MBA431 - STRATEGIC MANAGEMENT

CIA-3

A REPORT ON

“Company analysis of Royal Dutch

SHELL”

By

SUBHANGI RAJ

REGISTRATION NUMBER:
2027044

UNDER THE GUIDANCE OF

PROF. SANDIP SEN

SCHOOL OF BUSINESS AND MANAGEMENT CHRIST (DEEMED TO

BE UNIVERSITY), BENGALURU

September 2021

1
INTRODUCTION

Fig.1. Logo of Shell

The Netherlands' Royal Dutch Petroleum Company and the United Kingdom's "Shell"
Transportation and Trading Company merged in 1907 to form Royal Dutch "SHELL," a
multinational energy and petrochemicals company that aims to meet the world's growing
demand for cleaner, more economically, environmentally, and socially responsible energy
solutions. Shell soon reached the peak of the American Standard Oil race, and by 1920, it had
become the world's largest oil producer. Shell made their first foray into the chemical industry
in 1929. From the mid-1940s through the mid-1970s, Shell was one of the "7 Sisters" that
dominated the global oil sector. In 1964, Shell was named as a partner in the world's first
commercial LNG marine transport. (LNG). Shell bought the Billiton mining company in 1970,
which it sold in 1994 and is now owned by BHP. In recent decades, gas has been an increasingly
important part of Shell's business, and in 2016, the company purchased BG Group, making it
the world's largest LNG supplier.

Shell is vertically integrated and active in all industries, including exploration,

production, refining, transportation, sale and marketing, petrochemicals, power generation, and
trading. Biofuels, wind turbines, kites, and hydrogen are examples of renewables. Shell
operates in over 70 countries and manufactures around 3.7 million barrels of equivalent oil
daily, with 44,000 filling stations all over the world.

Vision

Old - make a difference by our people, a team of committed experts that appreciate our
customers, deliver on our promises and promote sustainable development.

New – to make our principles a permanent effect on society and to commit to a firm with a
zero-carbon footprint which makes stakeholders prouder than ever.

2
Mission

Old – Safe marketing and sales and supply of innovative value-added services for energy and
petrochemical products.

New - Leveraging skill and technology to provide our customers with the greatest service and
to sell our products safely.

MAJOR CHALLENGES OF SHELL-

• The company's main vision and direction may lose if activities are divided into many regions,
and dividing operations into primary and support duties may not be practicable due to increased
complexity.

• The dividing process can be time-consuming and finding the appropriate information might
be difficult.

• Effectively implementing a value chain demands not only familiarity but also in-depth
knowledge.

• It may be difficult to acquire critical information if Royal Dutch Shell plc's Business
Information System is not appropriately developed.

NEW STRATEGIES OF THE COMPANY-

• The fact that most fossil fuels contaminate the environment in the environment is one
of the most important challenges for oil and gas firms. It is commonly recognized that
these non-biological fuels contain several carbon fractions, which are nonetheless
required to be produced by enterprises because of their fragility. This is why firms are
heavily attacked by ecologists. Oil and gas corporations are sending out the news while
the government and the public are examining them.
In this instance, Shell may readily investigate other types of biofuels, solar
energy and other hydrogen energies, together with fresh people and inventive
technology, to diversify into different industries. These industries should rapidly
expand because the ROI is excellent and will address several problems in one go.

3
• The adoption of digital tools and functionalities has to be taken seriously by Shell by
applying petroleum refining digital technology. This will be a main factor in cost
reduction, increased safety and speedier optimisation. Applications include AI for
industrial optimization, as well as automation of material management and digital asset
management. For example, Shell can increase asset dependability by utilizing advanced
maintenance management to optimize maintenance cycles by combining big data and
machine learning algorithms to prevent major device failures.

In all three phases of life cycle management, the digital twin technology, where
a virtual duplicate is produced and regularly updated, will also act as a vital strategic
instrument to help and generate efficiency: the planning phase, budget estimates and
project planning. The project development phase, from concept to building; and the
operational phase when the owner and the owner can act and achieve business
objectives.

• New materials and production processes such as polymer 3D printing are predicted to
rise to $180 billion by 2035, bringing the shell business models' difficulties and
opportunities for material suppliers and design partners. Shell can therefore invest in
this new technology and adopt a more sustainable manner of fuel production.
• Shell can offer numerous value-added services in its fuel stations to boost the billing
value of each visitor. In the coming years, Shell intends to grow to 1,500 petrol pumps
in India. Adding petrol stations to the charge station options might be a game change
because the electric vehicle sector is starting to grow in India, with major businesses
aiming to expand on the Indian market. In newly awakened countries like India, Shell
is still lacking basic service, washing, pollution control and other checks. Their
competitors used a similar method and were quite successful.

4
 STRATEGIC ANALYSIS (Corporate, Business & Divisional
Level)

SWOT Analysis
STRENGTS WEEKNESS
• Company name is biggest in the field • Legal issues
of energy • Over statement of oil reserves
• Strong brand equity being the 2nd controversy
largest energy company • Human Rights and environmental
• High financial growth issues degraded image.
• Latest technology • Struggling to resolve safety and trust
• Operations in over 90 countries issue
having 44,000 stations

OPPORTUNITIES THREATS
• Acquisitions by buying out • Government regulations
competition • High Competition
• Increasing demand for fuel • Environmental laws
• New technology • Economic instability
• Growing market for biofuels • Rising pay level
worldwide

5
PESTLE ANALYSIS

Fig.2. Pestle Analysis

As demonstrated above, the PESTEL assessment of the presence of the Royal Dutch Shell
Organization also indicates that there is no effective prevention measures against the hazard of
environmental change. While existing legislative standards fully recognize the need of
standards to deal with the threat of waste and the need to minimize the negative impacts of oil
mining, the corporation has failed to focus on the issue of environmentalism.

Therefore, the results of the PESTEL assessment show that the market environment for
the Royal Dutch Shell Company is extremely competitive and organized on the basis of
stringent ecological norms. Given the industry in which Royal Dutch Shell works, the described
features are anticipated and largely inevitable.

The economic side of the environment in which Royal Dutch Shell operates
demonstrates that the target setting is highly lucrative and offers the organization much
opportunity for prosperity. Despite the negative consequences it creates and the threat to
sustainability, the oil and gas industry has flourished. As the items are produced which may be
described as limited common resources, the reasons for the outstanding success of oil and gas
business are rather understandable.

6
BLUE OCEAN STRATEGY for SHELL

Fig.3. Blue Ocean Strategy of Shell

The corporation is currently at the crossroads of broadening its products and
minimizing the cost of production/ Shell will need the Blue Ocean Strategy in order to deal
with the given challenge, which can help define trade accurately and so outline the financial
framework for future decision-making. At the moment, Shell must situate its trade by striking
a balance between cost and value through an innovation approach and the redesign of its
infrastructure, choosing a single supplier and moving the company closer to that provider. This
minimizes transportation costs and implements the Blue Ocean Strategy.

• A strong slogan, concentration, and divergence are three elements that Shell Effort BOS
should possess.
• Shell Effort approach canvas' four actions should be directed toward enforcing these
important qualities. Shell's effort plan will be confusing, homogeneous, and difficult to
explain without these crucial traits, and it will have a considerably high-cost structure.
• The four steps to generating a new value curve should be well-guided toward creating
a strategic profile for a company that includes these features.
• These three traits serve as an early litmus test for blue ocean ideas' commercial
potential.

7
BCG MATRIX for SHELL

STARS- The financial services strategic business unit is a star in the BCG matrix of
Shell. It operates in a market that shows promise in the future. Shell receives a
considerable portion of its money from this SBU.
The Number 1 brand Strategic business unit is a star in the BCG matrix of Shell, and
this is also the product that produces the largest sales within its product line. The
potential inside this industry is likewise strong as people are wanting this and
comparable sorts of items.
The Number 2 brand Strategic business unit is a star in the BCG matrix of Shell since
Shell has a 20 percent market share in this category. It also the market leader in this
area.

CASH COW- The supplier management service strategic business unit is a cash cow
in the BCG matrix of Shell. This has been in operation for several decades and has
generated Shell a substantial amount in income. The market share for Shell is strong,
but the total market is falling as firms manage their supplier internally rather than
outsourcing it.
The Number 3 brand strategic business unit is a cash cow in the BCG matrix of Shell.
This is an innovative product that has a market share of 25 percent in its category. Shell
is also the market leader in this area. The overall category has been dropping slightly
in the previous few years. Shell has the capacity to affect the market as well in this area.
The worldwide food strategic business unit is a cash cow in the BCG matrix for Shell.

QUESTION MARK- The local foods strategic business unit is a question mark in the
BCG matrix for Shell. The current developments within the industry suggest that
customers are concentrating more towards local foods.
The Number 4 brand strategic business unit is a question mark in the BCG matrix for
Shell. This key business unit is a component of a market that is constantly developing.
The confectionary strategic business unit is a question mark in the BCG matrix for
Shell. The confectionary business is an appealing sector that is increasing throughout
the years.

8
DOGS- The plastic bags strategic business unit is a dog in the BCG matrix of Shell.
This important business unit has been in the loss for the previous 5 years. It also
operates in a market that is shrinking owing to increased environmental concerns.
The Number 5 brand strategic business unit is a dog in the BCG matrix for Shell. This
is operating in a market sector that is decreasing in the previous 5 years.
The synthetic fibre products strategic business unit is a dog in the BCG matrix of Shell.
The market for such items has been shrinking, and as a result of this drop, Shell has
been experiencing a loss in the previous 3 years.
The artificially flavoured goods strategic business unit is a dog in the BCG matrix for
Shell. These goods were released lately, with the anticipation that this category will
increase.

Fig.4. BCG Matrix

9
SHELL’s Position on BOWMAN’S STRATEGY CLOCK

Bowman's strategy clock displays how a corporation can position a two-dimensional product
or service. It's about pricing on the one hand and perceived worth on the other. Looking at the
various combinations of these two dimensions in the Bowman Strategy Clock, eight possible
tactics are split by four quadrants.

These 8 techniques are shown in a clock on which the name of this approach is based.
The Bowman Strategy Clock provides a company with the best competitive advantage.

Fig.5. Bowman’s Strategy Clock

In respect of SHELL’s, Consumers see extra value in the hybrid strategy by combining low
competitive prices and product differentiation. If the added value is continuously supplied, this
can be an effective method for positioning.

Therefore, it's highly regarded products. The firms, on the other hand, focus on
inexpensive prices. The customer is persuaded that there is a good additional value to it. The
Bowman Strategy Clock positions itself quite efficiently, especially if the added value is
consistently and skilfully applied and supplied.

10
EVALUATION OF LONG-TERM OPPORTUNITIES OF SHELL-

Low Carbon emissions: -

"Our discussions with investors show that combating climate change requires cooperation,"
said Ben van Burden, CEO of Shell. "We are helping to make our net carbon footprint aim a
reality by identifying shorter-term targets. This goal prepares the company for the future with
the Paris Climate Agreement in sight.

Shell was the first international oil and gas business to reduce the net carbon footprint of its
energy products sold in 2017, with its total life-cycle emissions. Shell wants to halve its net
carbon footprint by 2050 and by 20% by 2035, according to the objectives of the Paris
Agreement.

Shell is now broadening its long-standing objective to establish specific net carbon impact
targets for three or five years. The targeting cycle begins in 2020 and concludes in 2050.

Fuel hydrogen: -

Despite the slow growth of hydrogen vehicles, Shell thinks that by the end of the century gas
will make up 10% of the world energy demand.

It plans to repurpose old hydrogen storage and transportation oil and gas offices as demand for
non-renewable energy decreases.

Shell has little room for hydrogen generation unless there is plenty of combustible gas.

The company was established in the UK last year and will be based in Buckinghamshire on
Tuesday.

It is expected to take the first transcontinental hydrogen flight in 2040. Tesla plans to use most
hydrogen or battery trucks by 2070.

Shell anticipates oil demand to platform in the 2020s, before decreasing substantially owing to
renewables after 2040. By 2040, many electricity grids will be needed for solar, wind and
hydropower to run properly. The biggest influence will be on carbon taxes or charges imposed
by governments in 2030.

The restructuring: -

11
The structure must be more transparent, smoother, competitive, flattering and responsive to
customers. You must lose some authority unpredictability in order to be more thorough. They
also have to ensure that we maximize the vital capacity of the centre. The personnel is currently
dispersed throughout the authority structure of the company. We shall gather our families in
one structure with these abilities.

This suggests that our main business is more involved. So, the upstream Shell, the part that
finds and produces oil and gas, is raced.

To safeguard Shell's big earnings but how many barrels of oil or cubic meters of gas Upstream
generates will not matter. We will continue to contribute. The efforts that we fund will be
enormous. Shell will need to be upstream accurately as we make adjustments, so that we can
invest more in our low-carbon goods.

Collaboration with Microsoft: -

This crucial cooperation will support Shell's objective of achieving net zero emission energy
by 2050 or sooner. Shell's environmentally friendly power helps Microsoft reach its flexible
management goals and its greater target of carbon negativity by 2050.

The Highlight includes-

• Shell will provide Microsoft with sustainable power, helping Microsoft to fulfil its
responsibility to have 100% sustainable energy by 2025.
• Both organizations will continue to cooperate in human-made rationality that has just
determined a change in Shell's tasks by acquiring continuous information experiences,
improving the well-being of its specialists and locators.
• Shell and Microsoft will explore cooperation to promote the use of supportable energy
sources for avionics.
• Microsoft's Azure distributed computer infrastructure and Shell information resources
will be used by enterprises to enhance operational safety by increasing hazard review,
projection and anticipation.

12
RECOMMENDATIONS/ ALTERNATIVES/ SUGGESTIONS-

Annual targets/objectives-

• Shell's energy resource will increase every year by 4 percent if biofuel is the principal
contribution
• Sales of biofuel should increase by at least 10 percent each year
• Improving biofuel production and energy quality
• The supply of biofuels should be wider and continuous service should be provided

Policies-

• In order to make the environment healthier, workers should use biofuel in their vehicles
because this is the first step in internal marketing
• Make sure that employees are working in a safer and healthy environment
• The advertising material should be used in green and ensure that all material used by
management is environmentally friendly.

FUTURE PERSPECTIVES AND STRATEGIC CHALLENGES-

• While the Royal Dutch Shell industry is extremely wealthy, its environment is
extremely competitive, implying that the corporation should focus on seizing
every opportunity presented by its targets.

• As a result, despite the exceptional experience and huge competitive advantage

that the Royal Dutch Shell organization has in the market of their choice, the
firm may risk losing its assets and customer loyalty. Royal Dutch Shell may
lose its competitive edge and, as a result, reduce its profit margins and
performance rates unless changes are made to the company's current
performance.

• The question of transport and the reorganization of Shell's incoming and

outgoing logistics has to be seen as a fundamental transformation.

13
STRATEGY REVIEW AND EVALUATION

The firm is encouraged by the survey and assessment to guarantee that the processes are
correctly carried out and completed, and that the best outcomes are obtained. The auditing of
marketing estimates will be used by Shell to conduct the review. Supervisors will complete the
investigation, which will then be reviewed by division directors. The division supervisors will
hold meetings and briefings with the office heads to discuss the present state of the techniques.
Division Heads use the marketing diagram and introduction as an evaluation tool to assess the
system's effects. A decent approach would lead to a decent assessment when the measurements
are carried out and destinations are met every now and then.

CONCLUSION

In terms of pricing, quality, and innovation, the Shell Group, as an industrial authority, faces
enormous social, political, economic, and legal constraints. Its technology to zero, new ways
of abusing capricious oil and gas holdings and therefore bringing about productive
development, have all been successful, though the momentum has slowed due to financial
consequences. to maintain political unity with a colossal oil behemoth like Shell.

Governments in many nations have normalized, but this cannot rely on and confront large
capital speculation, as Shell is currently doing well by consistently investing resources in new
petroleum and gas extraction plants in unorthodox locations such as oil sands and petroleum
shale. These efforts are gradually causing natural degradation, and management may once
again become dominated by extreme ecological changes in the future. The manufacture of
ethanol and solar and wind power, as well as putting resources into additional bio-fuel energy
to capture new chances, is a wise strategy.

14
References
• https://www.shell.com/sustainability/environment/climate-change.html
• https://www.theguardian.com/environment/2018/mar/26/hydrogen-powered-
transport-key-to- climate-targets-say s-shell
• http://Shell.com
• https://www.shell.com/investors/shell-and-our-strategy/our- strategy.html
• http://en.academic.com
• http://thefreedictionart.com
• https://studycorgi.com/royal-dutch-shell-companys-strategic-analysis/
• https://reports.shell.com/annual-report/2020/consolidated-financial-
statements.php

15