Bharat Petroleum's Upstream Strategy and Exploration Success
(11 pages of text)
Bharat Petroleum Corporation Limited (BPCL) is an Indian public-sector oil company that features among the Fortune Global 500. The company has historically been in the business of refining and marketing petroleum products. For about 25 years, BPCL operated in a protected environment where it was assured 12 per cent post-tax returns by the Indian government. In 2002, the government stopped guaranteeing returns to its oil companies, and BPCL found that its sales were increasing but its profitability was declining. In response, BPCL ventured upstream into the exploration and production of hydrocarbons. The case is set in 2010, seven years after BPCL adopted a corporate strategy of vertical integration. BPCL’s chairman and managing director assesses reasons for the company’s spectacular success and considers what BPCL should do next.
This case provides insights into an industry that is highly globalized, risk- and capital-intensive, involves multiple partners and alliances, and is strongly influenced by governments. It is intended for use in a capstone course on strategy or towards the end of an MBA program, when students have already been exposed to the basics of strategy. It can also be used in executive education courses in strategy, general management or public-sector management. The case addresses the following interrelated questions:
- When is a corporate strategy of vertical integration most relevant?
- How might you internationalize from a position of operating only in one country?
- What do you do when capabilities for vertical integration do not exist in your existing business?
- What alliance strategy might you adopt?
- How do you manage the uncertainty and risks inherent in vertical integration, joint ventures and internationalization?
This case will familiarize students with the petroleum value chain and the operations of global oil companies. However, the underlying concepts will help students relate to the dynamics of vertical integration in any capital-intensive, high-risk, globalized industry.
India, Large, 2010
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