Question

Please give suggest recommendations for the BP Company on how can they be better partners and how can they take a lead in the oil industry. referencing the case "BP in Russia: Bad Partners or Bad Partnerships? (A)” (Case study 3: Strategic Management: Competitiveness and Globalization 12e: Hitt, Ireland, Hoskisson (page C42)

Since entering the Russian oil market in 1997, BP plc (BP) had two main partners. The first was Rosneft, the Russian state-owned oil major. The second was Alpha Access Renova (AAR), a consortium of Soviet-born oligarchs and one of Russia's largest privately owned financial-industrial conglomerates, with interests in oil, gas, and banking.

In January of 2011, BP and Rosneft announced the formation of a new strategic partnership to develop oil and gas reserves on the continental shelf in the Russian Arctic, covering approximately 125,000 square kilometers in the Kara Sea. Yet within five months, AAR, with whom BP had already formed another partnership, would obtain a series of court injunctions, effectively scuttling the deal with Rosneft.

The failure of the BP-Rosneft alliance could be attributed to a lack of due diligence on BP's part or, perhaps more saliently, to poor alliance management. A key conditional variable of any alliance is the degree of interpartner conflict: Alliance partners' interests can diverge so much that they undermine the initial common goals of the partnership, and “effective cooperation demands a relatively low level of conflict.” In the wake of the Deepwater Horizon disaster in the Gulf of Mexico, which cost them tens of billions of U.S. dollars, BP's interest was in expanding its oil assets and revenues. AAR's interest, meanwhile, was in maintaining TNK-BP's position in the Russian oil market, which the BP-Rosneft alliance would have undermined (Table 1).

For companies intending to enter into alliances, it is necessary that certain conditions be fulfilled so as to make the alliances successful. First, both companies should consolidate critical relationships with suppliers, providers and other important companies. Without this, alliances may fail. Moreover, alliances may also fail due to poor management of essential partnerships. This can be linked directly to the case of BP and Rosneft (Alobaid, 2011). Even though BP had maintained various other relationships successfully, building of a successful alliance with Rosneft failed due to lack of proper management of the alliance with Alpha Access. Despite this challenge, it is still possible for BP and other companies to revive alliances resulting in advantages such as improved value, attraction of stakeholders and increasing competitiveness.

Answer 1

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