Shell’s tool for the Volatile market

Introduction Shell is a diversified group of companies with a wide variety of activities on a global scale. It has, as its core values honesty, integrity and respect for people. Shell recognizes that maintaining the trust and confidence of share holders, employees andcustomers is crucial to its continued growth and success. Shell must have a very effective planning so as to meet the demand of the ever growing global customers.

Shell recognizes five areas of responsibility to share holders, employees, They along with other similar multinational companies are facing a though task from diminishing reserve, environmental policies, political instabilities which are the few of the challenges they have to overcome with planning so as to live up to the reputation.

Table of content Topic Page SWOT Analysis of Royal Dutch Shell 4 Strengths 4 Weakness 5 Opportunities 6 Threats 7 Strategies in evidence of Shell’s thinking 8 Shell’s Response to Environmental Turbulence 9

SWOT Analysis of Royal Dutch Shell Strengths: Planning for the future of a market with diverse needs requires a planning that eliminates projection, prediction or preferences, but incorporates demographics, geographic, military, political and industrial info with social, technical, economical, environmental, educational, aesthetic trends which are key driving forces. Such a planning was pioneered by shell called as strategic planning. It was viewed as one of the most sophisticated and effective of any multinational company. It was much debated and imitated. Unlike other planning, the basis of strategic planning was not forecast but scenario settings.

With a great concern for the environment and ecological balance, research into alternative fuels like hydrogen ethanol, methanol and bio diesels and alternative energy from solar, wind, biomass and bio gas helped gain support from market that were more concerned with ecological issues and longevity of fossil fuels. Each shell company has a wide freedom of action however the common factor of all the global shell companies is its reputation. Upholding the reputation reaps its own rewards.

Acting honestly, Integrity in all its dealing and doing the right within the legitimate role of business are all parts of maintaining reputation. Shell has built and maintains a reputation that has a positive impact on its existing and up coming projects. Tie ups with other major market players like Coles have shown to improve their m arket existence. Shell has created strategic partnership with companies like Dutch tomato farmers to supply its by products of refinery like carbon dioxide which is used to ripen tomato so as to reduce the impact on environment.

Weakness: The ever growing demand for fuel has caused a dramatic reduction to easily available fossil fuels, which has led companies like shell to lead their exploration into harsh frontier environments, including ever deeper waters of the open sea. Perdido which is off the coast of Texas in the Gulf of Mexico is the world’s deepest offshore oil field. Explorations into such extreme frontiers has a high impact on the cost involved thereby reflecting upon the price of fuel.

Flaring and burning is a method of separating associated gasses, accompanying crude oil in order to increase crude production. This method has a severe and devastating effect on the environment, by releasing methane and carbon dioxide which contributes to global warming. This process has long been condemned by many environmental groups and developed nations.

Risks of having oil spill and an ineffective waste management are an ever looming threat that could cause a catastrophic damage to the eco-system. Manipulation of share market to increase share value are just a short term market attraction.

Opportunities: Rise of China and India as economic power houses has created a growing demand for fossil fuels, which largely benefits oil companies by providing opportunities to explore and meet this demands. Projects like Sakhalin II, Perdido, and Athabasca are all results of the ever growing demands.

Responding positively to criticism of environmental group about emission and other ecological issues may strengthen relations with the group thereby creating opportunities to explore and extract. The push to find the alternative fuel has created a diverse opportunities to the major players. Shell’s investments in Bio-fuels, Conversion of gas to liquid fuels, extraction of extra-heavy oil from oil sands and converting it to synthetic crude oil, turning coal into synthetic gas are all proof of opportunity existing to support the demands.

Threats: Moving into unstable part of the world had proved to be a growing security risk. Companies must deal with situations like kidnapping, exorcism, gorilla movements, terrorist activities and risk of expropriation.

National oil companies in countries like India, Venezuela, China, Iran, Russia and Saudi Arabia which runs as state monopolies controls almost 80 percent of the world’s reserves, these companies are pushing the oil companies out from their traditional exploration as well as supporting the third world countries in exploration. Exploration into extreme frontiers has a toll on the projects due to extreme working condition, nature’s challenges like swells hurricane, unpredictable weather and seismic activities are a few other threats faced by the major companies.

Strategies in Evidence of Shell’s Thinking Managing internationally involves taking into account many and diverse variable and possible situation and uncertainty.

Rather then treating uncertainty as a problem in forecasting it accepts it and incorporates it into reasoning via scenario planning, thereby presenting decision makers with wider outlook to the future. In the current case it is clear that shell has a clear picture of political environment, an understanding of diverse culture involved across various countries, emerging economies and its high demands, geographical knowledge, diverse market activities across the globe, Threats involving terrorism and security and a good understanding of the reserve of fossil fuels and its alternatives.

Options Available to Shell, in Response to Environment Turbulence Research and development into alternative fuel and energy are an answer to energy efficient and environmental friendly fuel demands posed globally. Deep sea exploration and exploration into extreme frontiers in search of fossil fuels can be seen as an answer to the fuel demands. Tie up with other state run national oil companies and providing technical and technological assistance can see shell sustain its position of global dominance. Focusing and incorporating more strategies into its planning can help shell in more diverse ways.

Conclusion: Pierre Wack was the man behind the introduction of Scenario planning to shell. By 1972 shell was busy creating scenarios and strategies to counter them. It was well prepared for the unpredictable future. In 1973 when OPEC oil crisis struck, shell was more than prepared than any one else. It already had a strategy for a situation which was not foreseen by others.

References: 1. Davidson.P, Simon.A, Woods.P & Griffin.R.W, 2009, Management, John Wiley & Sons, Milton, Q.L.D 2. http://royaldutchshellplc.com/ 3. http://actrav.itcilo.org 4 www.alternative-energy-news.info 5. www.blackwellpublishing.com 6. http://en.wikipedia.org/wiki/Gas_flare 7. http://www.netmba.com/strategy/scenario/ 8. http://www.fastcompany.com/magazine/60/tina.html