ASA UNIVERSITY BANGLADESH (ASUB)

Term Paper
Subject: Strategic Management
Company: Shell oil

Submitted To:

Professor Dr. M. MahmodulHasan

Faculty of Business Administration

Department of Management

MBA Program

Submitted By

JAFLONG Group

Strategic Management
MBA (R)

ASA University Bangladesh

Letter of Transmittal

April 26, 2013

Professor Dr. M. MahmodulHasan

Faculty of Business Administration

Department of Management

MBA Program

Sub: Submission of the Term Paper

Dear Sir,

It is our privilege to submit the Term Paper on “Shell oil Company.” which was assigned to me as part of our Term Paper. I have tried my level best to make this report as good as possible. . However, there have some shortcomings in this report due to our limitation. I hope that your honor would kindly consider our limitation favorably and accept the Term Paper.

Your kind consideration and valued assessment would guide and inspire our in future.

Yours Sincerely

JAFLONG Group

Strategic Management

ASA University Bangladesh

Acknowledgement

We would like to thanks our Advisor Prof. Dr. Md. Mahmudul Hasan Faculty of Business Administration, Department of Management MBA Program in ASA University Bangladesh, Who was always there to guide us throughout the project and without his guidance we would have never been able to accomplish this task

This is a Term paper of a case analysis for Shell Corporation. First and foremost, we need to understand and research on Shell Corporation and its existing vision, mission, objectives and strategies are identified. Then, the vision and mission statements for Shell Corp. are developed. Other important factors that we have analyzed are to identify the organization’s external opportunities and threats.

Two major competitors of Shell are Exxon Mobil and BP which have been analyzed with Competitive Profile Matrix (CPM). These companies are global extension.

The External Factor Evaluation (EFE) Matrix is constructed to illustrate the external factors for Shell Corporation.

The organization’s internal strengths and weaknesses are identified in order to construct an Internal Factor Evaluation (IFE) Matrix. The SWOT matrix, BCG Matrix15. QSPM Analysis Financial Analysisare prepared to analyze and evaluate the organization’s current situation and strategies to be adopted for the portfolios. Besides, the QSPM is constructed to evaluate the pros and cons for the alternative strategies.

In addition, specific strategies and long-term objectives are recommended. These included the costs for each projected year. Our recommendations are compared to the actual strategies that have been planned by the company. Meanwhile, we have specified how our recommendations can be implemented and the results we expected. Lastly, we have recommended specific annual objectives and policies as well as the procedures for strategy review and evaluation for Shell Corporation.

Executive Summary

Shell is a superior brand name with more than 100 year history in this region, in fact the company is still in fact the company is still possession of a fuel storage tank from 1899. However the document history of the royelduch/shall group the asiasubcontinted dates back to 1903 when a partnership was struck between the shell transported and trading company and the Royal Dutch petroleum company to supply petroleum product in Asia.

With Their key indicator of progress already soaring to new heights, shell is committed to dedicate all its energies, resources and the time to bring higher value and satisfaction to their customers, Employees and shareholders.

The graph of shell is going up every yer the ratio of profit is increasing at good percentage. Shell is serving the people is increasing at good percentage. Shell is serving the people at high level of standard by going accrding to the wishes of the customers.

Strategic Management

Strategy

Strategy is a high level planto achieve one or more goals under conditions of uncertainty. Strategy becomes ever necessary when it is known or suspected there are insufficient resources to achieve these goals

Strategic Management (Theory: 2000 – 2010)

• Strategic Management can be defined as (1) the art and science of formulating, (2) implementing, and (3) evaluating cross-functional decisions that enable an organization to achieve its objectives.

• Strategic Management focuses on integrating management, marketing, finance/accounting, production/operation, research and development (R&D) and computer information systems to achieve organizational success.

Strategic Management (Theory: 2011 – 2015 ±)

• Strategic management involves strategy development, which is comprised of five stages:

Discovery,
Strategic thinking,
Strategic planning,
Strategy roll-out,
Strategy tune-up/adjustment.

Discovery requires all members of the team to individually gather information on an agreed upon set of attributes affecting the organization.
Strategic thinking, which can be defined as ‘the generation and application of business insights on a continual basis to achieve competitive advantage’.
Strategic planning stage utilizes the insights form the strategic thinking phase to assemble a mission statement, set goals and objectives, audit the organization for internal strengths and weaknesses, assess the external environment for opportunities and threats, evaluate strategic options, and then select and operationalize an organizational strategy
The strategy roll-out phase turns the strategy into activities and offerings and ensures that the strategy is communicated well throughout the organization.
The strategy tune-up phase is a meeting held several times per year to keep track of the progress of the implemented strategy and adjust for changes in the internal and external climate of the organization.

Strategic Management Models:

1. PEST analysis

2. STEER Analysis

3. Five Forces Model

4. Strategic Group Map

5. SWOT analysis

6. Blue Ocean Strategies

7. Open innovation

8. seven S model

1) PEST Analysis: PEST analysis stands for "Political, Economic, Social, and Technological analysis" and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management.

2. STEER Analysis: STEER analysis systematically considers Socio-cultural, Technological, Economic, Ecological, and Regulatory factors.

3. Five Forces Model:Porter five forces analysis is a framework for industry analysis and business strategy development. It draws upon industrial organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market.

4) Strategic Group Map:

Extent of product (or service) diversity.
Extent of geographic coverage.
Number of market segments served.
Distribution channels used.
Extent of branding.
Marketing effort.
Product (or service) quality.

5) SWOT Analysis

• Strengths: characteristics of the business or team that give it an advantage over others in the industry.

• Weaknesses: are characteristics that place the firm at a disadvantage relative to others.

• Opportunities: external chances to make greater sales or profits in the environment.

• Threats: external elements in the environment that could cause trouble for the business.

6)Blue Ocean Strategy is a business strategy book first published in 2005 and written by W. Chan Kim and Renée Mauborgne of The Blue Ocean Strategy Institute at INSEAD. The book illustrates what the authors believe is the high growth and profits an organization can generate by creating new demand in an uncontested market space, or a "Blue Ocean", than by competing head-to-head with other suppliers for known customers in an existing industry.

7) Open innovation is a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology.

8) Seven S-Model:

Business Environment/Strategy: Competition, Economy, regulation/taxes, labor & supplier issues, Short-Term vs. Long-Term Goal etc.
Shared Values: How would you describe the mission of this company to your prospective buyers?
Structure: Organization Chart, Departments, the number of management layers
Staff: the strengths and weaknesses of the organization's key people.
System/Infrastructure: reward system, manufacturing system, technology, customer feedback
Skills: key knowledge and skills are needed to succeed in this business/organization
Style: Emphasize on quality, encourage teamwork, reinforce standards

Shell oil Company Profile

Shell Oil Company is the U.S. subsidiary of the Netherlands-based Royal Dutch Shell plc, the third-largest energy company worldwide; Shell Oil sells one of the most recognizable brands of gasoline in the U.S. Drawing from its oil and gas fields in California, Texas and the Gulf of Mexico, Shell Oil currently operates more than 22,000 service stations around the country. Shell Oil also explores for, produces and markets oil, natural gas, chemicals and electricity directly to residential and small business customers. Less prominent but fast-growing units in the company, such as Renewables and Shell Hydrogen, are cultivating lower-carbon energy sources like hydrogen fuel. Its parent company, Royal Dutch Shell, has more than 120,000 employees in over 145 countries around the world; Shell Oil's U.S. headquarters is located in Houston.

Shell oil Company Strategies

• More Upstream, Profitable Downstream remains on track.

• Shell’s strategy to invest in the development of major growth projects, primarily in the upstream businesses of Exploration & Production and Gas & Power

• Our strategy has four portfolio themes: sustaining our heartlands, core countries that have the infrastructure, expertise and remaining growth potential we need; focusing on new oil and gas projects where technology is a differentiator; building integrated gas opportunities; and continuing to unlock unconventional oil and gas resources.

• Our strategy is to be the leading oil sands operator by focusing on operational excellence and profitable growth.

• The Chemicals strategy remains focused on our portfolio of crackers and selected first-line derivatives, which supply bulk petrochemicals to large industrial customers. Our strategy is to strengthen our asset base in the Americas and Europe through operational excellence and highly targeted investments, and to achieve profitable growth in Asia-Pacific and in the Middle East as projects with the right combination of feedstock, costs, and portfolio are developed and mature.Shell Oil CompanyVision

Shell oil company vision is to make the difference through their employee, people they do business with, a team of dedicated professionals, who value their customers, deliver on shell oil business promises and contribute to sustainable development.

Shell oil Vision

Shell does not have any existing vision stated in their website or annual report.

Shell Oil Company Mission

To continuously deliver shareholder value by:

Manufacturing and supplying oil products and services that satisfy the needs of our customers
Constantly achieving operational excellence
Conducting our business in a safe, environmentally sustainable and economically optimum manner
Employing a diverse, innovative and results-oriented team motivated to deliver excellence

Shell Oil Company Objectives

We are committed to deliver sustainable excellence in business performance by focusing on the following:

Benefit our shareholders
Realise the potential of our people
Meet our customer requirements
Maximise refinery margins
Safeguard asset integrity
Deliver structural cost reductions
Sustain a robust management system
Deliver continuous sustainable Health, Safety, Security and Environmental excellence

Shell Oil CompanyOrganogram

Our management believes that the success of our business endeavour largely depends on management’s commitment towards the realisation of it’s business goals.

We also believe that People are fundamental to our success. Thus, we are committed to the care, training and development of our employees so that they reach their full potential and achieve maximum productivity. Company organogram:

Company organogram

Regional

Manager

Service Heads (petroleum, oil Change, Convenience store)

Front Line Manager

Territory Manager

Franchise Heads

Board Of Directors

Zonal Head

Chairmen (Regional/Zonal)

Managing Directors

Departmental Heads

PEST/STEER/PESTEL Analysis

Shell Oil Company PESTEL Analysis

POLITICAL.

The policies of government on shell oil are factor affecting shell Oil Company for example of this policies affect the rate of production in oil business.
Tax on petroleum product by the government of the country where refinery are built, are factor to affecting shell oil business.
Political instability of government of the country where shell oil have its refinery.

THE ENVIRONMENTAL FACTOR:

this is matter that arises from environmental pollution cause by shell oil which makes government lay embargo on production of oil product in some country.

ECONOMIC.

UNEMPLOYMENT: This are the number of able man and woman unable to attach them self to any work force in the society.
GROSS NATIONAL PRODUCT TREND: this are the factor that affect shell oil economically because of the pattern of gradual change in a condition, output or process.
INFLATION: this is another factor that affects shell oil when the price affects the growth of production in oil business.

SOCIAL-CULTURAL:

LEVEL OF EDUCATIONS: The standards of education of most of the employee of shell oil are not up to date because of government involvement in the human resource department of shell oil.
Population demographic of the countries where the refinery are built play a major factor.
FLEXIBILITY: Most of the employees of shell oil think that their jobs are not flexible enough which doesn't increase their lifestyles.

TECHNOLOGICAL

Introduction of shell oil card for payment for fuel at shell station worldwide are not generally accepted my some country that are lacking behind technologically.
speed in technology worldwide is another factor affecting shell oil.

ENVIRONMENTAL

T he cultural back grounds of the country where shell oil have its refinery plays a major factor as a strategy.
Impact of shell product on the environment: this course a major problem in Nigerian where the community that shell is building the refinery claim that shell oil are causing their land to be hazardous.

LEGAL

The health and safety law: they are enforcing by government on employer over their employees in other to have a better and safer work.
Some law which are enforcing by government that require the employer to employer certain percentage of people to shell oil which affect shell oil either in a positive and a genitive way.

SWOT Analysis

SWOT ANALYSIS CONDUCTED ON SHELL OIL COMPANY.

This analysis is conducted on shell Oil Company in order to identify the company strengths, weakness and their threats. And this is seen in as a process of isolation and its important decisions are taken based on my finding about shell Oil Company. Michel Robert (1993).

Shell Oil Company falls into the situation of Analysis in strategic and marketing planning.

The swot analysis of shell Oil Company is as follow.

SHELL OIL STRENGTH.

STRONG BRAND NAME
GOOD PRODUCT
HUGE CAPITAL
HIGH QUALITY WORK FORCE
They have the ability to sustain robust management system over the other major players in oil industries.
SHELL OIL MAXIMISE THEIR REFINERY MARGINS:.
THEY DELIVER STRUCTURE COST REDUCTION:
INTRODUCTION OF SHELL CARD
WIDE RANGE OF PRODUCT AND SERVICE.
Shell oil has the right sell and they have a good distribution outlet all over the world

SHELL OIL WEAKENESS.

OPERATING IN UNSTABLE ENVIRONMENT
CORRUPTION IN OIL BUSINESS
Establishment of partnership with stake holders.
EXPLORE NEW FIELDS.
Creating parties which will be held accountable for unethical practices in shell Oil Company.
SHELL MARKET RESEARCH IS NOT UP TO DATE
LACK OF FREEDOM
CRUDE OIL PRICE.

SHELL OIL COMPANY OPPORTUNITY.

EXTENSIVE RESEARCH DEVELOPMENT
EXPLORE NEW FIELD
Shell oil are been affect by many controversy in the past that want to make them loss their value. But they also have the ability to quickly amend those things.

SHELL OIL COMPANY THREAT.

NEW OIL PLAYER
ECOLOGICAL FACTOR
LOBBY GROUP
INTRODUCTION OF NEW REGULATIONS BY OPEC
CONTINUED NEGATIVE IMAGE AND PUBLICITY.
continued discrediting of portion:
people using shell product are more price conscious as a result on inflation all over the world.
Continues government interference in shell Oil Company where they have their refinery.

Diagram of Porter's 5 Forces

Porter’s Five Forces Analysis of Shell

Level of Competition

There is a high level of competition in the industry but among few players. Shell’s major competitor is British Petroleum. British Petroleum’s strategy has also been focused on acquisitions, partnerships and alliances to build up a larger framework to meet growing demand. Currently BP has acquired contractual agreement with the government of Azerbaijan and Gulf of Mexico, while Shell gauged its success in 2009 in Iraq, Canada, and Australia and also in the Gulf of Mexico (BP, 2010 [online]).

Threat of Substitutes

With the advent of alternative energy sources, the threat of substitute products has risen, such as from bio fuels. Many companies are now investing in bio fuel technologies to respond to social, environmental and political pressures (The Guardian, 2010 [online]).

Threat of New Entrants

Threat of new entrants is low, as it requires a heavy capital investment to set up plants and use advance technology for extraction domestically and internationally to meet the demands.

There are heavy fixed costs involved in the industry which can only be curbed once economies of scale are received (Oil and Gas, 2010 [online]).

Bargaining Power of Suppliers

Bargaining power of suppliers is low. There are few suppliers in the industry.

The industry is focused on low cost production and, thus, alternative energy sources are searched and invested in heavily, the suppliers of which are low, but under the influence of the manufacturers (Oil and Gas, 2010 [online]).

Bargaining Power of Customers

Bargaining power of customers is low as there are not many fuel companies available in the industry which offers conventional, alternative and bio mass fuels.

SWAN Analysis

• Strengths

• Weaknesses

• Achievements

• Next step

alternatives –

• SW And Needs

• SW Ambitions Needs

TOWS – Matrix

• Technique used in strategy formulation for combining

– External analysis (EFE Matrix)

• Opportunities

• Threats

– Internal analysis (CPM Matrix)

• Strengths

• Weaknesses

The Value Chain

A company’s value chain identifies the primary activities that create customer value and related support activities

Company Value Chain

Shell oil Company Value Chain Analysis

Primary Value Chain Activities

Inbound Logistics

Shell is currently in contract with Cosan, a Brazilian company to supply ethanol. Azherbaijan and Russian suppliers are also used to supply oil and gas reserves (Shell, 2010 [online]).

Operations

The performance strategy involved restructuring and reorganizing the operations of the company to upstream and downstream where priorities were towards performance focus, competitive growth and new project investments. The overall operational performance has also met with improvement as efficiency rates have rose. The reorganization will allow faster implementation of future growth strategies as well (Shell, 2010 [online]).

Outbound Logistics

Shell has an extensive global outbound logistics network which allows it to distribute the refined oil in the most cost efficient manner. It uses light transportation (Shell, 2010 [online]).

Marketing and Sales

Shell markets itself as the largest fuel provider, where its service centers are located in 90 countries worldwide. It adds the image of an innovation and quality-focused company which does not compromise on performance. Although, Shell has previously received an excellent amount of sales revenue, recently, there has been a decline, due to rise in oil prices, rising social exposure of the workforce exploitation and environmental degradation by the company (Shell, 2010 [online]).

Service

Shell uses its helpline service to address customer complaints and queries. Other than that, there is no extensive or special form of service that Shell offers to customers with regard to complaints and queries. Shell service stations have the direct interaction with the customers and the company makes sure that the employees address to customers appropriately and offer services in the standard way (Shell, 2010 [online]).

Support Value Chain Activities

Procurements

Shell is now engaged in e-procurement, using the help of SAP’s support systems to enhance its supply chain activities. SAP’s support offers an ERP system that allows procurement to be done online (SAP, 2010 [online]).

Technology Development

Over $1.2 billion have recently been spent by Shell in research and development of new technologies to gauge the most benefit out of the reserves of oil and gas and find new opportunities for investments (Shell, 2010 [online]). Technological innovation development in extracting energy is a key strength of the company and it is continually engaged in investing in new technologies that would give it an edge over its competitors.

Human Resource Management

Human resource activities are the most challenging for Shell as it has to face several employment issues starting from health, and work environment to safety issues. These are true for factory workers who work in high danger zones (Shell, 2010 [online]). In Nigeria, a high rate of people dying in the factory has become common.

As shell is a global competitive company, it seeks highly talented and experienced people who seek innovation and growth for the company for its management. Shell offers learning and development opportunities for its diverse workforce. It offers monetary and non-monetary forms of incentives to employees (Shell, 2010 [online]). The human resource management uses online application system for interested candidates and uses simulation based testing tools for hiring appropriate employees for middle management and senior management posts.

Firm Infrastructure

Shell’s infrastructure is heavily reliant on technological support, by means of ERP, data anagement, research and development, marketing, procurement, human resource management, extraction and production operations (SAP, 2010 [online]). This allows a strong network of coordination and ommunicationto be maintained globally.

ViSA - Model

• Vi = Vision

• S = Strategy

• A = Action Plan

SMARTER - Model

• Specific: Stimulating Sincere

• Measurable: Mapped to goals

• Achievable: Accountable

• Realistic: Relevant

• Time: Trackable

• Encompassing: Evaluating

• Reviewed: Rewarding

SMARTER Objectives for Shell oil Ltd

• Specific: To obtain 5% market share within the first year of operations within our industry.

• Measurable: To sell 4000 units per month, which equates to approximately 5% market share.

• Achievable: Taking into account primary and secondary research and facts from our market share data ABC Ltd do believe the objectives set are achievable.

• Realistic: Considering the amount of financial resources and manpower expertise we at ABC Ltd do believe that objectives set are realistic.

• Time: It is the expectation that the 5% market share objectives set for ABC Ltd will be achieved by the end of Dec 31st 2012.

Shell In BCG Matrix

We put Shell in stars in the BCG matrix because shell has a good market share it has opportunities to grow more.

Effective placement of product :

Shell has established a special council called ‘product placement Council” Its sole function is to keep an eye on proper placement of the various products offered by the company. The council makes contracts with dealers and retailers regarding the placement of the products and also keeps cheeks in order to see that there is no violation of the contracts.

Positioning:

The positioning of arranging of product to occupy clear distinct and desirable place to competing products in the minds of target consumer. Shell company lies its growth stage in the market and enjoy 65% shares. Now gradually with the increase of growth rate is expands its products line and also distributions.

Marketing-Segmentation analysis of Shell

Shell Oil Products Company succeeded in building its new brand image to increase retail marketing revenues.In this case analysis, we will use STP to analyze Shell’s sucessful marketing strategy.

Segmentation
Oil station market consists of buyers who differ in one or more ways, so Shell need first segment its potential consumer market.
There are several major variables that can be used in segmenting consumer markets, including geographic, demographic, psychographic, and behavioral variables. In this case, SOPC used the latter two variables to segment its market. It chose “personality” and “benefit” as its segmentation criteria, of which the former belongs to psychographic segmentation and the latter belongs to behavioral segmentation.

* Why to choose these two criteria?
According to the requirements for effective segmentation, SOPC has to make sure that its market segments are measurable, accessible, substantial, differentiable, and actionable. The requirement of differentiable market segments means that the segments are conceptually distinguishable and respond differently to different marketing mix elements and programs. Neither geographic segmentation nor demographic segmentation can be effective, because those criteria do not affect Shell’s customers’ attitude of stopping their automobiles at gasoline stations. That’s why SOPC aimed at customer needs and chose personality and benefit as segmentation criteria..

How It Works:

The principles above were implemented by Shell Oil in the early 2000s after recognizing that short-term tactics would only lead to a "prisoner’s dilemma" (in which two players are likely to avoid cooperative strategies that might actually be in their best long-term interests) and declining long-run industry viability. To create a long-term competitive advantage, Shell employed a process which typifies advanced marketing research, including:

Share Your Best Practices:

Do you have a best practice for creating sustainable advantage through customer analysis and market segmentation? If so, please share it on at Wharton's Center for Leadership and Change Management.

PURE Objectives

• Positive

• Understood

– Performance

– Style

– Jargon

– Culture

• Recorded

• Ethical

GREAT model

• G – Goals

• R – Roles/ Results

• E – Expectations / Performance

• A – Accountabilities / Abilities

• T – Timing

GREAT - Model

Goals

• What are the goals of the project?

• What is the goal of each individual activity?

• Why are we doing this?

Roles

• What is my job as an individual team member?

• What do I do?

• What is the contribution I am expected to make?

• What expertise do I bring to the situation?

• What is everyone else’s role and everyone else’s expected contribution?

Expectations

• How good is “good enough”?

• What is the level of performance that is desired?

• What level of performance is not desired?

• Why are the expectations set at this level as opposed to another?

Accountabilities / Abilities

• Who is accountable for each phase of the work, especially on jobs that cut across functional lines or involve several people?

• What abilities do we possess that have a hearing on the individual job assignments?

Timing

• When must this be done?

• At what pace am I to work?

EFE Matrix of British Shell oil

	WEIGHT	RATING	WEIGHTEDSCORE
Opportunities
1. Increase usage for energy	0.12	3	0.36
2. Increasing price of energy	0.13	2	0.26
3. Increasing propensity of people to spend	0.06	2	0.12
4. Increasing mobility of labor, capital and technology	0.08	2	0.16
5. Demand shifts for renewable energy	0.05	3	0.15
Threats
1. Regulations restricted excessive emission of CO2	0.08	4	0.32
2. Depletion of natural energy resources	0.12	3	0.36
3. Exxon Mobil is rivalry in the industry	0.09	1	0.09
4. The credit crisis and volatile commodity prices that emerged in the second half of 2008 affected many aspects of the business environment	0.10	1	0.10
5. The hurricane impact in the US Gulf Coast region, currency exchange impact	0.07	1	0.07
6. Disruption in gas supply to the Nigeria LNG venture	0.06	1	0.06
7. Currency exchange losses of $650 million in 2008 were mainly driven by the appreciation of the US dollar	0.04	1	0.04
Total	1.00	2.09

The Competitive Profile Matrix (CPM)

• The Competitive Profile Matrix (CPM) identifies a firm’s major competitors and its particular strengths and weaknesses in relation to an individual firm’s strategic Position.

• Score Systems:

4 = Major Strength

3 = Minor Strength

2 = Minor Weakness

1 = Major Weakness

		*SHELL*		*EXXON MOBIL*		BP
Critical success factors	Weight	Rating	Weighted score	Rating	Weighted score	Rating	Weighted score
Advertising	0.20	3	0.60	3	0.60	3	0.60
Product quality	0.10	4	0.40	2	0.20	3	0.30
Management	0.07	3	0.21	3	0.21	4	0.28
Financial position	0.10	2	0.20	3	0.30	3	0.30
Customer loyalty	0.05	3	0.15	3	0.15	2	0.10
Global expansion	0.20	4	0.80	4	0.80	3	0.60
Market share	0.09	3	0.27	4	0.36	3	0.27
Logistic	0.15	3	0.45	3	0.45	3	0.45
Production capacity	0.04	3	0.12	4	0.16	3	0.12
Total	1	3.20		3.23		3.02

Construct a Competitive Profile Matrix (CPM)

The CPM identifies a firm’s major competitors and its particular strengths and weaknesses in relation to a sample firm’s strategic position. Critical success factors in a CPM include both internal and external issues; therefore, the ratings refer to strengths and weaknesses, where 4= major strength, 3 = minor strength, 2 = minor weakness, and 1 = major weakness. In a CPM, the ratings and total weighted scores for rival firms can be compared to the sample firm.

QSPM (Quantitative Strategic Planning Matrix)

Technique designed to determine the relative attractiveness of feasible alternative actions

Attractiveness Score:

• 1 = not acceptable;

• 2 = possibly acceptable;

• 3 = probably acceptable;

• 4 = most acceptable;

• 0 = not relevant)

Limitations

Requires intuitive judgments & educated assumptions
Only as good as the prerequisite inputs

Advantages

Sets of strategies considered simultaneously or sequentially
Integration of pertinent external & internal factors in the decision-making process

Shell oil STRATEGIC ALTERNATIVES

		INVEST IN SOLAR & WIND ENERGY		INVEST IN BIOFUEL
KEY FACTORS	WEIGHT	AS	TAS	AS	TAS
*Opportunities*
1. Increase usage for energy	0.12	2	0.24	4	0.48
2. Increasing price of energy	0.13	2	0.26	4	0.52
3. Increasing propensity of people to spend	0.06	2	0.12	3	0.18
4. Increasing mobility of labor, capital and technology	0.08	2	0.16	3	0.24
5. Demand shifts for renewable energy	0.05	4	0.20	3	0.15
*Threats*
1. Regulations restricted excessive emission of CO2	0.08	3	0.24	1	0.08
2. Depletion of natural energy resources	0.12	2	0.24	3	0.36
3. Exxon Mobil is rivalry in the industry	0.09	-	-	-	-
4. The credit crisis and volatile commodity prices that emerged in the second half of 2008 affected many aspects of the business environment	0.10	-	-	-	-
5. The hurricane impact in the US Gulf Coast region, currency exchange impact	0.07	2	0.14	1	0.07
6. Disruption in gas supply to the Nigeria LNG venture	0.06	-	-	-	-
7. Currency exchange losses of $650 million in 2008 were mainly driven by the appreciation of the US dollar	0.04	-	-	-	-
1.00
*Strength*
1. Strong financial position with income of $26.5 Billion and capital investment $38.4 Billion	0.11	3	0.33	4	0.44
2. High production capacity - producing 2% of the world’s oil, 3% of the world’s gas and selling 7.5% of the world’s LNG	0.09	-	-	-	-
3. Worldwide customer base	0.07	2	0.14	3	0.21
4. Investment in R&D more than $1.2 Billion	0.08	2	0.16	3	0.24
5. Spending on alternative energy and CSS $1.7 Billion in the last 5 years	0.06	-	-	-	-
6. Generating wind power for nearly 250,000 homes	0.05	4	0.20	1	0.05
7. Operating in more than 100 countries and with around 45,000 service stations worldwide	0.09	1	0.09	4	0.36
8. Running more than 25 refineries and chemical plants	0.09	1	0.09	3	0.27
*Weakness*
1. Loss of $474 millions in chemical and corporate portfolios	0.12	-	-	-	-
2. LNG sales of 13.05 million tonnes, down 1%	0.04	2	0.08	1	0.04
3. Oil Sands – higher operating costs, lower bitumen production volumes	0.09	-	-	-	-
4. Chemicals – significantly lower margins, lower income from equity-accounted investments and higher operating expenses	0.11	-	-	-	-
1.00		2.69		3.69

Shell oil Financial Analysis

Projected cost of investment for next 5 years (in Billion)

	2010	2011		2012		2013	2014
Invest in America	14		16	18	10			10
Invest in Europe	10		14	15	8			8
Invest in Asia	8		9	10	6			6
Total investment	32		39	43	24			24

We should invest large amount in first year based on region and reinvest the accumulated earning for the next 2 years. From the fourth year onward, we would standardize the investment to maintain the same level of growth

Projected Financial Statements

Forecast Statement of Income ($ million)

Forecast Statement of Income ($ million)	2010	2011	2012	2013	2014
Revenue
Exploration & Production Gas & Power Oil Sands Oil Products Chemicals Corporate	30,011 35,389 734 492,293 44,956 32	36,013 42,467 778 539,878 48,990 27	43,216 50,960 1,096 559,712 51,003 23	51,859 61,153 1,259 612,839 56,223 25	62,231 73,384 1,593 698,531 58,861 30
Total	603,415	668,153	706,010	783,358	894,630
Cost of sales	482,447	534,882	552,980	631,992	708,291
Gross profit	120,968	133,271	153,030	151,366	186,339
Selling, distribution and administration expenses Exploration Share of profit of equity-accounted investments Interest and other income Interest expenses	17,982 2,211 7,391 1,092 1,209	18,921 2,309 8,434 1,380 1,938	20,487 2,746 8,587 1,487 2,321	21,942 2,866 9,342 1,032 1,993	22,133 3,003 9,873 1,447 2,207
Income before taxation	108,049	119,917	137,550	134,939	170,316
Taxation	43,397	46,213	53,909	56,210	61,219
Income for the period	64,652	73,704	83,641	78,729	109,097
Income attributable to minority interest	234	126	656	715	455
Income attributable to Royal Dutch Shell plc shareholders	64,418	73,578	82,985	78,014	108,642

Generated revenue for 2012

Ranking	Company	Industry	Revenue	FY	Capitali zation	Employees	Listing
1	Exxon Mobil Corporation	Oil and gas	$482.295	December 31, 2012	$408.78	76,900	NYSE: XOM
2	Royal Dutch Shell	Oil and gas	$481.7	December 31, 2012	$236.34	90,000	LSE: RDSA
3	BP	Oil and gas	$388.285	December 31, 2012	$140.27	83,400	LSE: BP
5	Chevron	Oil and gas	$253.706	December 31, 2011	$211.95	61,189	NYSE: CVX

Chevron Corporation

• Merger of Texaco Inc. and Chevron

• San Ramon, California

• 11.6 billion barrels of OE in reserves

• 2.6 million barrel of oil each day

• 26, 000 gas stations

Competitor Analysis Shell Oil Company

Shell Oil doesn't shilly-shally around as it explores for, produces, and markets oil, and natural gas, and produces and markets chemicals. The company's Shell Exploration & Production unit focuses its exploration on the deepwater plays in the Gulf of Mexico. Shell partners with Saudi Aramco in a US refining and marketing venture (Motiva) and owns Motiva's sister company Shell Oil Products US. Shell also produces petrochemicals (Shell Chemical) and liquefied natural gas (Shell US Gas & Power) and markets natural gas and electricity. Shell's parent, Royal Dutch Shell, vies with Exxon Mobil) to be the world's #1 integrated oil company.

What is competition in oil industry?

• Tough

• Growing fast

• Quality of the product

• Service provided

• Activities of the company

• Experience

Royal Dutch competitors are…

• Exxon Mobil

• BP ( British Petroleum)

• Chevron Corp

Exxon Mobil:

• Number 1

• Irving, Texas

• 40, 000 gas and service stations

• Reserves of 13.6 billion barrels of OE

• Daily production is 6.4 million barrels

• Major producer of petrochemicals

BP (British Petroleum):

• Founded as Anglo Persian Oil Company

• London, UK

• 18.3 billion barrels of OE- reserves

• 2.8 million barrels of oil a day

• Wells in Prudhoe Bay Alaska

• Alternative fuel

• Green washing

Shell oil Breakeven Analysis

Shale plays have gotten a lot of attention lately, as more and more news articles focus on the importance of U.S. shale in helping reverse the 40-year decline of U.S. domestic oil production. "Hubbert's Peak" has ruled as production fell to under 5 mmboe/d from a peak double that in 1970. Outside of a rise in the late-1970's/early-1980's brought on by a 12-fold increase in the price of oil in 7 years, production had been in a multi-decade steep decline - until the U.S. shale revolution:

Merrill Lynch is looking for shale production to hit 3.2 mmboe/d by 2017, with a chance of an upside surprise to 5 mmboe/d:

Many companies have experienced phenomenal production growth in recent years from shale basins, like Continental Resources (CLR) and EOG Resources (EOG), dominant in the Bakken and Eagle Ford shales, respectively. But the shale story is not new, and while some companies have and will experience outstanding production growth, for many companies that growth is already discounted in the stocks. For others, the cost of acquiring the gas and/or oil is prohibitively high in terms of extraction costs or costs to shareholders via equity dilution or debt financing. U.S. natural gas prices are depressed, making 'dry gas' drilling uneconomical in most areas. Shareholders may or may not benefit, depending on events outside their control, namely the price of natural gas and domestic/international oil benchmarks.

KSF Analysis

1. Technology-related KSFs

2. Manufacturing-related KSFs

3. Distribution-related KSFs

4. Marketing-related KSFs

5. Skills & Capability-related KSFs

6. Other types of KSFs

Strategy Evaluation and Contingency Plan

Scenario planning, also called scenario thinking or scenario analysis, is a strategic planning method that some organizations use to make flexible long-term plans. It is in large part an adaptation and generalization of classic methods used by military intelligence.

The original method was that a group of analysts would generate simulation games for policy makers. The games combine known facts about the future, such as demographics, geography, military, political, industrial information, and mineral reserves, with plausible alternative social, technical, economic, environmental, educational, political and aesthetic (STEEEPA) trends which are key driving forces.

In business applications, the emphasis on gaming the behavior of opponents was reduced (shifting more toward a game against nature). At Royal Dutch/Shell for example, scenario planning was viewed as changing mindsets about the exogenous part of the world, prior to formulating specific strategies.

Scenario planning may involve aspects of Systems thinking, specifically the recognition that many factors may combine in complex ways to create sometime surprising futures (due to non-linear feedback loops). The method also allows the inclusion of factors that are difficult to formalize, such as novel insights about the future, deep shifts in values, unprecedented regulations or inventions. Systems thinking used in conjunction with scenario planning leads to plausible scenario story lines because the causal relationship between factors can be demonstrated. In these cases when scenario planning is integrated with a systems thinking approach to scenario development, it is sometimes referred to as structural dynamics.

Recommendations

Recommend specific annual objectives and policies

Annual objectives

• Make biofuel the main contributor to Shell’s energy resources increase every year by 4%

• Increase the sales of biofuel by minimum 10% every year

• Improve biofuel energy quality and utilize the production

• Advertise continuously to create brand awareness and retain requirement for biofuel

• Enhance service of biofuel supply and continuously establish wider supply network

Policies

• Encourage employees to use biofuel for their vehicles as the first step of internal marketing the biofuel ensures healthier environment.

• Promote all advertising materials in green and ensure the materials used in the management are environmental friendly.

• Ensure employees working in good and safety environment all the time.

Recommend procedures for strategy review and evaluation

Review and evaluation helps the firm to ensure the strategies are implemented and carried out appropriately resulting to the desired outcomes. For Shell the evaluation will be done through review over the sales figures. The analysis will be done by the managers and later reviewed by department managers. Interviews and presentations will be conducted by the department managers presenting the current evaluation of the strategies to the department heads.

The sales report and presentation would be the evaluation tool for the department heads to judge the result of strategies. A good strategy implementation would result to a good evaluation as the forecasted sales achieved and objectives fulfilled from time to time.

Conclusion

Shell Group with industry leadership in terms of cost, quality and technology, is faced with immense social, political, economic and legal challenges. Its strategy to focus on performance, new ventures to exploit unconventional oil and gas reserves and achieve profitable growth in return has met success, but the pace has slowed due to economic influences. for big oil giant like Shell, keeping diplomatic alliance with the governments of many countries has become common but this not something to rely on and to put heavy capital investments at stake like Shell is doing right now, by continuously investing in new plants for oil and gas extraction from unconventional reserves such oil sands and oil shale. Such attempts are increasingly causing environmental degradation and the government may go strictly against them in future once more drastic environmental changes become dominant. Clever strategy is to continue ethanol and solar and wind energy production and invest in more bio fuel energies to tap new opportunities.