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Most of the oil consumed today has moved from one country to another. It is the largest single commodity in the International market and the Petroleum industry is one of the largest industries in the world.
Petroleum is a fossil fuel because it was formed from the remains of tiny sea plants and animals that died millions of years ago. When the plants and animals died, they sank to the bottom of the oceans. They were buried thousands of feet below the sand and silt. As time elapsed and as the layers increased, this organic mixture was subjected to enormous pressure and heat. The mixture changed, breaking down into compounds made of hydrogen and carbon atoms called hydrocarbons. Finally, an oil-saturated rock-much like a wet household sponge was formed.
All organic material does not turn into oil. Certain geological conditions must be met within the oil-rich rocks. There must be a trap of non-porous rock that prevents the oil from seeping out, and a seal that keeps the oil from rising to the surface. Under these conditions, only two percent of the organic material is transformed into oil. (Parra, 2004)
Shell Nigeria History
Shell Petroleum is one of world's leading producers of oil, gas and petrochemicals; Shell Oil Company has distinguished itself through its commitment to industry innovation. Its marketing expertise has enabled the company to compensate for its relatively low volume of crude oil production, as compared to its strongest competitors, by selling an equivalent amount of gasoline nationwide.
Oil and gas operations began in Nigeria effectively in 1956, with the first commercial find in that year by the then Shell D'Arcy. By the 1960s growing environmental concerns led Shell to invest heavily in systems intended to reduce pollution and to conserve energy in its plants. In the following decade, the company began publishing a series of consumer-oriented booklets on such topics as car maintenance and energy conservation. Shell continued to dominate the Nigerian oil industry for long until Nigeria joined the Organization of Petroleum Exporting Countries (OPEC) in 1971, after which the country began to take a firmer control of its oil and gas resources, in line with the practice and rules of the other members of OPEC.
Within this period, many Multinational Oil Companies like Gulf Oil and Texaco (now ChevronTexaco), Elf Petroleum (now Total), Mobil (now ExxonMobil), and Agip, in addition to Shell, which was already playing a dominant role in the industry emerged. To date, the above companies constitute the players in Nigeria's oil industry, with Shell the major player accounting for a just little less than 50% of Nigeria's total daily production, which currently stands at about 2.4 million barrels of oil per day, (Socyberty, 2010). The company has delved into various businesses and these can be classified into three organizations namely upstream organization, the downstream organization and the projects and technology Organization,
The Upstream organization explores for and extracts crude oil and natural gas, often in joint ventures with international and national oil companies. The organization also liquefies natural gas by cooling and selling it to customers. It also converts natural gas to liquids to provide cleaner burning fuels. It is also responsible for marketing and trading natural gas and power. It also develops wind power as a means to generate electricity.
The organization turn crude oil into a range of refined products, which are moved and marketed around the various states in Nigeria for domestic, industrial and transport use. These include fuels, lubricants and bitumen. The manufacturing business includes Refining, Supply and Distribution. Marketing includes the Retail, Business to Business, Lubricants and Alternative Energies and Carbon dioxide. The Chemicals business has dedicated Manufacturing and Marketing units of its own. It trades crude oil, oil products and petrochemicals primarily to optimize feedstock for the Manufacturing business and to supply the Marketing business. The Carbon dioxide organization is responsible for coordinating and driving Carbon dioxide management activities across the company.
Projects & Technology
The organization provides technical services and technology capability in upstream and downstream activities. It manages the delivery of major projects and helps to improve performance across the company. It delivers differentiated technical information technology for Shell and drive research and innovation to create tomorrow's technology solutions. Projects and Technology also houses Safety & Environment and Contracting & Procurement as these are integral to all Shell Petroleum's activities.
External and Internal Environment of Shell Nigeria
All organizations should have the input from their external environment that in turn exchanges the product and services they produce in order to provide the energy for continued existence. "An organization needs to be able to manage its environment to survive in the current business environment by being constantly aware of development from its environment" (Tiernan et al 2006). All factors that are within other functions of their own firm are referred to as the internal environment. (Shell 2010)
Challenges facing many companies today originate outside them. A study of the external environment can spot major opportunities and threats. Successful companies follow broad environmental trends and intermittently assess changes taking places in their industry. A company cannot in general control its broad environment. (Dess and Miller, 1993:45)
An organization environmental analysis should be continuous and feed all aspects of planning before beginning the marketing process. PEST analysis is a way of analyzing an organization's external environment. PEST means Political, Economical, Social, and Technology. These factors are beyond the control and influence of a business but it is important to be aware of it when doing product development, strategy or business planning, (Rapidbi 2008).
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PEST ANALYSIS ON SHELL NIGERIA
Wars and Conflicts
Home Economy Trends
General Taxation Issues.
Market and Trade Cycles
International Trade and Monetary Issues.
Interest and Exchange Rate
Internal Finance and Cash Flow
Consumer Buying Patterns.
Advertising and Publicity
Brand company and Technology Image
Consumer's attitude and opinions
Maturity of Technology
Information and Communications
Intellectual Property Issues
The political arena can increase or decrease a company's independence and make the environment unfriendly or supportive of its activities (Dess and Miller, 1993:48). It has a huge influence upon the regulation of businesses, and the spending power of consumers. This relates to how government policies affect Shell Nigeria Petroleum's operation. Political factors such as Government policies, Political trends, and Government structures, militancy or terrorism have high impact on Shell Petroleum.
Rapid changes in Government policies have affected Shell Nigeria Petroleum. When a government comes to power, he condemns the planning work done by the precious government and brings in new policies that may or may not favor Shell Petroleum. Due to political instability, slow development occurs.
Militancy or terrorism has affected Shell Petroleum in Nigeria seriously. The militants in the Niger Delta where the main oil is situated also affect the production of oil by Shell petroleum highly. They are not supportive of the activities perpetrated by Shell. They are of the opinion that Shell Nigeria do not deserve to be there as there are no significant development in their areas despite large amounts of oil been gotten from the Niger Delta communities. As a result of these, the militants seize oil wells, kidnap expatriates for large amounts of money known ransom in return. They also blow up oil wells and even kill these expatriates. The militants want a percentage of what is gotten from the sale of oil from their community and as this has not been given to them or has been mismanaged by the top officials in the government, the militants go a long way to affect the daily production of Shell Petroleum in Nigeria.
The Economic factors of a state also have a high impact in the conduct of a company. The stability of the economy of a country determines how the consumers would be able to consume energy products. The overall state of the economy influences the performances and strategies of a company.
Nigeria's economy has undertaken several reforms over the past decade after years of political instability due to over-dependence on the oil sector. Since 2008 the government has begun showing the political will to implement the market-oriented reforms urged by the IMF, such as to modernize the banking system, to curb inflation by blocking excessive wage demands, and to resolve regional disputes over the distribution of earnings from the oil industry. In 2007-2009, GDP rose strongly thereby making it one of the growing economies in Africa. As at 2009, Nigeria's GDP stood at $339 billion and the GDP official exchange rate stood at $173.4 billion (2009 estimate) and the GDP real growth rate is 6.1% (2009 estimate). (Source: CIA World Fact, 2010)
As a result of this analysis, the economy situation of Nigeria has a high impact of Shell Petroleum Nigeria as it affects it positively. Unemployment rate In Nigeria stands at 4.9% as at 2007 while the inflation rate stands at 12.4% as at 2009, (Source: CIA World fact). This analysis has a slightly negative effect as the purchasing power of the customers would be reduced.
Constituents of Nigerian GDP in 2008
People's choices which include the beliefs, values and attitudes of society are affected by Social factors. Changes in the social factor of a country can impact purchasing behavior. Shell is aware of this social aspect and this can be shown due to the large number of customer buying Shell Petroleum related products. Oil spillage in the Niger Delta region of Nigeria is one of the health hazards caused by Shell Petroleum in Nigeria as they spill oil in the rivers making it impossible for people in this region to fish, which is one of their major occupations. Gas flaring is also one of the environmental hazards caused by Shell Petroleum but it already has plans to stop it by the end of 2011.The world population is increasing and social values are also changing so the demand of fuel consumption is also increasing.
Advances in technology have had a major impact on Shell Petroleum's success. Technological change impacts socio cultural attitudes. Due to the advancement in technology, Shell Nigeria Petroleum have a section of their organization that carries out technology related projects dedicatedly just to meet up with the current advancement in technology in the energy sector and better the life of its customers. The Shell Petroleum Project and Technology section deliver differentiated technical information technology for Shell Petroleum and drive research and innovation to create tomorrow's technology solutions. (Shell 2010)
Porter's Five Forces
Porter 1980 stated that the competition state of an industry depends on five basic competitive forces. The combined strength of these forces establishes the final profit possible in the industry, where profit potential is précised in term of long run return on invested capital. Various industries differ in their ultimate profit potential as the collective strength of the forces differs. The forces include:
Bargaining power of buyers
Shell petroleum has various brands of products from which a customer can choose from. It ranges from the lubricants to the natural gas. The power of the buyer is high because of these various range so g products that abound in Shell petroleum.
Bargaining power of suppliers
Various suppliers of petroleum products also increase the strength of Shell petroleum because they mostly rely on Shell petroleum for the supply of petroleum products. The bargaining power of suppliers is high.
The petroleum sector is a competitive sector. Competition is high and fierce as there are many companies like Exxon Mobil, Total, and Agip. Shell petroleum has remained ahead of these companies because it has a strong brand name and it wields enough power and has strong influence in the oil sector due to its various quality brand products.
Threats of New Entrants
It would be extremely difficult for new entrants to enter the petroleum market because Shell has created and established a strong image and brand name. The threats of new entrants are low because new entrants would face various barriers like:
They would need more time in making its brand known and etching it in the minds of existing customers of Shell petroleum who already like Shell Petroleum's product.
They would need more time and to break the monopoly of Shell
Threats of Substitutes
Shell petroleum offer quality products to the Nigerian market. Quality products like the Shell Rimula and Mysella are products that would be difficult to substitute because the products have undergone much research before it was introduced to the market. Before a product is released into the market, it is well developed by the various departments in its various sectors in the company therefore the threats of substitutes is low.
To exploit opportunities and minimize threats in the external environment, managers must analyze a firm's internal strengths and weaknesses. The most effective strategies are based on a thorough understanding of an organization's internal environment, (Dess and Miller, 2003:74).
This is a tool that is used to analyze a company and its environment. SWOT analysis helps companies who aim for success channel its eyes on key issues as it's the first stage of planning. SWOT analysis is divided into two namely the Internal and the External factor. The Internal factor consists of Strengths and Weaknesses while the External factor consists of Opportunities and Threats from its competitors.
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SWOT ANALYSIS OF SHELL NIGERIA
Longevity in the market
Strong performance in the market
Strong brand image
Affecting the public positively
Gas flaring still in place
violence still affects it
much focus onoil
Discovery of new oil wells
Penetration into Danger zone
Embarking on new products
Rapid response to environmental criticisms
Loss in profit as a result of fuel price
conflict and violence
competition from rivals
High interest rate
Shell has been one of the major leaders in the oil and gas industry and has enough strength to perform in the oil and gas sector. It has its presence in over 72 countries (Shell 2010). As a result it has a strong brand image in Nigeria. It controls most of the oil wells in Nigeria.
Shell also embarks on new projects as they have a dedicated section of their services wholly committed to carrying out new projects to see how to better the lives of Nigerians and the world as a whole.
In Nigeria, Shell also organizes competitions like mathematics competitions and essays for students in secondary schools. Shell Nigeria also awards scholarships to undergraduates in Nigerian universities from the Niger Delta region as a way of aiding their studies. They also aid post graduate students from the Niger Delta to study either in Nigerian universities or abroad.
As one of the major leaders in the oil and gas sector, Shell Nigeria also has a range of excellent products that are supplied to different industries. They include Lubricants and Natural gas. Shell has various ranges of lubricants and motor oil which include:
Shell also supply natural gas through pipelines to big firms that are situated in Lagos state, Ogun state, Abia state and they have a strong brand image.
Shell Nigeria still embarks on flaring of gas during extraction. They flare gas to remove unwanted bi-products. This process degrades the environment as it causes airborne diseases to the communities and also affects the ozone layer. Many of the people living in the Niger delta where Shell operates are fishermen and farmers by occupation but most of their lands and source of livelihood has been affected by Shell as a result of oil spillage. This affects the fishermen and the farmers as the fishes in the river dies and their farmland are destroyed.
Major focus on the oil and gas sector alone in Nigeria has made Shell not to search for and invest heavily into other sectors of the Nigerian economy like agriculture. Heavy dependence on the oil proceeds allows it to be exposed to stringent market conditions and as new companies are also emerging in the oil and gas sector, it puts it at a competitive disadvantage to its rivals who explore the other sectors of the Nigerian economy and not the oil and gas sector alone.
Opportunities abound for Shell Petroleum in Nigeria. Oil wells are still being found in various places in Nigeria and as Shell is a major player in the oil and gas sector, it has taken over these wells. Shell has also been able to thrive in the Niger delta area in Nigeria, a place where many oil companies are backing out from. Inspite of the threats and violence coming from the militants, they have been able to win the heart of some of the militants.
The power industry has improved in Nigeria and as a result of this, Shell also has been able to embark on new products and introduce them to the Nigerian market. This includes products like the Shell Turbo.
As a result of the issues facing Shell in the Niger delta region of Nigeria, Shell has been affected as some oil sites were collected from them according to a court ruling in Nigeria and handed to local owners. Shell operates in the large oil and gas sector, and as the oil and gas sector is rapidly increasing, there is intense competition from other oil and gas companies in Nigeria. These companies include Agip oil, ExxonMobil, Total.
Various conflicts in the Niger Delta also affect Shell Petroleum in Nigeria. Various militant groups kidnap expatriates and oil wells and ask for huge ransom. As a result of this, the company is affected greatly as they cough out huge money to secure their oil wells and protect their employees.
Like SWOT analysis, MOST analysis is also a tool used to internally analyze the environment of a company. It defines the company through its Mission statement, its Objectives, its Strategy and the Tactics it plans to use in meeting these objectives.
Shell Nigeria's mission statement is toÂ enhance profitability through innovative management strategies while ensuring cost effectiveness and harnessing creative ideas. This mission statement is the reason for the existence of Shell. It strives to harness creative ideas by creating more innovative and effective ways of transforming energy to energy fit for human use.
Shell Nigeria has stated objectives that are intended for its operation. These objectives are essential points that it intends to meet so as to keep up with its mission. The objectives are to engage in oil and its product efficiently and to source for energy to meet customer's needs and the world's growing demand for energy. By meeting these objectives, the company intends to have an edge over its competitors.
Shell Nigeria has in place various strategies to make the company achieve its mission and set objectives. These strategies include career development, empowerment, and open door policy. The project and technology sector in the organization applies the needed factors in achieving these strategies. These strategies are long term strategies that have been set to benefit not only the end customers but also the economic state of the organization in return. It also has strategies in place for improving its existing products and also producing new ones.
Shell Nigeria has used various tactics to implement its mission, objectives and strategic mission. These tactics have helped the company have an edge over its competitors thereby making customers to continue to patronize them. These tactics include:
Free car servicing in every Shell petroleum filling station
Good shed for relaxing
Various promos intended to make the customer continue to patronize them
The variables in MOST analyses are indispensible and can be analyzed also from top to bottom. One cannot do without the other. They work hand in hand by driving each other until the organization is successful.
For an organization to achieve its proposed aim, mission and vision, it needs to have a kind of structure in place that would enable it carry out these processes. There have been various definitions of what an organizational structure is by different academics but John Martin and Martin Fellenz (2010) defined an organizational structure as "the formal arrangement of task, communication and authority relationships that influence and control how people coordinate and conduct their work" (John Martin and Martin Fellenz 2010: p336).
In the early 1990s, Shell operated using the matrix kind of structure. They comprised of four companies which include The Parent Companies, The Group Holding Companies, The Service Company and The Operating Companies. The Committee of Managing Directors (CMD) managed the company. The committee of managing directors consists of five managing directors which includes the chairman, the vice chairman and three other managing directors. The president of the Royal Dutch Petroleum and the Managing Director of Shell rotated the chairmanship of the committee of managing directors. The committee's job was to provide a connection and linkage between the formal structures of the group and also the management structure of the group.
However in 1995, Shell Petroleum restructured the way it operated. It dismantled the matrix operating structure of the companies and produced four business organizations to attain a closer integration within each sector in every country where Shell Petroleum operates. The structure made each business effectively control and plan its operations well. The bureaucracy type of leadership that had been in operation was removed paving way for the structure to have enough strength to map out a defined role to the operating companies and business organization.
Strategy is an articulated desired direction of an organization that can be used by others to understand the organization (Linstead et al, 2009:711). For Shell Nigeria, its strong drive to implement its strategy can be seen by the resulted developments in Nigeria and as a result of this drive and development, they retain their strong Image and name that they have both in Nigeria and the world as a whole. Shell Nigeria's main strategic features were:
They embarked on a strategic future plan. Most of Shell Nigeria's competitors like Agip, Total embarked on a four or five year plan but Shell Nigeria embarked on a twenty year plan not because they wanted to have a forecast of what is going to happen within the twenty year period but because they imagined scenarios that would happen and wanted to have enough solutions to the scenarios. The solutions they provided would allow managers to consider various ways to strategically respond to any scenario that might unfold in the future, (shell 2010).
They also played a strategic role by having a strategic future plan where they would have enough facilities to develop organizational learning,
They also focused on the upcoming generational talents. They were not too focused on financial performance. Various ideas from different study department like mathematics, economics, and ecology were not thrown away by the Project department in Shell Nigeria instead they delved into it wholeheartedly so that their strong name would still be number one and their reputation would be retained .
They operate an open door policy which means that they welcome ideas and constructive criticisms from their employees and the general public. They have a listening ear by taking into significance the employees needs through various discussions with them either through councils or accepted trade unions.
They have various workforces from all walks of life which comprises of different skills, cultures, gender. These various workforces bring together and share ideas that help Shell Nigeria in its quest to get more customers and understand them better.
They employ highly skilled, qualified and experienced workers and as a result of this, it offers great remuneration to its employers. Shell petroleum also reward outstanding employees with various bonuses like healthcare allowance, wardrobe allowance, house allowance. Shell petroleum also gives annual leaves and its entitlements. They also engage in maternity/paternity leaves and its entitlement. They also have a retirement plan for the elderly and experienced ones who have served the company for many years.
Various employees of Shell Nigeria who wish to further their careers more than their current state are wholly supported by Shell Nigeria through various schemes like scholarship schemes. Shell Nigeria on its own train its staff through various professional training and leadership programmes. They do this to instill and embed leadership and managerial values in their employees.
Shell Nigeria as a company embarks on various philanthropic projects just to better the lives of the people in Nigeria. Such empowerment programmes include various Scholarship schemes, various inter-school competitions, and various football tournaments. They also invest greatly in research and development. Shell is one of the largest investor in research and development and spends much on the exploration and expansion of technologies that would lead to the generation of more and pure energy with proficient products for its customers. (Shell.com, 2010)
Since the concept of strategy is based upon a company achieving its goals and objectives (Tony Morden, 2007:184), Shell Nigeria has a dedicated focus to achieve it by applying the needed factors needed to achieve these strategies through their dedicated Projects and Technology Section of their organization that provides efficient services. By doing this Shell Nigeria now has a strong presence in the Nigeria oil and gas industry thereby overpowering its major competitors like Agip, Conoil.
Change management means applying measures and technologies to deal with changes in business surroundings and to profit from changing opportunities. The features of change include adapting to change, controlling change, and effecting change. Change has become an essential issue and characteristics of present-day companies and as a result of this, it poses a range of key challenges for all sort of organizations, whether private, public or voluntary, (Stephen Linstead et al, 2009:619).
Various factors like management, policies and trends of the governments, complex organizational structure of a company, competition and threats from other companies, causes a company to change and the people largely responsible for change in an organization are the managers of that organization.
The Gagliardi Model of change
The Gagliardi model of change was developed by Pasquale Gagliardi in 1986. The model describes that "the primary strategy of an organization is the maintenance of its cultural identity in terms of prevailing values. A virtuous circle from the collective experience of success through stabilized values to cohesion and efficiency sustains the continuity of culture. But if the alternatives allowed for by the culture are unsuited to new problems, then the virtuous circle becomes a vicious circle impeding change. The result may be apparent cultural change, cultural revolution or cultural incrementalism", (Gagliardi 1986).
For Shell, change started as the result of the number of changes embarked by the world petroleum industry in the twentieth century but as at that time Shell didn't undergo any change because they had a stable management structure, a structure without an autocratic chief executive officer. Gagliardi (1986) stated that if the alternatives allowed for by the culture are unsuited to new problems, then the virtuous circle becomes a vicious circle impeding change, the result could be an apparent change in culture, cultural revolution or culture incrementalism but for Shell petroleum, it maintained its identity in terms of prevailing value that were in place majorly from its competitors because its structure was stable. Shell began lagging behind in terms of its financial statistics and because the financial statistics had features of reduced financial performance and bogus organizational structure, and because other companies in the oil industry had carried out organizational change and began to flourish, Shell set up an internal team in July 1994 that would study its internal structure and the team would in turn come up with plans on how to embark on a change that would be effective and improve and regain its strong brand image.
The motive behind the need for change in the company was the quest to have a structure that would be easy for the corporate center to exert influence over the operating companies that would be effective and also the quest to improve coordination between the operating companies. The team embarked on its assignment and after much interview and sourcing of ideas, the team came up with various options for change by October 1994. They handed in a report to the Committee of Directors and spent days with the directors spotting out the objects of change. It was deliberated upon by the management and an announcement was passed to all employees in the company's employ. The management led by Cor Herkstroter, the chairman of the committee of directors in 1995 gave a speech to Shell employees worldwide. He signified the essence for change, outlined the principal aspect of change and at the same time told the employees to be ready for whatever change that would come. Gagliardi's (1986) model makes leaders of organizations know how their companies would be affected culturally when they establish change ideas in their organizations little wonder the committee for change was initiated. At the end, the organizational change affected most employees as many of them lost their jobs.
As a result of this change, Shell now operate a straight-forward management structure where effective power and control is exerted by the corporate center over the various operating companies and the reporting relationships would be easier to follow. When the change was done, many of its staff was trained to cope and understand the change that has been carried out since they were involved in it, this is part of the company's strategy which is "Shell operates an open-door policy with its employees".
Gagliardi's (1986) change model explains the outcome of apparent, incremental, and revolutionary change on cultural views that exist in organizations. This change model that was implemented was to strengthen and broaden the theory and values associated by the change initiative, (Latta 2009).
Organizational culture is now an indispensable part in the understanding of various organizations. A connection or bond exists between the culture of an organization and other concepts such as leadership, power, and organizational structure, (Stephen Linstead et al, 2009:151). In any change occurring in any organization, the effects on the individual and group behavior are the most significant. There have been various definitions of organizational culture by different scholars but according to (Schwartz and Davis 1981: 33), "Culture is a pattern of beliefs and expectations shared by the organization's members. The beliefs and expectations produce norms that powerfully shape the behavior of individual and groups in the organization". Change dwells at the heart of leadership. Organizational culture is one of many situational variables that are very important in making the efforts of leaders successful when change initiatives are implemented, (Latta 2009).
Shell's culture covers various aspects which includes its
Vision and Mission statements
Values and objectives
Technology, products and services
Vision and Mission Statements
Vision and Mission statements are stated by most companies so that they would know what they want to achieve and where they want to be in the nearest future. It is a way of making a company look very effective. Shell Nigeria mission statement is "toÂ enhance profitability through innovative management strategies while ensuring cost effectiveness and harnessing creative ideas" while its vision statement is "to be the market leader and deliver the best value to our stakeholders."
Shell Nigeria has enough loyalty and dedication to its stakeholders also having its customers in mind. They search out for more ideas on how to be pioneering in its quest for creating energy.
VALUES AND OBJECTIVES
Shell Nigeria's values is "to set high standards of performance and ethical behaviors while its objectives is "to engage efficiently, responsibly and profitably in oil and its products, and other selected businesses and to participate in the search for and development of other sources of energy to meet evolving customer needs and the world's growing demand for energy".
As oil and gas cannot be done without, as it is a major source of energy, Shell Nigeria's sole value and objective is to source for oil and gas in the Niger delta region in ways that it would not affect the environment.
TECHNOLOGY, PRODUCT AND SERVICE
It has been the culture of Shell Nigeria and Shell in other locations of the world to harness technology and provide better products and services for its customers. More ways have been found on how to better harness and process energy. Shell Nigeria has various products and services which include lubricants and natural gas which is used for everyday living.
Power and Politics
Power is needed in organizations because it is the major way organizational goals can be achieved through various contributions of ideas. Therefore organizational politics are activities used to gain and apply power in organizations (Martin and Fellenz, 2010: p518)
Shell Petroleum had a powerful status after it was formed. The influence they had could not be matched because they had no fierce competitors as at when it was created. They were even said to be one of the three most well known institutes. Shell Petroleum is unique in its structure and its day to day management of its various groups is complex. The Committee of Managing Directors (CMD) had control over the group; they were the ones in charge of the affairs of the company. The Committee also had its own chairman which rotated between the President of the Royal Dutch Petroleum and the Chairman and Vice Chairman of Shell Transport and Trading.
Shell operates a single tier leadership. The overall leadership structure is chaired by a non executive chairman, Jorma Ollila while the executive management is led by Chief Executive Officer, Peter Voser. These directors, chairmen link with other chairmen and directors of Shell all over the world to make sure that Shell lives up to its name. They make sure the image is retained and also make sure that more ways to source for energy are devised and harnessed.
Shell began to build a strong image and name for itself and became one of the largest petroleum companies in 1995. Shell petroleum play a high level of politics and wield enough power in the oil sector of Nigeria. The political culture of Shell petroleum in Nigeria is one that has been always criticized. The company was criticized for the part it played in the sentencing of an activist, Ken Saro-Wiwa of the Ogoni land and ever since the incident happened, they have gained more critics than friend both locally in Nigeria and Internationally.
The policies of the Nigerian do not seem to affect Shell Petroleum because in spite of the clarion call made by protesters in the Niger delta region of Nigeria of the continued oil spillage caused by their Shell, it has fallen on deaf ears because the company has been seen as a major player in the oil sector of Nigeria. Shell petroleum still flares gas in Nigeria, a policy the Nigerian government has abolished but because of the untouchable nature of Shell, the Nigerian government was forced to shift the deadline of gas flaring various times.
Shell petroleum has been the major cause of civil unrest in the Niger delta due to the political influence they have on the Nigerian government. They have seized the lands of the people living in the Niger delta and instead of the company developing the Niger delta region, they spill oil on it. The government does nothing tangible to stop them because of the influence they have. The federal Government of Nigeria has failed to place tougher sanctions for companies engaging in oil spillage. The rules are being bent whenever Shell petroleum wants to be affected.
RISK ANALYSIS AND MANAGEMENT
Organizations do know that they may face risks at some certain times in their business life and as a result of this they analyze their firms to understand what risks would threaten their assets. They propose measures to prevent these risks afterwards.
Shell petroleum understands that they may in the future face risks from changing conditions in economic, competitive, legal, political, finance and business field which would have effect on their performance and as a result, they have analyzed this risks and proposed safeguarded solutions to the risks due to their skill in discovering where their business is most susceptible. The analyses include:
Fluctuation in the price of crude oil and oil products
The demand and supply of oil could be affected by various factors like natural disasters and political instability which would result in the fluctuating prices of crude oil and its products. These fluctuations could affect the finance conditions of Shell Petroleum and could make long term projects in its upstream sector less profitable. This poses a potential risk to the finance situation of the company and as a result Shell Petroleum has moved to increase their oil reserves so that in the nearer future, if the risk happens, they would not be affected.
Competition from other major players in the Nigerian oil sector like Total, Agip are becoming a major threat to the existence of Shell Petroleum. These competition forces are strong because the products of Shell Petroleum are competing in commodity type markets which make other petroleum products known. The ability of Shell Petroleum to attain its set strategies depends on the company's reaction to these competition forces. Shell Petroleum as a result of this has moved to manage their expenses through cost-efficient budgets.
Brand image and Company Reputation
Shell Nigeria has largely dominated the Nigerian oil sector since its creation through the acquisition of oil wells, larger oil reserves, oil lands from the government. All these are the major assets of Shell Petroleum which constitutes their brand image and the reputation of their company. An erosion of this reputation would have an adverse reaction on the company's operation and the access to new assets. By identifying this risk, Shell has moved to ensure strict compliance to the code of conduct and principles of her business by making all CEOs of various Shell companies all over the world ensure that their employees are constantly being reminded of these rules by signing the ethics form.
Various sensitive regions in Nigeria, most especially the Niger Delta could expose the employees to risks, accidents and even loss of life. Social unrest, natural disasters, crime, health of the employees, explosion all contribute to risks that poses threats to Shell Petroleum which could affect its operations negatively and bring a bad reputation to its image. Shell petroleum identified this risk and made sure that all employees who operate in these regions are made aware of the fact of working in these regions, they also made sure that the employees are Health Safety Security and Environment (HSSE) certified. They also made sure that they are well trained on what to do in the event of any natural and unnatural disaster.
Reliable Information Technology
The world is turning into a global village and it is the responsibility of companies to follow the trend in the change in Information Technology. Shell Petroleum is aware that in the nearest future, information technology may fail to deliver her services in an efficient manner due to reliance and relocation of information technology services. The company has moved to solve this problem by investing more in Project and Technology department. More technological projects are being carried out in all regions where the company operates. This is to make sure that the company continues to deliver quality and improved services all the time as innovation and technology are its major elements.
Climate change like the emission of greenhouse gases, the depletion of the ozone layer are risks and concerns that could lead to the delay of various projects. Shell Petroleum's objective to be the major producer of energy fit for human use would take a downturn if climate changes continue to affect it. As a result of this risk, Shell Petroleum has found alternate ways of producing energy from alternative sources by increasing the rates of its carbon dioxide intensity and emission rate. This is to make sure that the company does not decline in the production of energy.