Joint Venture Strategy: Shell and EDF Renewable Energy Sector Analysis

This report provides a comprehensive analysis of the joint venture strategy employed by Shell and EDF Renewables in the energy sector. It begins with an executive summary outlining the report's objectives, which include examining the importance of joint ventures, specifically focusing on the alliance between Shell and EDF Renewables. The report delves into the details of their joint venture, Atlantic Shores Offshore Wind LLC, discussing the motivational factors driving their collaboration, such as economies of scale, market expansion, and leveraging each other's strengths. It then explores the advantages of the joint venture, including increased market share, access to new technologies, and reduced operational costs, while also addressing potential disadvantages like unclear objectives and management clashes. Furthermore, the report identifies the model (scale and collusive alliance) followed by Shell and EDF and how this model facilitates the achievement of their respective goals, offering recommendations for the joint venture's success and concluding with a broader overview of Shell's other joint ventures. The report highlights the strategic importance of joint ventures in the competitive energy landscape.

Running head: JOINT VENTURE AS A STRATEGY IN THE ENERGY SECTOR
JOINT VENTURE AS A STRATEGY IN THE ENERGY SECTOR
Name of the Student
Name of the University
Author Note

1JOINT VENTURE AS A STRATEGY IN THE ENERGY SECTOR
Executive Summary
The purpose of this report is to analyze the importance of the joint venture as a strategy in the
energy sector. The report contains a detailed analysis of the joint venture entered by Shell
with EDF renewable. There is proper representation of the motivational factors that drives the
companies to enter into the joint venture. It also discusses about the benefits and drawbacks
of entering into such kind of strategic alliances. The report is concluded by which model is
Shell and EDF following and how is this model helping them take advantage over each other
in achieving their respective goals.

2JOINT VENTURE AS A STRATEGY IN THE ENERGY SECTOR
Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................3
Atlantic Shores Offshore Wind LLC.....................................................................................4
Motivational factors for the joint venture:.........................................................................4
The advantages of the joint venture...................................................................................6
The disadvantages of the joint venture...............................................................................7
Recommendation for the joint venture...............................................................................8
Few other joint ventures by Shell...........................................................................................9
Conclusion................................................................................................................................11
References................................................................................................................................12

3JOINT VENTURE AS A STRATEGY IN THE ENERGY SECTOR
Introduction
Strategic management refers to the process whereby any organization makes the
required analysis and assessment of the organizational processes that helps them in achieving
the organizational goals (David and David 2013). Hardcore competition from the rivals and
continuous technological advancement and innovation makes the organization decide for
strategic management. It helps an organization to set plans both short term long term and
thereafter take decisions on achieving the goals. There are three types of strategies that an
organization can adopt. They are - do it yourself (DIY), joint ventures (Alliance) or merger
and acquisitions (Buy).
Strategic alliance is a part of strategic management, where the organizations decide to
pursue a strategy by sharing their resources and then enter into a mutually beneficial project
(Albers et al. 2016). It can be of two types – equity and non-equity alliance. Joint venture is
an equity alliance, where two separate companies’ pool their resources and forms a new
entity separate from them.
This report discusses about the joint venture strategy of Shell Global industry that
operates in the energy sector. The motivational factors, advantages of the joint venture and
further recommendations to improve the venture have also been discussed in the following
paragraphs.
Discussion
Shell Global is an oil and gas company that was formed in the year 1907 through the
amalgamation between the Shell transport and trading company and the Royal Dutch
petroleum company. It was incorporated in the United Kingdom but is headquartered at

4JOINT VENTURE AS A STRATEGY IN THE ENERGY SECTOR
Netherlands. The organization ranked top in 2013 Fortune Global 500 list (Shell Global
2019). The organization has been chosen because of its global presence and dominance in the
energy sector. It has integrated and diversified products and services that include petroleum,
natural gas, liquefied natural gas, lubricants and petrochemicals. It is also dominant in energy
activities like wind energy, hydrogen energy and biofuels. The main reason for selecting this
company for the given report is that Shell has participated in a number of strategic joint
ventures. The following paragraphs will tell about the concept of joint venture and the joint
venture between EDF Renewables and the Royal Dutch Shell.
Atlantic Shores Offshore Wind LLC
Shell and EDF Renewables entered into a 50/50 joint venture, which is called as the
Atlantic Shores Offshore Wind LLC. It aims to develop an offshore area for wind lease in
New Jersey. The specific region is located 12.9 kms away from the Atlantic City coast and it
covers an area of about 183, 353 acres. The area has the potential to produce an energy of
around 2500 megawatts that is enough for more than a million homes (Colle et al. 2016).
There is a very strong and steady resource of wind in the area and is very close to the
population that has a huge demand for electricity. The organization will start its operation in
the mid-2020s after all the formal procedures are totally completed. This joint venture
follows the model of scale alliance and collusive alliance.
Motivational factors for the joint venture:
There are several motivational factors because of which organizations enter into joint
ventures. The organization might opt for:
i. Economies of scale.
ii. Try to gain access over the capabilities of the other firms.

5JOINT VENTURE AS A STRATEGY IN THE ENERGY SECTOR
iii. To complement each other’s strengths and weaknesses (Owens, Palmer and
Zueva-Owens 2013).
iv. Gain market importance.
Increased competition and globalization puts a huge pressure on the organization
because of which it might not be able to take any huge investments alone (Shaoul et al.
2013). Research and development also requires a huge amount of expertise and money. The
organization therefore tries to take advantage by entering into the joint ventures.
Shell has a strong ambition to grow itself in the wind energy sector globally and the
EDF group has the aim of achieving its renewable capacity to 50 giga watts globally within
10 years (Reporters 2019). EDF also wants to contribute to the New York and the New Jersey
economy by providing them with employment opportunities and proper supply chain
management. Both the companies want to increase their market reach. If Shell gets access in
New Jersey, it will be complemented by their entry in the Massachusetts as well. EDF’s
ambition of leveraging its opportunities and experiences in the off shore wind market of
Europe will be solidified because of this joint venture. The core business of EDF renewables
is onshore and offshore wind power and solar energy sector, whereas the core business of
Shell is oil and gas (EDF Renewables 2019). Shell aims to dig deep into the wind energy
sector whereas EDF renewables aims in more competitive advantage by using Shell’s
position in the market. Shell has been operating in the offshore assets for a long time and it
also has a strong supply chain network. The company wants to increase its efficiency in this
sector and hence collaborated with EDF, which will also help EDF in achieving their
renewable energy power goals. The cost of off shore wind has also declined and it is one of
the most motivating factors for both the companies because it will reduce the cost of
operations to a large amount. Strong support from the state and the federal is also being
provided to those working on this sector.

6JOINT VENTURE AS A STRATEGY IN THE ENERGY SECTOR
The advantages of the joint venture
Joint venture is usually the combination of resources of two or more organization.
There are numerous advantages for such combination of resources and working together for a
finite period and for a fixed objective. They are discussed as below:
i. It enables the organization to provide their customers with a new and developed
type of product (Dan 2013).
ii. Costs of operations as well as for marketing and advertising get reduced as the
risks of cost are being shared.
iii. The business is not permanent in nature and is goal oriented, which means that
there is no permanent commitment.
iv. The organizations can gain new technological know-how.
v. It increases the capacity of production.
vi. New market access as well as new distribution access (Sun and Lee 2013).
vii. A network of relationship is built.
viii. There will be limitless potential.
The joint venture of Shell and EDF Renewables has loads of advantages. Shell has a
great dominance in the market and it wants to enter into the wind energy sector as well.
Similarly, EDF renewables wants to utilize its expertise in the US offshore and other offshore
projects (Gatzert and Kosub 2016). Therefore both the companies have formed this venture to
gain a competitive advantage and lead the market together. The basic advantage of this joint
venture is that both EDF and Shell can increase their market share. EDF can increase its
production capacity and Shell can penetrate its market at Massachusetts. Shell can take
advantage from EDF in case of research and development in the EDF sectors. EDF can use
Shell’s market dominance and goodwill to increase its market share. Both the organizations
need not have to spend more amount in the advertising of their services as both the

7JOINT VENTURE AS A STRATEGY IN THE ENERGY SECTOR
companies are well known by everyone and are business giants. The organizations can learn
more about each other’s operations and core business and can get a better insight in the future
(Killing 2013). They can take advantage of this knowledge in their own business in the
future. Both EDF and Shell are pooling their resources together and providing each other
their expertise as a result of which the operational cost will be reduced but the product quality
will be high. This will help the companies to earn a large amount of profit at very low cost.
Once their objectives of penetrating the market and increasing the capacity are fulfilled, they
can easily exit from the joint venture. Most of the people are trying to opt for the renewable
resources. Shell is having access to wind sectors but does not enjoy the competitive
advantage and hence collaboration with EDF will help it diversify its expertise in the
renewable sector as well.
The disadvantages of the joint venture
The joint ventures do come with a great sense of mutual advantages and benefits but it
can also possess a great risk for both the companies as well (Chanu and Dhir 2016). There
can be complex situations that can arise because of partnering with other business
organizations. The disadvantages are as follows:
i. The objectives of the joint venture can be unclear sometimes and they are rarely
communicated to all the people involved in the venture.
ii. The parent companies lose focus on their individual companies while giving stress
on the joint venture, as a result of which the companies can suffer individually.
iii. There can be clash in the management styles of the companies that will result in
non-cooperation and misunderstandings.
iv. The attitudes and beliefs of the employees of both the organizations will never be
the same (Zamiret al. 2014).

8JOINT VENTURE AS A STRATEGY IN THE ENERGY SECTOR
v. It becomes difficult for the companies to exit the joint venture all of a sudden as it
is contractual in nature.
The disadvantages in case of this joint venture between Shell and EDF renewables is that
both the companies are leading in the energy sectors. One company is leading in the oil and
gas sector and the other is in wind sector. Shell is already an old and dominant company in
the market. The company also has resources of moving ahead in the wind energy sector but is
not as competitive as EDF. Therefore, it can take advantage from EDF by acquiring more
technical know-how about the company’s resources and procedures. It can start competition
with EDF in this sector after the joint venture is over. EDF and Shell does not come from the
same place and therefore the employees operating in the organization does not share the same
set of thoughts and beliefs. This can create a clash between the employees (Jancenelle 2015).
The project that these two organizations have taken requires a lot of research and planning.
Both the companies need to perform their tasks equivalently but which organization will take
which part of the work sometimes remain unclear and vague. This results in loss for both the
companies. Most of the times it may happen that the partners entering into the joint venture
does not tend to provide enough support and leadership in the primary stage, which results in
the instability of the joint venture. There are five operational onshore projects on wind energy
in North America, upon which Shell has interest and another off shore wind farm in Europe
has also grabbed its interest (Rand and Hoen 2017). It is also an integral part of the
consortium that deals with the Borssele 3 and 4 wind farms in the Europe. It can be thus said
that Shell can turn out to be one of the biggest threat for EDF Renewables.
Recommendation for the joint venture
Any strategic alliance requires a lot of planning and research. A joint venture set up
can bring major changes in the business of the company and hence the decisions related to the
joint venture must be properly planned. The joint venture strategy must align with the overall

9JOINT VENTURE AS A STRATEGY IN THE ENERGY SECTOR
business strategy (van der and Kamminga 2015). The companies must do research how the
other companies are performing on a similar kind of project and what business strategies are
they using so that they can adopt the perfect strategy suitable for their business. SWOT
analysis of the project must be done before entering into the joint venture (McDonald 2016).
It will help both the companies in finding out their respective weakness, where they can work
upon for making the project more strong and reliable. The employees’ attitudes and behavior
should also be considered and accordingly the business should be structured so that there are
less clashes and disputes within the organization. Before entering into the joint venture both
the companies must assess each other’s expectations. The objectives must be realistic and
achievable. There are a lot of things that are required to be done in order to make the joint
venture successful and it varies from organization to organization.
It has already been seen that both Shell and EDF has their own set of objectives which
are clear and achievable. The off shore wind project that has been taken by them requires a
huge amount of research work and also a lot of investment (Strachan et al. 2015). The
feasibility report of the project should be properly done. Both the companies must set a
proper term with themselves in regards to the tasks to be performed. The tasks should be
allocated as per the expertise of the organization as well the employees. The joint venture can
use the marketing strategies of Shell and technological expertise of EDF Renewables to
achieve success globally. A clear set of performance indicators should be prepared to assess
the performance. All the disagreements that can arise must be handled with great
professionalism so that there is a win-win situation and the resources do not get wasted.

10JOINT VENTURE AS A STRATEGY IN THE ENERGY SECTOR
Few other joint ventures by Shell
Shell has entered into a number of joint ventures over the time to increase its market
dominance globally. The joint ventures have helped the organization in achieving all the
advantages of forming a joint venture. The joint ventures are –
Name of the Joint
Venture
Ownership % Task Performed Place of Operation
Infineum
International Ltd.
Shell – 50%
ExxonMobil – 50%
Manufacture of fuel
additives and
marketing of the same.
Globally
Sadaf Shell – 50%
Saudi Basic Industries
Corporation – 50%
Ethylene, ethanol,
styrene monomer,
ethylene dichloride,
MTBE and caustic
soda
Al Jubail, Saudi Arabia
ELLBA BV Shell - 50%
BASF – 50%
Manufacture of styrene
monomer/propylene
oxide
Moerdijk, The
Netherlands;
CNOOC and Shell
Petrochemicals
Company Limited
Shell – 50%
CNOOC
Petrochemicals
Investment Limited –
50%
Manufacture of
chemicals and
derivatives and selling
them.
Huizhou Municipality,
Guangdong Province,
China
All the joint ventures that have been listed on the above table have helped Shell in
diversifying its business products and achieve its market dominance globally (Shell 2019).
These joint ventures have allowed the organization to operate in China, Japan and Saudi

11JOINT VENTURE AS A STRATEGY IN THE ENERGY SECTOR
Arabia as well. They penetrated the market very easily which was otherwise not possible for
them. All these joint ventures have helped them in achieving a diversified product base as
well as goodwill in the market because of the quality. The reduced cost of production has
helped the company increase its profit overtime.
Conclusion
It can be concluded form the report that Shell and EDF Renewals has entered into a
joint venture strategic alliance to combine together their power and to increase their market
reach and potential. The report thoroughly analyses that the companies has a huge potential in
their respective sectors and wants to diversify their segments and gain a global reach for
which they have entered into the joint venture. The venture that they have entered into is
analyzed as a collusive and a scale alliance. Both Shell and EDF can gain a lot form this
project because of their resource pooling and expertise. The reduced cost of offshore winds
motivated them to increase its operation in this sector as it would help them increase
profitability. Shell already has a part of its wind energy sector that is operating in US and
Europe and is planning to spread its wing in this sector. The report clearly concludes that
Shell can use the expertise of EDF Renewables to achieve that goal. EDF similarly plans to
achieve its renewables goal and market reach that can be achievable with the help of Shell.

12JOINT VENTURE AS A STRATEGY IN THE ENERGY SECTOR
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