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Nguyen Viet Phong F05-173
BTEC HND IN BUSINESS (FINANCE)
ASSIGNMENT COVER SHEET
NAME OF STUDENT Nguyễn VIệt PhongREGISTRATION NO. F05-173UNIT TITLE Unit 1: Business EnvironmentASSIGNMENT TITLE Organisations in their EnvironmentASSIGNMENT NO 1 of 2NAME OF ASSESSOR Jubred A. PeñanoSUBMISSION DEADLINE November 20, 2012
I, __________________________ hereby confirm that this assignment is my own work and not copied or plagiarized from any source. I have referenced the sources from which information is obtained by me for this assignment.
________________________________ _________________________
Signature Date
----------------------------------------------------------------------------------------------------------------FOR OFFICIAL USE
Assignment Received By: Date
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Unit Outcomes
Outcome Evidence for the criteria
FeedbackAssessor’s
DecisionInternal
Verification
First attempt
Re-work
Understand the
organisational purposes of
business
LO1
Identify the purposes of
different types of organisation
1.1
Describe the extent to which an organization
meets the objectives of
different stakeholders
1.2
Explain the responsibilities
of an organization
and strategies employed to meet them
1.3
Understand the nature of the national
environment in which
businesses operates
LO2
Explain how economic
systems attempt to allocate resources effectively
2.1
Assess the impact of fiscal and monetary
policy on business
organizations and their activities
2.2
Evaluate the impact of
competition policy and other
regulatory mechanisms on the activities of
a selected organisation
2.3
Merit grades awarded M1 M2 M3
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Outcome Evidence for the criteria
FeedbackAssessor’s
DecisionInternal
Verification
First attempt
Re-work
Distinction grades awarded D1 D2 D3
Assignment( ) Well-structured; Reference is done properly / should be done (if any)
Overall, you’ve
Areas for improvement:
ASSESSOR SIGNATURE DATE / /
NAME:
(Oral feedback was also provided)
STUDENT SIGNATURE DATE / /
NAME :
FOR INTERNAL USE ONLYVERIFIED YES NO
DATE :
VERIFIED BY :
NAME :
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A REPORT OF BRITISH PETOLEUM
Prepared for:
Jubred A. Peñano (Lecturer)
Course: Business Environment
Banking Academy, Hanoi
BTEC HND in Business
Prepared by:
Nguyen Viet Phong
Registration No.: ITP F05-173 (F05 A)
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Submit date: 19th November, 2012
Executive Summary
Vietnam is developing country and has a huge potential for any company to
penetrate into and implement their business plans. The economic system, resources, and
the policies of Vietnam also can meet the requirements of every international firm in
general and BP in particular to launch their business plan there. In this assignment, the
author has conducted many researches to gather information about the characteristics of
BP and the impact of Vietnam business environment on this company.
In my reports, I've done some research on the company British Petroleum as follows:
You are required to identify the legal structure and type of the organization and state the purposes such as mission, values, aims, profits, market share, goals, objectives of selected organization (1.1)
Describe the extent to which selected organization achieves the objectives of stakeholders. Identify the stakeholders, conflict of expectations and satisfaction the stakeholders objectives (1.2)
Explain the legal responsibilities of the selected organization and strategies employed to meet objectives of stakeholders (1.3)
Explain how economic systems in your country (Viet Nam) attempt to allocate and make effective use of resources available within the country (2.1)
Assess the impact of fiscal policy, monetary policy economy on selected organization and stakeholders in your country (2.2)
Evaluate the impact of competition policy and other regulatory mechanisms
on the activities of a selected organization (2.3)
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Table of contents
Executive Summary.................................................................................................................................................5
Table of contents......................................................................................................................................................6
Introductions............................................................................................................................................................7
1.1 Identify the purposes of different types of organization within British Petroleum............................................9
1.1.a The legal structure of British Petroleum:...................................................................................................9
1.1.b Vision, mission, values, objectives of British Petroleum:.........................................................................9
1.1.c: Conclusion................................................................................................................................................11
1.2 Describe the extent to which an organization meets the objectives of different stakeholders.........................11
1.2.a About Stakeholders of BP.........................................................................................................................11
1.2.b The extent of BP to meets the objectives of difference stakeholders..................................................15
1.3 Explain the responsibilities of an organization and strategies employed to meet them...................................17
1.3.1 Evaluation for Responsibilities of BP:...................................................................................................18
1.3.1a Management Responsibilities:.............................................................................................................18
1.3.1b Social Responsibilities:.......................................................................................................................19
1.3.1c Environmental Responsibilities:..........................................................................................................19
1.3.1d Ethic and Business..............................................................................................................................20
1.3.1e Public Relations and Corporate Image................................................................................................20
2.1 Explain how economic systems attempt to allocate resources effectively.......................................................20
2.1.1 Definition of economic systems.............................................................................................................20
2.1.2 Economic systems attempt to allocate resources effectively..............................................................21
2.1.3 The effectiveness of the uses of the resources of BP............................................................................22
2.1.4 Economic system in Vietnam affects BP................................................................................................23
2.2 Assess the impact of fiscal and monetary policy on business organizations and their activities.....................23
2.2.1 The impact of macro-economic policy to Vietnam Economy and BP.................................................23
2.2.2 The impact of Global Economy to Vietnam Economy and BP..............................................................24
2.3 Evaluate the impact of competition policy and other regulatory mechanisms on the activities of BP............25
2.3.1. Impact of industrial policy.....................................................................................................................25
2.3.2. Impact of social welfare policy..............................................................................................................25
2.3.3. Impact of interest groups and pressure groups...................................................................................26
Conclusion..............................................................................................................................................................26
Reference................................................................................................................................................................27
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Introductions
In this assignment, my main research subjects are British Petroleum, major oil and gas companies of the United Kingdom. I also give some information that I have researched about Vietnam's economy in a number of stages. As well as the policies and activities of the Vietnamese economy has influenced the company British Petroleum. Here is some basic information about this company. BP is an international oil and gas company that operates in more than 80 countries, servicing its customers with fuel for transportation, energy for heat and lighting , as well retail services and petrochemicals products. The Company is split into two segments, Exploration and Production, and Refining and Marketing. Exploration and Production’s activities are three key areas. Upstream activities which include oil and natural gas exploring, field development and production. Another area is called Midstream and includes pipeline, transportation and processing activities related to its upstream activities. The third area is marketing and trading activities which are the marketing and trading of natural gas, including liquefied natural gas, together with power and natural gas liquids. Refining and Marketing’s activities include the supply and trading, refining, manufacturing, marketing and transportation of crude oil, petroleum and petrochemicals products and related services . BP is a global group, with interests and activities which cover main business segments of Exploration and Production, Refining and Marketing and Gas, Power and Renewable energy (NYtimes.com). As of 2009 BP had total assets of $ 235,968 million and total revenues of $ 246,138 million with the majority of their revenues coming from its refining and marketing business and the majority of their profits from Exploration and Production (BP.com).
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MAIN BODY
1.1 Identify the purposes of different types of organization within British Petroleum. 1.1.a The legal structure of British Petroleum:
The British Petroleum Company (BP) is an international oil and gas company that
operates in more than 80 countries. BP is headquartered in London, and the workforce is
about 92,000 people in 2008. In the same year, BP's worldwide network consisted of 22,600
locations branded BP, Amoco, ARCO, and Aral. BP stock is composed of original BP shares as
well as shares acquired through mergers with Amoco in 1998 and the Atlantic Richfield
Company (ARCO) in 2000. The company's shares are primarily traded on the London Stock
Exchange, but also listed on the Frankfurt Stock Exchange in Germany with the name is BP.
In the United States shares are traded in US dollars on the New York Stock Exchange in the
form of American depository shares (BP.com). So, with above information, we can see BP is
Public Limited Companies. And it’s also a Large and Multinational business.
1.1.b Vision, mission, values, objectives of British Petroleum:According to Mintzberg, Mission describes the organization’s basic function in society,
in terms of the product and services it produces for its clients (Business Environment, 2010,
p.26). So, we can understand the mission statement is the purpose of existence of the
organization, while the vision statement is where the organization is going in the future.
From what I could find in “www.BP.com”, although not specifically labeled a "Mission
statement”, BP has a published statement of "What We Stand For". And it’s: “We care
deeply about how we deliver energy to the world.” I think it really is BP’s mission. That
Mission statement is very short and easy to understand, so, the reader can understand why
BP has become one of the world's leading companies of petroleum. Above everything, that
starts with safety and excellence in their operations. This is fundamental to their success. BP
approach is built on respect, being consistent and having the courage to do the right thing.
As well as Mission statement, BP has a published statement of “What We Do” is: “We
deliver energy to the world”. Based on the definition of the vision, so, it is the Vision
statement of BP. Reading it, we can imagine the work that BP will do in the future. It is to
provide energy to the world. They find, develop and produce essential sources of energy.
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They turn these sources into products that people need everywhere. And BP strive to be a
safety leader in our industry, a world-class operator, a good corporate citizen and a great
employer.
Values are the goals or aims of the organization will have an ideology based on beliefs,
value and attitudes (Business Environment, 2010, p.25). So, the values of BP are known as
the statement "What We Value" in BP.com. And their values have 5 keys: Safety, Respect,
Excellence, Courage and One Team such the information below.
With these criteria in value, BP has achieved much success in global business; get the
trust from their customers. Moreover, BP are also much focused about environment
pollution. Employees in the company always try my best and work as a team to achieve the
best results.
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According to Mintzberg (1997), Goals are the intentions behind decisions or actions, the
states of mind that drive individuals or organizations to do what they do. And BP’s goals in
2011 are “Our goal is to grow operating cash flows to enable us to both invest for future
growth and increase distributions to shareholders”.(BP Annual Report and Form 20-F 2011,
p.37). With those goals, BP has been active and achieved very good results in 2011 with
Sales and other operating revenues are $ 375.517 million, Proved Reserves are 17.748
million barrels of oil equivalent (BP.com).
Objectives are normally quantified statements of what the organization actually intends
to achieve over a period of time. According to BP.com, BP’s objective is to create value for
shareholders by helping to meet the world’s growing energy needs safely and responsibly.
It’ means BP is working to enhance safety and risk management, earn back trust and grow
value. They are working to become a simpler business, with a clear focus on what they do
best. Their distinctive capabilities include exploration, operations in deep water, the
managing of giant fields and gas value chains, and their world-class downstream business –
underpinned by technology and relationships.
1.1.c: Conclusion . At present, the most important purpose of BP is the global energy supply. However,
they are still interested in environmental pollution, social issues, and more importantly,
profitable. And with the statement of mission, vision, values, goals, objective, BP has been
operating true to their original purpose and growing.
1.2 Describe the extent to which an organization meets the objectives of different stakeholders. 1.2.a About Stakeholders of BP
All enterprises have stakeholders; they are individuals or groups who have an
interest in how the enterprise performs because it affects them in some way. Simply,
stakeholders are likely to be affected by a proposed intervention (either negatively or
positively), or those which can affect the outcome of the intervention. And there are
eighteen groups of stakeholders divided into three broad types in each organization.
BP is one of the largest companies in the world, so they also have groups of
stakeholders relatively standard. These stakeholders have one very huge influence to the
operation of BP's business. Constructive dialogue with stakeholders helps BP to make
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responsible and sustainable decisions as a group. According to www.BP.com, they have
some main groups of stakeholder:
Industry
Board of directors
Local communities
Governments and regulator
Shareholder and analysts
Employees
Customers
Contractors and partners
Non- government organization
However, in this paper, we only learn about the main groups have a great influence
on BP. Addition to clarifying groups, objectives and the relevance of each group and how BP
solve problems and achieve their goals will be evaluate.
To identifies and assesses the effect of a different individual or group of stakeholders
on a company, we can use a strategy business tool, its Stakeholder mapping. Based on it, we
can evaluate the power of the parties involved, the likely impact of the power companies
and their lever of interest regarding the company.
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Within table above, we can understand about the group A, B, C, D as follows:
Group A: these stakeholders do not need much effort because they cannot pose a
threat because they have low interest and power.
Group B: These stakeholders have very high interest but have little power, so, in
order to maintain these groups, should provide information about the company for
them to do not miss any event.
Group C: These stakeholders may not see the level of their impact on the company,
so let's keep them satisfied. However, because they have low interest so they
unlikely to cause much disturbance.
Group D: These groups should be most interested companies to meet their
requirements so that they have enough power to serve the company and a high
degree of likelihood.
According to BP, the following table will show the importance of each stakeholder
group:
Broad Type Stakeholders
Stakeholders mapping
Key
players
Keep
satisfied
Keep
informed
Minimal
effort
Internal
stakeholders
Board of directors
Employees
Connected
stakeholders
Shareholders
Customers
External
stakeholders
Local community
Government and regulators
Non- governmental organization
Industry
Table 1: Types Stakeholders of BP
Internal stakeholders:
Board of directors: BP’s board of directors are highly involved in the crisis as
they are the decision making body of the organization, and have the power to
make managerial decisions and decisions about which initiatives that should be
taken to reduce the damage of the crisis.
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Employees: BP’s employees who do all the work of BP, an oil company, they
have the workers on the rig and the office staff. Therefore, they have enormous
influence and interest.
Connected stakeholders:
Shareholders: means who are interested in the business of BP.? They put their
money for BP business and wish to receive more dividends. The money they
spend corresponding to their power in BP. BP is Public Limited Companies, so
the number of their shareholders is extremely large and the small and medium
shareholders, they can only keep informed about BP.
Customers: Customers are the most important to the business of BP. They also
have relatively high power in BP. They connect with BP in the business and more
interested in the product, price, service, etc.; they have high interest. So BP
should take great care to customers.
External stakeholders:
Local community: Local community simply people, organizing activities around
BP workplace. They do not have much power for BP, but more interested in BP.
Because, with specific job-related BP oil - a product that affects everyone. So BP
need to keep informed for them.
Government and regulators: BP engages with governments on many fronts,
from consulting on environmental regulation to understanding our tax liabilities
and collaborating on community or entrepreneurial initiatives. In some places,
they work in partnership with governments through production-sharing
contracts. However, their attention to BP is not much, despite their great
power.
Non- governmental organization: This stakeholder has both low power and
interest for BP. they engage with regional and international non-governmental
organizations (NGOs) in a variety of ways. For example, new projects often
consult with relevant local and international NGOs, who may contribute valuable
insights into our plans and provide specialized expertise with understanding and
managing impacts.
Industry: The challenges the world faces in the energy future are too big to be
addressed by any single organization, so BP are working through business and
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industry groups to help establish standards and address complex energy
challenges. BP has their memberships in industry and business organizations,
such as Biofuels, Climate change, Ethics and Compliance. So the industry does
not interest in BP, but still have their high power
1.2.b The extent of BP to meets the objectives of difference stakeholders . Stakeholders have many goals to achieve. Each group of stakeholders has a
variety of different objectives. BP’s trying to implements those objectives day by day.
The following table is designed to clarify the objectives and what BP has done,
Type Stakeholders Objectives Achieved Not achieved
Internal stakeholders
Employees Job security
High salary
Job satisfaction and conditions
Connected stakeholders
Shareholders Possible capital growth
A steady flow of income
Growth of investment funds
External stakeholder
Government
and regulator
Tax
Environmental Protection
Table 2: Stakeholder objectives
Employees: Job security: BP needs employees who have the right skills for their roles and who
understand the values and expected behaviors that guide everything they do as a group. Despite of many such employees, BP has always respected their employees and treat them with the best possible. “We aim to ensure equal opportunity in recruitment, career development, promotion, training and reward for all employees, including those with disabilities. Where existing employees become disabled, our policy is to provide continuing employment and training wherever practicable.” (BP Annual Report and Form 20-F 2011,p.74)
High salary: Is one big company and with large revenues, salaries of employees working at PB are very high BP and works in BP always been one wishes for everyone. The average salary for British petroleum jobs is $61,000. Average British petroleum salaries can vary greatly due to company, location, industry, experience and benefits. (http://www.simplyhired.com, 2012)
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Job satisfaction and conditions: with such a large number of employees, in order to satisfy all requirements is not possible, but BP is still trying to create the best working conditions for their employees. Evidence is “The survey includes 10 questions which make up the employee satisfaction index. The overall employee satisfaction index score for 2011 (62%) was below the score from 2009 (65%) but above that of 2008 (59%).” (BP Annual Report and Form 20-F 2011,p.74)
Government and regulator:
Tax: As a multinational company and norms, BP always correct tax regulations in each country where their business. The amount of tax paid is huge and it contributes 1 no small part to the government. “The charge for corporate taxes in 2011 was $12,737 million, compared with a credit of $1,501 million in 2010 and a charge of $8,365 million in 2009. The effective tax rate was 33% in 2011, 31% in 2010 and 33% in 2009.” (BP Annual Report and Form 20-F 2011,p.57)
Environmental Protection: Although there are many efforts to protect the natural
environment, BP is still cannot control a serious accident. “The Deepwater
Horizon rig exploded on April 20th 2010 in the Gulf of Mexico killing 11 people
and the following oil spill caused massive environmental damage to the area
around the Gulf Coast”. British Petroleum, who owned the rig, was widely
criticized by both the public and the media due to its poor handling of the oil spill.
(BP.com, 2010)
Shareholders:
Possible capital growth: “In 2011 BP restored your dividend, and BP report that
they increased the dividend by 14% in February 2012, in accordance with their
policy.”(BP.com) BP is developing a stable and gradual recovery from the crisis.
And with the increase of the dividend, it will make BP's equity growth
Growth of investment funds: According to BP.com, BP will use additional
operating cash prudently. They want to use around half for increased investment
in their project inventory for growth, and around half for other purposes. This
may include increased distributions to shareholders through dividends or share
buybacks or repayment of debt.
Overall, by the efforts of business, research and development, BP has launched
the optimal operating strategy to meet their goals as well as other stakeholders.
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1.3 Explain the responsibilities of an organization and strategies employed to meet them
Every organization, whether large or small, whether activities and business in any
field, they have responsibilities for many aspects. BP also, their responsibility is also divided
into three basic types and they also have their own strategies to implement them. Following
table will clarify that.
Responsibilities of BP
Responsibiliti
es
Specific Responsibilities of BP Strategies Employed
Management
Responsibilitie
s
- Provide customers with the
best product and service.
- Give employees the best work
environment.
- Generate profits for
shareholders.
- BP cooperation in production of
electricity with Petro Vietnam and
EVN.
- The average salary for British
petroleum jobs is $61,000.
(simplyhired.com, 2012)
- Profit attributable to BP shareholders
for the year ended 31 December 2011
was $25,700 million and included
inventory holding gains. (BP Annual
Report and Form 20-F 2011-p.56)
Social
Responsibilitie
s
- Creating jobs for people
- Investment in education
- Investment in enterprise
development.
- BP has invested more than US$6
million in community projects across
Vietnam, with particular focus in Ba
Ria Vung Tau Province.
- BP has provided over US$620,000 in
sponsoring Vietnamese students to
pursue graduate studies in the UK
Environmental
Responsibilitie
s
- Funding for environmental
improvement activities.
- Investment in Science and
technology in environmental
- BP Vietnam has funded
environmental programs in Ha Long
Bay and Cat Ba total of $ 260,000.
- BP fund up to $1 billion for
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protection restoration projects that will restore
injured natural resources in the Gulf of
Mexico.
- Has 59 projects screened in early
planning for environmental impact
Ethic and
Business
- Business ethics
- Ethical practice
- Requirements of which apply to all
employees, such as anti-bribery and
corruption, anti-money laundering and
competition / anti-trust law
compliance.
- BP also operates a range of
compliance training and monitoring
programmes for our employees. (BP
Annual Report and Form 20-F 2011,
p.46)
Public
Relations and
Corporate
Image
- Communicate with and listen
to our customers.
- Create a good relationship
with the government
- BP uses a variety of methods,
including interviews, surveys, feedback
tools and marketing programmes.
- Training the Vietnam’s government
employees
1.3.1 Evaluation for Responsibilities of BP:
1.3.1a Management Responsibilities : For BP, responsible management is their top concern. BP has the specific responsibility
to care about customers, employees and shareholders. To expresses their responsibilities,
BP had Strategies employed positive:
Provide customers with the best product and service: It means BP must always focus
on research and development of their products to achieve customer satisfaction,
with BP, such things as fuel, petrol ... even, in Vietnam, BP cooperation in production
of electricity with Petro Vietnam and EVN. (vietbao.vn)
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Give employees the best work environment: After the customer, to have good
business results, BP regardless of its employees to meet them the best conditions to
work. Ensure safe and worthy salary is what employees would like. And the average
salary of employees in BP very desirable with $ 61,000. (simplyhired.com, 2012)
Generate profits for shareholders: to prove its business activities effectively, the
simplest way is to create more profits for shareholders. With their ability, BP has
given shareholders a huge amount is $ 25.700 million in 2011.
1.3.1b Social Responsibilities : Creating jobs for people: to demonstrate social responsibility, BP always takes
actions beneficial to the whole society. Every year, they create jobs for thousands of
people by recruiting staff for various positions. BP received both disabled people and
gives them a suitable works.
Investment in education: Focus on investment in education is also a way of
expressing social responsibility. BP should have practical impact on education in their
places of business. BP has provided over U.S. $ 620,000 in sponsoring Vietnamese
students to pursue graduate studies in the UK. (BP.com)
Investment in enterprise development: In a number of places where BP work, they
run a range of programmes to develop local supply chains and build the skills of
businesses. These range from financing for small and medium-sized enterprises to
sharing global standards and practice in areas such as health and safety. Such as BP
has invested more than US$6 million in community projects across Vietnam, with
particular focus in Ba Ria Vung Tau Province.
1.3.1c Environmental Responsibilities : Funding for environmental improvement activities: As an oil and gas company. BP
toxic products and have the ability to destroy the environment, so their
environmental responsibilities very large. During their activities, BP always have to
act in order to improve the environment, and protect the environment in which they
work. But that is not enough; BP also sponsors a large amount of money for activities
to improve the environment of the community. BP fund up to $1 billion for
restoration projects that will restore injured natural resources in the Gulf of Mexico.
BP Vietnam has funded environmental programs in Ha Long Bay and Cat Ba total of $
260,000
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Investment in Science and technology in environmental protection:
technological development in the protection of the environment and BP are
much focused, they invest a lot of money into the development of biofuels and
other environmentally friendly technologies… According to BP.com, they has
59 projects screened in early planning for environmental impact
1.3.1d Ethic and Business Business ethics: According to BP Annual Report 2011, they have requirements of
which apply to all employees, such as anti-bribery and corruption, anti-money
laundering and competition / anti-trust law compliance.
Ethical practice: BP also operates a range of compliance training and monitoring
programmes for our employees.
1.3.1e Public Relations and Corporate Image Communicate with and listen to our customers: BP uses a variety of methods,
including interviews, surveys, feedback tools and marketing programmes. Marketing
through television and print advertisements and other channels is the most visible
way in which BP communicates with customers. They have a responsibility to market
our products and our brand in ways that are consistent, truthful and compliant with
legal requirements.
Create a good relationship with the government: BP engages with governments on
many fronts, from consulting on environmental regulation to understanding our tax
liabilities and collaborating on community or entrepreneurial initiatives. In some
places, BP works in partnership with governments through production-sharing
contracts. They aim to maintain dialogue with all relevant government agencies,
ministries and regulatory departments at every stage of our presence in a country.
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2.1 Explain how economic systems attempt to allocate resources effectively 2.1.1 Definition of economic systems
An economic system is simply a society are trying to satisfy human needs and wants
by producing goods and services. Production of goods and services is affected by the limited
supply of factors such as labour, land and natural resources and capital. There are three
kinds of economic systems, named as:
Free Market Economy: is an economy which has government intervention is kept to
the minimum while supply and demand and the ability to pay influence decision
making.
Command Economy: is an economy which the government control what is produced,
how much is produced, the price and who the goods are available to.
Mixed Economy: is an economy combines elements of both free private enterprises
and intervention, in varying guises, by the state.
2.1.2 Economic systems attempt to allocate resources effectivelyBased on the features of economic systems and the specific case of Vietnam,
Vietnam has a mixed economic system. According to Vietnam-ustrade.org, Vietnam is now
in transition from a centrally-run to a market economy. The country’s Constitution
recognizes a socialist oriented multi-sector economy operating under both the market
mechanism and management by the State. Foreign and domestic private sectors are among
the economic sectors constitutionally recognized in Vietnam. There are currently state-
owned enterprises, state-private joint-stock companies, foreign invested enterprises,
domestic private firms, cooperatives and household businesses operating in the country. A
level playing field is being created to encourage all economic sectors to expand and develop.
However, Vietnam government still keeps controls of some kinds of business, like the
electricity, petroleum, and water. Therefore, there are few good sources which are cited as
the good conditions for the organization such as: Land and natural resources, Labour
resources, Capital resources.
Land and natural resources: Vietnam has natural material plentiful and rich
minerals, agriculture, forestry and fishery such as Coal, crude oil, zinc, copper, silver,
gold, manganese, iron. Agriculture, forestry, and fisheries (20.58% of GDP, 2010):
Principal products--rice, coffee, cashews, maize, pepper (spice), sweet potato, pork,
peanut, cotton, plus extensive aquaculture of both fish and shellfish species.
Cultivated land-12.2 million hectares. Land use--21% arable; 28% forest and
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woodland; 51% other. It is advantage for economy of Vietnam. Vietnam has used
this advantage as well as attracts foreign organization to invest in the country. The
government has been doing many things to protect natural material while using it to
improve economic.
Labour resources: human resources are always the most important factor to decide
the strength of the whole country. As of 1/4/2009, Vietnam's population: 85,789,573
people, second most populous country 13 in the world and 3rd in the region. The
young generation accounted 55% national population so that Vietnam has a major
advantage of labour resources.
Capital resources: Vietnam is developing country, so most of capital is from
investment’s foreign organization and loan from the World Bank. After Vietnam
joined in WTO, many foreign companies invested their money in Viet Nam. On the
other hand, Vietnam is invested from Official Development Assistance (ODA capital),
Foreign Direct Investment (FDI). Project no 1 has US$130 million in total capital, of
which $120million comes from ordinary capital resources (ORRC) and $10 million is
from the Asian Development Fund (ADF). The loan airs to assist Vietnam as the
country reform a number of state-owned enterprises and their affiliated companies
to improve their efficient and governance.
2.1.3 The effectiveness of the uses of the resources of BP
Labour resources: Vietnam has a large workforce can provide to BP's business
activities in Vietnam effectively. Vietnam's population is nearly 88 million and the
number of people in working age is around 51million, accounting for 57% of the
population. However, the quality of workers in Vietnam is quite low compared to
other countries in the region. Thus, if BP would like to have the best performance in
Vietnam, they have made many plans to improve the quality of their local labour. By
working with local government to train more workers and their employers.
Land and natural resources: land resources of Vietnam is a lot of potential, the total
number of unused land in Vietnam accounted for 10% of the total land resources, BP
offered many benefits to be able to build more projects in Vietnam. Moreover, the
amount of untapped crude oil in the waters of Vietnam is huge. So BP can make use
of the natural resources to do their business and profitable for them.
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Capital resources: Total investment in Vietnam has increased in many years. This
proves that Vietnam's economy is growing well and the Vietnam government is
expanding the policy to attract foreign investment and support foreign investors
such as BP.
2.1.4 Economic system in Vietnam affects BP
BP is an energy company working in the oil and gas industry that it is guaranteed by
the government of Vietnam. Therefore, it will be more difficult for BP to compete with the
Vietnam National Oil and Gas companies, domestic enterprises in the energy and gas
industry. Furthermore, according to Decree No.84/2009/ND-CP of Vietnam government
about petroleum business, any business activities in this industry must be under control of
the government, so BP cannot set the price for their products; they have to give a fixed price
as the Vietnamese government.
2.2 Assess the impact of fiscal and monetary policy on business organizations and their activities. 2.2.1 The impact of macro-economic policy to Vietnam Economy and BP
Macroeconomic policy is known as the government policy aimed at the aggregate
economy, usually to promote the macro goals of full employment, stability, and growth.
Common macroeconomic policies are fiscal and monetary (Economic Glossary, nd).There
are two common macro-economic policies: Fiscal policy and Monetary policy.
Fiscal policy involves the use of government spending, taxation and borrowing to
influence both the pattern of economic activity and also the level and growth of aggregate
demand, output and employment (tutor2u, nd).
Monetary policy directly affects cash flow and the economy of the country,
monetary policy affects economic activity through the four points that interest rates,
exchange rates and control money supply, control over bank lending and credit (BPP
Professional Education, BE, 2010, p.155).These are two important policies of
macroeconomic policy in Vietnam. They are an effective tool which helps the government
guide the whole economy.
Clearly, that fiscal policy affects every business. Financial policies related to
taxes, government spending, borrowing and debt. There are four types of taxes:
income tax, profit before tax (corporate tax), value added tax (VAT), import duties
and quotas. These taxes are collected in different ways (directly or indirectly) as on
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personal income, savings, profit. Corporate income tax will be reduced by 30%, 50%
VAT on the products made of aluminium fell from 3% to 0% (115/2010/TT-BTC
Circular of the Minister of Finance). 10% VAT applied to consumer goods, 5%
applies to goods and services related to agriculture, education, health care
(Government, 2008). However, the rate is still higher than many countries in the
world.
Fiscal policy impacts BP directly. Annually, BP has to pay corporate income tax for
government. The corporation tax is fixed at 25% profit of the company. BP has also pay VAT.
However, when the Government reduces 30% corporate tax in 2009, BP can keep a lot of
money.
Vietnam went through an economic crisis in 2009.Thanks to monetary policy, the
whole Vietnamese economy get rid destruction. At that time, the State Bank of Vietnam to
interest rate subsidies, tax deferred wage disbursement time. In the second quarter of 2009,
GDP increased by 4.5% and 5.8% during the third quarter. In 2010, the Vietnamese
government to change the exchange rate between VND and USD to 13%, higher than 3%
during the same period in 2009. This helps to maintain the balance of the economy and
reduce inflation. Monetary policy also strongly impacts on BP. While the interest rate stays
at high level, stakeholders would rather keep money in the bank than investing into BP. It
could be not good for the operation of BP.
2.2.2 The impact of Global Economy to Vietnam Economy and BP The economy is now dealing with the consequences of 2009 financial crisis. The
depression started in the United States and then led to others countries. According to VOA
news, East Asia has been hardest hit. In February, exports from China fell twenty-six percent
from a year ago. The World Bank estimates that up to three trillion dollars of public and
private loans in developing countries must be repaid that year.
When it affects the Vietnam, in the first quarter of 2009, the impact of the crisis
became apparent when GDP increased by only 3.1%. During the first eight months of the
year, Vietnam's export ratio only14.2% and the import ratio is worse - less than 28.2% of the
accumulation foreign currency decreased significantly from $ 23 billion (2008) USD16.5
billion (August, 2009).
BP has also been hit hard by the economic crisis. Due to the severe decline in the
export of Vietnam, BP has faced a major problem; it is the fuel demand of the domestic
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production activities will be reduced. Moreover, the Vietnamese Government has
implemented a number of policies to attract foreign investment and support. Therefore, BP
may lose the advantage of the policy support from the Government of Vietnam before.
2.3 Evaluate the impact of competition policy and other regulatory mechanisms on the activities of BP. 2.3.1. Impact of industrial policy
Industrial policy allows government to take an active role to support investment, to
encourage a faster rate of economic growth in industry, to halt the decline of the
manufacturing sector (BPP Professional Education, 2010, p.161).
A country wish growth and economic development will require the appropriate
economic policies in each stage of development. Among those policies, industrial policy is
the most important policy for large industrial contribution to GDP and is the driving force for
agri-cultural development as well as services. Because Viet Nam is developing country,
industrial policy is the most important policy is the core of the industrialization strategy.
However, the fledgling local companies are often unable to compete with
foreign companies. Therefore, the Vietnamese Government has launched a number
of industrial competition policies to protect Vietnamese companies to compete with
foreign companies in some industries. For example, in the oil and gas industry,
accounts Vietnam National Oil and Gas Company for 55% of the energy market,
accounts Vietnam National Oil and Gas Company for 25% of the energy market,
account Saigon Oil and Gas Company 10% of the energy market. That means that
only the remaining 10% for BP in the energy market. Therefore, BP will have to face
many difficulties in doing business in Vietnam with this case.
2.3.2. Impact of social welfare policy According to BPP Professional Education (2010), social welfare seeks to protect and
directly improve people’s standards of living. In Vietnam, the welfare policy has been
applied for everybody, especially disabled people, wounded soldiers, and the victims of
dioxin. There are about 5 million Vietnamese, accounted for more than 6% of the
population, are disabled. These people are treated equally to other normal ones.
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Vietnamese government lays down a strategy to build schools for disabled children so that
they can have a chance to gain the knowledge like every student.
From 2011 to 2020, the government will try to address the issues in three main
areas: labour markets, social insurance and poverty reduction. According to Decree No.
70/2011/NĐ-CP and Decree No. 98/2009/ND-CP the government increased the minimum
wage to 1,400,000 VND to 2,000,000 VND will push up the labour cost for the company.
Also, Vietnamese Labour Law 1994, last edited in2007 stated that employees must have the
right to be provided health insurance in the company. BP will have to increase its labour
costs in providing its employees with protection from not only diseases and accidents but
also other things such as get pregnant etc. On the other hand, according to the Vice Minister
for Labour, War Invalids and Social Affairs (MOLISA) NguyenThanh Hoa, the government will
try to put into practice the policies including providing of unemployment benefits to the
unemployed. This is good sign for BP as it will not have to worry about straining its budget
to buy insurance which also covers the risk of losing jobs for their employees. Therefore, the
employees and the trade union of BP will be able to feel more secured about the workers’
source of income if they are to be unemployed.
2.3.3. Impact of interest groups and pressure groups
Interest groups and pressure groups have a major impact on business operations of BP.
BP always interested in their employees and the remuneration policy with talent.
Association of employees have high requirements with BP. And they will stand to ensure the
rights of workers in BP. Forced BP to implement their obligations to their employees.
Conclusion
Business environment around BP is quite complex. BP has to compete with many competitors to maintain its position in the energy market. However, the developing of Vietnam economic also provides BP many opportunities to widespread the popularity as well as expand its business. The author recommends that BP should take
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a deep research into the demand of Vietnam market for the standard of petroleum products to improve their outcome in order to overcome their competitors step by step to retain more customers and gain more profit.
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