Question

1. From an industry-based view, explain why alliances are a frequent mode of entry for the oil industry in Russia.
2. From a resource-based view, what are the complementary resources and capabilities both sides brought to TNK-BP?
3. From an institution-based view, what are the formal and informal rules of the game governing this industry in Russia?
4. As an ethics consultant to BP, how would you advise it during both episodes of the conflicts with AAR?

Answer 1

Q 1) From an industry-based view, explain why alliances are a frequent mode of entry for the oil industry in Russia?

Ans) The industry-based view suggests that the strategic task is mainly to examine the competitive forces affecting and industry, and it focuses on the external opportunities and threats. In the above case study, the collaboration between BP and AAR to create TNK-BP proves advantageous to BP. BP is the third-largest energy company and operates in the oil and gas industry. Its operations include exploration and production, refining, distribution and marketing,petrochemicals and power generation. High political and economic risks are associated with investments in Russia. But its vast oil and gas reserves attract the attention of foreign investors.Russia’s law on foreign investment makes it easier for foreign companies to form strategic alliances with Russian companies in order to exploit its oil resources

Q 2) From a resource-based view, what are the complementary resources and capabilities both sides brought to TNK-BP?

Ans) The resource-based view concentrates on the internal strengths and weaknesses of the firm. The Russian consortium had the advantage of knowing how to operate with the Russian bureaucracy. What it lacked was a technical know-how which BP provided. In order to get into the Russian market, BP had to enter into an alliance with AAR and create TNK-BP

Q 3) From an institution-based view, what are the formal and informal rules of the game governing this industry in Russia?

Ans) The institution-based view is a leading perspective of strategy that argues that in addition to industry-and-firm-level conditions, firms also need to take into account wider influences from sources such as the state and society when crafting strategy. BP’s role in the second episode illustrates the importance of the institution-based view. Owing to the pressure from AAR and the Swedish arbitration tribunal, BP had to backtrack rom its alliance with Rosneft, Russia’s state-owned second largest oil company. The alliance with Rosneft had the full support of the Russian government which turned vindictive when BP admitted its fault.

Q 4) As an ethics consultant to BP, how would you advise it during both episodes of the conflicts with AAR?

Ans) Business ethics is an agreed-upon code of conduct in business, based on societal norms.

1 Business ethics lay the foundation and provide training for “behaviour that is consistent with the principles, norms, and standards of business practice that have been agreed upon by society.”

2 Many of these values have been codified in law. Therefore, laws are the first hurdle that must be met. However, law and ethics are not always synonymous.

3 A firm’s ethical responsibilities go beyond its legal responsibilities; they embody the full scope of expectations, norms, and values of its stakeholders.

4 Managers are called upon to do what society deems just and fair.

5 As an ethics consultant for BP, I would advise BP to use this framework when dealing with its conflicts with AAR. Doing so will show that BP should not have pursued separate relationships with other Russian companies without first getting out of its relationship with AAR.