Impact of Existing Competition and Globalisation on Shell Petroleum Operations

EXTERNAL INFLUENCES

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Contents
Task 1.........................................................................................................................................1
Executive Summary................................................................................................................1
Impact of existing competition...............................................................................................2
Globalisation and its impact on Shell petroleum operations..................................................2
Task 2.........................................................................................................................................3
Shell’s poor ethical behaviour’s impact.................................................................................3
If Shell was a very ethical company.......................................................................................3
Cost Benefit analysis table-....................................................................................................3
Conclusion..................................................................................................................................4
References..................................................................................................................................5
Task 1
Executive Summary

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Within the industry of Oil and gas, competition has become much higher. This has forced
organisations to improve the way in which they are doing their business especially related to
ethical considerations. Shell or Royal Dutch Shell Plc. is a British-Dutch oil and gas firm.
Shell came into existence after the merger of UK’s “Shell” Transport and trading company
and Netherland’s Royal Dutch Petroleum firm. The Company is in the group of six major oil
and gas firm and as per revenue it is the fifth largest (Schifferes, 2007). Shell has vertical
integration and is very active in the business in different parts of the world. They have
operations in the areas such as exploration, production, transportation, refining,
petrochemicals, trading, power generation and marketing and distribution. It also deals in the
renewable energy activities such as energy-kite systems, wind bio-fuels and hydrogen.
Production as well as exploration of gas is one of the most essential business activities of
Shell. After acquiring BG group in the year 2016, Shell become the biggest producer of LNG.
Company is primarily listed on London Stock Exchange and it is also a part of FTSE 100
index. Organisation of the company is in four major business grouping i.e. integrated gas and
new engines, upstream, downstream, Project and technology. Other competencies of Shell lie
in the natural gas. Vertical integration business model provides large amount of barrier to
entry and economies of scale. The profit for 2018 crossed 36% mark and touched $21.4
billion (Shell, 2018).
Their multinational competitor is British Petroleum while their national competitors include
Citgo, Repsol, Velero energy, HollyFrontier etc. This company is having its operations in
around 70 countries and generates around 3.7 million barrels on everyday basis. In all across
the globe they have 44,000 service stations. It is having an oil reserve of 13.7 billion barrels
of oil equivalent till 2014.
Impact of existing competition
Shell is facing intense rivalry from both multinational and national firms doing their business
within UK. Toughest competition is given to them by the companies from United States. This
competition has made industry of oil and gas UK to be Red Ocean and hence companies are
forced to follow red ocean strategy. Since the oil and gas reserves in various regions of the
globe are reducing hence ensuring sustainability in the existing rivalry is becoming difficult.
This has also forced the organisation to improve the resource base they have especially in
terms of exploring new oil reserves throughout the globe. Due to this, Shell has to invest a lot
of money on highly expensive deep ocean exploration (Topmba, 2014).