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Royal Dutch Shell Case Study

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Words 1228
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Submitted by: Waqas Ahmed Student ID: M003416757 Module: MGT3201 – Global Business Strategy Module Leader: Dr Qiuping Li

Global Business Strategy: Case Study – Royal Dutch Shell in Nigeria: Operating in a Fragile State by Dr. Isaiah A. Litvak

21 March 2011

1



Royal Dutch Shell
◦ 1907 - Merger of Shell Transport & Trading Company Ltd. and Royal Dutch Petroleum Company (Shell) ◦ 1936 - Shell operations started in Nigeria – Shell D’Arcy (Shell Nigeria) ◦ “Royal Dutch Group of Companies proved more than 50% of Nigeria‟s oil and gas reserves” – (Parboteeah, 2011)



Nigeria
◦ Formed by Britain in 1914 - “…the colony and Protectorate of Nigeria, governed by „indirect rule‟ through local leaders” (BBC News, 2010) ◦ High poverty and deteriorated political and security stance since existence ◦ Worldwide economic importance – Huge oil reserves

◦ 80 % revenues to Nigerian Government through oil reserves

Global Business Strategy: Case Study – Royal Dutch Shell in Nigeria: Operating in a Fragile State by Dr. Isaiah A. Litvak

21 March 2011

2



Compliments
◦ Support to Nigerian economy



Criticism
◦ Oil Pollution (Jolly, 2011)

◦ Development of communities
◦ “Shell invests $1bn on Nigerian oilfield” (BBC News, 1999) ◦ “Currently the Delta gets 13 percent with the balance going to the central government and other states” (Ruseckas, 2009) ◦ Employment for Nigerians (Parboteeah, 2011)

◦ Involvement in violence – Ken SaroWiwa (Pilkington, 2009)
◦ Bribery (Wyatt, 2010)

Ken Saro-Wiwa in 1993. Photograph: Greenpeace/AFP Shell’s Bonga offshore oilfield - Nigeria

Global Business Strategy: Case Study – Royal Dutch Shell in Nigeria: Operating in a Fragile State by Dr. Isaiah A. Litvak

21 March 2011

3

Addressing Question 1



Risks Operating in Nigeria
◦ Criticism by NGOs – Friends of Earth (pg. 484, Parboteeah, 2011) ◦ Losing capable Employees (pg. 484) ◦ Deadly threats to Shell employees on site (pg. 485) ◦ Dilemmas for operating Socially Responsible (pg. 489)

◦ Shell Considered “to be an enemy of the Nigerian people” – Strikes (pg. 490)
◦ Infrastructure vandalized – Pipelines damages (pg. 496)

Global Business Strategy: Case Study – Royal Dutch Shell in Nigeria: Operating in a Fragile State by Dr. Isaiah A. Litvak

21 March 2011

4

Addressing Question 1



Values for Shell in Nigeria
◦ Nigeria – A huge source of oil production (pg. 496, Parboteeah, 2011) ◦ Critical for long-term competitiveness ◦ “Shell is the biggest western oil firm in Nigeria, the world‟s tenth largest producer, and has had operations there for 70 years” (Fortson, 2009) ◦ “Shell helped to pioneer the massive Nigeria liquefied natural gas plant on Bonny island” (Nigeria, 2010)

Global Business Strategy: Case Study – Royal Dutch Shell in Nigeria: Operating in a Fragile State by Dr. Isaiah A. Litvak

21 March 2011

5

Addressing Question 2

 

Failing of keeping law and legal order on site of operations (pg. 489) Labor unrest due to increase in fuel prices – 4 days strike (pg. 490)


 

Nigerian troops and Ethnic Militia Clashes (pg. 490)
Kula Residents taking over 3 oil platforms (pg. 493) Complains on looting money by Niger Delta region‟s leaders (pg. 493)

However coming to worse


Criticism on having “…grip on the politics and economy of Nigeria” (pg.484)

Global Business Strategy: Case Study – Royal Dutch Shell in Nigeria: Operating in a Fragile State by Dr. Isaiah A. Litvak

21 March 2011

6

Addressing Question 3



Huge Royal Dutch investment on infrastructure over the period of 60 years

Matter of competitiveness and sustainability in Global Market – Strategic Perspective




Huge business investments & 55% share in a joint venture (pg. 496)

Global Business Strategy: Case Study – Royal Dutch Shell in Nigeria: Operating in a Fragile State by Dr. Isaiah A. Litvak

21 March 2011

7

Addressing Question 4



Ensure Law and Order (Struggling efforts to keep peace and equality)

Assist Companies in doing Business – Domestic and Multinationals (Nigeria assisting Shell in its operations)




Provide security to companies (Nigerian Troops against Kula Residents)



Development of country‟s economy (Collection of taxes from Shell)

Global Business Strategy: Case Study – Royal Dutch Shell in Nigeria: Operating in a Fragile State by Dr. Isaiah A. Litvak

21 March 2011

8

Addressing Question 4

Help in increasing industrial productivity (joint venture of Shell and Nigerian National Petroleum Corporation) (pg. 487)


Provides revenues in form of taxes and Royalties ($1.2 billion tax & $668 million royalties to Nigerian Government) (pg. 497)


Employs Local population (SPDC and SNEPCo employed around 6000 direct employees and contractors – about 90% of them Nigerian) (Nigeria, 2010)


Community development by providing clean water (Nigeria, Global Memorandum of Understanding, 2010)


Global Business Strategy: Case Study – Royal Dutch Shell in Nigeria: Operating in a Fragile State by Dr. Isaiah A. Litvak

21 March 2011

9

Addressing Question 5


Following are recommendations to Aron which he can include in his brief:
◦ Shell must increase its proficiency in handling internal and transparency matters in Nigeria.

◦ Sit down with the Nigerian governing body and discuss the possibilities of reducing risks in operational sites

◦ Shell management must strictly investigate any disliked practices and acknowledge the outcries of local people and pressurizing bodies in order to stop prolonging allegations.

◦ Shell can ask for a neutral body which can help in investigating issues and provide recommendations on situations which are well outreach from Shell‟s administration

Global Business Strategy: Case Study – Royal Dutch Shell in Nigeria: Operating in a Fragile State by Dr. Isaiah A. Litvak

21 March 2011

10



BBC News. (1999, October 25). BBC News. Retrieved March 20, 2011, from BBC News | Africa | Shell invests $1bn on Nigerian oilfield: http://news.bbc.co.uk/1/hi/world/africa/484914.stm BBC News. (2010, December 26). Nigeria Timeline. Retrieved March 20, 2011, from BBC News: http://news.bbc.co.uk/1/hi/world/africa/1067695.stm Fortson, D. (2009, December 20). Shell plans £3bn sale in Nigeria. Retrieved March 20, 2011, from The Times: http://business.timesonline.co.uk/tol/business/industry_sectors/natural_resources/article6962925.ece Jolly, D. (2011, January 26). Dutch Lawmakers Question Shell on Oil Pollution in Nigeria. Retrieved March 20, 2011, from The New York Times: http://www.nytimes.com/2011/01/27/science/earth/27nigeria.html?scp=1&sq=nigeria+shell&st=nyt Macalister, T. (2004, August 26). Shell hit by $1.5bn Nigeria spill claim. Retrieved March 20, 2011, from Gaurdian.co.uk: http://www.guardian.co.uk/business/2004/aug/26/environment.oilandpetrol Nigeria, S. (2010). Global Memorandum of Understanding. Shell Nigeria. Nigeria, S. (2010). Shell in Nigeria = Gas Flaring. Shell. Parboteeah, K. P. (2011). Strategic International Management. South-Western, Cengage Learning.









   

Pilkington, E. (2009, June 9). Shell Agrees to Pay Compensation for Execution of Saro-Wiwa and Ogoni Protestors. Retrieved March 20, 2011, from Gaurdian.co.uk: http://www.guardian.co.uk/world/2009/jun/08/nigeria-usa
Royal Dutch Shell. (2010). Annual Report . Royal Dutch Shell. Ruseckas, L. (2009, August 3). Don't Blame Shell For All of Nigeria's Problems. Shell Nigeria. (n.d.). 1936 - 1979 - Nigeria. Retrieved March 20, 2011, from Shell Nigeria: http://www.shell.com.ng/home/content/nga/aboutshell/who_we_are/history/country/first_steps.html Shell. (n.d.). The Shell history - the beginnings - About Shell. Retrieved March 20, 2011, from The Shell: http://www.shell.com/home/content/aboutshell/who_we_are/our_history/the_beginnings/ Wyatt, E. (2010, November 4). Oil and Gas Bribery Case Settled for $236 Million. Retrieved March 20, 2011, from The New York Times: http://www.nytimes.com/2010/11/05/business/global/05bribe.html

  





Global Business Strategy: Case Study – Royal Dutch Shell in Nigeria: Operating in a Fragile State by Dr. Isaiah A. Litvak

21 March 2011

11

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