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SWOT and Porter Five Forces Analysis of Royal Dutch Shell (Coursework Sample)



Royal Dutch Shell Plc (RDS) is the biggest company globally operational in more than 80 nations and boasting of more than 30 major oil refinery plants and with a workforce of roughly 90 000 employees. The corporation has a listed office in London and is headquartered in The Hague, Netherlands as a means of tax reprieve and was positioned number one with a market capitalization of £135,511.7 billion as of 5 March 2013. The corporation’s major potencies include a worldwide presence with internationally recognized brand names, growing monetary strength, noteworthy production and technological aptitudes and an expanded portfolio of products. The worldwide operations of the corporation are allied with difficulties of standardisation of value as a result of diverse operational settings. Besides, the corporation is faced with taut rivalry from the top sellers in the business such as Exxon Mobil Corporation, Total S.A. and BP Plc. Conversely, the corporation can use delineation strategy banking on its globally renowned brands to found a competitive rim over the rivals. Additionally, the corporation can enlarge its global existence in the course of striking tactical affiliations with local small to medium scale enterprises in foreign markets to boost infiltration into the markets.
Table of Contents
* Introduction
* SWOT Analysis
* Porter’s Five Forces Analysis
* Conclusion
* List of References
Royal Dutch Shell plc (RDS), generally referred to as Shell, is an autonomous Anglo-Dutch conglomerate incorporated in the UK but headquartered in the Hague, Netherlands specializing in the production of oil and gas internationally (Jonker, 2007). As of 5th March 2013, the company boasted of a market capitalization of £135,511.7 billion pitting it as the number one on the FTSE100 Index (Samantha). The company has its operations split into three definite categories so as to facilitate its operations all round: downstream, projects and technology and Upstream. To begin with, upstream facet of the company comprises of activities concerned with the exploration and drilling, liquefaction and shipping of oils, wind energy and natural gas. On the other hand, the downstream department is charged with the development, distribution and promotion of chemicals together with oil products. Lastly, the projects and technology section encompasses all the vital support utilities of the company’s central business in the downstream and upstream factions of the company (McIntosh, 2001).
RDS SWOT Analysis
With roughly 90 000 employees on its books, the company enjoys a number of vital strengths. To begin with, Royal Dutch Shell Plc is the top oil and gas company on a global scale with its existence in myriads of countries. Subsequently, the corporation obtains its strength from the global image it has worked so hard to create and uphold. Secondly, the corporation has recorded positive financial performance via increased profit margins since the 2008/2009 economic slump. The company, consequently, possesses a sturdy capital base enabling it to be competitively involved in the market. Thirdly, the corporation has created robust brands renowned globally such as Shell V-Power as well as Shell FuelSave. Finally, the corporation uses advanced exploration and drilling technological resources, as an intrinsic strength, in addition to a varied assortment of merchandise in both the upstream as well as the downstream facets of the company (Royal Dutch Shell Plc Sustainability Case Study, 2010).
When it comes to weaknesses, the size of the corporation and its international scale of operations may serve as weakness. This is due to the problems experienced by such a magnanimous company when it comes to the management of the quality and standards of its commodities as the operational circumstances vary in every state it has a refinery set up. This also affects the administrative competence and efficacy of the company’s management in a negative manner. Exposure to diverse regulatory systems, in the course of its global existence, presents difficulties in the creation of uniform policies pertinent to the company’s worldwide operations (Shell, 2012).
There is growing awareness and apprehension for ecological sanity where lowered carbon emission is a crucial contemplation for most oil-related commodities. As a result, this has triggered an increasing demand for clean energy in the form of liquefied natural gas. This is expected to boost the company’s proceeds from liquefied natural gas and its products. There are also exist opportunities for the corporation to expand to promising and emerging markets such as China via merger, joint ventures, amalgamations and takeovers as epitomized by the purchase of Neste Oil Oyj in Poland (Global 500).
The economic retardation witnessed in the US and the European Union, emanating from the debt ridden member countries, accentuates a threat to the company’s success (Shell, 2012). Terrorism mannerisms pose a threat to the company’s worldwide operations by escalating business- related operational costs. Increasing stern environmental policies are also a danger to the contemporary and future functioning of the company since more effective and environment conscious exploration, drilling and manufacturing technologies will be required by the company in compliance to these policies and systems being instigated. Erratic interest rates and unrests experienced in various nations globally, more so in the Middle East, also pose a threat to the company’s operation due to its global presence.
Porter’s Five Forces Analysis of RDS
Porter recognizes five forces that are useful in the analysis of the competitiveness of a corporation in its industry of operation; the forces comprise the risk of new entrants into the market, danger of substitute goods and services, haggling capabilities of sellers and consumers and competition amongst existent competitors (2008, p.80). Royal Dutch Shell Plc has instituted large scale presence in over 80 nation states enjoying the economies of scale and also a global image with reputable strong brand names making it hard for new entrants into the market (Frynas, 2003). Thus, the danger of new entrants is minimal due to the soaring capital wants to commence operations in the oil and gas sectors.
Threats due to substitutes other than its products are multiple for this company. This is attributable to the high number of competitors offering similar goods, services and products; oil-related products together with chemicals and natural gas (Holzer, 2007). Key competitor commodities can easily serve as substitutes for RDS’ products. Consequently, this poses a threat to the company’s green portfolio and may lead to losses. An explicit example has been the value of the company’s shares at the FTSE 100 Index where for the second year running now, the stock value has been overvalued hence registering a continuous decline in value (Global 500).
Royal Dutch Shell Plc has adopted a vertical integration expansion stratagem which involves taking over and merging with corporations at diverse echelons of operation and hence it has significantly influenced its supply chain (Learning At Royal Dutch Shell vol 18 (7), 2002). Moreover, the company has improved its technical capabilities through undertaking various demanding projects and the establishment of a robust and well equipped technology division in the company (Shell, 2012). This has rendered the bargaining powers of its suppliers low since the company is already well equipped with the requisite equipment reducing this threat altogether.
Oil and gas are indispensable products in every economy. They form the backbone of the economy through provision of energy in all quarters- even generation of electricity depends on oil and in some instances natural gas to power turbines. The oil industry is exemplified by companies joining hands and even amalgamating to form huge trading blocks, such as OPEC and cartels to control the supply and prices of oil (Learning At Royal Dutch Shell vol 18 (7), 2002). It is the same case with RDS since it was formed after the merger between Royal Dutch Petroleum togeth...
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