Analyzing Shell's Strategic Position

The assignment provides a detailed analysis of Shell's strategic position by examining its external and internal environment. It considers factors like competition from other oil and gas companies, Royal Dutch Shell's stock value, and the cost of producing a barrel of oil and gas. The analysis is based on various sources including academic papers, industry reports, and online articles. This assignment helps students understand how to analyze a company's strategic position and make informed decisions.

DEVELOPMENT
STRATEGIC PLAN

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK...............................................................................................................................................1
PESTLE ANALYSIS .....................................................................................................................4
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Strategy is a term which means to plan an effective scheme for success of an organization
by considering necessary facts or figures. However, entire corporate world is based on various
types of useful strategy in order to attain company goals or objectives in a defined time period.
Shell oil company is one of the famous petroleum organization at UK marketplace which is fully
owned by subsidiary of Royal Dutch Shell seen as a multinational company. Therefore,
assignment is going to classified into various parts for analysing the external factors in order to
make effective decision (Resch, 2011). Moreover, assessment of micro and macro elements are
outlining in this project as well as effectiveness of porter five forces model. Thus, main objective
of this report is to focus on several development strategy which is used by an organization to
attain their company goals.
TASK
Internal and external analysis
There various kind of factors which impacts on different aspects of business relevant to
its activities as well as processes top generate desirable outcomes of Shell Petroleum company.
Such factors have two categories like macro and micro elements of business environment which
are responsible for affecting strategies or policies of company in several prospects. These
components in detail are described below:
External environment Internal environment
 Political and legal factors  Customers
 Economic factors  Intermediaries
 Social and cultural factors  Shareholders
 Technological and environmental
factors
 Competitors
External environment
This term refers to various kind of macro elements which may affects the functions or
operational activities to attain desired outcomes of an organisation (Hill, Jones and Schilling,

2014). Its several components are given below in respect Shell petroleum company which are as
follows:
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(Source:- Oil and Gas Trends, 2017)
According to graphical representation it has been understood that Shell Petroleum or
entire Oil industry is getting succeeded in enhancing their performance in coming time period
due to the maximization in consumer demand. In fact, while comparing with other nation UK
is growing in a more faster way by coming with maximum branches at marketplace. Political and legal factors:- As per declaration of UN and EU, carbon emissions are to be
charged with penalties or taxes for all oil and gas companies. This element may refers to
political as well as legal rules or norms which are necessarily followed by Shell
petroleum company. Economic factors:- It is relevant to increasing price of oil and gas all over the world
which can resultant heavy taxation from government due to that costs of manufacturing
have risen (Bringle, Hatcher and Jones, 2012). Social and cultural factors:- It is related to procedures or activities of oil and gas
companies which may harm the social or cultural aspects. The Shell petroleum company
have to take care of this so that their production will not harm,social or cultural norms. It
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Illustration 1: 2017 Oil and Gas Trends

is observed that its operations causing gas flares consistently which has caught social
attention but firm is reluctant to take action due to cost reduction strategy.
 Technological and environmental factors:- the industry of oil or gas may benefited
greatly by adopting technological changes in drilling and extraction of main product. This
is become very useful because it saves time and money money both as well as improve
quality of product or services. The firm have to take care of issues related to pollution by
using ozone-friendly procedures.
Internal environment Customers:- It is well known that clients are key elements behind profits or benefits of
company. It is so because the firm have to make its products or services as per needs.
wants an d demands of people to attain better profitability as well as productivity (Warner
and Sullivan, 2017). Intermediaries:- The Shell petroleum company correspond to associations between
organisation and customers. They have task to attend final client and sell their goods or
services as well as provide information about feedbacks of them to firm. This will
facilitate to implement appropriate changes in products to enhance sales or profits of
company. Shareholders:- This term may refers to those people who invest capital for operational
activities of firm and have right to render suggestions in decision making. They are
necessarily invited in firm's meetings or conferences and provide essential information to
them
 Competitors:- there are various kind of competitive firms which are also manufacture
substitute product to fulfil same needs or demands of people. They have apply several
profitable strategies them it will work as forcing factors to apply innovative techniques.
This will facilitate to attract new clients and retain the current ones to attain profits for
Shell petroleum company.
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(Source:- Breaking down Royal Dutch Shell by its competition and stock value, 2015)
Throughout the diagrammatic presentation it has been understood that high range of
competitors are emerging at marketplace for gaining maximum profit. But at the same time
Shell is improving their performance in coming time period by satisfying the need of distinct
clients. In fact, they are coming with outstanding ideas and techniques of facilitating
consumers.
SWOT analysis
This term be described as tactical developmental technique which may utilised in
management and strategy formulation. This can be done through identifying strengths, weakness,
opportunity and threats of specific organisation (Gordon, 2013). Swot analysis basically focussed
on understanding the internal as well as external environment. This technique provides an
important knowledge about organisation so that they will take appropriate actions. It is
necessarily facilitate better decision making through observing and studying the strong and
weak aspects of Shell petroleum company.
Strengths
 Shell petroleum company has obtained its competitive edge in terms of advanced
technology and spend over $1.2 billion in research and developmental processes.
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Illustration 2: Royal Dutch Shell

 It contains first mover advantages by utilising unconventional oil reserves to attain cost
profits.
 This firm have its focus on strategies of performance which may support to decrease cost.
 The Shell petroleum company signed join venture to gain cost benefits as well as enhance
its presence in ethanol market (Shay, Hyduke and Burris, 2013).
 It is also invested money in solar and wind energy which is part of Shell Renewable SBU
and it has 20% brand preference which is highest amongst various competitive
organisation.
Weakness
 The Shell petroleum company has severe lack of association with bio fuels which may
grow in demand in current scenario of market.
 It also have lack of substantial countering of social pressures and media exposures. This
is due to various environmental issues which may affect the goodwill of brand in market.
This will results in reducing sales and profits of the organisation.
Opportunities
 As it is fuel providing company then its bio substance and low carbon emission fuel
sector which is growing in market. It is also greatly motivated by government authorities,
society because id its healthy impacts in environment (Herazo, Lizarralde and Paquin,
2012).
 The Shell petroleum company put their efforts in promoting better health and safe
surroundings in plants. This is good opportunity for the company as it will helps in
establishing healthy relations with public. This aspect can be done through conducting
several effective campaigns related to safety of society as well s environment.
Threats
 The firms are implementing certain new techniques to attain profits but they have their
threats also which are needed to be controlled.
 Several strict actions are taken by government and interest groups against heavy carbon
emitting fuel companies like Shell petroleum company. These steps are due to
maintaining healthy society and environment and firms will make ozone friendly
products.
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 There are heavy investments in unconventional gas reserves which are full of stakes as
they reserves allow for large amount of carbon emissions. This aspect may be potentially
dangerous for organisation's image and acceptance in market.
PESTLE ANALYSIS
Macro factors are those element which plays a major role in development of an
organization because Shell petroleum company is having their branches across at global
marketplace (Ping, Dongqin and Tinghan, 2011). As a result it aids an enterprise in attaining
their organizational objectives in a minimum time frame by satisfying needs or demands of
various domestic as well as foreign consumers. However petroleum industry is growing in a
fastest way due to changes in demand of society. For example; overall society is developing due
to emergence of multinational companies which provide job opportunities to distinct needy
people and increase the income level of common people. It means, entire society are becoming
more richer due to which their demand is also increasing day by day. Therefore, because of all
this situation or changes in societal desired encourage petroleum industry towards modification
in their current strategy in order to cope up with existing barriers. Basically, external components
are playing a major role in a company success because norms and organizational policies are
fully depend upon macro factors in different ways (Knowles, 2012). Thus, it has been analysed
that PESTLE elements are having a major impact on a company performance and act as a growth
strategy for overall organization which are highlighting as follows:-
Political Governing bodies of a nation is responsible for designing various norms, policies,
laws, acts, rules and regulations which is followed by entire corporate world while
running their business entity across the international boundaries. Thus, Shell
petroleum organization is expanding their business across the borders for gaining
maximum revenue by satisfying the needs of domestic as well as foreign clients. It
means, selected firm needs to considered necessary laws while expansion process
in order to minimize the chances of loss, fraudulent activities and various other
barriers. Thus, advisor bodies act as a major role in a growth of an enterprise
because managers needs to consider rules or regulation of a political parties while
setting a business norms. For example; recruitment is going to hire a skilled or
eligible person to fill vacant position of a company. Thus they need to offer equal
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opportunities to all the eligible person without discriminating on the basis of caste,
colour, religion, gender hence forth (McCarthy and et. al., 2012). Therefore, if a
company is following a policy of equality them most of clients as well as
employees get attracted towards selected firm which resulted in development. It
means political rules have a major impact on a success of a Shell petroleum
because maximum contracts of an association are related with foreign clients.
Economica
l
Changes in currency rate of a nation have a major influence on a existing and
future contract of an enterprise because it may fluctuate the profit due to alteration.
Thus, it may hamper the success of a business entity as well as affects the
economy of a UK. Shell petroleum company is engaged in various types of
contracts with foreign companies which plays a major role in success of an
enterprise. Along with this, provide employment opportunities to number of
unemployed person in order to facilitate them with several facilities. Hence,
emergence of inflation or deflation affects the company success by influencing
their profitable contract with foreign clients.
Social Overall products of an enterprise is finally consumed by the society and changes in
their choices or preferences have a major impact on a company success or
development (An, Lee and Shin, 2011). Thus, it has been analysed that
consideration of societal choice is indispensable for company success because
goods are finally consumed by them only. It means, Shell petroleum company
plays a major role in developing the society by offering them with advanced
products or services.
Technologi
cal
Modern technologies plays a major role in developing the enterprise in various
manner because it aids an employees while designing products. Along with this
one of the major benefit of distinct technology is that number of promotional
techniques has been observed by marketing managers to increase their company
sales. Moreover, technology is used for capturing the attention of millions of
clients in a minimum time period. For example; usage of social media, online
services, promotion through brochures, websites designing and so on. Hence, all
these method used by company for maximizing their profit as well as aids
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customers while booking products. Apart from this, one of the major impact of
technology on Shell petroleum is that it supports managers while transaction
process by offering best facilities.
Legal Legitimate bodies act as a major role in creating a nation free from fraudulent
activities by considering various acts, laws, norms and beliefs. As a result it aids
an association while running their business operations (Sadeghzadeh and Salehi,
2011). Along with this, main objectives of the legal bodies is to create peaceful
relations between buyer and purchaser by implementing the various policies at
workplace.
Environme
ntal
Resources are acquired by organization through surrounding such as; raw
materials, labours, funds, plants or machinery and so on. Thus, Shell petroleum is
adopting all the necessary materials from environment in order to attain company
objectives.
Hence it has been understood that Shell petroleum company is have a greatly affected by macro
factors and study of these element plays a very crucial role in development of an enterprise.
MATRIX analysis
The matrix synthesis is an effective technique which can be utilised to determine new
opportunities for growth in today's competitive scenario of market. This method will help to
build more effective as well as efficient strategies or policies to conduct various functions of
Shell Petroleum company. By this they become able to identify beneficial opportunities and grab
them at right time to make better profitability or productivity of an enterprise. It is also necessary
to implement several unique and innovative changes or modifications to improve the quality of
good or services render by firm (Drenkard, 2012). A competitive matrix may adopt to critically
profile and compare the position of goodwill of firm against competitive firms. At one glance
they are able know about competitive landscape and differentiate the company from others.
The firms need to analyse the competitive matrix of it to determine certain key elements
or profits which are essential to existing and potential clients. And after this it is necessary to
rank an organisation in comparison to its competitive enterprises. Overall, it is helpful in
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building firm's profitable growth strategy. Some of aspects reveals by matrix which are as
follows:
 Boosting up the methods of manufacturing to make products more effectively.
 It is required to develop client training function for using products in most effective as
well as safest way.
 They have to create new or unique methods to customize easily to fulfil various needs to
people and make comparisons with other ones.
 It is necessary to build innovative marketing campaign which is linked to revised sales
plan to communicate correct message of cost effective benefits (Fox, 2013).
 They have to find out efficient opportunities and grab them at right time to make profits
from it.
 The factor of matrix as an internal sales training method to enhance skills or abilities to
sales staff to effectively convince the clients for making better profits for n organisation.
Porter's five forces approach
There is high level competition which can be observed in market scenario in respect of
goodwill of company as well as its productivity in front of competitive firms surviving in current
situation. The British Petroleum strategy also focus on acquisitions, alliances and partnerships to
build up greater framework to meet growing demand. In case of Shell petroleum company, it is
still glued to oil and gas reserves to stay ahead in this competition for long time. Porter's
framework of five forces shows its influenced with industrial aspects which are given below:
Threat of substitutes:- There are various kind of firms which are manufacturing different
products or services to complete same demands or wants or people. This will facilitate high
competition in market trends which may works as barriers for productivity of firm (Song, Zhou
and Zhang, 2011).
 The Shell petroleum company perform with advent alternative energy sources, threat of
substitute products risen in case of bio fuels.
 There are several forms which tries to invest in bio fuel technologies to respond to social,
environmental and political pressures.
Threats of new entrants:- There is already very high competition in market area and it
will increase due to launch of new firms with their different products in market place. The
pricing is low and competition is high then it will become quite difficult to attain profits.
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 Its impact is low because of requirement of heavy capital investment to set up plants. And
utilise advance technology for extraction in domestic as well as global market to meet
demands of clients.
 Sometimes, it is observed that fined cost of greater which involved in industry to be
curbed once economies of scale are received (Ny, Hallstedt and Ericson, 2013).
Bargaining power of suppliers:- this term may refers to that aspect when considering
high number of suppliers and maximum size with its higher switching cost for few retailers. Fuel
supply chain from large organisations are able to do desired activities.
 The Shell Petroleum company has low bargaining power of supply due to having few
such members available in industry.
 Such firms have direction on low cost production and invested in heavy alternative
sources but under the influence of manufacturers.
(Source:- Cost of producing a barrel of oil and gas, 2016)
Bargaining power of buyers:- It is moderate due to increase of demand from consumers
because there is no other alternative fuel for motors. Because of high expense on manufacturing,
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Illustration 3: Barrel Breakdown

marketing and advertising the products with its less brand image due to high demand (Fundingsl,
Tetlow and Hanusch, 2012).
 This factor is low as there are not many fuel providing firms available which offers
conventional, alternative and bio mass fuels.
 It also considers exercise limited power and low switching cost.
Competition rivalry:- It is well understood that there are various firms who are
manufacturing different products to complete same needs, wants and desires of people. For
surviving in strong competition (Legacy, 2012). The Shell Petroleum have to make some of
unique and more effective strategies to beat its competitors and make own position profitable in
market condition in front of clients.
 In respect of this factor, Shell is playing a much risky game by perusing new oil reserves
through huge money investments.
 Shell gauged it success in several nations like Iraq, Canada, Austria and also in Gulf of
Mexico as well.
CONCLUSION
The above report concluded that every organisation have to build an effective as well as
efficient strategic plan to implement it for attain better profitability and productivity of company.
There are various factors related to internal and internal business environment. Theses elements
are necessarily observed and studied to follow their wants and desires to run business
successfully. This is essential because components of micro and macro factors impacts on targets
or outcomes of an organisation. It is basically includes elements such as legal, social, cultural,
environmental, economical, customers, intermediaries, competitors, shareholders and so on. The
organisation have to conduct different kind of analysis like pestle, swot, porter's five forces
model and matrix synthesis. These will facilitates to identify the threats, weakness, opportunities
and strengths to make profits from them as well as control challenges to reduce loss.
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REFERENCES
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