Consolidation Of Pipes At BP: Mergers And Acquisitions Strategy (Term Paper Sample)

Pipes consolidation at BP Name Institution Abstract Consolidation occurs within individual companies as well as in industries. A company can decide to combine operations due to corporate restructuring or two companies operating in the same industry might agree to merge operations. Carrying costs are the costs which a business incurs on maintaining its intended level of inventories. It includes storage costs, for instance, warehouse, rent, fire insurance, spoilage costs, etc. As well as opportunity cost of capital tied up in inventories. Keeping track of carrying costs is fundamental to any business as it is a significant component of total cost stocks. Keywords: consolidation strategy, carrying costs, inventory, inventory management Consolidation of pipes at BP BP is the world’s largest providers of fuel transportation, energy for heat and light and petro-chemical products. Consequently, the cost of current inventory costs varies between companies. For instance, if a company that has large cash balance depicting no attractive investment options, has excess space for storage and its products have a low probability for deterioration, the company's holding or carrying costs are low. On the other hand, a company with enormous debt, little space, and products being susceptible to deterioration, the holding costs are high. Realistically, decision making is apt; while identifying the economic order or production quantity, for example, it is crucial to determine the holding costs for a year. Elaborately, it is worth to have the insights of the possible additional holding costs expressed as an annual cost for the items the company purchases or produces. In this case of BP, consolidating t pipes is not economically feasible as there is a possibility of having to store the pipes for a longer duration. There lacks a sense of standardization of the pipes. For instance, engineers can use a high-pressure pipe in areas where the pressure is low at a higher unit cost. In most cases, failing to use them, they remain in the pipe yard and probably are written off unless the BP engineers use them. Strategy for consolidation A consolidation strategy is an external growth strategy expected to transform the performance of the company CITATION Col01 \l 1033 (Collins, 2001). Usually, it is motivated by growth, synergy, and diversification among others. A company's performance is a function of strategies since these strategies account for why firms are dynamic, how they behave and dictates the allocation of resources and transfer of the same. Mergers and Acquisitions consolidation strategy A consolidation strategy for Mergers and Acquisition come forth from a company's need to expand. It is a means of growing, and it can occur as a result of vast scenarios. Notably, an M&A strategy involves synergies or viable ways for the combined companies to be more efficient than they were alone CITATION Bro \l 1033 (Gaughan, 2001). A merger is as a result of a process whereby two or more previously autonomous concerns come under common control. Merger and Acquisition consolidation strategy allows capacity for expansion, vertical integration and entry. The approach forms part of the strategic options expected to transform the performances. Therefore, opting high-grade pipes is ideal since the question of quality and efficiency is crucial. As a result, irrespective of incurring high unit costs concepts of efficiency and performance are vital. Two groups who are likely to oppose the consolidation efforts: BP engineers and joint interest groups that help fund each project. As a result, there is need to approach them smartly to attain approval for the consolidation plan. Firstly, embracing Vendor management inventory whereby you leave your suppliers to manage their products within your premises is cost effective hence reducing the holding costs CITATION Col01 \l 1033 (Collins, 2001). As a result, you no longer have to purchase extra quantities that later cease to be dead stock. In fact, it is the job of your suppliers to ensure you are always in stock (avoiding chances of over-stocking or under-stocking). Equally important the suppliers will have a better idea of how to adjust their output to meet demand. Apparently, at this juncture, you do not need any favors to hasten shipment or face out-of-stock situations. Secondly, being in the era of modern technology where every company including BP savors the benefits of comput...