Strategy for BP investment in Norway Case Study Example | Topics and Well Written Essays - 500 words

Strategy for BP investment in Norway - Case Study Example This investment strategy has been especially popular in the last thirty years. For example, joint ventures between European firms and foreign-based firms have increased by almost 30% since 1985 (Hess & Siegwart, 2013). While not all joint ventures in the oil and gas industry have been successful in the past, BP should use a joint venture for several reasons, most importantly because of the capital-intensive nature of the oil and gas industry. Using the joint venture strategy has become popular for oil and gas companies operating in foreign markets because it saves money. Along with metals processing and mineral extraction, oil and gas exploration and development is a capital intensive industry. Since Norways oil and gas industry is already well-developed, financing such an investment on its own would be a risky undertaking for BP, necessitating the use of a joint venture strategy to share costs and risk, as well as create economies of scale (Grandell et al, 2011). In addition, BP should use a joint venture strategy because of the high costs that will be involved in continuing their operations in such a capital-intensive industry. BP and other petroleum companies are heavily dependent on technology advances so as to achieve lower costs. A joint venture should enable BP to pool its personnel and funds with a Norwegian company with knowledge about the Norwegian petroleum sector in developing advanced technologies, specifica lly to reduce production and exploration costs, while also increasing profit margins. Ideally, BP and its Norwegian partner will contribute roughly the same amount of capital and resources into the joint venture, although Norway does not allow foreign companies to own majority stakes in their oil sector (Grandell et al, 2011). International financial institutions like the WTO, World Bank, and the IMF have been heavily involved in fostering international