An Examination Of Royal Dutch Shell Business Essay

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Introduction:

Royal Dutch Shell which is commonly known as Shell. Shell one of the largest petrochemicals and Energy Company in the world. With its working in more than 90 countries in the world and territories, it employees over 101,000 staff. The biggest advantage that shell has is that it fulfills the demand for energy environmentally, economically and in socially responsible way. It plays a very important role in the U.K. market and economy. Millions of people use the heating and powering in the U.K. which is provided by the shell. They are the leading player in the North Sea for more than 30 years. Shell produces about 15% of gas and oil in the U.K. In the U.K. sector the North Sea, They have a 50 fields interest, Over 30 platform installed, Approximately 30 subsea installed, One FPSO vessel 3 gas plants and one marine terminal. From the warm houses around the U.K. to the depth of the North Sea, from petrol pumps to oil well. Energy which is needed in the Britain is supplied by the shell group.

In the U.K. shell employees over 8600 people directly, it also boosts the economy in the form of investments, tax revenues and employment. It also provides a lot of products and services to the customers. It has over half a million customers daily and over 900 shell- branded service station in the U.K. Shell being the second largest refinery in the U.K. With a variety of product ranging from Shell V-Power a part of premium fuels and a lot of chemicals for industries.

Location in the U.K.

Shell Centre, on the south bank of the Thames in London, is the global headquarters for Shell's downstream business and supporting functions.  Shell Trading and Shipping, a global network of trading and shipping companies, are also based in London. 

Shell Technology Centre Thornton, based in Chester, has a large community of scientists involved in a wide range of research projects, including technologies associated with fuels, lubricants, additives, engineering and the environment.

PEST Analysis

Energy demand will increase by almost 60 percent with alternative energy markets having limited relative contribution (see Appendix III). Whilst proven oil reserves can answer this demand, the financial investment in infrastructure and extraction is expected to be huge, whilst rising CO2 emissions are leading to greater climate destabilisation (IEA, 2004). The IEA (2004) predict that alternative energy can make a significant contribution to 2030 global energy demand although this will require a marked change towards a sustainable energy system underpinned by technological breakthroughs and government action (IEA, 2004). The political, social, and legal factors affecting the industry, underpinned by the Kyoto Agreement (UNFCCC, 2004), is accelerating the process towards more sustainable forms of energy, requiring Shell (Modern Power Systems, 2002) and BP (Hoffman, 2004) to adapt.

Organisational Structure for Shell

The three dimensions of this matrix were represented by the principal executives of the service companies, who were designated "coordinators." Thus, the senior management team at the beginning of 1995 included the following:

Committee of Managing Directors

• Chairman

• Vice Chairman

• Three other Managing Directors

Principal executives of the service companies

• Regional coordinators:

- Europe

- Western Hemisphere and Africa

- Middle East, Francophone Africa, and South Asia

- East and Australasia

• Sector coordinators:

- E&P Coordinator

- Chemicals Coordinator

- Coal/Natural Gas Coordinator

- Metals Coordinator

- President - Shell International Trading

- Marine Coordinator

- Supply and Marketing Coordinator

Strength of Bureaucracy:

The labor division is introduced by the spheres of influence

An officials offices set in a definite hierarchy.

Appropriate rules and regulations.

Technical qualification is the process for the selection in office.

Promotion is a form of selection by seniourity.

Disciplinary control over the incumbent of each office.

There should be a proper selection method and not by fraud or bribe. It's a clear form of selection.

Weaknesses of bureaucracy?

1. Becomes an Iron Cage of Control (as Weber saw it)

OTHER DYSFUNCTIONS SINCE WEBER

2. Red Tape from all the rules and sign offs

3. A typical form and difficult to change this form

4. Divisions of labour compartmentalize attention and response.

5. Hierarchy can mean silos (e.g. must go up and down chains of command to get things done).

6. Certain irrationalities result.

Compare alternative forms of organisational development.

Organization Development

Organisational development is a planned intervention. They are plans or programs comprised of specific activities designed to effect change in organisation.Numeorous interventions have been developed over the years to address different problems

OD is a planned intervention .They are plans designed to manage the change when the organisation has a change.

The different forms of organisational that could happen are

Adhocratic organisation

It lacks organizational structure. It depends on the team work and new creative ideas, totally on human resource.

Mechanistic organisation

This type of organisation has a well-defined structure in which everyone has specific and explained Job roles.

DESCRIPTION OF WORK

DIVISION OF WORK

CREATING DIFFERENT DEPARTMENTS

CO-ORDINATION OF WORK

MONITORING AND REORGANISING

Changes in the Shell.

Staff cut down, especially at the corporate level, was one of the major changes in the company's policy. The excess capacity of the refinery was reduced by closure, scrapping of the ongoing tankers and increasing the sales. By giving full responsibilities of profit and loss of the business units by decentralizing of decision making from corporate levels to the division level and from the division level to business unit level. Chemicals, downstream activities and upstream activities division was formed worldwide in the organization structure shifting which was done from geographical organization around the world regions to worldwide product division. Hierarchical structure was formed delayering through eliminating administrative layer. Amoco broke up into three major divisions, 13 business groups was created by breaking the mobile and forming a structural division, direct corporate center reporting had been setup for 17 business group.

There was introduction of the phase which was termed as multi-jurisdictional project, in which there was involvement of all appropriated stakeholders through deployment, planning and operation phase in a collaborative and formal manner. A very important lesson which was passed from the institute to both the project team passed on to the evaluation team after forming a new multi-jurisdictional project it is very important to involve the stakeholders in all the decision making as they are the one who also play a very important part in the organisation as they are the one who are the major investors and if they are not happy the company will not be happy as they will lose on the trust of the stakeholders. For stakeholders to deploy and require a diverse group a parking management systems are often integrated into urban or neighbourhood environment.

STRENGTH

The brand name is one of the strengths of the company

Lowest cost producer in the world

Stable balance sheet (low debt to equity ratio)

Experience in Tata doing the acquisitions.

Presence of operating facilities present in whole Europe.

WEAKNESS

High operational cost.

Present economic conditions of the UK. Due to recession there is a short in customers'.

Due to the 12% GDP close UK budget is still similar to Greece.

OPPURTUNITIES

Consolidated trend in Steel industry.

To get a right price at a time when the market is less volatile.

THREATS

Huge pension liability.

There was a structure created in 1995- 1999 that was better able to respond discontinuous chahges and uncertainties. The changes which was brought about in the 1996 was arguably

One of the best changes of all time for the company. There were a lot of harsh decision take at that time cutting-down the staff , even shutting down a lot of headquarters not only in the not only was cost effective, also proved out to be better for the shell as the graph starting moving upwords even outside the company and the shell watchers and the investers both who say that the managagement at that time not only was effective but efficient as well in the recognization of the company.The toughest dicision for them was that of restructuring of chemicals and downstream businesses.

This all started in the eearly 1990's when the managing team in the company thought to become more aggressive and restructuring the company. Firstly it was operating with 80% pf refineries around the work, the managing team thought of changing the idea and getting a lot of capital back by 2001 and they to cover that capital they started selling the refineries. There another goal from this plan was to get the refinery control to 65% to 70% again by the end of 2001 in order to achieve their average capital employed by 15%, Another example is that it also had chemical plants scattered round the world with more then 30 plants in Europe, 7 in Asia Pacific, and 17 in America. Today the are planning to have much more lesser plans and want to concentrate on a few but worl-class plants. Earlier they had more plans but it was like few of them made profits and few of them made loss which was manufacturing 22 different products. When then reduced to 12 product groups.

The restructuring of chemicals and downstream businesses revealed both a tough-mindedness and a decisiveness that few had associated with the Shell-of-old.

 

There was one important question that raised in a lot of people's mind is that whether shelling was trying to play more card then present in the deck or what?

By 2000 it created a sectored organisation that other multinationals had created decades ago. More over the restructuring of such structure was being don't by its competitors. For example BP - said to be one of the most dynamic and responsive of any of the petroleum majors had abandoned its traditional decisional structure for a flatter structure. It means giving decisive powers to the business units directly to the corporate centre.

 Re- engineering:

Shell still retains it old structure that could involve the new philosophy of responsiveness and single-point accountability. Like all single corporation shell was till a joint venture and in which the committee if Managing Directors compiled of Board of Members from dual parent of the companies. They had been following an old principle of rotating leadership between the two parent with a fixed term of office for the  CMD chairman was still intact. When other companies had been tranfering to merger and acquisition it still followed the old rules. A laid back managing tech in the organization they were still bothered about their internal re-structuring. As said and noted in the Financial Tiems' Lex column that had shell missed out on the great oil patch M&A Boom/ it would preferably be to get serious about merging in itself before merging with any other company and that should be given the priority. Following such a laidback and a traditional form of managing in an organization they definitely need to change their system, restructure them in a huge way.

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