- Subject: Strategic Management. - Mandatory book for this week's assignment (file attached - please include in citations): Rothaermel, F. T. (2013). Strategic management: Concepts. New York: McGraw-

B ack g ro und

O n A pril 2 0, 2 01 0, a n e xp lo sio n o ccu rre d o n B P’s D eepw ate r H oriz o n o il d rillin g r ig

o ff th e L ouis ia na c o astlin e, k illin g 1 1 w ork e rs . T he s u bse quen t o il s p ill c o ntin ued

unab ate d fo r o ve r th re e m onth s. It r e le ase d a n e stim ate d 5 m illio n b arre ls o f c ru de o il

i n to th e G ulf o f M exic o , c a usin g th e la rg est e nvir o nm enta l d is a ste r in U S h is to ry . T he

cle a nup a lo ne c o st B P $ 14 b ill io n, a nd tw o o f it s e m plo ye es e ve n fa ce d m ansla ughte r

ch arg es.

Te ch nic a l p ro ble m s a sid e, m an y e xp erts a rg ued th at B P’s p ro ble m s w ere s yste m ic

b eca use m anag em ent h ad r e peate dly fa ile d to p ut a n a dequate s a fe ty c u lt u re in

p la ce . In 2 005, fo r e xa m ple , B P e xp erie nce d a c a ta str o phic a ccid ent a t a T e xa s o il

r e fin ery , w hic h k ille d 1 5 w ork e rs . A y e ar la te r, a le akin g B P p ip elin e c a use d th e

la rg est o il s p ill e ve r o n A la ska ’s N orth S lo pe. B P’s s tr a te gic fo cu s o n c o st r e ductio ns

in it ia te d a fe w y e ars e arlie r, m ay h ave s ig nif ic a ntly c o m pro m is e d s a fe ty a cro ss th e

board .

In t h e a fte rm ath o f th e G ulf o il s p ill, B P fa ce d th ousa nds o f c la im s b y m any s m all

b usin ess o w ners in th e to uris m a nd s e afo od in dustr ie s. T hese b usin ess o w ners w ere

n ot p ow erfu l in d iv id ually , a nd p urs u in g v a lid le gal c la im s m ea nt fa cin g p ro tr a cte d a nd

exp e nsiv e c o urt p ro ce edin gs. A s a c o lle ctiv e o rg aniz e d in a p ote ntia l c la ss-a ctio n

la w su it , h ow eve r, th ey w ere p o w erfu l. M ore ove r, th eir c la im s w ere b acke d b y th e U S

gove rn m ent, w hic h h as th e p ow er to w it h dra w B P’s b usin ess lic e nse o r c a nce l

cu rr e nt p erm it s a nd w it h hold fu tu re o nes. C olle ctiv e ly , th e s m all b usin ess o w ners

a lo n g th e G ulf C oast b eca m e p ow erfu l B P s ta ke hold ers , w it h a le git im ate c la im th at

need ed to b e a d dre sse d. In r e sp onse , B P a gre ed to p ay o ut $ 8 b illio n to s e ttle th eir

c la im s. T a ke n to geth er, th e m oneta ry d am ages o f th e D eepw ate r H oriz o n d is a ste r

alo n e h ave c o st B P a bout $ 22 b illio n to d ate , n ot to m entio n t h e lo ss in r e puta tio n a nd

good w ill.

E ve n s o , th is w as n ot th e e nd o f th e s to ry fo r B P. A ddit io nal fin es o f u p to $ 20 b illio n

m ay s till c o m e if B P is fo und to h ave c o m mit te d “ g ro ss n eglig e nce .” M ore ove r,

c la im in g th at B P d is p la ye d a “ la ck o f b usin ess in te grit y ” in h a ndlin g th e G ulf o il s p ill,

t h e E nvir o nm en ta l P ro te ctio n A gency ( E PA ) b anned B P fr o m a ny n ew c o ntr a cts w it h

t h e U S g ove rn m ent. If th e E PA d ecis io n s ta nds, th e b an w ould p ut B P a t a m ajo r

co m petit iv e d is a dva nta ge. It w ould b e u nable to a cq uir e n ew le ase s fo r o il fie ld

e xp lo ra tio n in th e U S, o r to c o n tin ue a s a m ajo r s u pplie r o f r e fin ed fu el to th e a rm ed

fo rc e s.

T he Q uestio n ( 2 0 P oin ts )

B P’s e xp erie nce in th e G ulf o f M exic o h as m ade it th e p oste r c o m pany fo r h ow n ot to

m ana ge s ta ke hold er r e la tio nsh ip s e ff e ctiv e ly . W hat a dvic e w ou ld y o u g iv e to B P’s

m ana gers in o rd er to h elp th em c o ntin ue to r e build s ta ke hold er r e la tio nsh ip s in th e Gulf r e gio n? H ow c a n B P r e pair it s d am aged r e puta tio n? B ra in sto rm w ays th at to p

m ana gem ent m ig ht le ve ra ge th e e xp erie nce g ain ed b y r e actin g in th e G ulf a nd u se

th at k n ow le dge to m otiv a te lo ca l m anagers a nd e m plo ye es in o th er lo ca le s to b uild

s ta ke hold er r e la tio nsh ip s p ro activ e ly s o th at B P a vo id s th is ty p e o f n egativ e p ublic it y .