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TNK - BP Case Study

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Lulu Alanis

on 24 February 2016

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Transcript of TNK - BP Case Study

TNK - BP Case Study
Joint Venture TNK-BP
Problems of the joint-venture
BP approach to JV
Alliance vs Competitive
Conclusions
The joint-venture between AAR and BP was thought strategically but only financially (shares, costs, earnings) and power (who decides what).
The cultural aspect and different way of doing business was never considered and that cost them the business, since BP sold his 50% share to Rosneft in 2012.
Growth Strategy
Problems over time
CEO had no experience in Russia
High cost of BP's managers and engineering experts
Different ways of doing business (cut dividends vs. keep dividend cash flow)
Visa refusals
"Spy" accusations towards the CEO
Russians had control over government relations, legal affairs and security.
Tax costs
How could they have been overcome?
Outline requirements from both sides and align them to the joint-venture
Find a middle ground or independent parties to help solve disputes
Understanding the different cultures, ways of working and business models
Agree on a different share division (50-50) to guarantee there is no dispute and one company will be able to make decisions
Joint venture: Benefits and risks
Reasons: Joint-venture (BP and AAR)
For Russia
: Opportunity to get access to external technology.

Deal:
$6.8 billion + BP's know-how in exchange of access to Russian oil reserves estimated at 4.1 billion barrels.
For BP
: Opportunity to enter (through partnership) to the Russian Oil Industry
and
the attractiveness of Russian natural resources (eighth largest oil reserve in the world and the largest natural gas reserve).
Good start at mutual terms (50-50 split) which lead to growth

When issues rose, both parties tried to cover their back

Joint analysis and implementation could have been able to resolve issues sooner
No loss of jobs

Both companies retain ownership and power

Mutual Growth
Organic Growth
Reliance on own resources

No need to relinquish control and power
Whether both Alliance and Acquisition
enforce points mentioned above
Drawbacks


Culture clash and integration problems

Anticipated gains do not materialize

Risk of becoming dependent on partner firms

Protection of proprietary
technologies
,
knowledge bases
.
Benefits
The lower investment costs and risks for each partner by facilitating resource pooling and risk sharing
More flexible organizational forms and allow for a more adaptive respone to changing conditions.
Growth Strategy Matrix (examples)
Increasing the firm’s scale of operations and market share.
Expanding a firm’s geographic coverage.
Extending the firm’s business into new product categories.
Gaining quick access to new technologies or complementary resources and capilities.
It helps build, sustain, or enhance a core competence or competitive advantage.
Block a competitive threat.
Increasing the bargaining power of alliance members over suppliers or buyers.
Opening up important new market opportunities.
Mitigating significants risk to a firm’s business

Alliance
Full transcript