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Royal Dutch Shell Business Analysis Report

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Royal Dutch Shell Business Analysis Report

Introduction

The gas and oil sector is one of the major industries in the globe regarding activities and revenue generation. Shell emerges to be one of the leading players in the industry with the company having its stations in more than 70 countries across the world. Shell faces stiff competition from other operators in the area that employs advanced strategies of acquiring more significant portions of the market. The company also adopts various ways that will help it venture into future activities without serious impediments. The company’s leadership needs to consider multiple ways of improving its operations if it wishes to elevate the firm’s performance in the global arena.

Brief Company Overview

The Royal Dutch Company that is also called Shell is a Dutch-British international gas and oil corporation that has its headquarters at The Hague, Netherlands. The company which now ranks as the seventh largest firm globally and the biggest in Europe owns its supply chain meaning that it is vertically integrated, and invests in all areas of the gas and oil sector. The company’s whose Chief Executive Officer is Ben van Beurden focuses on exploration, oil and gas production, refining, marketing, power production, petrochemicals, and trading activities (Shell). Shell also invests in green forms of energy such biofuels, hydrogen power, and wind.

The company conducts its activities while adhering to specific guidelines and principles. Shell’s purpose is to provide energy solutions for many years to come, while its role is to generate and deliver energy resources that are affordable using responsible and environmentally friendly ways. The company follows a code of conduct that guides its workers on how to execute the Shell General Business Principles in tandem with the organization’s core values. Shell’s core values include the upholding honesty, respect for others, and integrity (Shell). Finally, the company has a code of ethics that assist every person at Shell behaves by the applicable laws and regulations. The corporation’s leadership believes that the guidelines shall help it contribute towards sustainable development as well as to balance its short and long-term objectives.

Operational Areas

The Shell company functional area is extensive and covers various continents. The corporation started to drill oil in Africa during the latter parts of the 1950s with its initial point being Nigeria where it set up a station in 1958. The company sells in Africa in countries such as Cameroon, Egypt, Gabon, Libya, S.A, Ghana, Morocco, and Tunisia (Shell). Shell also performs its activities in nearly sixteen countries that fall under the downstream oil sector. The company also operates in different markets in Asia with its operations in Hong Kong being almost a century old now. Malaysia also serves as a crucial selling point for Shell with the company starting its activities in this region in 1914. The organization operates in the Philippines where it has its headquarters in Makati City where the company acquires the natural resource from vast fields. Shell is also proving its supremacy in Singapore, China which stands as the chief center for the corporation’s petrochemical activities in the Asia Pacific area. Europe also serves as a critical target area for the company. Shell has invested in Ireland where the company started its operations in 1902, and in the Nordic nations such as Finland, Denmark, Norway, and Sweden (Shell). Shell is also generating massive amounts of revenue from its stations in the U.K, North America, and Australia that all have various filling and extraction points.

The Company’s Products

Shell understands that providing customers with a broad range of goods and services opens the avenues attract more categories of buyers, and gives the company the chance to generate more revenue. The company strives to achieve diversification by offering products that vary in nature, and which satisfy consumers’ needs. The company offers petroleum that is used to run automobiles and machines. Shell Chemicals, a division of the parent company, serves as one of the leading chemical providers in the globe with an expertise of nearly 85 years in the area. Information from the company’s website shows that the company supplies up to 17 million tones of petrochemicals every year to industrial customers who acquire the products in large volumes. Shell also provides lubricants that suit the different machines and engines, and which help to improve the equipment’s efficiency, prolong vehicle performance, and lower downtime. The company also supplies sulphur to different markets after it established Shell solutions nearly 50 years ago to have the entire value chain of the product. The company also provides extensive volumes of bitumen that come in different packages that suit the development of roads, airport runways, and other facilities, and roofing (Shell). The corporation is also generating large amounts of money from the sales of the Shell liquefied petroleum gas (LPG) which is increasingly becoming the source of energy in the manufacturing and transpiration sector. Finally, the company provides its customers with Shell fuel cards that have access to global network access and which allows buyers to reduce cost and to perform their businesses anywhere they prefer.

 

Current Market Position

Shell has a history of being one of the leading operators in the gas and oil sectors for many years. The company served as the leading supplier of fuel petroleum to the British Expeditionary Force during WWI. The company after taking over the activities of the Mexican Eagle Petroleum Company in 1919 shifted to the leading position regarding oil production and supply (Shell). The company also boasts of being the first firm to apply electronic applications in its activities in the Netherlands which gave it the chance to extend its coverage of the market.

The company is continuing to show impressive performance in the current times. The organization was ranked as the third largest company in the world in 2015 based on revenue generation. The company dropped to the seventh position in 2016 when it recorded total revenue of $234 billion down from the $470 billion recorded in 2011 (Shell). The company’s current capacity of production amounts to 3.8 million barrels every day which puts it at a leading position in the on the London Stock Exchange where it enjoys a market cap of 194 billion pounds – the highest than any other listed firm on the region’s exchange, and one of the highest of any corporation in the globe.

Competitors Analysis

The competition in the gas and oil sector is quite stiff, and this requires high levels of operations to fit into the market. Total S.A. is one of the major competitors for Shell, and it uses various strategies to remain in the top positions. The company is in charge of its supply chain in the same way as Shell. The firm applies procedures that it believes will put it at the forefront with one of them being that it specializes in the production of fuel that has low carbon content. The French international company that commenced its operations in 1924 understands that the rate of environmental degradation due to the emission of greenhouse gases is escalating and that the call to produce fuels that have low carbon content is increasing (Total). The company applies a similar strategy as Shell of setting up selling points in different locations. Setting up multiple stations allows consumers to have easy access to the product which serves a significant purpose in attracting buyers. The total group also uses rebranding and forming coalitions as some of the techniques of dominating the market. The company changed its name to Total CFP in 1985 and later switched to Total in 1991 when the firm was listed as a public company on the New York Exchange. The rebranding process paints a new image for the corporation which urges the buyers to consider it as being an emerging in its services. Finally, total acquired Petrofina (a Belgium-based oil and gas firm) in 1999 after which it changed its name to Total Fina and later acquired Elf Aquitaine (Total). The company also signed a deal with Saudi Aramco and the Royal Dutch Shell with the view of expanding its operations. The mergers and acquisitions expand Total’s market share and provide the opportunity explore areas that were initially inhabited.

The other stiff competitor for the Royal Dutch Shell is BP Public Limited Company that has its headquarters in London. BP is also vertically integrated meaning that it ventures in all the areas of oil and gas production entailing exploration, refining, marketing, and selling. The company operates in more than 72 countries across the globe and has a vast reserve of oil and gas amounting to 17.80 billion barrels (BP). The company that started its services in 1908 and has since transformed in various ways, primarily through the development of its facilities and more stations. One of the strategies by the company that puts it in the leading position is its positioning in different countries which gives it the chance to serve a broader market base. The company, for example, has put an extensive investment in the U.S. that takes up to one-third of the activities of the business across the globe. BP has also invested heavily in China, Egypt, and Britain as well as other developed and developing nations. BP’s involvement in the production of low-carbon and renewable energy such as solar and wind power also makes it a strong competitor for Shell. The company, for example, introduced the BP photovoltaic (PV) module that contains multiple PV cells which interconnect to create energy when powered by solar (BP). The company also completed a crucial phase of wind farm development in seven states in the U.S. and is set to establish an additional plant in Hawaii (BP). Apart from expanding its source of revenue, entering into the production of low carbon and renewable forms of energy serves as an excellent strategy for joining other platforms of operations.

Shell faces stiff competition from Chevron Corporation which has its headquarters in San Ramon, California. Similar to Shell and its leading competitors, Chevron considers venturing into green sources of energy as a good strategy for penetrating the market. The team has put large plants of solar energy, biofuel, hydrogen, and fuel cells in different stations in at least a quarter of the 180 countries it serves. The company that considers Southeast Asia, the U.S. Gulf Coast, South Korea, and the coastal part of North America to be strategic workplaces also puts much investment in the production of geothermal power which distinguishes it from other players in the gas and oil industry (Chevron Corporation). Finally, Chevron views forming mergers and acquiring other companies to be a strategic way of gaining firmness in the competitive area. The corporation joined hands with the Caltex oil company in 1936 to get oil in Saudi Arabia and later took over the operations of the Standard Oil. The company also bought Texaco in 2000 further widening its market share and operational base.

The company must deal with the stiff competition that emanate from other players considering that the presence of other players in the industry may limit the amount of revenue the company generates from its activities. Failing to adopt proper ways of dealing with competition may lead to rivalry in the industry which Michael Porter considers to be one of the major external forces that may impact on the company’s performance (Mwangi et al. 80). Shell, for instance, should avoid copying the strategies other firms apply, especially if the imitation will result in controversies. Shell, however, may imitate techniques that it believes will help it advance but will not cause any wrangles. Otherwise, the development of a stiff competition may be difficult to deal with without developing a practicable approach.

Strategies to Exploit Future Opportunities

Shell in its pursuance of continuing with its operations to the future makes plans that it believes will help it exploit the future opportunities. The company is identifying newer oil and gas fields while applying the latest technology to secure surplus production that will satisfy consumers in future. The company is proud of the Stone project which is the globe’s most profound gas and oil program, functioning in about 9,500 feet of water in an exceptional location in the U.S. Gulf of Mexico (Shell). The program commenced operations in 2016 using the FPSO (floating production storage and offloading) technology which links to the subsea thus producing large amounts of gas and oil from pools as deep as 30,000 feet below the water surface. The management of the project believes that the FPSO technology that is designed to extract gas and oil without causing any wastage and environmental harm continue to be helpful and relevant for many years to come and will enable it to reap from the future opportunities.

Apart from investing on the development of FPSO, the company is working hard to build on the FLNG (first floating liquefied natural gas) technology which will become handy in extracting gas in future when extractors will have to reach deeper reservoirs to acquire satisfying amounts of the product. Shell is putting more energy into developing FLNG because the technology has the potential to reach gases in fields that continue to prove hard to achieve (Shell). Forecasters at the company predict that the demand of oil may escalate by 50% by the time 2040 reaches and that it would be in a better position to supply its buyers if it identifies technologies that can overcome the technical and geographic hindrances that make it challenging to explore challenging areas (Shell). The company looks forward to gaining from the innovation that may become more important and applicable in future.

Finally, Shell can liaise with other companies to consider ways of adapting to the changes that may occur in future.  The business leaders should identify like-minded institutions and develop plans on how to enter into future operations while prepared in terms of workforce, technology, and business management. Sharing ideas with other firms may provide information that was initially unknown to the company which will may it easy to exploit future opportunities.

Recommendations

Following the stiff nature of the market in which Shell operates, it needs to consider ways of improving its services to attract more customers and to expand into more regions. The company should first ensure that it provides quality services to its customers. The leadership needs to employ business management tools that may help to improve the way the company achieves customer satisfaction. An efficient way the company can use to advance its quality is to pay more attention to its application of total quality management (TQM) programs. The application of TQM which according to Sadikoglu and Olcay (3) refers to an organizational approach which focuses on advancing the quality of products and services and the nature of the processes to meet the customers’ needs will require the executors to consider the chief principles of the tool during its application. The tool requires that the company associates itself with the production of quality services and goods to create the reputation that the company produces quality. The administrators must also focus on the customers’ wants and work towards achieving their needs. TQM also requires that the executors develop a strategic structure to record improvements which should occur continuously. The TQM tool also calls for the mutual respect among the workers and the need to serve as a team. Even though Shell might have to incur additional expenses to improve how it applies TQM, it will experience more growth in different areas which will make it more stable when going about its operations.

The description of the company’s (Shell) status indicates that it has enough workforce and resources to carry out its activities, but it must consider ways of motivating the employees to make them put more effort in their duties. Motivation is an essential aspect of the organization, and it is upon the business leaders to identify the suitable forms of encouraging the service providers (Osabiya 67). It appears that the company sponsors the training of some workers to make them more skilled and knowledgeable which is a right way of motivating workers. The information from Shell’s website also shows that the employees who perform well in their areas of work stand a chance of gaining higher ranks which instill the desire to work hard. The management while motivating the workers at different stations should consider the framework by Abraham Maslow commonly known as Maslow’s hierarchy of needs. The theorist argues that human beings would first want to satisfy their physiological wants (food, shelter, and clothing) before developing the urge to meet their security needs (Heylighen 40). The theory by Maslow further informs that humans who meet their basic and security wants would want to make friends and would need to gain a feeling of belonging before earning respect from others. The presentation by Maslow finally calls on the provision of conditions which cause people reach self-actualization where they sit back and consider the magnitude of their achievement. The management at Shell should not disregard the concept of employee motivation which will enable its workers to serve with the vigor that makes the company competitive enough to fit into the industry.

Conclusion 

The report shows that Shell operates in a highly competitive area where it must adopt useful forms of carrying out its activities to improve performance. The company which currently holds the sixth position regarding revenue generation faces stiff competition from companies such as Total, BP, and Chevron Corporation which appear to apply advanced ways of attracting buyers and penetrating the market. Even though Shell offers a wide variety of products, uses advanced technology, and invests in many countries, it needs to consider other ways of making its services and products better and more appealing to buyers. The corporation may find ways of providing quality products and services, and may also contemplate on means of motivating the employees.

 

 

 

 

 

 

 

 

 

 

 

 

Works Cited

  1. “The Consumer Electronics Revolution Coming to the Gas Field.” BP, 2017, https://www.bp.com/. Accessed November 27, 2017

Chevron Corporation. “Chevron Corporation.” Chevron Corporation, 2017. https://www.chevron.com/. Accessed November 27, 2017

Heylighen, Francis. “A Cognitive-Systemic Reconstruction of Maslow’s Theory of Self-Actualization.” Behavioral Science, vol. 37, 1994, no. 1, 39-58.

Osabiya, Joseph. “The effect of Employees’ Motivation or Organizational Performance.” Journal of Public Administration and Policy Research, vol. 7, no. 4, 2015, 62-75.

Mwangi, Michael et al. The Application of Porter’s Five Forces Model on Organization Performance: A Case of Cooperative Bank of Kenya Ltd. European Journal of Business and Management, vol. 6, no. 16, 2014, pp. 75-85.

Sadikoglu, Esin and Olcay, Hilal. “The effects of Total Quality Management Practices on Performance and the Reasons of and the Barriers to TQM Practices in Turkey.” Advances in Decision Sciences, vol. 1, 2014, pp. 1-17.

Shell. “Who we are.” Shell Global, 2017,

http://www.shell.com/about-us/who-we-are.html. Accessed November 27, 2017

Total. “Total, a Major Energy Operator.” Total, 2017,

https://www.total.com/en/group Accessed November 27, 2017.

 

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