CHAPTER 2 The external environment: Opportunities, threats, industry competition and competitor analysis Studying this chapter should provide you with the strategic management knowledge needed to: 1 2 explain the importance of analysing and understanding the firm's external environment define and describe the general environment and the industry environment 3 discuss the four activities of the external environmental analysis process 4 name and describe the general environment's seven segments 5 identify the five competitive forces and explain how they determine an industry's profit potential 6 define strategic groups and describe their influence on the firm 7 describe what firms need to know about their competitors and different methods (including ethical standards) used to collect intelligence about them.
CHAPTER TWO THE EXTERNAL ENVIRONMENT OPENING I ., BRITISH PETROLEUM (BP) AND ITS ENVIRONMENT: HOW THE DEEPWATER HORIZON OFFSHORE DRILLING PLATFORM DISASTER IS SHAPING ITS STRATEGY The explosion that led to the subsequent sinking of the oil and gas drilling platform on 20 April 2010 not only sent ripples across the Gulf of Mexico but also had a huge influence on BP and its two subconrraccors, Transocean and Halliburton. The Deepwater Horizon spill was the largest accidental offshore spill in history, at 206 million gallons. In comparison, the 1989 Exxon Valdez tanker wreck spilled 113 million gallons of oil. However, this was not BP's only large and well-publicised disaster. In 2006 there was an environmental spill in Alaska, and in 2005 there was the largest refinery explosion in Texas City that killed 15 people. These evenrs, especially the Deepwater Horizon disaster, have put BP in the cross-hairs not only of regulacors and government officials but also of environmentalists. Furthermore, these evenrs have generated doubts about its legitimacy with critical stakeholders on Wall Street, and also influenced other industry participants (especially in the south-eastern and south-western states associated with offshore drilling in the Gulf of Mexico) and its customers. One immediate outcome of the disaster was the replacement of Tony Hayward, CEO at the time of the disaster, with Robert Dudley on 10 July 2010. Additionally, BP announced a $32 billion charge realised on its 2010 balance sheet relative to past and current expenses associated with the disaster. The strategic actions (see Figure 1.1) that BP will take relative to this disaster and to position for future success will be influenced by continuing pressures from its external environment. One of the main challenges for the firm's strategic leader (Robert Dudley) is to understand what the external environment's effecrs are on the furn and co predict how its future strategic actions might lead to success.