BP and the Consolidation of the Oil Industry, 1998-2002

Forest L. Reinhardt; Ramon  Casadesus-Masanell; David J Hanson

Case | HBS Case Collection | March 2002 (Revised January 2010)

BP and the Consolidation of the Oil Industry, 1998-2002

by Forest L. Reinhardt, Ramon Casadesus-Masanell and David J Hanson

Abstract

Examines the economics of the oil and gas industry with a focus on 1998 through 2001. Discusses the rationale behind using a growth in scale as a means to increase profitability and to gain competitive advantage. Also examines the classic strategic implications of vertical integration and questions the necessity of remaining vertically integrated in today's markets. During 1998-2001, the industry structure changed dramatically with the occurrence of a wave of merger activity. Set at the end of 2001, as BP's chief executive, Lord John Browne, ponders the company's future. BP set off the merger activity in 1998 with its combination with Amoco. Other major oil concerns quickly followed suit. Several large and dominant firms, termed "supermajors," separated themselves from the rest of the competitors. Although a large number of independent specialty firms also exist, the supermajor firms no longer believe them to be direct competitors. After the case discussion, students should be able to: 1) understand the basic economics of the oil and gas industry, 2) analyze the rationale behind vertical integration strategies, 3) analyze why the industry restructuring occurred, and 4) understand the economies of scale of the supermajor firms as well as the potential problems their immense size could create.

Keywords: Non-Renewable Energy; Growth and Development Strategy; Industry Structures; Competitive Advantage; Consolidation; Horizontal Integration; Vertical Integration; Energy Industry;

Language: English

Format: Print

37 pages

Educators Purchase

Citation:

Reinhardt, Forest L., Ramon Casadesus-Masanell, and David J Hanson. "BP and the Consolidation of the Oil Industry, 1998-2002." Harvard Business School Case 702-012, March 2002. (Revised January 2010.)

Trust Merchant Bank, a leading bank in the Democratic Republic of Congo, needs to decide whether to enter the soon-to-be-liberalized insurance industry. Since its founding in 2004, TMB has played a pivotal role in reshaping the DRC banking landscape. In TMB’s early years, existing banks in the DRC were almost exclusively focused on corporate clients in the major cities. In contrast, TMB targeted underserved towns and focused on retail clients across all income levels, offering them no fees for deposits or withdrawals. These services distinguished TMB from competitors and enabled its rapid growth to become one of the largest banks in the DRC. More recently, TMB’s launch of the mobile banking platform Pepele Mobile, the first of its kind in the country, strengthened TMB’s mission of inclusive finance by providing access to a broader population. In 2018, the Congolese government decided to open up the insurance industry, formerly a monopoly of the state-owned and acutely mismanaged Société National d’Assurances (SONAS). TMB is considering applying for the newly available insurance licenses as the bank is well-positioned to capitalize on its existing banking infrastructure to begin selling insurance. On the one hand, if TMB enters insurance, there is no guarantee that the Congolese people will react favorably to the bank’s new offering. Furthermore, TMB will need significant resources and internal capabilities to successfully navigate this uncharted territory. On the other hand, perhaps growth potential for TMB in banking will become increasingly limited as its competitors also focus on financial inclusion. In this new context, perhaps it is time to try something new. The benefits of TMB’s focus on customer service and financial inclusion could carry over to the insurance sector.

Case | HBS Case Collection | September 2019 (Revised May 2020)

Keroche (A): Fighting for Share in the Kenyan Alcoholic Drinks Market

Ramon Casadesus-Masanell and Pippa Tubman Armerding

This case discusses the challenges faced by Kenyan alcoholic drinks producer Keroche Industries Limited in 2003, when the Kenyan government accused the company of manufacturing and selling substandard alcoholic drinks, revoked its liquor licenses, and shut down its manufacturing facility. At the same time, the multinational East Africa Breweries Limited (EABL) was planning to enter the same low-income market as Keroche. The husband and wife duo Tabitha and Joseph Karanja had founded Keroche in 1997 with the aim of providing Kenya’s low-income consumers with a cheap and safe alcoholic drink alternative, since these consumers frequently turned to unregulated, informally brewed alcohol that could blind or even kill those who drank it. However, the government was now claiming that Keroche, too, produced substandard drinks. Tabitha Karanja was convinced that EABL was behind these government attacks. The case describes the history of Keroche and EABL, and asks what Tabitha Karanja might do now to combat the allegations of the government and respond to the factory closing.

Keywords: Keroche; alcohol; wine; manufacturing; informal market; regulation; illicit; illegal; shutdown; factory; low-income consumers; multinational; local; government; allegations; accusations; negative press; EABL; Tusker; beer; SAB; chang'aa; Naivasha; Rift Valley; East Africa; lawsuit; legal battle; Business Ventures; Business Exit or Shutdown; Business Growth and Maturation; Business Startups; Production; Safety; Quality; Distribution; Small Business; Family Business; Crime and Corruption; Customer Focus and Relationships; Decisions; Income; Demographics; Geographic Scope; Geographic Location; Goods and Commodities; Government Legislation; Growth and Development; Business History; Lawsuits and Litigation; Laws and Statutes; Lawfulness; Goals and Objectives; Consumer Behavior; Market Entry and Exit; Problems and Challenges; Social Issues; Poverty; Strategy; Competition; Entrepreneurship; Manufacturing Industry; Food and Beverage Industry; Kenya; Nairobi; Africa;

Citation:

Casadesus-Masanell, Ramon, and Pippa Tubman Armerding. "Keroche (A): Fighting for Share in the Kenyan Alcoholic Drinks Market." Harvard Business School Case 720-390, September 2019. (Revised May 2020.) View Details

Cite View Details Educators Purchase

This case discusses the Kenyan government’s decision to increase excise taxes on wines in 2007. The tax increase would cause an average increase in price of 367% on Keroche’s fortified wines. Meanwhile, Keroche’s competitor EABL had effectively lobbied the government for its Senator beer to receive a zero-tax rating. Since Keroche’s wines targeted low-income consumers, Tabitha Karanja knew they would no longer be able to buy its products after the price hike. To make matters worse, Keroche was in the middle of building a brewery, with plans to enter the beer business in 2008. Now Tabitha Karanja had to decide how to react to this tax increase. One option was to lobby the government for a repeal of the tax increase (a long and costly process). Another was to abandon the wine business altogether, either in favor of the vodka Keroche already produced or another alcoholic drink.

Faculty & Research

BP and the Consolidation of the Oil Industry, 1998-2002

Abstract

Citation:

About the Authors

More from these Authors