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Business and Finance

British Petroleum Financial Analysis

Performance Strategy

Financial Analysis (from 2013 – 2017)

British Petroleum has been having fluctuating sales revenues from 2013 to 2017. It had sales revenue of $396217 in 2013, and it declined to $ 358678 in 2014. The growth trend of sales revenue is at a declining rate from 2013 to 2016 and started to rise again in 2017 as shown in the revenue growth trend curve shown below.

BP is expected to have a sales target of $ 269,341 in 2018, 281 131 in 2019, and $ 264,518 in 2020. The increase in sales will be generated from the sale of petroleum products, which are sold in more than 80 countries across the world. Its central sales revenues come from oil products, which it explores, produces, refines, and distributes in the global market. There is another source of revenue, such as power generation and trade in other energy activities, that contributes towards its increase in sales revenues.

Year 2015 2016 2017 2018 2019 2020
Sales 222 894 183 008 240 208 269 341 281 131 264 518
EBITDA 24 010 16 542 27 536 32 530 34 152 35 505
EBIT 8 791 2 037 11 952 16 157 16 788 18 613
EBT -9 571 -2 295 7 180 13 389 15 569 17 754
Net income -6 484 115 3 389 8 644 9 196 10 301

BP improves its sales revenues through the addition of complementary services to its existing products. It also sells other sources of energy apart from petroleum products, such as gas. BP explores, produces, refines, and markets different sources of energy. The addition of complementary services helps it attract many customers, who increase its sales revenues. BP also improves its sales revenues through the extension of the geographic market area. This strategy is essential to BP because it opens the market for its products. For BP to increase its sales revenues further, it also has to enter into cooperative sales agreements with other companies dealing with complementary products to help it sell its products. It collaborates with companies such as Shell, Total, and others to sell its products.

BP also improves its sales revenues through the provision of exclusive discounts that make it different from its competitors. It offers quantity discounts to its customers who buy its petroleum products in large quantities. BP also provides tie-in discounts by ensuring that it sells two or more different products together. This helps it increase its sales volume and attract more customers to its products. Finally, the increase in sales revenue can also be enhanced through diversification. BP has to introduce many more products to develop exponential growth. It is important for BP to identify the product that the target customers prefer most in the market. This will attract many customers and increase their satisfaction.

Fiscal Year ending 2013 2014 2015 2016 2017
Revenue 396217 358678 225982 186606 226681
Sales difference -37539 -132696 -39376 40075
percentage differences from year to year 9% 37% 17% 21%

BP had a negative percentage of sales difference from 2013 to 2016. Its change in sales is fluctuating, and it started to increase in 2017 by 21%. This increase in sales revenue was due to the attraction of new customers through the above strategies.

Balance Scorecard

Objectives Key measures Targets Initiatives
Financials -To increase sales revenues

-To increase profitability

-To enhance shareholders earnings

-Sales growth rate

-Profit margins

-Dividend payout ratio

$269 341M

$8 644M

-Diversification

-Provision of special discounts

-Addition of complementary services

Customers -To improve customer satisfaction

-To enhance customer retention ability

-To attract customers

-Customer retention ability

-Customer retention ability

-Customer attraction ability

-Retain all the existing customers

-Retain more customers

-Acquire new customers

-Increase product quality

-Offer products for sale at a lower price

-Offer special discounts to customers

Internal business processes To improve customer service

To enhance production capacity

To increase product quality

Product and service quality High product quality Assessment of product quality before distribution

Motivate employees

Learning and growth To improve the capability of workers

Create strategic awareness and motivation

Employees performance Competent workers Offer free training

Provide some training programs relating to the organization’s needs.

 

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