Essay Instructions: The First part already submitted is as under with the remarks of the instructor
The organization in the strategic context week 4 mp1:
INTRODUCTION :
Strategic decisions often face controversial public reputation which impacts the entire organization. The effect of globalization, technological advancement and increased role of media has required strategic managers an increased sensitivity to the public appearances. Since companies are operating in the international business structure, their strength of making a choice from the available suppliers on the international board, the capacity of the business to satisfy their international customer needs and operation of business all are now given the increasing importance to be taken under ethical consideration. Therefore, in today?s business environment the firm?s actions are evaluated from its strategic decisions that require a firm to have strong analytical strategy formulation processes, resource-focused approaches to sufficiently consider the importance of working capital (Holt and McNulty, 2008). During this process of strategic decision making and strategy formulation phases, the firm?s establishes a sense of responsibility and credibility to all stakeholder that are considered on ethical grounds.
The increased focus of consumer needs and public awareness has emerged the conceptual framework of ?risk society?. The concept of risk society has given rise to a completely new horizon of the dialogue between the individual, institutions, social and political levels. The ethical framework has strong tangled the risk society creating ?ground rules? of communication between firm and public (Jones, 2002). In view of the changing business environment and the emergence of risk society, the communication mechanism in the strategic decision making process is focused more and is given more importance from organizational members. It actually establishes the basis upon which the strategy implication can be evaluated and carried forward for future sustainability of the organization.
The case of BP deep water horizon oil spill, portrays one such example of corporate strategic decision making under risk society at international front.
STRATEGIC IMPLICATION OF SHELL OIL SPILL : THIS WAS WRONG AS THE ARTICLE WAS ALL ON BP
The strategic parameter for oil & gas companies in general is to make sure how safe their companies are in general? And how much are they prepared to respond such crisis? These two questions that are core to the strategic management process of companies like oil & gas whose business are at risk under the consideration of Health and Safety Executive committee. The challenging position for BP in the case under review was that in the post inquiry inspection the Health and Safety Executive committee have found a number of fragile points regarding the failure on the Deepwater Horizon were uncovered among which the most prominent ones were the dead batteries in the operation process and devices of weak and non technical nature were found that was insufficient to control the oil spill in the event of explosion (O?Murchu, 2010).
Further to this comment made by Health and Safety Executive committee also retrieved from the article of O?Murchu (2010) the two main sources of company?s risk position inspected during some of the critical scenarios that the company has gone through. These were highlighted as:
a) The company had lacked clear chain of command. The chain of command describes who reports to whom and makes every person within the chain accountable of their duties and reporting authorities. In the case when there is perplexed chain of command, the workers are unaware of the reporting line and are not sure who to report under the situation of crisis. Companies when undergoing sensitive operation like deepwater drilling in it a slightest mistake or even a slight manhandling of the instrument can result in massive disaster that not only effects the environmental elements of the society, the resources of the affected bodies and the financial loss of the company but it is a major risk to the company reputation as well. Therefore, it is critically important for a company to have clear spam of control, line of instruction and well defined roles and responsibility of each worker in case of emergency.
b) The Health and Safety Executive committee has pointed out another area that had exhibited weak position during the time of emergency was the lack of communication system. It was reported that the communication devices like satellite phone and handheld radio were not remitting and receiving signals, thus not operative at the time of emergency. This has let the company in the sensitive position to support themselves in defense of their accusation. It is the primary responsibility of the company to foresee that all the communication system is in proper working conditions before any accidental situation arises. The company despite having a contingency plan were not even prepare for the emergency situation.
REGULATORY FRAMEWORK OF STRATEGIC RISK ASSESSMENT :
The Social Amplification of Risk Framework has formulated the risk communication system that is based on the ?risk signals? which has taken the form of risk images, risk signs and risk symbols. These risk signals interplay their part in the whole communication process of risk assessment through their interaction with social, cultural, institutional and psychological processes of the business to communicate the presence of risk in the process flow and possible mitigation and management procedures (Kasperson, 2003). The risk is communicated in three possible potential risk signals which can be termed as: The toxic risk signal, Shell as a polluting agent risk signal and the moral purity of the deep ocean risk signal.
BP in response to the lawsuits that were assumed to cover-up the economic losses suffered by gulf fishermen, hotels, seafood processors, restaurants and other associated businesses have been filed impulsively in response to the breach of the 1990 Oil Pollution Act without any descriptive proof for the looses being incurred. In response to these lawsuits company has asked for the detail of claims which will initially be presented to the special BP-financed fund manager. BP has decided the time space of 90 days before any claims would be lodged from court. This action of BP was well supported by many academic leaders in the field of law. They are in support of the BP?s action and argue that the company has right to get time and debatable points of law in their support to amend the charges made against them. However in doing so the company might have to face certain social, political and media restriction and opposition which can bring bad name to the company (Peel, 2010).
In the formulation of best strategic framework for the company, there are certain management issues that intervene in the process. The management issues not only contributes to setting of the internal process system to its right order after the solution has attained but also is responsible for managing the external environment of the company (David, 2000). Some of the major management issues are listed below:
a) Matching organization structure to the strategy
b) Linking performance and pay to the strategy
c) creating organization climate conducive to change
d) managing political relations
e) creating a strategy supportive culture
f) adapting production/operation processes
g) managing human resource
h) establishing annual objectives
i) devising policies
j) Allocating resources.
In addition to the points identified by David (2000) in strategic development and strategy implementation, organizations must empower their team to operate under risky situations. The success of Greenpeace over Shell in North Sea, June 1995 was the example of organizations slow with respect to modernity in their operation. In the well developed, highly advanced and technically sound economies risk consideration is as important as any other wealth and financial resource. In the societies inherited with risk ?symbolic power? is as important as any other economic, social or public power that adds value to the resources and public image of the organization (Tsoukas, 1999). The companies like Shell in such an environment are not only competing with the market competition but are also experiencing challenges. However, in response to these challenges they conducted public discussions and arguments to make the point clear. The strategic development team of Shell thinks that these public discussions and arguments are equally important as producing a quality product that creates competitive advantage.
The strategy adopted by BP in respond to the litigation was defensive strategy, where the company was aggressively using measure to defend their point of weak strategic decision making process and technical insufficiency that resulted in the company?s bad image and ruined financial position among the share holder.
NEW OUTLOOK OF STRATEGY IN BP CASE :
Michael Porter (1996) has defined strategy in terms of competitive strategy, which can be based on the argument for the company, creating its competitive position during the time of risk. According to him a company can outperform its competitor only if:
a) A company can have long term sustainability and can beat its rival provided it can create a clear difference that it can conserve.
b) Strategic position can be achieved through customer needs, customer?s convenience and a wide range of product or services being offered.
c) Competitive value of individual duties cannot be segregated from the whole unit.
d) Strategic positions are long term not limited to a single process flow or product or service cycle.
e) Management?s role is to define strategy, make trade-offs and finding the best fit among business functions.
Many organizations in response to the global competitive environment are finding it difficult to differentiate between operational effectiveness and strategy. Technological innovation and advance level of learning and training in the field have made it possible for firms to introduce new operating procedures, quality control measures and time and resource management tools for increasing the profitability of the company. But these firms have failed to understand what drives these forces. It is actually the corporate strategy that molds these operational procedures and gives it a shape of long term sustainability and profitability. Within this strategic process is the company?s ability to respond under emergency or crisis situation. Organizations role in risk management process is idealistically of preemptive in nature, capturing the risk signals, understanding those signals and taking measures to mitigate and manage the causes of these signals. When establishing a risk symbol strategic framework in an organization the following points needs to be taken into consideration:
a) Defining Roles and responsibilities of each work team: This phase is part of the risk assessment in which company is responsible to define the roles and responsibility of each individual, in the normal course of business and under the emergency situation as well. For the purpose of clarity and standardization, these duties and roles are laid out in the human resource instrument of the job description and job specification duly signed by the employee and supervisor.
b) Spam of control and chain of command: Employees are being aware of the reporting line and supervisory control. In case of work groups functioning in the form of teams, team leader is responsible to play the necessary role.
c) Health, Safety and Security sensitive workplace: When the company is operating in the business which is sensitive to the health and security of the staff then measures to be adopted by the company not only to safeguard the heath and security issues of its employees but also of the surrounding bodies being affected through business operation. This should be held as an important element in the standard operating procedure guidelines of the business and should also be legally bound on the part of the employer.
d) Setting up benchmarks: Besides setting financial goals for the company, benchmark on the risk measurement and control mechanisms should also be set. Risk sensitive areas to be evaluated against non risk sensitive areas and risk gap should be assessed to have control of the company business operations.
CONCLUSION:
BP has undergone a strategic change in their management practice due to the issue of underwater oil spill. This case is an example for many of the companies either operating in similar industry or in diversified business. Strategic development of the company not only limits itself to concentrate on the corporate goals and missions subjected to financial benefits of the company but also view its importance on the risk requirement framework that sees the sustainability of the business from multiple dimensions.
In this regard, the role of management in the strategy formulation and process flow have been dynamic and widened. All the business functions are interlinked to its operation. Communication lapse in any of the area can break this network and bring the company in great loss. The loss under such circumstances is also not limited to the financial loss but it unfolds the company?s responsibility towards the stakeholders and the general public which can be distorted through bad public image portrayed in media. Therefore, the ability of the company to create its sound strategic image in the media and the general public is also important integral part of strategic management process that ensures the perseverance of company?s policy and sustainability long term. Every function of the business is equally held responsible in the process flow.
References
David, R. F., (2000) Strategic management concepts & cases. Prentice hall publications, upper
saddle river, New Jersey 07458
Holt, R. & McNulty, T. (2008) ?Securing the license to act: a foundational capability?, Journal of
Strategy and Management, 1 (1): 72-92.
Jones, R. (2002) Challenges to the notion of publics in public relations: implications of the risk
society for the discipline. Journal of Public Relations Review, Vol-28, issue Feb. 2002.
pp. 49-62
Kasperson, J. X., Kasperson, R. E., Pidgeon, N. and Slovic, P. (2003) The social amplification of
risk: assessing fifteen years of research and theory, The Social Amplification of Risk,
Cambridge: Cambridge University Press.
O?Murchu, C. (2010) BP?s failures are symptomatic of wider problems. Retrieved on 2 August 2011 through: http://blogs.ft.com/energy-source/2010/09/15/bps-failures-are-symptomatic-of-a-wider-problem/#axzz1TqXNBcwO
Peel, M. (2010) Opposition grows to BP?s legal strategy. Retrieved on 2nd August 2011 through:
http://www.ft.com/cms/s/0/caabc8d6-c0f7-11df-99c4-00144feab49a.html
Porter, M. (1996) what is strategy? Breakthrough Ideas, Harvard Business Review, issue Nov-Dec 1996
Tsoukas, H. (1999) ?David and Goliath in the risk society: making sense of the conflict between
Shell and Greenpeace in the North Sea?, Organization, 6 (3): 499-528.
THE INSTRUCTOR?S REMARKS
Your MP1 was good. It was the right length, and had references at the end. RE: "STRATEGIC IMPLICATION OF SHELL OIL SPILL :" - the assignment is about BP, not about Shell. I wasn't really happy about the coherence and logic of the writing, but you did raise a lot of good issues. The second half of your paper was forward looking (i.e. recommendations) and so would have fitted better in the Week 7 MP2. (the second part which you are going to write now)
