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Theories of international development of MNCs

The objective of this project is to examine the international business environment in the Oil and Gas industry, in order to provide better ways of Shell Company based on the results and research. These will allow Shell to improve its performance and progress, through different strategies used, and at the same time, overcome the problems they are facing. The aim is to give a clearer picture how Shell can continue to expand into market to ensure sustainability and global competiveness.

It will attempt to explore on how Shell can increase its international competiveness and its own international growth in the most effective manner, and at the same time, evaluate other alternatives that might be most beneficial for Shell to follow in international development.


The methodology applied to achieve results for this project is via an analysis on the coal and oil industry, as well concerning assess Shell to improve on the strategies used, and at the same time, further growth into international business. Through the analysis of the overall, industry and interior environments, we will be in a position to understand the performance of Shell's problems faced and the various varieties of strategies that the company can apply in the foreseeable future.

1. 2. 1 Data Sources

The data options utilized because of this paper will be mainly extra data gathered from various resources such as, internet, publications, books and research reports.


Theories Of International Development Of MNCs

In the studies of international business strategies, research workers went on to examine the macro-level indications of various countries. It includes economic, social, cultural, political and legal environment, and trade insurance plan for the purpose of market segmentation and target market selection, however, there are a few whom identify other factors such as organization size, previous experience and management orientation, and also, the mode of access (Ahmad, 2008). Spada (1999), suggests that the key determinant of successful growth is extent to which, a company optimally suits its resources with the environmental contingencies.

According to Cui (2001), many multinational companies (MNCs) are given the opportunities to go beyond their house countries into market segments, thus, it is able to maintain growth and support long-term viability. Many firms would expand further when they are able to acquire better intangible property such as managerial skills, patent protection, technology or when companies gain in economics of range (Gleason, Mathur, Mathur & Harr, 1999). However, Doukas, Pantzalis and Kim (1999) concluded that the results appear to be inconsistent with the predictions of the internationalization theory, in the sense that MNCs can also be affect by the exterior rather than only the inner assets.

Through empirical studies, Tseng (2006) talked about that joining a overseas market can lead to some risks as a result of major difference in customer tastes and as a result, management experts are searching for new ways to deal with problems, getting close to new challenges, and to manage intricate multinational organizations effectively. However, another blast of research shows that internationalization is a gradual process, where MNCs proceed through different levels of incremental development. Due to lack of familiarity with foreign markets ongoing, knowledge development acts as the main tool in reading doubt and recognized risk and basically determines the amount of firms' resource commitment (Hafstrand, 1995).

Accordingly to Martin, Swaminathan and Mitchell (1998), a kind of international growth can be through international direct investment as it can help to represents a particular useful context of assessing the competitor and community influences on organization growth. Furthermore, Luo (2000) also claims that foreign immediate investment, joint endeavors or wholly managed subsidiaries tend to be used for development, because the resources gathered are often information intensive, tactic and organizationally embedded.

Studies of varied multinational corporations in various companies and country markets claim that effective strategies that deploy the firms' competitive advantages and this fit the environmental contingencies have a great impact in the internationalization and extension of organizations. As firm's success and longevity are increasingly thought as its capacity to learn and adjust to the changing environment regularly, the evolution theory offers a distinctive alternative point of view for studying MNCs' global market growth. A major good thing about the evolutionary point of view is its focus on the marketplace environment as a vibrant stochastic process and the performance of individual businesses as a function of the root causes and a rsulting consequence the combination of competitive conditions, market composition and strategies of individual firms.

In today's business, a firm that can sustain revenue that exceed the common for its industry, the firm is thought to have a competitive benefits over its competitors (Bruce, n. d), and for that reason, it is said that the purpose of business strategy is to accomplish a ecological competitive advantage. According to Piccoli and Ives (2005), prediction on the successful creation of impediments to replication of strategy by opponents is one way that helps to protect competitive advantages. Alternatively, Anderson, Fornell and Rust (1997) added that, technique to improve competiveness can be carried out through the blend of services and products.

In the oil and gas industry, it consist the actions of exploration, creation, development, refining, storage space, travel and marketing of oil and gas. To be able to remain competitive, corporate and business strategy is aimed to help industry to establish a profitable and lasting position against makes that determine competition (Shinno, Yoshioka, Marpaung & Hachiga, 2006). Strategy is reported to be the creation of a distinctive and valuable position, which links up different group of activities which allows firm's to compete for other position in the industries (Min, 2005). Nevertheless, you may still find other factors that people need to discover in order to remain competitive.

Basically within an organizations, operation management researcher is to discover how they may improve and therefore, increasing the development of company (Pagell, Krumwiedez & Sheu, 2006). Costs stay competitive when a firm is able to deliver the same benefits as rivals but at a lower cost. Customer satisfaction also plays a big role in reaching competitive advantage. Predicated on many empirical studies, it shows that if firms have the ability to gratify each customer, financial earnings and market value would improve (Gonzalez, Camara and Gonzalez 2009). Director tends to concentrate more on their direct rivals and thus, they had failed to notice other elements in the competitive environment.

According to Shinno et al. (2006), it is state that competiveness and competitive strategy are mainly influenced by the inner and exterior environment. Strengths, weaknesses, opportunities and risks (SWOT) is effective as it we can attain systematic techniques and support for successful industry strategy formulation. However, Porter five pushes also helps to identify the importance factors that we need to consider for a business, and on the other hand, allowing us to change accordingly and so continue to be competitive (Porter, 1980). Porter's model examines on the external factors of the environment, and competition take place when the five intimidating forces are poor (Carle, Axhausen, Wokaun and Keller, 2005).

Although coal and oil industry is riddled with risk, it continues to be in a position to increase its expansion by sustaining competitive advantages. Profitability is essential as it can help the industry to measure both the efficiency and the principles that customers place on products and services. We must also be careful in keeping a functional view of the prospect of environment (Mansgi, Opaluch, Jin and Grigalunas, 2005). Examining the various strategy used can obviously allow us to look at the environment in an improved view.

Foreign Direct Investment

Foreign Direct Investment (FDI) happen when company invests straight in facilities to produce a product in a international market, or whenever a firm buys an existing enterprise in a overseas country (Hill, 2003). In addition, Barrel and Pain (1997), citied in Gugler and Brunner (2007) recommended that FDI has an important impact in creating competiveness. However, international market entrance is a process fraught with complexity for organizations with unfamiliar operation options. Thus, many organizations ponder carefully whether to move abroad and which market to enter, considering of various factors. It is also said that organizations go abroad only when expected benefits outweigh expected costs (Guler and Guillen, 2010).

Lee (2010) claims that as tendencies move towards regionalism and integration in the economy proceed, FDI serve as an important resource for development in many expanding countries. However, economics results remain indistinct due to the relationship between the kind of economics where multinationals choose to get and the successive performance of multinationals. In order to set the appropriate FDI policy, it is vital to comprehend the role of FDI within an economy. Alternatively, Vita and Kyaw (2009) analyzed that it is advised for developing countries to count on FDI as it's the most favourable form of capital inflows for boosting economical activity.

FDI into a land can be done through different ways. The three main varieties include joint projects, acquisition of assets in a region, and Greenfield business which helps company to build its business or processing facilities in a state (Lau and Bruton, n. d). It also includes other studies on the dichotomous choice involving green-field investment and acquisition, and therefore, acquisitions are occasionally coupled with mergers (Darkow, Kaup and Schiereck, 2008) as a definite entry method and joint projects are contained in the green-field investment. However studies Papyrina (2007) points out that decision on access mode still is determined by the firm's and environment's feature.

Through various studies made by researches, it's been said that FDI has an important effect on competiveness. Results shown that through the proper execution of FDI, extension of multinational enterprise activity is continuing to grow at a faster rate than almost every other international ventures (Blonigen, 2005). As stated by Golub (2009), gaining benefits from FDI can be done through employment creation, managerial skills, technologies, etc.

Based from earlier researchers pertaining the financial development and sustainability, the door for expanding countries has been left wide open by FDI guaranteeing the possibilities to gain more successes. Being part of the contributor of development, FDI promote global efficiency and targets advancement of monetary system. FDI can be categorized into different investment funds and manager must have the ability to select the appropriate nature of organization and to where it'll be investing. Predicated on empirical facts, FDI contribute to long-term economic expansion and thus receive a wider database specifically for producing countries.


3. 1 General overview

Royal Dutch Petroleum Company and Shell Transport and Trading Company were two public mother or father companies of a group of companies known collectively as "Royal Dutch/ Shell Group". However in 2005, Royal Dutch Shell became sole parent or guardian company of Royal Dutch and Shell transportation, the two ex - public mother or father companies of the Group. Shell petrol is wholly owned by Shell Petroleum Inc, which is one of the most significant petroleum companies in america. It is energetic in both the upstream (exploration and development) and downstream (refining) sections of the industry. The business also makes and trading markets chemical and logistical and talking to services.

3. 2 Product and Services

Being in a huge oil and gas company, Shell olive oil has developed experience in a multitude of management and technological fields. Shell subsidiary was created in early 1995 to market this competence to companies in the petroleum industry and also, in other industries. It provides services in the next fields: information technology, human resources, general accounting and procurement and invoice processing.

As shown in Physique 3. 1, it shows the services that Shell is involved in are oil and gas exploration and development, transportation and marketing of gas and electricity, marketing and shipment of engine oil and chemicals.

In the upstream, it looks for and recovers crude oil and gas, liquefies and transports gas ad operates the upstream and midstream infrastructure as to deliver coal and oil to market. As for downstream, it manages Shell's manufacturing, circulation and marketing activities for essential oil products and chemical.

3. 2. 1 Types of basic strategies

Shell Oil's overall strategy was to restructure its operations and reduce its costs. Shell reduced its staff, and at the same time, reshaped its natural gas, refining and substance procedures through joint projects. This plan allows Shell to bolster their position as a leader in the O&G industry and provide competitiveness and at exactly the same time, helping to meet global demand in a liable way.

3. 3 Performance of Shell

The company income was recorded at of $278, 188 million in the financial yr ended December 2009 (FY2009), and when compared with FY2008, there is a loss of 39. 3%. Nevertheless the operating income of company was $21, 178 million in FY 2009, and thus a loss of 58. 8% when compared with the statement with FY2008. The net income was $12. 518 millions in FY2009, however in comparison to FY2008, there was a loss of 52. 4%. These can be seen in Fig 3. 2, demonstrating the income data and contrasting it with the information of days gone by five years.

The world thought the acute effects of the global recession, and cause the oil demand to drop. Nevertheless, by the finish of 2009, unprecedented economic-stimulus plans change the irresponsible development of key Asian countries, which appeared to turn around the global market. With the overall economy recovery, global demands resume its expansion, in step with increasing population and rising riches in developing countries.

3. 4 Current activities of Shell

In conditions of market capitalisation, working cash flows and O&G creation, Shell had achieved and is currently one of the world's largest independent coal and oil companies. For Shell to preserve strong operational performance and support continued investment, it is determined by the center countries which may have available infrastructure, skills and remaining growth probable. The heartlands include Australia, Brunei, Canada, Denmark, Malaysia, the Netherlands, Nigeria, Norway, Oman, the united kingdom and the united states. However, it is to anticipate Qatar to become part of the heartland in the coming years.

Shell experienced also helped bring new coal and oil supplies on heavy steam from major field improvements. It is stated that Shell are investing in growing its own gas-based business through LNG and GTL assignments. They are working on the projects and building one of the world's greatest GTL jobs in Qatar. And at the same time, Shell continued exploring for oil and gas prolific geological formations that may be conventionally developed. In the same way, these can be found in Gulf coast of florida, Brazil and Australia. On the other hand, Shell also continued exploring for hydrocarbons in formations, such as low permeability gas reservoirs in the USA, Canada and China, which can only just be economically produced by unconventional means.


4. 1 Summary of Industry

To identify the overview of international petroleum industry, it include all companies that are involved in the coal and oil production string as shown in Fig 4. 1 (PetroStrategies Inc, 2010), from the owners of the resources to operators, drillers, equipment manufactures, facility constructors, providers and executive companies. Inside the integrated oil and gas sector, many companies are engage in the exploration and creation of oil and gas (upstream), as well as you other major activity, in essential oil refining, vehicles or marketing (downstream).

4. 2 Issues

The petroleum industry has experienced significant challenges which have helped explain and shape its regulations and steps, with both positive and negative results. It really is under increased scrutiny by consumer, industry individuals, and exterior interest because of this of price volatility, politics uncertainty, changes in the industry structure, and the surroundings. All these tendencies impact everyone as olive oil prices gets to new heights. The issues facing the industry is increasingly complex due to the shift in source and demand, investment uncertainty and risk, the role of future trading and speculation, and the emergence of new technologies. However, this would require expert knowledge and guidance in understanding the effects on all who are damaged.

It is further emphasized and concluded that highly competitive business environment of the industry, together with international restrictions and other institutional arrangement continue to concern companies and their strategies can operate effectively and effectively.


5. 1 Exterior Environment

The external factors are linked with makes in a firm's external environment, which can result in new progress opportunities (Cui, 2010), and at the same time, additionally, it may come in the form of hazards. New opportunities happen when firms can exploit differences between countries and physical regions and achieve economies of scale in broadening how big is the markets provide. It could also stabilize getting across markets as economic expansion cycles fluctuate between countries. A menace, on the other palm, could be a new rival on the market weakening the positioning of the prevailing firm. As a result, the external factors lead to development that is either offensive or defensive in nature.

5. 1. 1 Basic environment

In order to analyse the exterior environment of a firm, we uses PESTEL platform. This model divides the macro-environmental causes into six categories: politics, economic, social, technological, environment and legal. PESTEL helps us to judge how these makes affect the company and it assists companies in the selection of attractive market segments and appropriate admittance mode. PESTEL aims to judge business environment in which Shell runs by inspecting the constantly changing external factors that affect company.


The politics environment has large impact for international expansion and investment choices as it manages under demanding political conditions worldwide. The control of oil and gas resources is now increasingly political as much countries want to have control of its resources. However, governments still have the expert to distribute licences as they prefer. Political risks in the petroleum industry arise from sovereign risk discussing the plans and decisions of variety government authorities or conversely, the absence of effective rules and governmental treatment. Furthermore, wars and local issues are part of the political risks engine oil companies are facing. OPEC performs an important role in the politics industry of the petrol industry and it ensures stabilisation of engine oil prices, and is willing to do this if the price tag on oil lowers, by lowering their source.


A major issue in the global oil and gas market segments is the affect of the coal and oil prices. The prices of coal and oil fluctuate over time consequently of changes in the demand and offer. Demand for petroleum has been more secure as it is affect by factors such as political instability, the option of energy substitutes, petroleum prices, economical growth and weather conditions. Hence, it offers increase despite the high levels of the petrol price. However, the source fluctuating more than demand, is influenced by usage of resources, development costs, climate, administration polices and geopolitical dangers. Climate changes and problems brought on by natural disasters have affected the way to obtain coal and oil. Although engine oil prices have been record high in the past few years, lots of the integrated oil companies have struggled with lower success, even if the net income of petrol companies are increasing due to the high degrees of oil prices, the future success of the industry is threatened consequently of increased expense inflation. The essential oil companies are worried that if olive oil prices stop increasing or even show up, the increased costs will further pressure their margins. Hence, due to the inflationary pressures in the industry, oil prices well above historical levels are actually necessary for the continued profitability of several international petrol companies.


Social forces are ways in which companies on the market are inspired by changes in contemporary society. Friendly environment of global engine oil industry change in demographic due to the ageing of baby boomer would cause employees to retire and thus affect engine oil companies. However, securing skilled individual capital has become progressively more challenging and there happens to be a warfare for skill within industry. There's a demand for petroleum increase because of the world's society, and strong economical progress and industrialisation in appearing markets. Many advancements in the living standards in rising economies have increased their energy use. These lead to significant higher CO2 emissions, and consequently an increased matter for the surroundings.


Technological and infrastructure have major impact on the profitability of global petrol companies. Growing new technology and learning how to make use of it would help to increase exploration success rates thus increasing oil recovery rates and reducing costs petrol. Moving towards worldwide technology can assure a reliable supply of O&G at a reasonable price in a long time. The leading IOCs are most active in applying progressive concepts; however R&D ventures among NOCs are growing. Alternatively, buying infrastructure is also necessary for O&G companies, as it offers less expensive solutions. Infrastructure for long-distance sea transportation in the form of LNG, are needed to secure future resource in producing countries.


In the coal and oil industry, the most crucial elements are to reduce the emission of greenhouse gases and the introduction of renewable sources of energy. O&G exploration and development cause sever harm to the surroundings, furthermore increased energy usage has led to large emission of greenhouse gas. Probably the most challenging areas of environmental damages will be the CO2 emissions from development, discharges to drinking water, solid and other wastes, and contamination of land and groundwater. In order to reduce greenhouse emission, O&G companies develop and implement move forward technologies to handle these issues. Gas cell technology and advance fuels, the lowering and removal of venting and flaring and improved use of gas are other initiatives that are put set up. Hence, continuing of partnerships between the public, governments, environmental organizations and the industry are needed for further improvement.


In the coal and oil companies, there a wide range of regulations and regulations that administration impose on. National protectionism is a huge obstacle to trade when one or more companies on the market are profitable. In attaining the same standards, suggestions and best operating routines developed by olive oil industry associations and nongovernmental and intergovernmental organizations (NGOs and IGOs) constitute the major work to achieve even standards and operating routines throughout the world. However, lack of practices can decrease the negative influences of oil exploration and development. Competition is vitally important to the heath of the world's economies and with the help of antitrust, the enforcement specialists' responsibility is to assist in preventing anticompetitive behaviour and collusive activities. The target is to prevent the activities that will probably reduce competition, and therefore create higher prices. Licensing in oil industry give the right to explore and produce petrol in this territory. Therefore, petrol companies have to adapt to whatever licensing system prevailing in this market.

Industry Environment

In order to determine the degree of rivalry in the olive oil industry, Porter's five pushes construction are being used to analyse the effectiveness of the makes shaping the industry. This platform takes into account the competition among customers and suppliers as well as commercial rivals; it is also helpful for analysing the change and the composition of the global essential oil industry, also to monitor which of the makes that are most influential today. In addition, the analysis is designed to recognize the relevant industry opportunities and threats, which enables companies to complement these with their resources and features, and hence gain a competitive benefit.

Rivalry among Existing Firms

Oil and gas industry is considered a competitive industry as it is highly attractive and has a big amount of players. In order for an industry to stay competitive, it is very important to be economically strong. There are many reasons that induced competition between competition in the industry to be graded high. The industry development would create huge competition between companies in bidding for deals in new areas and at the same time, maintain quality so they could get the agreements extended. Second, companies that are of equal size would definitely make an effort to out perform each other so as to gain a more substantial market share. Access to a huge and cheap labour drive provides them the necessary manpower to new locations to build up the infrastructure in the countries they look for oil. Lastly, service characteristic is where people would choose based on the convenience and the pricing that would gratify them.

Threat of New Entrants

In the past, entry to industry was much easier as there were fewer companies involved, but today, many proven companies exist on the market. There are large economical of scale, as inventory for petrol refiner and trader and endeavor upstream operational cost contributes to cost advantage over any new rival. As for Capital requirement, it is crucial to be fiscally strong as it requires huge financial reference in manufacturing facilities. Unavailability of documents and indefinite financial balance is grounds that may deter new companies from going into the industry. Government set strict guidelines and rules, limit entry into industry through licensing need by restricting usage of raw materials. High moving over cost machinery are being used, the firms are reluctant to switch to another machines as it requires high training cost.

Bargaining Electric power of buyers

Most of the oil and gas producer integrate downstream through owning of petrol station, and thus, purchasers are the final consumer. Hence it is a required source of energy for the transfer and electricity. Purchasers have no effect on price plus they need to accept the market prices at any point of that time period. Hence if the essential oil prices are high, end consumer would suffer from most. Engine oil prices lately increases with factors such as availability of energy, substitutes, economic growth and weather conditions. It is becoming difficult to swap engine oil with other resources as it entails large switching charges for buyers. Due to geopolitical problem in Middle East and Russia together with nationalisation resource, way to obtain crude olive oil is controlled, causing high price popular over way to obtain oil. Furthermore, there is absolutely no threat that purchasers will assimilate backwards due to the fragmentation of the purchasers and their lack of ability to organize their activities. Therefore, we conclude that customers in the industry are kept with little bargaining vitality.

Threat of Swap Products

In the industry that serves Coal and oil, it has yet been faced with the problems of substitutes. It provides other services like refining, terminating and circulation, marketing and trading of crude oil and enhanced petroleum products. None of them of the available substitutes can replace essential oil in every its multiple usages. It really is clearly understood that if substitutes are located for such industry, it will definitely be terribly affected. However, substitutes available today are not superior in quality and function, it requires a process that is costly and would depend on governmental regulations, which would take years to build up. Therefore, it is figured there is currently nothing which could replace crude essential oil.

Bargaining Ability of Suppliers

In this industry, there are extensive small companies across the world with insignificant show of the marketplace. Consequently, they cannot exert ability over their customers due to inability to replace. The industry is dominated by few companies; therefore, many choose suppliers consequently to the type of services they offer. Suppliers are able to integrate onward and compete immediately with present customers as they develop the highly-specialised equipment and advanced technology that the oil companies uses. The quantity of goods to supplier is very important as it will lead to a permanent relationship between your provider and consumer.

5. 2 Internal Environment

The interior inducements are conditions within the company itself, which desire to raised exploit and employ its resources and competences. The learning resource based mostly view, addresses why businesses are different and concentrates on a firm's internal strengths and weaknesses. This evaluation allows us to identify the key resources and competences of Shell and exactly how company utilize these in order to create a lasting competitive gain internationally. From your external evaluation, we conclude that the key task today is to secure usage of petroleum reserves scheduled to nationalisation of resources and increasing power of host government authorities. Competition is intensifying with the accessibility of emerging market petrol companies and the independents, as well as service suppliers gaining a more powerful foothold in the market. These factors have managed to get increasingly difficult to be competitive in the market, and it is required to adapt to these changes in order to endure.


Financial strength is vital in the industry as it requires on larger and more complex projects, and distributed risk. Shell is an extremely profitable company and achieved profits in both upstream and downstream. Nonetheless, with the industry cost inflation, Shell margins are pressured. Because of this, Shells' greatest problem is to ensure good balance between success and production progress. Shell in addition has invested closely in R&D to develop the technology necessary for its resource. It partcipates in project sharing agreements to share the risks and costs of assignments. Shell works in various projects around the world in order to diversify both project-specific and country-specific dangers and maximise results. However, we conclude that money provide Shell with a competitive disadvantage in the international setting.

Natural resources

Being competitive in the industry, gaining access to the coal and oil resources is becoming increasingly problematic for oil companies. As for Shell, access coal and oil reserves is one of the most valuable resources as that's where the company creates its income from, and so additionally it is the most common way to obtain energy. Alternatively, Shell continued to broaden their profile of products and increase expenditures on solar power, wind ability and energy from hydrogen, which helps the organisation diversify in a market where ecological issues are of increasing matter, handling issues of the longevity of fossil energy reserves. Therefore, we believe Shell's usage of international natural resources happens to be a competitive advantages for the business.


Shell possesses valuable technology with which it is able to compete in complex projects requiring advanced technology. Among Shells main technological advantages is its skills in coal and oil exploration, drilling and creation from officially challenging fields. However, the least developed technology in Shell is that it uses the technique of flaring and getting rid of gas from engine oil extracting sites as a means of interacting with unwanted by-products of its procedures: this is considered to be environmentally unacceptable by many. Moreover, in the future, because of the scarcity of reserves and increasing matter to protect the environment, we recommend continuing investments in better oil recovery techniques and environmentally reasonable technology to keep up competitiveness. To conclude, Shell provides company with a current competitive advantage.

Human Resources

In knowledge-based organizations, such as Shell, the recruiting become the most valuable advantage as they have got the know-how and skills embedded in the company. However, securing access to sufficient real human capital is a major problem for Shell and the industry in general. Many people like "greener" sectors, thus, it causes an industry extensive war for expertise. It is critical for Shell to have the ability to train a big number of professionals from a number of countries, but Shell has an established trainee program, and invests highly in the development of its individual capital. According to our conclusions Shell has valuable organizational features in recruiting, training and motivating its human resources. Furthermore, its strong embedded commercial principles and culture are transferred throughout the whole corporation and value string. Therefore, we conclude that Shell's recruiting do not lead to a lasting competitive gain internationally, but competitive parity at best.

Reputation resources

Good reputation among various stakeholders and number government is valuable in negotiating offers (kang and Yang, 2010). Shell spent some time working hard to improve its standard reputation in several areas which is believed that it's now seen more favorably than it used to be. The most significant relates to the company's proven record of the major projects that they have completed. Furthermore, the company stands out as a frontrunner in sociable and environmental responsibility. People nowadays are ever more concerned about the need to protect the environment and Shell is closely engaged in developing more green solution that ought to appeal to coordinator government and the general consumers.

Through the analysis and understanding of the company Shell, it is shown that not all the resources supply the company with competitive advantages. Because of this, the company must emphasise on handling its weaknesses to be able to better compete internationally, and also, to build up or acquire the resources that currently only given them competitive parity.

6. 1 Natural and financial resources

The main obstacle that Shell's facing is the inadequate access to natural and financial resources. In order to work towards success in the global essential oil industry, companies need usage of new reserves to stay in business and the financial strength to defend myself against risky projects. The company should leverage its reputation as a trusted supplier of coal and oil, as it increase to being both socially and environmentally responsible. Though these factors might be an advantage to the business, however, it continues to be crucial in growing good marriage with host administration.

6. 2 Technologies

Shell is known as to have competitive gain in its scientific know-how, however, it continues to be important for company to be constantly at the forefront of producing new technology and solutions for better exploitation of natural resources. There is certainly potential to increase the process technologies. Work should be channelled toward development in specific areas. Shell's presently faces numerous challenges in developing capital jobs, especially large ones. It includes challenge like creating hydrocarbon creation and nurturing experience in management, For Shell to increase its international competiveness, Shell needs to work towards improvement. In years to come, shell can upsurge in better size and scale results, through the success of financial strength and secure better access to skilled individuals capital internationally.

6. 3 Shortage of skilled personnel

There is a shortage of experienced labor force with the relevant technological skills, consciousness and responsibility towards safe practices, heath and security environment concerns. Shell has significant businesses in difficult geographies, as well as environmentally delicate parts, which expose those to the risk, among others, of major process protection occurrences, personal health safety and offense. If a major HSSE risk, such as explosion or spills, was due to process safety happenings, materialize, this may result in injury, loss of life, environmental damage, disruption to business activities and depending on the cause and severity, material damage to Shell's reputation. Thus, there will be a need to enhance collaboration between your company and training institutes to nurture the technical trainees (Fang, 2010).


Internal development

Shell today is an extremely profitable and acknowledged oil company which has mainly expanded through organic growth and interior development. The business enjoys a strong position in its home marketplaces, but there continues to be ways that Shell could improve and do better. Hence, in order improve its performance and growth, Shell should sharpen its competitive edge-particularly through technology and invention. These can be developed internally, by buying innovative and useful technology as to facilitate a far more advance exploitation of coal and oil reserves.

Resource Management

Shell today is one of the largest producers in oil and gas industry. Shell's directs strong initiatives towards effective management and works towards success in future, however, it still be capable of continue to control its' domestics procedure through internal development. To achiever a larger height, it requires Shell to have a more impressive range of competence and efforts to maintain to creation in the long-term basis. Through internal development, it can help Shell to maintain competition, and therefore contribute to successful source of information management.

Technological competences

Shell could also expand internationally through leveraging its position as a leading technology professional and reliable distributor of coal and oil. The company is investing greatly on R&D and is at the forefront of growing new technology for the oil and gas industry. Shell can contend in most complicated projects needing advanced technology, and in every of the tasks done, you can find technology development concurrently. However, when Shell works together with another partner, it could help the precise job in technology development, thus acquire competence in deploying it which is often further transferred to new tasks.

Horizontal merger

Horizontal merger is where two direct competing companies within same industry made a decision to get together and join forces. This aims to fortify the position relative to competitions and therefore increase market show. Merger allow Shell to reaction to the challenges facing the oil and gas industry today, and at the same time, ensuring increased in competiveness internationally and long-term growth.

Size and scale

Shell should combine and work with others as it is likely to lead to substantial cost keeping through more efficient management and the reduction of duplicate functions, such as R&D and IT. By merging common businesses and releasing real human capital, higher efficiency through economic of scale is projected. In addition, merger is also likely to lead to increase revenues in the long term by implementing best practices and far better use of scarce resources with regards to drilling and well activities, removal, integrated businesses, and management of center areas and international experience.

In other words, merger would provide Shell with an increase of individual capital, by merging the company's labor force and therefore, better utilise their human resources. Both companies have the ability to talk about knowledge and exchange best practices, allowing individual capital from abroad to get skills and knowledge from the international industry. Through merger, the business can pursue new international expansion opportunities, hence, able to engage in bigger and riskier tasks.


Having a similar value system and management philosophies would be beneficial to the companies when it comes to horizontal merger. These common prices will lessen the integration of the firms and likewise profit the merged company, as commercial social responsibility will become more valuable in future.


Skill and experience are complementary in sense that both companies have experience from technologically domains. By combining the companies' technological competences and know-how, it has the potential for faster development and higher use of new ground breaking technology. These allow firms to further bolster their reputation and offer them with stronger competitive advantages.

Vertical merger

Vertical merger is where company combines upstream or downstream the value chain. As for coal and oil company, it will be active along the supply string from finding crude engine oil, drilling and extracting petrol, refining it into petroleum products, to distributing fuel to petrol train station. For Shell to gain international competiveness, Shell's could take part in an upstream merger by subscribing to with a distributor. In this case, Aker will be the potential company that Shell could use to build up the technology. The business is a respected international coal and oil engineering and development group which provides construction services, technology and products to coal and oil companies.

Resource and Technology ownership

Similar to horizontal merger, it joins pushes which could add financial power and human capital to Shell. Shell could benefit from gaining more technical expertise; however the remaining company's real human capital would add ideals to Shell and also other value chain activities.

Technological competences

Vertical merger between companies may help to create new and different anatomist and technology based mostly company. This might address the current changes and challenges in the global energy market.

7. 4 Strategic alliance

Strategic alliances are commonly seen within coal and oil industry as it allows companies to cooperate in certain matters, mainly jobs. Shell has been employed in a few tactical alliances within their international strategy. However, the company will still look into the potential positives and negatives of building a strategic alliance with a global coal and oil company instead of further enlargement. The recognized alliance was an agreement with China Country wide Offshore Oil Corporation to develop a variety of opportunities in coal and oil exploration and creation and gas marketing.

Size and size effects

Strategic alliances in the international engine oil industry allow companies to talk about hazards and costs involved with large and sophisticated projects. The main benefit is the fact two companies have the ability to talk about knowledge and lean from the other person in specific areas where they lack competence. Additionally, it'll be less costly than M&A, as an alliance covers cooperation on certain areas and does not require full integration of two companies. Essential oil companies usually build relationships strategic alliance, as to achieve the functional and financial strengths, thus it is effective for petrol companies to obtain largest share in projects, with more control over development of technology.


This job is to regulate how Shell can continue steadily to grow internationally. To conclude, I have analysed the various alternatives that Shell could go after in its search for further international development. To commence with, not absolutely all solutions can be considered ideal. In order to determine how Shell can improve and develop internationally, the understanding of the different frameworks were examined. PESTEL has been used to evaluate the business environment and then for analyzing the external factors that impact the company. Assessing exterior environment allows company to complement their durability and weaknesses with market opportunities and hazards, and therefore increase their international competitiveness.

Porter's five pushes framework can be used to look for the framework and power balance of the competition in global oil and gas industry. The industry is characterised by relatively strong risk of new entrants, low risk of substitutes soon, strong bargaining electric power of suppliers and low bargaining electric power of buyers. Therefore that there is strong rivalry in the industry, which will probably become even stronger soon with decreasing usage of reserves and with new players rivalling on different terms. As for the internal environment, I used source based view to handle the strength and weaknesses of Shell. It shows the importance of valuable resources that helped Shell to get sustainable competitive edge.

After indentifying the troubles faced, I went on to analyze various tactical alternatives that Shell can choose for the future international progress. To be exact, not all of the solutions can be viewed as ideal. Nevertheless, I've assessed four alternatives that I think is the most critical factors for success in the industry today. The different function of expansions Shell could follow are namely, internal development, mergers and acquisitions and proper alliance. I had developed also discovered whether horizontal or vertical integration will lead to an elevated in expansion. To conclude, Shell is able to consider the alternatives which give them an edge in the development opportunities

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