Strategic Investigation of Royal Dutch

Strategic Investigation of Royal Dutch Shell

INTRODUCTION of the ORGANIZATION

PURPOSE of the FIRM

VISION, MISSION, FUTURE ACCOMPLISHMENTS

STRATEGIC PLANNING

FINANCIAL ANALYSIS

COMPANY CULTURE, SOCIAL RESPONSIBILITY, ETHICAL STANDARDS

Strategic Investigation of Royal Dutch Shell

INTRODUCTION of the ORGANIZATION

The Royal Dutch Shell is regarded as the second largest multinational oil organization of the world after Exxon. In addition to that, it is also one of the largest industrial enterprises of the world. The Shell group consists of a complex system of around 1000 companies and indulges in about 2000 joint ventures at any one time. Furthermore, the group operates in a total of 135 countries throughout the globe. (Royal Dutch Shell, 2014)

A 60:40 alliance, which was made in the year 1907, between the Royal Dutch Petroleum Company and the Shell Transport and Trading Company, in the United Kingdom, led towards the development of Royal Dutch Shell. Both of these parent organizations, either directly or indirectly hold shares in the holding companies of Shell. (Royal Dutch Shell, 2014)

In addition to that, the directors, who are a part of the board, are also appointed by them. Furthermore, the also receive revenue, which is in the form of dividends from the group. (Royal Dutch Shell, 2014)

Royal Dutch Shell plc, which is commonly referred to as Shell, is an independent organization and a part of the wide Shell group. The organization, along with its registered office, is located in London, United Kingdom. The head quarter of the organization is located in the Hague, Netherlands. The organization conducts its operation in the oil and gas industry at a global level. (Royal Dutch Shell, 2014)

The operations that are conducted by the organization are classified into three main segments namely; Downstream, Upstream and Projects and Technology. (Royal Dutch Shell, 2014) All of these segments are discussed below:

The Upstream segment consists of the activities that associated with the search, recovery, liquefaction and transportation of oils, natural gas and wind energy. (Royal Dutch Shell, 2014)

The Downstream segment consists of the activities that are related to the manufacturing, distributing and marketing of chemicals and oil products. (Royal Dutch Shell, 2014)

The Projects and Technology segment, on the other hand, consists of the activities of all the critical departments that support the core business of the organization in the Upstream and Downstream segments. (Royal Dutch Shell, 2014)

2. PURPOSE of the FIRM

The basic business of the organization is associated with energy and petrochemical products. The basic aim of the organization is to efficiently fulfil the energy needs of the people in a manner that is economically, environmentally, legally and ethically viable, today and in the future as well. (Royal Dutch Shell, 2014)

As the organization operates at a global level in the oil and gas sector, therefore, it has set high ethical standards in relation to its operations. This is because the organization is judged on the basis of its actions. (Royal Dutch Shell, 2014)

In addition to that, the reputation of the organization heavily depends on the degree to which it relates to its core values, which are honesty, integrity and respect for people. The General Business Principles, Code of Conduct and Code of Ethics of Shell enable all the members of the organization to appropriately align with the core values of Shell and effectively comply with all the rules and regulations that are associated with the oil and gas industry. (Royal Dutch Shell, 2014)

The organization has a firm believe that oil and gas have a strong relationship with the energy needs as well as the economic development of the people. it, therefore, aims at finding out efficient ways in which these needs could be fulfilled. The organization clearly states that its role is to extract and deliver oil and gas to the consumers in a manner that is economically efficient and legally, ethically and environmentally responsible. (Royal Dutch Shell, 2014)

The organization seeks a high level of performance from its employees. In addition to that it also aims at maintaining a strong and growing long-term position in the competitive market in which it operates. The organization also establishes and maintains close relationships with its partners, customers and policy makers so that it may be able to find out more and more efficient ways of the deployment of natural and energy resources. (Royal Dutch Shell, 2014)

The following figure demonstrates the organizational chart of the organization;

3. VISION, MISSION, FUTURE ACCOMPLISHMENTS

The vision of the organization is, 'To be the market leader and deliver the best value to our stakeholders.' (Royal Dutch Shell, 2014)

The mission of the organization states that, 'To enhance profitability through innovative management strategies while ensuring cost effectiveness and harnessing creative ideas' (Royal Dutch Shell, 2014)

The organization has future growth potential. This is because the organization has manufacturing and management strategy that has been specifically designed to provide the organization with long-term and consistent growth in the global oil and gas industry. (Royal Dutch Shell plc Investors' Handbook 2008-2012, 2013)

In addition to that, the organization has a strong and reliable portfolio of pre-final investment decision options. This portfolio has a rate of return that is sufficient for supporting the production of the organization till the year 2020. (Royal Dutch Shell plc Investors' Handbook 2008-2012, 2013)

In addition to that, a total of about thirty projects are in their designing or planning phase. Out of these thirty about half of the projects are to be operated by Shell. These projects are not only based on the traditional exploration and production activities, instead they include other activities such as deep water, LNG, tight gas, liquids-rich shale and heavy oil. (Royal Dutch Shell plc Investors' Handbook 2008-2012, 2013)

In total, around 13 billion barrels of oil equivalent (per day) are represented by the above mentioned projects. (Royal Dutch Shell plc Investors' Handbook 2008-2012, 2013) the main areas in which Shell might have high potential future growth are:

The deep-water fields including the Gulf of Mexico,

The tight-gas and liquids-rich shale resources which are mainly located in North America

And the LNG projects which are located in Oceania. (Royal Dutch Shell plc Investors' Handbook 2008-2012, 2013)

4. STRATEGIC PLANNING

The strategy of shell is competitive and in nature. The basic aim of the strategy is to maintain and reinforce the position of shell as a leader in the oil and gas industry. The strategy aims at maintaining sufficient levels of production so as to support the productivity and efficiency of the organization and fulfil the energy needs of the people. The ethical standards and social and environmental benefits are the core of the strategic planning of the organization. (May & Davinha et al., 1999)

The technology, project-delivery capability and operational excellence, are important components and key differentiators of the strategy of the organization. These elements enable the organization to get an access to the upstream resources and downstream markets in an easy and effective manner. (Livesey & Kearins, 2002)

In Upstream the main focus of the organization in on exploring the liquids and natural gas reserves. In addition to that the organization, in this category, also focuses on the major new projects. The advanced technological equipment and the expertise of the organization add value to its product, in this case. (Livesey & Kearins, 2002)

In Downstream, the organization focuses on generating sustainable and stable cash from its existing resources or assets. In addition to that, under this category the organization also makes investments that are selective in nature. (Livesey & Kearins, 2002)

A number of strategic themes are followed by the organization, each of which requires distinctive risk management and technological tools. All of these issues are handled by the middle managers. The strategies are developed by top and middle management in a collective manner. (Livesey & Kearins, 2002)

It is then the responsibility of the middle management and the first line managers to appropriately communicate this strategy throughout the hierarchy of the organization. The effectiveness of the strategy is monitored on interim basis. If the set goals are achieved then strategy is upgraded only if there is a need for upgradation, but if the organizational performance is below the benchmarks then corrective actions are taken by the management and other concerned officials. (Livesey & Kearins, 2002)

The future strategic plan of the organization is depicted in the following figure:

5. SWOT ANALYSIS

The strength, weaknesses, opportunities and threats of the organization are demonstrated in the following section:

Strengths

The organization has a widely accepted brand name "Shell" and a strong and attractive global presence. As mentioned above it is currently operating in 135 countries worldwide. (Jonker & Zanden et al., 2007)

The organization generated excellent gross profits of 482 billion dollars in the year 2012. (Jonker & Zanden et al., 2007)

The company holds a strong capital base and capital investments in the projects that have a strong potential generating high returns in the future. (Jonker & Zanden et al., 2007)

The organization has a diversified range of products and services. In addition to that, it also has strong exploration and technological capabilities. (Jonker & Zanden et al., 2007)

Shell PLC is known to have a highly capable workforce, starting from its CEO to CFO and other major and minor employees of the organization. (Jonker & Zanden et al., 2007)

Weaknesses

Lack of control or control weaknesses may occur due to large scale operations. (Jonker & Zanden et al., 2007)

The presence of the organization in a number of global markets lead to issues in relation to the applicability of various laws in those regimes. In other words, the organization may be required to too many laws due to global operations. (Jonker & Zanden et al., 2007)

The formulation uniform policies and procedures due to the performance of operations in various global culture is a very difficult task. (Jonker & Zanden et al., 2007)

The existence of high degree of variation and instability in the energy sector and oil prices. (Jonker & Zanden et al., 2007)

Shell PLC has been confronting the issues in relation to corruption, instability and level of productivity due to the performance of exploration functions in various locations. (Jonker & Zanden et al., 2007)

Opportunities

The organization has the availability of a number of new fields in the various emerging economies, which it can explore and take. This, as a result, would lead towards an increase in the chances of growth and development. (Jonker & Zanden et al., 2007)

The organization due to its capable workforce has an ability to fight the constraints and grow. (Jonker & Zanden et al., 2007)

There has been an increase in the demand for products like LPG and CNG because of a rise in the prices of other petroleum products and an enhancement of awareness for environmental protection. (Jonker & Zanden et al., 2007)

The identification of new and better quality products and areas for exploration due to extensive and high quality research and development. (Jonker & Zanden et al., 2007)

Threats

The presence of economic crisis throughout the globe, which includes the deteriorating impact of circular debts. (Jonker & Zanden et al., 2007)

The emergence of terrorism activities on large scale around the globe can also have deteriorating and damaging impact on the profitability of the organization as it has already towards an increase in the operational costs of the organization. (Jonker & Zanden et al., 2007)