Leeds Beckett University

Leeds Business School

Level H6

The Strategic Manager Assignment

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Shell Company
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Module Tutor: Karen
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Student Name: Enes BOLFIDAN

Word Count
1. Shell`s Strategic Capabilities……………………….. 996
2. Shell`s Purpose, Culture & Governance………. 492
3. Business Strategy ………………………………………… 455
4. Innovation……………………………………………………. 696
5. Strategic Opinions….……………………………………..166
6. Recommendation…………………………………………..245

Total 3050
Contents
1. Shell`s Strategic Capabilities

2. Shell`s Purpose, Culture & Governance

3. Business Strategy

4. Innovation
5. Strategic Opinions

6. Recommendation
7. Appendix
Appendix 1: Shell`s PESTLE Analysis
Appendix 2: Porter Five Forces Model
Appendix 3: Oil & Gas Comparative Industry Analysis
Appendix 4: Oil & Gas Industry Life Cycle Analysis
Appendix 5: Oil & Gas Industry Strategy Canvas
Appendix 6: Shell`s Resources & Capabilities
Appendix 7: SSR Model
Appendix 8: Benchmarking Shell Against Other Competitors
Appendix 9: Shell Porters Value Chain
Appendix 10: VRIO Analysis – Resources & Competencies
Appendix 11: VRIO Analysis – Value Chain
Appendix 12: SWOT Analysis
Appendix 13: TOWS Analysis
Appendix 14: Diversity & Performance Graph
Appendix 15: Ownership Model
Appendix 16: Shell`s Governance Model
Appendix 17: Shell Power Interest Matrix
Appendix 18: Shell`s Cultural Web
Appendix 19: Experiencing Strategic Drift
Appendix 20: Application of Economies of Scale & Experience Curve
Appendix 21: Application of Porter`s three generic strategies
Appendix 22: Shell`s position on Bowman`s Strategy Clock
Appendix 23: Responding to Low Cost
Appendix 24: Dynamics of Product & Process Innovation
Appendix 25: Application of Diffusion S-Curve
Appendix 26: Shell`s Portfolio of Innovation Options

8. References
 Shell`s Strategic Capabilities
In the last few decades, the strategic capabilities of companies have been vitally important
as these allow companies to create long-term planning and competitive advantage. After
analysing Shell`s resources & capabilities (Appendix 6) which are components of strategic
capability, it is felt that the main success and power of Shell come from its large scale of
operations which are upstream, integrated gas and new energy, downstream and projects &
technology. In line with the Resource based view approach, operations in question are
Shell`s competitive advantage in gas & oil sector. This large scale of operations throughout
the world, is Shell`s one of the distinctive capabilities as to complete its main aim which is to
meet the increasing demand of energy, gas & oil. As Shell`s Porter value chain analysis
(Appendix 9) indicates that all supportive activities assist to success the main aim as well as
create a brand value for Shell company.

To achieve missions that overtaken by company, Shell must discover what is the best way to
do it. One obvious way to do it is benchmarking. By compering company`s performances
with other closest competitors, Shell can identify gaps and deficiencies in a project as well as
maintain its competitive advantages. The major competitors of Shell in oil & gas industry are
British Petroleum and ExxonMobil in terms of their strategic capabilities. Looking at
benchmarking (Appendix 8), it can be clearly seen that some competitive advantages l ike -
large scale of operations, giving importance to young entrepreneurs and having costly and
complicated pipelines make it difficult for competitors to imitate in question capabilities.
However, most of these capabilities may not be sustainable competitive advantage for the
long haul. Another notable aspect is inadequate profitability of Shell. Although a remarkable
increase has been seen in net profit of Shell in 2016 compared to previous year, the
profitability is not in desired level. This may be due employee numbers, insufficient cost
management, unpredictable oil prices or over costing operations conducted throughout the
world.

Shell`s innovation partnership with Scuderia Ferrari and technical partnership with Ducati is
another temporary competitive advantage due to achievements of these partnerships in the
race. As it has known that Shell has searched for many years that how its fuels and lubricants
are developed in the extreme and dynamic environment of motorcycle racing, to benefit
bikers all over the world. Finally, they developed Shell V-Power road fuels and Shell
Advanced lubricants for bikers. On the other hand, Shell has been identified with Ferrari, one
of its partnerships, due to their longest running partnerships. Being partnerships with Duc ati
in motorsports bring lots of competitive advantages to Shell. For instance; Shell found
opportunities to develop its high-performance fuels and lubricants for the benefit of itself
and its customers. Additionally, partnership with Ferrari in F1 provide advantages to
customer through a better-quality fuel that is more effective than other fuels. Last but not
least, with the world`s most-famous driver who is Micheal Schumacher, supporters of F1 and
Ferrari have become used to seeing the Shell pecten emblem across the driver`s chest and
painted on his super cars (Ferrari). This brings effective brand recognition to Shell, which
creates unique brand value.
Although some basic competitive advantages are difficult to imitate, the greater part of
them can be imitable sooner or later by competitors. Due to this reason, to create
competitive advantages, companies always must look for megatrends (in PESTLE analysis,
Appendix 1) that are more likely to affect the rules of competition in industries. To take
advantage of these megatrends, a company should use SSR model (Appendix 7), sensing new
opportunities in line with megatrends and afterwards, address these opportunities with new
products (seizing) and finally, redeploy capabilities which company has (reconfiguring ). For
instance, the PESTLE Analysis (Appendix 1) identified clear energy sources as a vital
megatrend. “Momentum to replace fossil fuels with cleaner energy sources is building, and
oil and gas companies need to consider their futures in this context.” (Financier, 2016
[online]). Shell has been immediately turned into this megatrend an advantage by utilizing its
dynamic capabilities (SSR model, Appendix 7). To benefit by this megatrend, Shell wants to
use new and smart ideas of young entrepreneurs (sensing) by supporting them financially
and finally, established a new programme in UK for young entrepreneurs (16-30 years old)
such as Shell liveWire (reconfiguring).

On the other hand, to determine a company`s capabilities in terms of their threshold or

distinctiveness, a VRIO analysis (Appendix 10) can be used. Some capabilities of a company
such as employee number and properties constitute threshold capabilities while, some
capabilities which are related to a company`s own skills and activities form distinctive
capabilities. In that concept, these distinctive capabilities which are almost impossible to
imitate- assist to create competitive advantages for a company. Shell`s one of the most
competitive advantage is to have a wide range of operations (upstream, Integrated Gas and
New Energies, downstream and project & technology). These operations in question are
over-costing to imitate and require advanced technology which also requires extensive
experience in the industry (see Appendix 6).

Another useful tool to constitute competitive advantages is Value Chain analysis (Appendix
11). A company`s categories of activities are directly related with its products & services, it
therefore to gain competitive advantage, the company should realize which activities are
vital in creating that value and which are not (Johnson et al, 2014). Advanced technology,
innovation through R&D and maintenance & development IT systems allow Shell to expand
its operations vertically throughout the world, resulting into reduction in total cost.

By now, Shell`s main strengths and weaknesses are designated compared to other rivals.
Additionally, opportunities and threats are analysed in the industry benefitting PESTLE
analysis, Porter`s five forces and other environmental analysis (Appendix 3 through 5). With
anatomy of these four elements in SWOT analysis (Appendix 12), now it is time to draw a
TOWS table (Appendix 13) to help a better understanding of the strategic choices that Shell
recently faces.
 Shell`s Purpose, Culture & Governance
As it is well-known that every organisation needs a well-defined purpose. This purpose
should not be only based on `profit maximization` but motivation for organisations`
strategies. Long term welfare and employee motivation strategies should be considered
while a purpose is established. Shell`s main purpose is that `reinforce our position as a leader
in the oil and gas industry, while helping to meet global energy demand in a responsible way.
Safety and environmental and social responsibility are at the heart of our activities`. This
mission statement is basically expresses an inspiration for helping people procuring their
energy demand. Additionally, it can be understood that Shell cares its employees` health and
lives performing its operations. Another inspiring point is that although influences of Shell`s
operations may be terrifying, Shell committed to deliver energy responsibly to local
communities and environment.

As it is indicated in Ownership model (Appendix 15), Shell is a publicly traded company that
focuses mostly on profit maximization as other public limited companies do. Shell mostly
sells its shares to the public and banks which means Shell uses shareholder model (Appendix
16). To manage the company professional managers are assigned by owners to maximize
financial returns, it therefore lots of potential shareholders buy these shares to participate
acquired profits. In that framework, shareholder model (Appendix 16) allows Shell to gain
higher rates of return and make better decisions while caused short-termism.

Stakeholders` anticipations has been critical in the last few decades. With the rise of social
media and increase in coordination between activist networks makes it difficult for oil & gas
companies to pay no attention to environmental and social concerns of stakeholders
(Johnson et al, 2014). In this concept, all stakeholders of Shell company has been evaluated
in terms of their importance to company for long-term success. As a power interest matrix
(Appendix 17) indicates that Shell` retail customers and non-governmental groups such as
activist groups should be closely engaged due to their influence and importance. Being
targeted by a host of activist stakeholder can prove challenging for companies, resulting loss
of reputation.

Royal Dutch Shell company has a single-tier Board of Directors chaired by a Non-Executive
Chairman, Charles O. Holliday. The executive management is led by the Chief Executive
Officer, Ben van Beurden. (Shell, 2016). Non-executive directors and their responsibilities are
indicated in the table below.

Name Position Responsibilities

Chief Executive Oversees the board of directors and takes the last
Ben Van Beurden
Officer decision
Chief Financial Finance, Investor relations, Strategy, Planning &
Jessica Uhl
Officer appraisal, Internal Audit, Treasury, Tax
Manufacturing, Retail, Global Commercial (Lubricants
Downstream and Business-to-Business), Chemicals, Trading &
John Abbott
Director Supply, Athabasca Oil Sands Project and Scotford
Upgrader in Canada, Alternative Energies
 Project Execution, Global Technical Expertise,
Research and Development, Third-Party Services,
Projects & Safety and Environment, Contracting & Procurement,
Harry Brekelmans
Technology Director Technical IT

Businesses and Functions

Exploration, Deep water, Unconventionals, Arctic,

Andrew Brown Upstream Director
Operated, Joint ventures, Production excellence

Functions

Chief Human Human Resources, Internal Communications and

Ronan Cassidy Resources & External Relations, Shell Real Estate, Shell Global
Corporate Officer Security, Shell Health, Shell Aircraft

Functions

Legal Services, Intellectual Property Services,

Donny Ching Legal Director
Compliance

Businesses or Functions

 Liquefied natural gas (LNG)

 Gas-to-liquids (GTL)
Integrated Gas  Commercial/new business development
Maarten
& New Energies  Integrated Gas ventures management
Wetselaar
Director  Integrated Gas production excellence
 Gas and energy marketing and trading
 New Energies

(Shell,2016)
(Not: Words number in the table does not be taken into account)

Organisational culture in an organisation has also been vitally important to create long -term
planning and sustainable competitive advantage in an industry. Components of an
organisation`s culture consist of different elements such as stories, symbols and
organisational structures. As it is known that these elements reflect organisations` DNA. For
instance, looking at Cultural Web (Appendix 18) it can be said that Shell`s red and yellow
pectin logo and its successful innovation partnership with Ferrari through decades reflect
company`s historical culture which is inimitable. However, among these, `diversity and
inclusion` culture at Shell is the most remarkable one as they constitute core-value of Shell
company.
 Business Strategy
Business strategies have been strongly essential for both small businesses and large leading
businesses. Business strategies of a company focus mostly on how to achieve goals in the
long run and how to compete against competitors in terms of pricing and branding.
Additionally, Shell`s business strategies related with `corporate level strategy` focusing on
objective of the company, acquisition and allocation of sources (Shell, 2016).

As it is indicated section 1, Shell`s wide-ranging operations which is distinctive capability

bring sustainable competitive advantage to company. These large-scale operations provide
tremendous cost and quality control over its products compared to other competitors. What
is more is that adopted vertical integration ensures Shell to control every stage; i ncluding
extracting the oil and selling these oil/products to customer directly (Economist, 2009). This
means that cost management is in the highest level in the company however, Shell has not
currently got any low-price implementation in the market. Shell also provide clean and
affordable low carbon energy to differentiate from competitor in the sector. By now, these
strategies could not properly be successful as it can be seen Porter`s three generic strategies
(Appendix 21) which specify that Shell located `stuck in the middle` section.

Another tool which is called Bowman`s Strategy Clock can be handy to demonstrate what
strategies are used by Shell. Compared to Porter`s three generic strategies, Bowman`s
Strategy Clock based on perceived product/service benefit and price to the customer rather
than cost to the organisation (Johnson et al, 2014). Basically, Shell demands affordable price
for its products/services, it is even less than average price in the market
(https://www.fool.com/investing/2016/07/18/these-3-big-oil-stocks-are-ridiculously-
cheap.aspx). On the other hand, perceived product/services value is the worth of a
product/service in consumers` mind. It is felt that perceived product/service of Shell is just
great looking at its more than 20 million customers a day visit a Shell service station for fuels,
motor oils and more (Shell, 2016). Due to these reasons, Shell currently employs a hybrid
strategy to compete in the oil & gas industry and attempt to win more market share.

As indicated above, Shell offers wallet friendly product/service throughout the world
because it has adopted vertical integration which help to manage the cost in every stage.
Apart from that, owning 22refineries and managing wide-ranging operations make it easier
for Shell to reach diversification in products and invest in technology and innovation which
reduce risk and total cost. After analysing the company`s power on cost management, it can
be easily said that launching a price war against Shell would be challenging and compelling in
oil & gas industry. Therefore, As -responding to low cost rivals table- (Appendix 23) show,
Shell does not need to be so worry about its rivals if Shell watches them.
 Innovation & Entrepreneurship
Over the last many decades, innovation has been crucial for both small and medium
businesses and large businesses to sustain their existences in a sector and protect their
competitive advantages. Innovation, basically, based on new knowledge and its practicability
to product/service for actual usage. To illustrate Shell`s innovation, four key innovation
dilemmas will be identified and responded respectively.

As it is indicated section 3 (Business Strategy), oil and gas industry has been witnessing
enduring competition. Consequently, this sector has been incorporating constant change,
intense competition and high demand, it therefore, the sector is exposed to
hypercompetition. As this sector incorporates constant change and intense competition, it is
felt that companies should invest in innovation, technology and R&D operations.

The first innovation dilemma which is technology push or market pull is about whether a
company creates its own innovation, technology and R&D system through technologist or
the company follows innovation strategies of other innovative companies. In this concept,
Shell has been maintaining technology push innovation strategy pioneering new innovations,
technology and R&D in the industry. An example to this could be Shell`s gamechanger
programme which strongly encourage young innovators to find a quick and cost-efficient
way to updated issues in the sector. One achievement of gamechanger programme is to
bring Kite Power System (KPS) to the future of wind energy (Shell, 2016).

The second innovation dilemma which is product or process innovation refers to whether a
company focuses on the final product/services or the way in which a product is
manufactured and distributed. This, indeed, will provide an intensive improvement in cost
management. As Shell`s comprehensive operations and adopted vertical integration show us
the company simply prefers process innovation as an effort to reduce total cost.

The third innovation dilemma that is open or closed innovation refers to whether a company
chooses to share ideas & knowledge and expertise with partners to expand its innovation or
keep these knowledge and expertise in secret to avoid competitors free-riding on ideas
(Reference). Compared to closed innovation, open innovation is more advantageous to
organisations that constantly receive and share information and expertise to produce better
product/service in the industry. However, usage of closed innovation is also intelligible due
to companies` desires to sustain their competitive advantage against their competitors.
Shell, as one of innovative companies, has opted to exchange ideas and expertise with
partners inside and beyond the energy sector to drive innovation forward (Shell,2016).
Additionally, Shell tends to share its experience obtained from developing Quest (Shell,
2016) and indicates that cooperation efforts with partners in advanced fuels and IT systems
will be increasingly continued.

The last innovation dilemma which is technological or business model is about the
determination of an organisation`s decision that how to gain its revenue and manage its risk
(Johnson et al, 2014). Looking at Shell`s value chain analysis, it can be concluded that Shell
has a drift for business model innovation. Shell`s ability to sale its products in the market
through its service stations makes Shell one of the companies that integrated with business
model innovation.

Another aspect in innovation is diffusion. Johnson argues that `diffusion is the process by
which innovations spread among users`. Innovations can be diffused by its owner claiming
no compensation. However, sometimes because of its commercial attractiveness,
innovations can be available commercially. According 9 th principle of UN Global Compact,
businesses should be promoted to spread their environmentally friendly technologies
(Unglobalcompact.org, n.d.). Concordantly, as it can be clearly seen in Diffusion S-curve
table, (Appendix 25) how Shell`s carbon dioxide emissions technology which is available
commercially- is diffused in time and in what level. Shell`s carbon dioxide emissions
technology locates near the tripping point on the diffusion S-curve table, due to its time
consuming and level of prevalence in the industry.

Last but not least, Shell has mostly become first mover benefitting its advantages such as
scale benefits and reputation. It has been evidence to first mover that owning an innovation
programme which is called LiveWire to encourage young entrepreneurs, brings an intensive
competitive advantage and reputation to Shell company. Additionally, to reduce
transportation cost which effect the overall cost, Shell has taken a bold decision which
establishing a large-scaled and complicated pipelines near its refineries.
 Shell`s Strategic Options
After analysing Shell`s strategic tools from Appendix 1 to Appendix 26, it is felt that it is time
to find out what are the best strategic options that Shell has. After that, some
recommendation will be taken apart in the end.

Strategic options of a company reflect its TOWS matrix (Appendix 13). Shell`s TOWS matrix
enable us to see how strategic capabilities could be used to maximize opportunities and
minimize threats. The major two recommendations are shown below;

 By mobilizing its financial capability and unique knowledge & experience, Shell can
easily get into demanding markets that could provide high profit margin to the
company.
 Leveraging advanced technology and innovative young entrepreneurs to go further in
biofuels which is already `blue ocean strategy` of the company. As these biofuels are
eco-friendly and state-sanctioned, Shell can minimize impacts of these fuels to the
environment delighting environmental activist throughout the world. Additionally,
this enhance Shell`s brand reputation and strengthen as well as its position in the
industry.
 Recommendations
1. Recommendation: Advertisement

One of the most compelling issue for oil and gas companies is that most of fossil fuels pollute
the environment. As it is a well-known fact that these non-bio fuels which contain high
percentages carbon- are still to be manufactured by companies due to their vulnerability. For
this reason, companies are strongly criticised by environmentalists and following this, most of
these oil and gas companies take part in news with their disrepute. In that concept, along with
these young talents and innovative technology, Shell can easily research into biofuels, solar
energy and other hydrogenic energy that helps Shell to diversify in a market by gaining positive
image from environmentalist. However, Shell should introduce its environmental friend ly
policies in public to gain more market share in the industry.
2. Recommendation: New Markets
Shell, one of the most powerful oil and gas company in terms of politically and financia lly,
should seek new markets to sustain its competitive advantages over its competitors. Investing
more over technology may ensure Shell to find and operate new reserves. On the other hand,
taking advantage of its political and financial power, Shell must dare to get into risky markets
where are very dangerous to operate such as middle-east. Although that is too risky and
dangerous, Shell can be able to set-up in rich areas where terror attacks happen frequently, for
instance Iraq and Lebanon. This strategy will certainly ensure a tremendous profit for the
company.
 6.0 Appendix
Appendix 1: PESTLE Analysis
Political
 Free trade agreements between Europe and America allow Shell to exports oil from
Russia where is the centre of oil. This will likely satisfy the growing oil demand.
 Another aspect of political factor is Brexit. With the Brexit, it is indeed that the tariff cost
will increase for fuel sector and it will reduce the profit of Shell Group
Economic
 Demand of oil for energy will rise in China and India in the next decades due to their
growing population and emerging economies. Shell is seeking oil and gas from
unconventional reserves all over the world to fulfil the increasing demand in the future.
However, this is going to mean higher prices for consumers.
Social
 With the ongoing civil war in rich countries in terms of reserves will affect production of
the fuels. Whereas, the rising terrorist incidents in various middle-east countries trigger
instability and insecurity on producing fuels in this area
Technological
 With the advanced technologies in power sector such as cloud-based digital drilling and
sliding sleeves ensure big advantages for innovative oil and gas companies in drilling and
extracting oil and gas from reserves.
Legal
 Regulations for carbon emission increased over the last few years and will likely increase
in the future without any doubt. Due to this reason, reducing carbon emission would be
crucial for Shell in the market
Environmental
 As the world transitions to a low carbon system, oil from unconventional reserves
contain higher carbon emission when it being used in the manufacturing of fuel.
“Momentum to replace fossil fuels with cleaner energy sources is building, and oil and
gas companies need to consider their futures in this context“ (Financier, 2016 [online]).
 Appendix 2: Porters Five Forces Model
Threat of New Entrance

Threat of New Entrance is quite low in this sector as it requires a heavy

capital investment to set-up plants. Additionally, numerous years of
experience is needed when it comes to gain advance technology to extract
oil and gas with low-priced. Apart from these, political power is needed to
enter rivalry with Shell or/and other oil and gas companies

Bargaining Power of Customers

Bargaining Power of Suppliers
Bargaining Power of Customers is too
Bargaining Power of Suppliers is low in
complicated to measure. There are, of
this sector and this is because of the
Competitive Rivalry course, not many fuel companies which
vertical integration strategy of Shell.
use alternative sources and offer
Shell can merge with various companies Competitive Rivalry is high in this market. It is true
biofuels in the market. On the other
at various levels, therefore Shell gains an that there are not many fuel companies in the
important power over its suppliers. hand, oil and gas companies are coming
market but they all have globally power and exist all
together to form a unique power and
over the world.
control over market. Furthermore,
there are lots of institutional buyers
that buy large amount of oil products
and losing even one of them would
considerably harm the revenue of oil
company. For these reasons the
bargaining power of customers is
medium.

Threat of Substitutes

Threat of Substitutes has risen due to the existing of alternative

energy sources such as gas, wind power, nuclear energy and solar
power. For instance, Shell prefer to invest on bio-fuels in order to
avoid social and environmental pressures.
 Appendix 3: Oil & Gas Competitive Industry Analysis

(Adapted from Johnson et al. 2014)

Findings:

Porter`s Five Forces Pentagon compares that where power lies in a business situation over the 5
years. Looking at the details, threat of new entrance and power of suppliers will reduce while
competitive rivalry, threat of substitute and power of buyers will increase.

It is also seen that over the five years, competition will still be intense in oil and gas sector.
 Appendix 4: Oil & Gas Industry Life Cycle

(Adapted from Johnson et al. 2014)

Appendix 5: Oil & Gas Industry Strategy Canvas

 Appendix 6: Analysis of Shell`s Resources & Capabilities

Resources Intangibles Competences

Property, plant and equipment Vertical Integration

 Headquarters of Shell located in The  Shell Company has succeeded a
Hague, the Netherlands and the parent beautiful example of vertical
company of Shell which is Royal Dutch integration controlling the cost, quality
Shell plc operates in Wales and England. and delivery time of inputs. Shell
 Shell exists more than 900 airports in controls every stage; including
about 36 countries standing ready for extracting the oil and selling these
aircrafts. oil/products to customer directly.
Refinery Portfolio (Economist,2009)
 22 refineries that Shell has interest in all Range of operations
over the world. 1. Upstream: The main aim of the
Distributors company is to discover new liquids and
 Shell also has more than 1.500 natural gas reserves.
distributors throughout the world. 2. Integrated Gas and New Energies: The
Store Portfolio company try to liquefy natural gas
 Shell, as an energy giant, has more than (LNG) and transform gas to liquids
43.000 service stations, across more than Physical (GTL). The company`s main aim is to
90 countries. form effective and secure system of
storing and shipping these fuels.
3. Downstream: In downstream, the
company produce and sell
petrochemicals for industrial use
throughout the World by turning crude
oil into a variety of refined products.
4. Projects & Technology: This operation
is responsible for delivering new
development projects and seeking low-
cost investments.
Global supply chain:
 Liquids, natural gas and petrochemicals
which are made by crude oil are
shipped to whole markets all over the
world.
Cash flow Derivative
 Net cash from operating activities is $20.7  Shell uses derivative instruments
million in 2015 while it saw a peak point (Reference)
reaching $45.0 million in 2014. Ability to make acquisitions
Cash and Cash equivalents  Owns financial capabilities for
 Cash and Cash equivalents at the end of acquisition in the market. For instance,
the year 2016 was $19,130m. Financial Shell acquired BG Group in deal a deal
Adequacy of Working Capital worth £47 billion (Donovan, 2015). BG
 In 2016, the working capital ratio of Shell Group is one of the multinational gas
was % 1,17 which is acceptable, reducing company headquartered in UK.
from % 1.32 in 2015.
Investors Pipelines
 Shell is the second largest publicly traded  Exhaustive and long pipelines are
oil company and the fifth largest publicly established to reduce transportation
traded company overall. cost.
Profit
 Shell` net profit after tax was $4.58
million for the full year of 2016 compared
with $1,94 million for 2015. This more
than double increase was due to recovery
of oil prices in the fourth quarter
(Finance.yahoo.com, 2017).
Employees Training Programmes
 Shell has 90.000 employees on average  Every student in this programme
bringing diversities together all over the receive world-class training and are
world. encouraged to contribute to
Board of Directors organization built around teamwork.
 Shell company has a single tier Board of The main aim of this programme, well-
Directors ruled by a non-executive educated employees and specialists in
chairman, Charles o. Holliday. this sector are to be trained.
Additionally, Ben van Beurden is the Chief  This programme includes PhD
Executive Officer who chairs the internships in the field providing
executive management. valuable hands-on experience and
progress professional development for
students.
Suppliers Initiative Campaigns
 Shell company has approximately 70.000  One of the biggest initiative campaign
suppliers in more than 90 countries. Human of Shell Company is #makethefuture.
Additionally, Shell improved a “Supplier With this campaign, the organisation
Qualification System” (SQS) that brought aims to explore people`s scientific
global visibility of proper up-to-date ingenuity, creative spirit and encourage
information which is handy for both Shell entrepreneurs to come up with ideas
company and its suppliers (Supplier regarding how to make fuels more
Qualification System, 2017). efficient.
Customers  Other innovation programmes for
 As it has known that Shell company young entrepreneurs are;
gained expertise in gas, fuels, power and  Shell Ideas360 for students
energy sector. Its main customers are;  Shell Eco-marathon for students
 Large and energy-intensive industries  Shell LiveWIRE for young
 Energy retail companies entrepreneurs
 Power producers  Shell GameChanger for experienced
innovators (Romero, n.d.)

Brand Value Sponsorship

 One of the most valuable and best-known  Shell has many sponsorship
brand in the world. Apart from that Shell` associations, mainly Formula 1 and
pecten emblem and its prominent yellow Superbike World Championship. These
and red colours strengthen Shell brand, sponsorships services ensure Shell a
Intangible
Shell values and quality of Shell products high-performance and high-quality
and services all over the world. performance.
Goodwill and Intangible Assets Enhancing popularity of Shell brand via
 Royal Dutch Shell PLC`s intangible partnerships
assets, including goodwill raised from  Formula 1 has a large global support
$4,394 million to $7,076 million, from base and Shell Company associated
with the most successful team in
2013 to 2014.
Formula 1 which is Ferrari. In the
Relationship
Superbike World Championship, Shell is
 One of the Shell`s innovation incorporating with `Ducati` which is
partnership is Scuderia Ferrari. quite successful motorbike brand.
Relationship with Scuderia Ferrari is These partnerships aid to raise
one of the longest and most popularity of Shell brand and provide to
successful in motorsports. develop Shell`s products.
Create Awareness
 The Shell Company created lots of films
and documentaries over the last 80
years that inform and entertain people
struggling the challenges of the time.
Although the main aims of these films
and documentaries were not to
advertise Shell`s brand, they helped to
raise the awareness of Shell brand as
Shell logo and company name
appeared only at the end of the films.
Advertising
 With the world`s most-famous driver
who is Micheal Schumacher, supporters
of this sport have become used to
seeing the Shell pecten emblem across
the driver`s chest and painted on his
super cars.
 Appendix 7: SSR Model

Product Sensing Seizing Reconfiguration

Oil & Gas Sensing an opportunity to Leverage company`s financial Shell has established new
leverage the new and smart sources to fund these young programmes in UK for young
ideas by encouraging young entrepreneurs to take entrepreneurs (16-30 years old) such
entrepreneurs. advantage of innovative ideas as Ideas360 and Shell liveWIRE.

Advertisement trend for Shell creates a positive brand Locating logos on famous driver`s
brands via partnerships image via sponsorship chest and painted on their vehicles,
associations, mainly Formula 1. Shell tends to increase its popularity
Shell locates its logo across and awareness.
famous driver’s chests and
painted on their vehicles.
(Michael Schumacher & Ferrari)

Leverage the smart phones Developed a `Shell Motorist Develop relationship with customers
app to serve customer in a App` and offer products (oil) and keep them loyal.
better way and services (bonus points
balance) to customers.

Sensing an opportunity to Due to its safety, oil pipeline Develop technology and create
reduce transportation cost transportation could be more additional funds to control oil
through establishing effective in regions that terror transportation channels.
exhaustive pipelines (Heyes, attacks happen.
2017)
 Appendix 8: Benchmarking Shell against other
Competitors in Oil & Gas Sector

Capability Shell BP ExxonMobil

Physical Forward and Backward Forward and Backward Forward and Backward
integration, controlling every integration, controlling every integration, controlling all
stage; including extracting the stage from field to sales, just stages from manufacturing
oil and selling these like Shell. (Economist,2009) to marketing (Refining &
oil/products to customer Chemical Manufacturing
directly Overview, n.d.).

Shell, as an energy giant, has The company has around 18,000 With more than 11,000
more than 43.000 service retail sites in 72 countries. service stations mostly in
stations, across more than 90 USA and West-Europe. Has
countries. several divisions such as
Exxon, Esso, Mobil or XTO.

Global supply chain (Mabandla, Global supply chain Global supply chain
2014)
BP owned or had a share in 11 ExxonMobil has 37 petrol
22 refineries that Shell has refineries and 17 petrochemical refineries in 21 countries.
interest in all over the world. manufacturing facilities
throughout the world.

(Shell,2016) (BP,2016) (Exxonmobil,2016)

Financial Seasonal financing Seasonal financing Seasonal financing

Shell is a public limited BP is also a public limited ExxonMobil is also publicly

company (PLC) and it is 50th company (PLC) and 370th traded company and it is 9th
biggest public company in biggest company in `Forbes` biggest public company
`Forbes` according to `Forbes`

Shell has a primary listing on BP has a primary listing on the ExxonMobil common stock
the London Stock Exchange London Stock Exchange and is listed on the New York
and secondary listings on secondary listings on Frankfurt Stock Exchange (NYSE)
Euronext Amsterdam and the Stock Exchange and the New
New York Stock Exchange. York Stock Exchange.

Net profit of $4,575b on Net profit of $115m on Net profit of $7.84b on

revenues of $233.6b in 2016. revenues of 183.0b in 2016. revenues of 218.6b in 2016.

Has market value of $203.5b Its market value is $225.9b Has market value of $363.3b

Shell uses derivatives as tool BP also uses derivatives as a tool Exxon shuns derivatives as a
(Parsons and Mello, n.d.) (Parsons and Mello, n.d.) tool for hedging the market
(Connington, 2017) risk (Parsons and Mello, n.d.)
 (Shell,2016) (BP,2016) (Exxonmobil,2016)

Human Has 90,000 employees 74,500 Employees 76,500 employees

Depends on having talented and Seek to foster diverse

Maintain a diverse and diverse workforce workforce
inclusive workforce culture
BP offer graduate opportunities Offer just internship
Has graduate programme for for students in business, opportunity for students
students and graduates engineering, science section

Many board of directors are Only one board of director

Almost all board of directors appointed recently. has long history with the
are recently employed. company

Invest in young entrepreneurs

(Shell,2016) (BP,2016) (Exxonmobil,2016)

Intangible Solid partnerships in BP will return to F1 in 2017 Exxon announced an
motorsports teams such as dealing with McLaren. BP agreement with Red Bull
Scuderia Ferrari and Ducati represent itself with its both Racing in F1 providing fuel
fuel and lubricants such as and lubricant
Castrol (Saward, 2016)

Owns some of the world`s Owns `Castrol` which is one of Owns some of the world`s
most recognisable the world`s most well-known most recognisable motor oils
performance fuels, Shell V- motor oils for automobiles and such as Mobil 1, Mobil Super
Power Unleaded and Shell V- motorbikes. `Castrol` also makes and Mobil Delvac.
Power Diesel. lubricants for vehicles

Owns Shell Helix Ultra and

Shell Helix HX8 motor oils

(Shell,2016) (BP,2016) (Exxonmobil,2016)

Appendix 9: Shell Porters Value Chain Analysis
(Adapted from Porter, 1985)
 Appendix 10: VRIO Analysis 1 - Resources & Capabilities
Resources/Capabilities V R I O CA?

90,000 employees throughout the world X P

Depends on having a diverse and inclusive workforce culture X P

Lead the field in number of service station (43,000) across more than 90 countries X P

Seasonal financing allows Shell to manage its operations easily X P

Having more than 70,000 suppliers in more than 90 countries allows Shell to establish a
X P
power over its suppliers.
Access to $19,130m cash and cash equivalents to make reinvestment X P
Owns some of the world`s most recognisable performance fuels, Shell V-Power
X P
Unleaded and Shell V-Power Diesel.
Films and documentaries which are created by Shell can be maintained to make
X X T
advertisements of the brand.
By developing possible vision of the future, Shell intends to make better decisions. Due
to this reason, Shell reveals lots of Scenarios Analysis such as Shell energy scenarios to X X T
2050.
Existing more than 900 airports in about 36 countries standing ready for aircrafts. X X T
Adopted a successful vertical integration controlling the cost, quality and delivery time
X X T
of inputs
Has various innovation programmes such as Ideas 360, eco-marathon, IiveWIRE and
X X T
GameChanger both for new entrepreneurs and experienced innovators

Has one of the biggest initiative campaign which is called #makethefuture#. By this,
Shell encourage young entrepreneurs and provide them funds to make fuels more X X T
efficient.

Having sponsorships with F1 and Superbike World Championship X X T

Shell`s innovation partnership with Scuderia Ferrari X X T

Having one of the most exhaustive pipelines near its refineries. X X X X S

Having wide-ranging operations (upstream, Integrated Gas and New Energies,

X X X X S
downstream and project & technology) throughout the world.

KEY:

 P= Competitive parity
 T= Temporary competitive advantage
 S= Sustainable competitive advantage

(Adapted from Johnson et al. 2014)

 Appendix 11: VRIO Analysis 2 - Value Chain

Resources / Capabilities V R I O CA?

Having good fiscal management and political power strengthen Shell`s hand in terms
X P
of marketing and acquisition

Well-defined strategic planning provides such a great expansion in sector X P

Providing training programmes (graduate & internship) to students, Shell gains
X P
talented and qualified employees
HR function enable young entrepreneurs to adopt their solutions over fuel efficiency
X P
by funding them

Maintenance & development IT systems are essential for high-quality and cost-
X P
effective global solutions along the entire value chain.

Diversity in productions (Gas & oil, lubricants and chemical products) X P

Tight relationship with suppliers X P

Has advanced technology to explore new liquids and natural gas reserves X X T

Acquire major and costly pipelines around the world X X T

Invest in innovative technologies create cost reduction in operations X X T

Abundant storage capacity in eight separate tanks X X T

Worldwide distribution X X T

Has adopted vertical integration due to control costs in every stage X X T

Wide-ranging operation function allow Shell to make a merger and/or joint venture
X X X X S
with key companies in the industry.

KEY:

 P= Competitive parity
 T= Temporary competitive advantage
 S= Sustainable competitive advantage

(Adapted from Johnson et al. 2014)

 Appendix 12: SWOT Analysis

Strengths Weaknesses
1. Has huge investments in exploration of new 1. Shell has been experienced an increase in its total
liquids and natural gas reserves will assist debt from $37,754 million in FY 2012 to $58,379
continued activities over coming decades million in FY 2015. Due to this reason, Shell slogs
2. With up to date latest technology, Shell can easily on to pay principal and interest with respect to its
research into biofuels, solar energy and other debt obligations.
hydrogenic energy that helps Shell to diversify in a 2. Shell has a strong presence in Nigeria, but this
market where environmental and ecological country is politically volatile and operations have
issues have importance. been halted due to security issues.
3. Adopted a successful vertical integration ensures 3. To manage large scale of Shell`s global operations
Shell to control costs in every stage as well as may create a weakness due to hardship of quality
quality and delivery time of inputs control.
4. Worldwide distribution ensures strong market 4. Environmental issues can harm the image of Shell
position as well as ease to get into a new market. due to varied regulatory and policy. For example,
5. Shell is leader in oil & gas sector with global Shell is accused of polluting the environment in
existence more than 90 countries empowering its Ogoniland, Niger Delta, Nigeria.
global image.
6. Shell has succeeded to overcome the 2008/2009
economic downturn, this means Shell has a strong
capital base for competition in an industry.
7. Shell recently uses scenario analysis as a planning
tool to explore potential future issues as well as
avert undesirable situations.
8. With fuel and credit cards, Shell intends to
maintain a wider portfolio of products.
9. Training qualified and talented employees all
around world to overcome all energy, gas and oil
issues.
10. Has strong relationships with strategic innovative
partnerships such as Ferrari. This partnership is
also beneficial for performance testing of
products.
11. Owns some of the world`s most recognisable
performance fuels such as Shell V-Power
Unleaded and Shell V-Power Diesel.
Opportunities Threats
1. With the emerging economies like China and India 1. The economic slowdown in the US and Europe
in where have a large demand for fuels, Shell can make it difficult for countries to pay their depts.
broaden its operations through mergers, Consequently, these countries constitute a treat
acquisitions and joint ventures to meet this to the Shell`s profitability.
demand of fuels. Acquisition of Neste Oil Oyj in 2. Terror issues in some areas where are rich in
Poland can set an example (Reuters, 2012). reserves like middle-east create volatile
2. With increasing in population throughout the environment, this hamper various investments on
world, the demand of biofuel and solar energy oil and gas reserves in the area due to security
will rise considerably in near future, this will concerns.
indeed increase the number of potential 3. Strick environmental regulations arranged by
customers. governments are also treats to operations of Shell
3. With the regulations of carbon emission, one of which should manage its operations environment-
the biggest opportunity for Shell is usage of low- friendly.
carbon fuels and Bio-fuels. These are healthier 4. Recently, fuel prices have been unpredictable due
than other fuels such as coal and oil and to political conflicts (between Iran and Saudi
encouraged by the governments and society. Arabia) induced losing of potential profits.
4. Innovative technologies in power sector provide 5. One of the consequences of Brexit is tariffs which
companies to lower economic limit of oil wells. will affect Shell in a bad way due to its existing
5. New oil and gas reserves are still waiting to be headquarter in UK. Any increase in tariff cost
found. would damage oil and gas sector in terms of
6. By using political and economic power, Shell can profitability.
be able to set-up in rich areas in terms of reserves 6. Weather can be another potential treat to
where are very risky to operate, for instance Iraq operations of Shell. Recently, Hurricane Ike hit
and Lebanon. This ensures a tremendous one of the Shell`s refineries.
opportunity for Shell.
(Amobi, 2014)

(SWOT analysis was drawn up using Appendix 1 through 10)

 Appendix 13: TOWS Matrix Analysis
Internal (Strengths & Weaknesses)

Strengths – Opportunities Weaknesses – Opportunities

(Leverage strengths to exploit opportunities) (Overcome weaknesses to pursue opportunities)
 S3,4,5-O1, Leverage the experience and  W1-O1,4, Leveraging innovative technologies
financial power of the company to get into get into huge markets that need fuels and
new and in demand markets power- to reinvigorate company`s economy.
 S2,7,9-O2, Compose company`s young  W4-O3,4, Eliminate people`s concerns about
talents and advanced technology to discover environmental pollution and find innovative
new and eco-friendly fuels for future solutions mobilizing company`s innovative
generations technologies
 S2,5-O5, Along with the advanced technology
and tremendous capital base, explore new
natural resources.
 S7-O6, Analyse current and future terror and
political issues in Iraq and Lebanon and try to
gain market share.
Strengths – Threats Weaknesses – Threats
(Leverage strengths to reduce vulnerability to (Minimize weaknesses and avoid threats)
threats)
 S9,2-T3, Leveraging innovative technology W3-T3 By downsizing in operations, the company
and young talents to create biofuels which are can be effective on some specific issues. For
eco-friendly and state-sanctioned. instance, to adapt for environmental regulations
 S3-T4, Capture all stages and control cost, which are arranged by governments, the
quality and delivery time of inputs to be company could gain more reputation by means of
affected less from uncertainty in oil & gas its eco-friendly products.
prices.
 S7,8-T5 Make scenario analysis on tariffs and
develop portfolio of products to be influenced
less from Brexit.
Appendix 14: Diversity & Performance Graph

(Adapted from Johnson et al. 2014)

Appendix 15: Ownership Model

(Adapted from Johnson et al.2014)

 Appendix 16: Shell`s Governance Model

Shareholder Model Stakeholder Model Enlightened Stakeholder

Advantages Higher rates of return Long term horizons Reduced risk

Reduced risk Less reckless risk-taking Less reckless risk-taking

Increased innovation & Better management Increased innovation

entrepreneurship
Better decision-making
Better decision making
Long-term horizons

Best of both

Disadvantages Diluted monitoring Weaker decision making Harder to make decision

Vulnerable minority Uneconomic investments Profit or meet stakeholder

shareholders demands
Reduced innovation &
Short-termism entrepreneurship

(Adapted from Johnson et al. 2014)

Appendix 17: Shell Power Interest Matrix

(Adapted from Johnson et al. 2014)

 Appendix 18: Shell`s Cultural Web

Stories Symbols

 Owns lots of films and documentaries  Has world`s most recognisable products.
 Winner of “Energy Company of the  Pecten logo
Year” and “Commodity Excellence  Shell`s red and yellow colours are
Award for Natural Gas” in 2012. colours of Spain, where many early
 Two female Shell employees, Divya Californian settlers were born. Possibly
Reddy and Yee Yee Low, won awards at emotional bond has been created.
the esteemed Asian Women of  Logo has been changed over years.
Achievement Awards on 4 June 2014 in  Among the largest oil companies in the
London. world
 Successful history of Shell and Ferrari
partnership in F1.

Power Structures
Core Assumptions

Rituals & Routines  Adopted `Goal zero ambition`

 Create secure and healthier
approach
environment for employees
 Sell products  Constitute `General Business
 Seek to strengthen our Principles` in 1976
 `Management day` runs once in a
leadership in the oil and gas  Recent non-executive chairman of
year
industry the company who is Charles O.
 Area for meetings Holliday believes that Shell should
 Control all stages to ensure cost
expand variety of its operations
and quality
throughout the world benefitting its
 Business integrity based on leader position in the market
honesty and respect for people

Organisational Structures
Control Sys tems
 Organisational structure of the
 Cos t control company is a mainly hierarchical
concept of subordination of
 R & D control
entities that cooperate and
 Fi nancial control contribute to serve one collective
 Qua l ity control aim.
 Local managers
 Diversity and inclusion
 Promoting ethical business
behaviour

(Adapted from Johnson et al. 2014)

Appendix 19: Experiencing Strategic Drift

(Adapted from Johnson et al. 2014)

Appendix 20: Application of Economies of Scale &
Experience Curve

(Adapted from Johnson et al. 2014)

Appendix 21: Application of Porter`s three generic strategies

(Adapted from Johnson et al. 2014)

Appendix 22: Shell`s Position on Bowman`s Strategy Clock

(Adapted from Johnson et al. 2014)

Appendix 23: Responding to Low Cost

(Adapted from Johnson et al. 2014)

Appendix 24: Dynamic of Product & Process Innovation
Appendix 25: Application of Diffusion S-Curve

(Adapted from Johnson et al. 2014)

Appendix 26: Shell`s Portfolio of Innovation Options

(Adapted from Johnson et al. 2014)

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