Reason for selecting BP for Term paperOne of the major recent shocks to a big corporation to its green image is for the case of BP. After years of projecting the new logo and the new image as green, BP received an extremely negative image. Its challenging to have a new marketing campaign when everyone around has already marked it as Green Washing. I worked in Oil and Gas Industry from last 7 years and believe that this industry is too complex and hence offer more challenges.

As managers, we are supposed to handle shocks such as these and derive the companies from negative image to positive image during these difficult times. I believe I can learn the most by analyzing and putting forward the arguments in the most challenging situation.

Also, one of the biggest take away from the sustainable marketing course for me was – “Sustainable Marketing is all about the Business Operations especially Supply Chain and not plain Advertisement campaign”. Hence, I have tried to focus on Business Operations in my paper.

Table of ContentsI. AbstractII. Mission, Vision and target of the Marketing planIII. Development of the Marketing PlanIV. Marketing PlanV. Implementation PlanVI. Communication PlanVII.Appendix

a) Expense Estimationb) WACCc) ROId) Thank You BP campaign of Green Peace

I. Abstract In April 2010, BP was struck with one of the worst accident in the history – The deepwater horizon crisis. All the previous efforts of green washing have been washed away with the real time crisis. Its share has dipped by 40% and it is looming with costly US government sanctions, NGO backlash and general US public boycott of downstream operations.

Oil & Gas is a unique industry in the sense that it has very little product differentiation and flow of products from source (crude oil) to end user (gasoline) is continuous in nature. In such a scenario the only differentiation is the opinions of the technical and legal experts. This paper takes this unique property of Oil and Gas industry into consideration while putting forward the marketing plan for BP.

Various important stakeholders for Oil and Gas industry have been mapped with reference to their influence and possible support to BP.

$5.9 bn seems to be a big cost on the face of it for a marketing campaign, but the increase in value for BP from this marketing plan is enormous. The marketing plan has an overall ROI of 96%.

II. Mission The proposed marketing plan aims to handle the various challenges being faced by BP currently.VisionTo become leader in Oil and Gas industry for sustainable business operationsTarget of the proposed Marketing PlanTo generate higher returns on investment along with sustainable development of the company

Challenges being faced ( BP Strategy needs)A. General Challenges Even if the Oil leak crisis would not have been there we continue to face the following risks in our business operations.

1. Managing resources capitala) Capital Investments in our exploration, distribution, refining and retailing.b) Intellectual Capital Pool / IP rights for new process technologies.

2. Accessing capital marketsa) Commodity Pricing – Trading of the products across the life cycleb) Supplies Pricing – Leases for Exploration

3. Globalization and international operationsa) Remote Locations – Operations offshore and remote fields in Africab) Different Time zones across world – Problems in integrated communicationc) Regulations and legal issues of different countries – Problems in framing universal

company policies4. Mergers and Acquisitions among customers and competitors – Increased B2B

competition5. Deployment of new technologies – How to coup up investment in long term oriented

projects (more than 20 years usually)6. Complexity in the industry can often give rise to inefficiencies and increased cost as

there cannot be any universal standard for operations on absolute scale.

B. Current / Recent Challenges If we analyze the reason for the recent Deepwater Horizon Oil Spill crisis, following are the most important and biggest reasons1. Subcontractor’s Failure to monitor and act on warnings (No concrete action on a leak

spotted weak before the blowout due to Faulty Cementing)2. Subcontractor’s Unsafe Operation (No pretesting of communication, hydraulic and power

lines)

Though our company is responsible for putting the subcontractors on board but the main reason for the accident were some of the faulty and low quality operations standards of the subcontractors.

III. Development of the Marketing Plan

Research and Analysis for study of situation and future developments1. All the key stakeholders identified through stakeholder mapping2. Market Sizing for all the stakeholders done3. Statistical analysis done for no. of data points required to get 95% confidence limit of the

results about the customers of BP in US.

Current Stakeholder Mapping and motivations - Below give chart shows the major stakeholder for BP in the current scenario.

Stakeholders Motivations

Technical/Legal Experts/KOL Career Progression and generating business by alliances with corporations such as BP

Employees Stable and Profitable company (BP in our case)

2 Focus Groups Interviews with diverse group of people

16 Indepth Interviews with Experts and KOL

1024 surve data points among general stakeholders

of BP

Power

Interest

NGO

Technical Experts

Business Groups

Environmentalist

Legal Experts

Citizens / Nature

Media KOL

EmployeesPoor

Media / NGO Constant feed of news and binding eyeballs

Citizens/Nature/Environmentalists Protection of environment, increased usage of alternative energy

Poor in Nigeria Economic development

PEST Analysis for Oil & Gas Industry (including BP)1. The Political scene in US is against Oil companies for their mischief’s.2. Despite recession, US consumer spending on Oil & Gas is still intact. BP is highly

profitable and its business operations are still intact.3. There is an increased backlash against Oil & Gas companies in US4. Technology for Non renewable sector is developing very fast. This can be major threat to

oil industry as a whole.

SWOT Analysis for BP

Key Leverage Points (KLP)1. Strong Cash Position can be used for lobbying with Government2. Public/Environmentalist attention can be diverted to subcontractor’s faults3. If there are further deterioration of public image, US government can act on BP

for heavy penalties.

Strength1. Strong partnership with KOL / NGO2. Strong cash position (after $20 bn Eschrow Fund)

Weakness1. Bad Media coverage from last 4 monts2. Poor image trackrecord with KOL/ NGO and no US Govt. support as provided to Exxon during the leak

Opportunity 1. Subcontractors also involved in accidents2. Since, BP has already seen bottom of share prices, one time high investment in Alternative energy research

Threat1. Strong backlash by US Government2. Big Oil giants of US may lobby against BP with local media SWOT Analysis

4. Legal KOL will be useful in later stage of litigations

Marketing Strategy development for BP

Various options on the selection of NGO/KOL and collaboration with the stakeholder have been analyzed and following are the recommendations1. There can be only sequential interaction with some of the stakeholders. For example the

General customers can be engaged only after successful interaction with the technical and legal experts

2. Different stakeholder groups have different motives3. Our Action plan (Marketing plan) should satisfy the needs of all stakeholders in phase

wise manner4. Any Marketing plan should have good financial returns ( ROI>WACC)

IV. Marketing Plan.

1. Public Campaign on various fronts

Industry Analysis and FactorsStakeholder AnalysisCompetitor no threat at present, but the KOL and media are very strongScenario AnalysisNPV and ROI from possible new campaignStrong competitors, Strong Media Backlash due to Deepwater Horizon

Long term and Short Term comparison - BPOption1

Recommendations

Analysis

Options

Recommendations

Action Plan

Public campaign to elaborate that BP has taken strong actions action against the real culprits in order to a) Engage Key Opinion Leaders (KOL) to reach a consensus with them through

meaningful dialogueb) Put legal claims against Sub vendorsc) Publicize the legal claims d) Engage top Advertising agencies to do a public campaign against

i. Operations Contractor, Halliburton1 (who completed cementing of the final production casing string)

ii. Rig Owner, Transocean (whose blow out preventers (BOP)failed)e) There are other parties who may be responsible but focus on only 2subcontratros as

people will be confused and mark BP campaign as information poisoning by BP. Hence, we will not put the other parties in picture.

1. M-I Swaco, the mud monitoring contractor2. Weatherford, did not took enough safety precautions in inserting of pipes

f) Publicize that BP took approval for all the operations from MMS (Mineral Management Services), the approving authority. Also, BP was fully complied with all the safety operations. It was the contractors who missed on their obligations.

2. Collaboration with NGO and KOL’s Identifying and allying with top 3 biggest NGO’s and reputed industry bodiesa) Involve top Management to show solid commitment to build up allianceb) Fund their programs, research and expensesc) Convince them about the faults of the sub vendorsd) Build consensus among experts

3. Generating public support after crisis. Recent news article2 shows that some people are still don’t blame everything on BP and are willing to do meaningful task out of Government Bureaucratic setup.

Buy 1 KL of Gasoline and educate 1 child in NigeriaHow it is relevant to Oil and Gas customer and Industry – There is wide spread smuggling and illegal usage of Crude oil in Nigeria. The local people try to refine the crude oil on their own in very crude and dangerous form. Most of the people involved in this trade are teenagers as they are less averse to the risk of using open fire. One of the biggest reasons behind this problem is the lack of education among the people due to which they don’t have other employment avenues. If the customer in US can donate money for education of people in Nigeria, they will be not be diverted to illegal activities related to Oil and gas.

1 http://www.huffingtonpost.com/2010/04/30/halliburton-may-be-culpri_n_558481.html2 http://www.treehugger.com/files/2010/07/dispatch-from-the-gulf-oil-spill-breaking-the-law-to-save-the-gulf.php (accessed on 3rd August, 2010)

Visit of benefited children to US ( Not Just Oil Campaign)In addition to the education in Nigeria, BP will take these children to US on visit to create intense media/NGO Campaign.

As we can see from the diagram above the most effective method for BP is to coordinate with the Technical and legal experts in stage 1 and NGO in later stages.

Effect of Marketing Plan on stakeholdersAfter implementation of Business Plan, the positioning of the stakeholders can be shown in

Buy 1 KL to educate 1

Nigeria Children

Better Education

More Employment

avenues

Diversifying of Nigeria

Economy

Effect on customer

Ability to participate in

Ist StagePartner with Technical Experts and Legal Experts. Engage Environmentalists and Key Opinion leaders in MediaEmpower Employees to promote company image

2nd StageMonitor continuously the citizens and competitors for thier inappropriate activites for BPEngage environmentalist in futursitics dialogue and events

3rd Stage Collaborate with NGO to spread good word about BP and help in restructuring business operations

the following manner.

StatusStakeholders Before Marketing

PlanAfter Marketing Plan

Technical/Legal Experts/KOL Negative View about BP

Partner of BP

Employees Frustrated and Insecure Motivated and Confident

Media / NGO Spreading Poison against BP

Engaged with BP

Citizens/Nature/Environmentalists Scared and Skeptical of BP

Engaged with BP

Poor in Nigeria Harming BP assets and interests by stealing and smuggling crude oil

Empowered by BP by education

Implementation Strategy of Marketing Campaign1. Opinion Generation

a) Key Opinion leaders

Support

Influence

KOL

Competitors

Environmentalist

Legal Experts

Citizens

Technical Experts

Media / NGO

Employees

Poor in Nigeria

b) Technical Experts2. Damage Control Activities

a) Legal and exposing contractors campaignb) Collaborating with other industry members for prevention of backlash from sub-

contractors3. Leadership in Industry

a) Industry Lobby for indemnification from Subcontractors mistakesb) Pushing KOL of legal space for the same.

4. Preparing for the next phasea) New terms of contracts with the Sub- contractorsb) Improvements in Vendor selection processc) Improvements in other components of Supply Chain

Time line Chart

Expenses Each stage has a cost associated with it. But these cost components are negligible if we just consider the impact of the negative publicity which currently the company is having in the

3 months 6 months 9 months 12 months

Lobbying with Other industry Members against Backlash

Taking KOL into confidence

Partnering with NGO’s

Publicizing Legal Actions against Subcontractors

Industry Level

Internal

External

Task Force of Top Management to overview Marketing Campaign

Time Period

current negative environment about the company. The impact of the crisis is both within the downstream retail channel as well as with the upstream operations. Total Expense = $5.9bn (Details given in appendix)

Identification of NGOBased on the various parameters identified through our research as mentioned previously, NGO B is selected (Creative Data)

Gains from the new Marketing Campaign1. Increase in Share Price3 - After the crisis, BP stock price dropped to $33 from $62. Now

the market Cap of the firm is only $91 bn. Hence, the total loss = (91/33*(62-33))bn = $ 78 bnEven if BP manages to get back 25% of the loss in the market cap, then the total gain for the company = 78/4 = $ 19 bn

2. Gain in Revenues – Since, Oil & Gas is a commodity product, there will be negligible effects of the marketing campaign on upstream operations. Most of the effect will be felt in the downstream operations. Hence, following are the estimates from the Marketing department in 3 possible scenarios

NPV of the project is positive = 5.7 bn USDROI of the project is very high = 96% (Calculations given in appendix)

3 Drop in BP Share Pricehttp://newtermlifeinsurance.net/bp-stock-price-drop-since-oil-spell-begins/http://www.dailyfinance.com/story/investing/bp-stock-plunges/19510758/

Future Scenarios

Successful

Highly Successful

Moderately Successful

Failure Failure

Target NGO Partner

Implementation of the Marketing Plan in the whole Value Chain

Michael Porter Diamond diagram can be used to demonstrate the effect of sustainability initiative on the overall profit margins for the business. There are 2 types of activities highlighted by Michael porter1. Primary Activities - Activities that are directly concerned with creating and delivering a

product (e.g. component assembly); and packaging

2. Support Activities – Activities which are not directly involved in production, but may increase effectiveness or efficiency (e.g. human resource management).

Primary Activity Description

Inbound logistics Increase the proportion of long term

Cost of

inbound

logistics

reduced by

long term

shipping

contracts

Lead

Industry in

terms of

discharge

and waste

treatment

Long term

downstrea

m contracts

will reduce

outbound

logistics

cost

Loyalty

enables

higher

premium

and

demand

Higher

Engage-

ment

Infrastructure development increased safety and sustainability deriveEmployee motivation effects Engagement and support for the image makeover of BP

Procurement of long term leases for the Oil and Gas wells will decrease procurement costs

Technology improvement for higher productivity, margins and safety

leases in the overall sourcing

Cost of receiving, storing, and carrying

inventory will be lower

Transportation scheduling stability will

reduce logistics cost

Long term contracts with pipeline and

shipping tanker companies will ensure

stability in freight charges

Operations Use organic packaging for lubricants

Increase audit standards for Sub

contractors for all the project by using

the highest standards of OHSA and HSE

Appoint 3rd party audits for

subcontractors works

Environment and safety risk reduction

will reduce the insurance cost for

operations.

Outbound logistics Loyalty program will reduce the cost of

distribution, warehousing and manpower.

Marketing and sales Collaborate with the NGO, technical

expert and media to gain greater mind

share

Service Customer service and understanding of

his needs and concerns will increase

Loyalty

Higher loyalty will help in introduction

of premium products, which results in

higher margins

Secondary Activity Description

Procurement Liaison with local governments of the

major oil producing nations such as

Middle East and Africa will enable lower

Exploration lease acquisition cost.

Human Resource

Management

Recruiting will be exclusively based on

the local population profile in all the

three components of value chain – raw

material sourcing, processing and sales.

Increased training of staff will increase

productivity per person.

Technology

Development

Increased role of IT and banking

technology will reduce the retail fuel

stations and Oil & Gas distribution cost.

Infrastructure It is easy to plan out infrastructure

spending for stable demand and safe

operations

This will reduce the cost of funding the

project (because cost of funding

increases if the risk is lower)

V. Communication Strategy 1. Collaborate with Greenpeace (Thank you BP Campaign)

In 2008, BP was awarded the “Emerald Paintbrush4” award and BP was nominee for the award again in 2009. Hence, BP image had been tarnished a lot by Greenpeace in last couple of years. BP will show its commitment to alternative energies by investing $3bn in Alternative energies. This will provide a greater push to the BP’s image. Our lobbyers in Green peace will force it to go to the public with new campaign on – “Thank You BP”. This campaign will highlight that BP had emerged stronger out of the crisis and the new BP is really credible.

Also the campaign will feature the new $2bn investment in to making the supply chains and business operations more sustainable in near immediate future.

Lobby with Greenpeace to include the recent spending in both Sustainable operations and Alternative Energy into total spending into new initiatives ($2bn +$ 3bn = $5bn). Greenpeace to be forced by lobbying to come up with new advertisement that BP is now

4 GreenPeace Award for Green Washing by companieshttp://weblog.greenpeace.org/makingwaves/archives/2008/12/bp_wins_coveted_emerald_paintb.html

spending 22% instead of just 7 % on green initiatives. Hence, they want to thanks BP for accepting their voice

(Please see attachment for the advertisement campaign)

2. In this campaign, Books, study material and other aid material will be collected at the retail fuel stations of BP. These books will be later distributed to the African (Nigeria in our case) for distribution.

VI. Appendix

1. Expenses

S.      No. Expense Item Estimated (m $)

Basis of Cost Estimation

1 Internal Mobilization resources for sustainability in Supply chain and business operations for OSHA (Occupational Safety and Health Administration)

2000 BP cost estimation by top Management Accounting department

2 Survey and Research 10 Average of Quotations from Ogilvy and Mather, Lintas, Publicis and other PR agencies

3 Organizing events of Key Opinion Leaders of HSE (Health, Safety and Environment related) in Oil & Gas Industry

50 Estimation for sum of cost of all possible events given by Marketing Department

4 Facilitating unaccounted activities of Key Opinion Leaders in Oil & Gas Industry

200 PR and Corporate Relations department estimation

5 Cost of lobbying with other industry Members to build multilateral agreements on Offshore drillings and explorations in future

5 Joints Events and Visits with Members for regulatory Authorities

6 Cost of Legal Fight against subcontractors

100 Estimation by Legal Department and other top notch legal firms

7 Advertising and publication cost to make people more aware about HSE initiatives and record of BP

100 Marketing department Estimation

8 Cost of sponsoring NGO/Industry Body events / Activities to showcase BP track record on HSE

50 Cost of Identification, liason and collaborating in events and campaigns

9 Cost of Collaborating / Accounted / Secret Activities with big Media Houses to defame Subcontractors and clean up the image of BP

300 PR and Corporate Strategy Department Estimation

10 Contingency and risk Management cost

100 McKinsey / BCG / AT Kearney cost estimation

11 Extra Strategic Losses due to 3000 E&Y / PwC / KPMG and internal

investment into Alternative Energies and other initiatives

strategy department estimation

　 Total 5915 　

2. WACC (Weighted Average Cost) of BP

Where: Re = cost of equity Rd = cost of debt E = market value of the firm's equity D = market value of the firm's debt V = E + D E/V = percentage of financing that is equity D/V = percentage of financing that is debt Tc = corporate tax rate We will use WACC5 to determine the Net Present Value (NPV) of our marketing project

3. ROI (Return on Investment Calculations) considering all possible scenarios Assumptions for simplifications of Calculations – Due to lack of time and resources for research, I have made the following assumptions for ROI calculations

a. Downstream Revenue ( from 2009 Income Statement)b. Assuming this return will be realised in 3 years, a year hereafterc. Assuming 50% of BP revenues are from Downstream opearation which will

5 WACC calculations mdi.typepad.com/blog/files/exxonmobil_energizing_change.ppt

have the real effect of marketing campaignScenario Analysis Highly

successfulModerately Sucessful

Failure

Probability 20 70 10Expenses in each scenarioin bn USD

5.9 5.9 5.9

Increase in Revenue in Each Scenario%age Increase

20 10 -10

Down stream Revenues 123 123 123

Absolute increase over revenue base of 246 bn USD

147.6 135.3 110.7

Net Gain in each scenario 18.7 6.4 -18.2Absolute Return 3.74 4.48 -1.82

ROI CalculationsTotal Return on the Marketing expense

6.4

Return per year 2.1

WACC 5.9

　 　NPV (year 1 Cash Flow) 2.0

NPV (year 2 Cash Flow) 1.9

NPV (year 3 Cash Flow) 1.8

　 　Total NPV 5.7

　 　ROI (%) 96.4

4. Green Peace ( Thank you BP campaign) Attachment as PPT file