Shell is a multinational company dealing with oil and gas. The Headquarters of the company is in Hague, one of the cities of Netherlands. It has a registered office in London, and by 2011, the company was second largest company in relation to revenue growth, and profitability. In the oil and gas sector, the company is second to ExxonMobil in terms of operations and its capital base (Bruijn et al, 2002). The company is grouped among the six most influential oil companies in the world. The other five are Chevron, Exxon Mobil, B.P, Conoco Philips and Total S.A.
The company operates in all areas of oil and gas industry, these areas include exploration of oil and gas, supplies and distribution, marketing, production, refinery, petrochemical development and power generation (McIntosh, 2001). The company is also concerned about environmental conservation, and it has invested heavily on the production, and distribution of renewable energy (Carroll, 1999). It supports initiatives of developing and distribution bio-fuel energy, wind and solar power, and hydrogen energy.
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Shell has branches in 100 countries, and operates an approximate number of 44000 service stations. The company producing more than 3 million barrels of oil per day, and this makes it second to Exxon Mobil. Due to its massive size, and huge capital base, the company is an important player in the international system. It has the capability of influencing world leaders to enact policies that will encourage capitalism, and liberalization of their economies (Carroll, 1999).
Due to its size, and the complex business activities the company engages in, the company operates under four main divisions. These are projects and technology, upstream international, upstream Americas, and downstream (Bruijn et al, 2002).
The role of upstream international is to manage business operations of shell that are outside the American continent. The division is responsible for identifying new oil and gas fields. It refines crude oil, liquefies it and transports the gas. The division creates the necessary infrastructure required to supply and deliver the oil products of the company to the target market. The division operates through geographic locations, and each location has its own CEO. In some instances, the upstream international unit collaborates with all its geographic units to deliver a service considered essential and important (Bruijn et al, 2002).
This only applies when the geographic unit of the company does not have the necessary skills to deliver the service. The Projects and Technology department is responsible for developing new and technological innovative systems, for purposes of improving the efficiency of the organization. The Unit concerns itself with the distribution of the organizations major projects, and it is not restricted to regions (Carroll, 1999).
It supplements the technological innovations of Upstream and Downstream divisions of Shell, and it is responsible for providing leadership and advice on the areas of environmental conservation, health, safety, and procurements and contracting. The downstream division is responsible for the production, manufacture, marketing, and distribution of the products and services of Shell Company. The unit refines, distributes and transports crude oil products (Green, 1985). The upstream America is responsible for the business activities of the organization in North and South America. In this region, the organization looks for new sources of oil, and gas. It also creates an infrastructure that has the capability of efficiently transporting the products of the company to its target markets (Jordan, 2001).
The division is responsible for extracting bitumen from oil sand. It converts them to crude oil, and thereafter refines them to produce energy. The main objective of the company is to search for oil and gas, and thereafter produce the product, manufacture itâ€™s, and deliver the product to the market. The company also explores for gas, refines it, and transports the product to its target market. The company also produces chemical products, and an example is the shell lubricant used to service the spare parts of motor vehicles (Carroll, 1999).
To effectively sale petroleum, the company operates more than 44000 thousand petrol stations all over the world. The company operates oil refineries, and their objectives are to convert crude oil to finer oil particles that can be used. The company produces renewable energies. And it does this by developing solar panels that have the capability of transforming sunlight into electric energy (Bruijn et al, 2002). The company has operations in Africa, Asia, Europe and the Americas, and therefore there target market is anybody using automobiles in the countries of their operation. Shell Company has various innovative challenges, and opportunities.
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The chairman of Royal Dutch Mr. Jorma Olila states that the success of the organization is because of its innovation in technology, market research, customer relations and production. The company invests heavily in research and development, for purposes of developing products that will stimulate the market, and give them an edge over its competitors. The management of Shell realizes that business organizations are under pressure to innovate (Carroll, 1999).
This is because of the recession happening in Europe and America, the growth of the Chinese and other developing economies, an increase in the population of the world, advanced technological developments, and changing trends at the international business environment. On this note, shell identifies three opportunities on which it needs to develop innovative ideas. These are, investing heavily in research and development, initiating measures to quickly commercialize their ideas, and looking for ways of effectively working with external partners (Bruijn et al, 2002).
The growth of the Chinese economy and of other developing countries presents a challenge to the objectives of Shell Company. This is due to the fact the market conditions in this countries call for low cost products. These markets also insist on the different lines of production. This is a challenge to shell because it will require the organization to revamp its business strategy, so that they can penetrate through these markets. However these markets present a lot of opportunity in relation to energy requirements, which is an essential element for the growth of an economy (Jonker, 2007).
It therefore calls for an innovative mind, to penetrate through these markets, and shell has done exactly that. Shell recognizes China as an important market, and center for research and development. To penetrate the market, shell involves the various universities, and institutions of higher learning, in researching on the various energy products that is sufficient for the Chinese market. An example is the relationship between the company, and Qingdao institute of Bioenergy, and Bioprocess technology. The two are working together to develop biofuel energy for the Chinese economy.
Advances in technology, and new gas and oil finds which are difficult to extract presents the company with an opportunity to innovate, at the same time it is a challenge. For instance the company projects an increase on the demand of energy products, by the year 2050. To satisfy these demands, the company must adopt an innovative culture, and develop machineries that have the capability of extracting oil and gas from these sources (Bruijn et al, 2002). For instance, the company has identified sites that contain gas in impermeable geological formations.
These gas deposits are found in United States of America, and to extract them, it requires it requires innovative drilling techniques and extraction methods. On this note, the company looks for other sources of gas and oil, so that they may extract them, and distribute the products to the market. On this note, the company projects to find new energy sources in China and Australia, and unlock them for purposes of developing energy products (Jordan, 2001). The company does not only involve innovation in the extraction of oil and gas. Technological innovations are also depicted on the products of the company.
The company has among its staff talented engineers and scientists whose role is to create and develop petrochemical products, and their related energy products. There other role is to advice the business organization on the impact of various technological innovations. They device strategies that will help the company overcame its technological problems, giving it an edge over its main competitors. Through the hardwork of these engineers, the company developed products such as, Shell Rimula, an heavy duty diesel engine oil (Jonker, 2007).
The lubricant has the capability of withstanding unfavorable temperature from the outer space, while performing its function. On this note, it is the culture of the organization, for its engineers to develop products whose main aim is to satisfy the needs of the customers. The company identifies the need of the energy efficiency, the need of minimizing lubrication costs and the various legislations that govern carbon emission as the driving force of their lubricants innovations (Carroll, 1999).
On this note, the company invests heavily on lubrication research, and it uses an approximate amount of $ 1.3 billion annually. The company involves its own customers in the research and testing of the lubricants. This makes the company to develop products that are needed in the market, increasing its revenue and profitability. The company does not only focus on technology, but also on business strategies. For instance Shell Company managed to acquire Arrow energy, an Australian energy company. The deal was worth 3.2 billion dollars, and the objective of this venture was to supply liquefied gas to the Asian markets (Jonker, 2007).
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These innovative tendencies by the company are meant to improve their business activities, and to develop new technologies that will help in opening up new markets for the company (Jordan, 2001). These innovations have an adverse effect on the organization, in relation to the perspective of change. The company advocates for innovation, and a change in my management might try to influence new cultures within the organization (Marcel et al, 2006). They might face resistance in the process of changing the culture of the organization. In case the new management might want to continue with the policy, it will take time before they are oriented with the innovative practices of the company. A change in the management will create inconsistencies, in the innovative tendencies of the company. A company that responds best to a change in management is one which is prepared for such a change (Jonker, 2007).
It is better to psychological prepare employees for a change in the management, and establish structures that will mitigate against inconsistencies that might arise from such changes. Inconsistencies will arise if the new management shows some signs and symptoms of inconsistencies to the culture, value and norms of the organization. However, if the new management promotes the values, culture and beliefs of the company, then the employees will continue to develop new ideas that will propel the company to growth. The following are the organizational cultural barrier of innovation at Royal Dutch Shell (Bruijn et al, 2002).
The four divisions of the company are independent of one another. They only work together in special circumstances. This is a barrier to innovative practices in the organization, because the divisions of the company have to coordinate together, to identify the various needs of their customers.
Another cultural barrier to technology is the bureaucratic channels of decision making. Before any important decision is made, the board of directors has to approve it. They may either reject or approve the idea.
Even though the company encourages ideas on its business strategy, its main focus is on technology, and it invests heavily on technology, at the expense of other divisions of the company, such as marketing, distribution and transportation.
Despite these barriers to innovation, there are cultural values in the organization that encourages innovation. These values are (Carroll, 1999),
The desire to satisfy the customerâ€™s needs.
The desire to improve profitability and growth of the company.
The desire to capture new markets, and exploration sites.
It is possible to address the mentioned barriers to innovation at Shell Company. One of the ways of addressing the problem is to integrate the four divisions of the company, by creating a communication liaison office. The responsibility of this office is to share information on the performance and operations of the four units to various heads of the units under consideration.
This will enable the organizations to develop ideas that are convenient, and applicable to the four divisions under consideration. Another method is to increase the number of days that the board of directors should sit, and deliberate on the ideas on offer. This will result to a quicker implementation of an idea, therefore increasing the efficiency of the organization. The company should also invest on other areas of its operations, such as marketing, transport, and distribution. By doing this, the company will not only use technology to develop products, but it will also ensure that the products are effectively distributed, and sold to the market.