Royal Dutch Shell Plc. Porter Five Forces and SWOT Analysis (Term Paper Sample)

SWOT AND PORTER ANALYSIS FOR THE ROYAL DUTCH SHELL PLC.
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Abstract
Royal Dutch Shell Plc. is the biggest company globally with operations in over 80 nations, and more than 30 major oil refinery plants. According to official statistics from the company’s human resource department, it has a workforce of roughly 90 000 employees. The corporation is registered in the UK with a listed London office; but is headquartered in the Hague, Netherlands, as a means of tax reprieve. Due to its operations and customer base globally, it was positioned number one on the FTSE 100 Index as of May 2013 with a market capitalization of $213.14 billion. The corporation’s noteworthy strengths include a worldwide presence with an internationally recognized brand name- the Royal Dutch Shell Plc. advanced technological inputs for manufacturing and production activities, and an ever expanding portfolio of products. Due to differences in business environments globally, the company is faced with the predicament of standardising its products. Consequently, the prices of its various products show great variances when all are equated in terms of a standard currency such as the Pound. Besides, the corporation is faced with stiff competition for the global market share from other top sellers in the business such as Exxon Mobil Corporation, Total S.A. and BP Plc.
Contents
TOC \o "1-3" \h \z \u Introduction PAGEREF _Toc431442413 \h 4
Royal Dutch Shell Plc. SWOT Analysis PAGEREF _Toc431442414 \h 4
Strengths PAGEREF _Toc431442415 \h 4
Weaknesses PAGEREF _Toc431442416 \h 5
Opportunities PAGEREF _Toc431442417 \h 5
Threats PAGEREF _Toc431442418 \h 6
Royal Dutch Shell Plc. Porter’s Five Forces Analysis PAGEREF _Toc431442419 \h 6
Threat of New Entrants into the Industry PAGEREF _Toc431442420 \h 6
Threat of Substitutes PAGEREF _Toc431442421 \h 7
Bargaining Power of Buyers and Suppliers PAGEREF _Toc431442422 \h 7
RDS’ Rivalry with Competitors PAGEREF _Toc431442423 \h 8
Conclusion PAGEREF _Toc431442424 \h 8
Bibliography PAGEREF _Toc431442425 \h 10
Introduction
Royal Dutch Shell Plc., generally referred to as Shell, is an Anglo-Dutch company legally registered in the UK but headquartered in the Hague, Netherlands, specializing in the production of oil and gas internationally. The company has its operations split into three divisions (so as to facilitate its all-round operations): downstream, projects and technology and upstream. The upstream division deals with all activities involving exploration, drilling, liquefaction and shipping of oils, wind energy and natural gas; the downstream division is tasked with the development, distribution and promotion of chemicals, chemical products, as well as oil products, while lastly the projects and technology division supports the other two divisions, through the provision of inputs, machinery, research and technological requirements. This report is based on the SWOT and PORTER analysis of RDS.[Joost Jonker, A history of Royal Dutch Shell (Oxford: Oxford University Press, 2007), 7] [Malcolm McIntosh, Royal Dutch Shell (London: Routledge, 2012), II]
Royal Dutch Shell Plc. SWOT Analysis
Strengths
With over 90 000 employees, Royal Dutch Shell Plc. is an independent gas and oil company with operations in numerous nations- according to Holzer (2007, p. 5), the company operates in over 80 countries. The corporation’s first strength is the global image it has created, mainly through its many subsidiaries. Secondly, the corporation has recorded positive financial performance by posting increased profit margins since the 2008/2009 economic slump. The company, consequently, possesses a strong and growing capital portfolio enabling it to continually grow its operations. Finally, the corporation uses advanced exploration and drilling technological resources putting it ahead of its competitors. This is in addition to the various products the company produces, such as Shell V-Power and Shell Fuel Save.[Shelley DuBois, Global 500http://money.cnn.com/magazines/fortune/global500/2012/snapshots/6388.html.] [Ibid.] [Royal Dutch Shell Plc Sustainability Case Study (1st. S.l.: Datamonitor Plc, 2010), 12]
Weaknesses
The size of the corporation and its international scale of operations serve are the prime weaknesses. This is due to the problems experienced by such a large company when it comes to management, standardisation of quality and research and development strategies. Owing to the mass production it engages in, the company has, time and again, had to call back some of the products due to quality, quantity or even expiry date issues. Exposure to diverse regulatory systems, as a result of its global existence, presents difficulties in the formulation of uniform policies across all its global branches.[J. George Frynas, "Royal Dutch/Shell," New Political Economy 8 no. 2 (2011): 275-285] [Paul M. Healy and Krishna G. Palepu, Business analysis and valuation: IFRS edition, text only. (Hampshire: Thomson, 2010), 1] [Shell, Investors’ Handbookhttp://reports.shell.com/investors-handbook/2012/companyoverview.html.]
Opportunities
There is growing awareness for environmental conservation where low carbon content is a crucial consideration while purchasing oil or its related commodities. This has triggered an increasing demand for clean energy. This is expected to boost the company’s proceeds. There also exist opportunities for the corporation to expand to promising and emerging markets such as China through mergers, joint ventures, amalgamations and takeovers.[Ricky W Griffin, Fundamentals of management ( Mason, OH: South-Western Cengage Learning, 2012), 17] [Shelley DuBois, Global 500http://money.cnn.com/magazines/fortune/global500/2012/snapshots/6388.html.]
Threats
The economic retardation witnessed in the US and the European Union threatens the company’s recent successes as a market leader in the oil and gas sector. Terrorism poses a threat to the company’s worldwide operations since terror attacks raise the cost of business through increased operational costs. Sterner environmental policies are also a threat to the company since this leads to stiffer requirements and compliances prior to issuance of permission to explore, drill and manufacture oil, gas and their related products.[Shell, Investors’ Handbookhttp://reports.shell.com/investors-handbook/2012/companyoverview.html.]
Royal Dutch Shell Plc. Porter’s Five Forces Analysis
Threat of New Entrants into the Industry
According to Porter, there are five forces that are considered when analysing the competitiveness of a company in its industry of operation; the threat of new entrants into the market, threat of substitute goods and services, bargaining powers of buyers and suppliers, and finally competition with other companies in the market. The Royal Dutch Shell Plc. has a large presence globally and thus enjoys economies of scale for its global presence. This is accentuated by its image and strong brand name making it hard for new entrants to get into the market. This threat is also minimised by the high capital requirements for new entrants into the oil and gas industry.[Michael E. Porter, On competition, (Boston, MA: Harvard Business School Pub, 2008), 25] [J. George Frynas, "Royal Dutch/Shell," New Political Economy 8 no. 2 (2011): 275-285]
Threat of Substitutes
Threats posed by substitutes other than its products are multiple. This is as a result of the high number of competitors offering similar goods, services and products. Key competitor commodities can easily serve as substitutes for RDS’ products except that these use different brand names and have different pricing schemes. Consequently, this poses a threat to the company’s market position and may lead to losses since these products have been found to be much cheaper and of the same quality.[Boris Holzer, "Framing The Corporation: Royal Dutch/Shell And Human Rights Woes In Nigeria Vol 30 (3)," Journal of Consumer Policy (2007) 281-301] [Thomson Reuters Fundamentals; Forbes, Royal Dutch Shell, (2014)/companies/royal-dutch-shell/.]
Bargaining Power of Buyers and Suppliers
The main suppliers include raw materials and labour providers, study staff, technicians, engineers and investigators of production, distribution and marketing. Royal Dutch Shell Plc. has adopted a vertical expansion stratagem which involves takeovers and mergers with smaller corporations. Moreover, the company has improved its technical capabilities through undertaking various demanding projects, boosting its portfolio for other sectors such as the chemical industry. This has reduced the bargaining powers of its suppliers, as well as buyers, since the company is already well equipped with the necessary workforce, machinery and materials required for its operations. On the other hand, the bargaining power of its customers is also low since the company has established i...