This will affect BP because it may increase competition due to existing customers going somewhere else because their nearest BP garage is now located further away. This is an interesting point as it provides the questions has to what the company plan to do with this incurred source of finance. Due to a re-styling of the BP image (with investments in a new company logo) petrol stations now have different functions as well as selling petrol. For example some service stations are setting up facilities for Internet access and improved variety for shopping.
Another issue, which is very important to BP and also to other oil companies, is the impact of taxation on fuel. This rate is set by the government and is currently at 75%, this was due to an increase in the price of crude oil. Competition is also a problem for BP not only from the likes of Esso, Texaco etc but also supermarkets. This can prove to be a very negative effect as large supermarket chains have prime locations within towns and cities, and due to their large turnover are able to offer larger variety of services.
This shows some signs of competitive pricing in the market, for example supermarket Safeway increased prices in their stations to 74.9 pence per litre. Often when a company expands it benefits from economies of scale and so customers receive the reward of lower prices. However, petrol is a very high priced commodity and so Safeway has been able to increase prices due to the demand. This in turn will affect the overall turnover figures for petrol companies, including BP.
BP and other oil companies extract many of their sources from Middle Eastern countries. This does have its benefits as it increases international trade, although there can be some heavy consequences. During 2002 the impact of the war in the Middle East put a premium on the price of crude oil, which then increased the price of petrol for UK customers.
Group Turnover 2002 2001
Retained profit of year 1,470 1,621
UK 1,696 2,668
Rest of Europe 1,703 1,814
USA 2,890 6,941
Rest of World 3,957 4,604
Figures show that the financial performance of BP has not been as good compared to previous years. Some reasons for this is the challenging environment in which it operates. Reports also just that there has been an economic slowdown on a global scale, poor business conditions has affected refining and the impact of events in 2002 has lead to unstable oil prices.
A number of aspects of the political environment clearly impinge on business activity. These range from general questions concerning the nature of the political system and its institutions and processes. Government activities both directly and indirectly, influence business activities and government can be seen as the biggest business enterprise at national and local level.
Source: Ian Worthington and Chris Britton
Politics and the legislation that parliament introduce, influence the business environment in many different ways. The policies that are introduced affect business from a local, national, and global front.
External Local influences in the political environment that could affect B.P. are as follows:
The local government and authorities have a legal responsibility and are bound by law to maintain trading standards and environmental health. As such they hold great powers over all organisations no matter how big within their area, and have the authority to close them down if severe breaches of law are discovered.
The National influences in the political environment that affects B.P are as follows:
If the government increases the tax and fuel duty on petrol and other fuels then there may be pressure groups such as the People’s Fuel Lobby (PFL), could start blockades which once happened towards the end of the year 2000.
The result of the blockades caused people to start panic buying the fuel, causing exceptionally long queues. Consequently police were forced to close some petrol stations in Cardiff after long queues began affecting city-centre traffic.
The Global influences in the political environment that affects B.P are as follows:
The Middle East an unstable area of the world is where a lot of the oil supply is brought from but with the hostilities that have been taking place has made the prices of fuel fluctuate. You have to ask yourself how stable is the countries in where you are producing your product.
Being environmentally friendly is at the forefront of countries agendas and petrol and diesel being one of the main contributors, pressure has been placed to try and find alternative cleaner methods. An around the world solar plane flight is to be attempted in the near future so alternative fuel or power for motor vehicles could be the next step.
Source: Sunday Times November 30 2003
BP has opened the world’s most environmentally friendly service station in Hornchurch, close to London. The new BP Connect features a selection of innovative green initiatives that shows BP’s continuing commitment to environmental responsibility.
All the stations energy requirements are met by renewable energy. The site generates around half of its own power, using solar panels installed on the roof of the canopy and shop, and three wind turbines. The remainder is acquired through London Electricity’s Green Tariff, which is part of the power company’s long-term efforts to develop renewable resources.
BP Hornchurch Connect also includes new features that cut its energy consumption by a quarter. One of these is excess heat from the refrigeration system redirected to an underfloor heating system.
Sustainable water management is another feature of the station, with a reed bed which is employed to treat waste water. This technique channels any run-off from the site through the reed bed. The bacteria living on the roots of the reeds break down any oil contaminants, filtering and cleaning the water. Rainwater is also collected and recycled.
The landscaping around the station has been planted with indigenous plant species and a number of initiatives are being undertaken to attract local wildlife such as dragonflies and insect-feeding birds to the area.
This holistic approach to sustainable retailing includes the use of biodegradeable forecourt cleaners, the sale of organic and fair-trade products, recycling waste, and a community tree-planting scheme – as well as offering customers the full range of BP’s suite of cleaner fuels.
On the national side of things there is increased support by national organisations such as the woodland trust in the UK. To mark the launch of each new station, BP is supporting the woodland trust by planting and caring for 100 trees at one of the trusts woods, closest to the new stations. To date 72 new sations have been built during the last year. BP’s financial support has been used to plant, dedicate and care for over 8,000 trees in the UK. The station that was launched in Hornchurch and to celebrate 1,000 trees were dedicated in a special BP area in a forest in Essex. This partnership is directly benefiting both partners enabling the Trust to plant and conserve woodland and allowing BP to demonstrate its commitment to the environment.
On a more global scale this press release by the green party in New Zealand shows us that there is a growth in the amount of ecological petrol stations. This is dated from the 28th of September 1999 BP today opened New Zealand’s first solar powered petrol station, next to Auckland’s southern motorway. Solar cells on the roof of the station will run the lights and petrol pumps, meeting a third of the station’s electricity needs. BP is hoping to save 3,500 tonnes of carbon dioxide emissions worldwide with the opening of two hundred “plug in the sun” service stations in ten countries.
Porter’s “Five Forces of Competition Analysis”
* Competitive rivalry
* Threat of new entrants
* Treat of substitute products or services
* Bargaining power of buyers
* Bargaining power of suppliers
BP’s main international competitor is Shell Group. BP’s competitor Shell group have launched a 5 year $500 million renewal energy investment program with worldwide projects which must attain internal profitability targets so that’s how Shell are competing with BP. But BP have announced that their goal is to be new company able to offer global energy solutions through gasoline producing lower emissions and becoming “the world’s leading producers of solar power.
Market leader of BP have told their rivals that they intend to drop petrol prices by 10 cents a litre, twice as much then their competitors are offering and that took place on Friday 2nd February and ran till midnight on Tuesday 6th February even though it didn’t run for that lone the customers gave their business to BP if they carry on doing offers. The managing director said, “New Zealanders have proven over the past 20 years that they prefer to visit BP more than any of its competitors”. He says that is because they have always been steps ahead of others. He says:
* They give their customers more than great price
* Also give them superior fuels that are better for their cars and the environment
* And convenience stores that leave their competitor stores behind
Shell group try and be more competitive with BP but BP are always one step ahead of them and customers prefer to visit BP rather than Shell because BP have great prices, since BP introduced a high octane’s, environmentally-friendly petrol, BP ultimate, in December, sales have soared. Most of the service stations selling the new fuel have seen sales jump about 60%. All service stations want to keep their customers and attract new ones. If a rival service station in an area drops its prices, BP would quickly lose customers if they didn’t reduce their prices as well.
Threat of new entrants
There are not many new competition in the petrol industry at the moment but BP does have a lot of competition already company’s which Shell, Mobil etc. Even though there isn’t any new competition other company’s are always try and compete with BP.
Threat of substitute products or services
BP tries and provides substitute products or services. BP has launched a environmentally friendly petrol which is a substitute as that it costs the same as normal petrol also it is environmentally friendly so customers would prefer to go for the new petrol. Some of BP’s stations have a 24 hour cafï¿½ so either customers can go to the cafï¿½ or buy food from the store which would be cheaper products at BP stores are the same price as supermarkets.
Bargaining power of buyers
BP is the buyers and so are the general public. BP has power as a buyer as BP has a good reputation and is the most successful company in the petrol industry and when they choose their suppliers they will shop around for the best price for their for their oil etc. and the suppliers will not take advantage of BP as they are a well known company so you could say BP have a lot of power.
Bargaining power of suppliers
BP imports from a variety of oil producing countries, but in February 2002 BP North America also imported from Middle Eastern countries in the following quantities Iraq, Kuwait, Saudi Arabia and Algeria.