Marketing Planning of Shell Oil Company - Essay Example

?Marketing Planning Part A Task a. AC 1 Shell is a global group of energy and petrochemical companies. It belongs to the oil and energy industry.The oil and energy sector plays an important role in the development of the economy and the political scenario that is prevailing worldwide. The constraint for oil and gas around the globe has led to the increase in price and limited supply. The increasing industrialization along with the population has exerted pressure on the United State’s oil and energy scenario. The IHS CERA North American Gas and Power Scenarios Advisory Services provide long term strategic initiatives for the oil and petrochemical companies. The advisory committee helps the companies to reveal the strength and weakness in the strategic plans. It discusses the strategic responses with the companies and provides them with the outcome where the company has to improve. The companies are required to get registered with the committee, so that they receive continuous updates and monitoring from IHS CERA. The membership is taken on the annual basis and the committee delivers two research cycles to the companies, who are registered under it. The committee provides with the current scenario of marketing strategies of the industries. The companies will remain well aware regarding the changing perspective of the marketing plans that are undertaken by the industry (Petro Tech, 2012). The members are bound to receive the following from the committee: 1) Forecast or anticipation of the oil and gas industry of the United States 2) Get the access to the IHS CERA Database Centre. 3) Receive semi annual client meeting (invitation/ record of the proceedings) Shell is the leading oil and petrochemical company based in Unites States. The company seeks to develop unique marketing strategy based on the current scenario of the marketing plans of the industry. If the company gets registered in the above committee, it will get the opportunity to receive annual semi annual updates in the changing scenario of the marketing plans in the industry (IHS, 2013). b. AC 1.2 Shell Oil Company is multinational oil and petrochemical company, which is based in the United States and is the subsidiary of Royal Dutch Shell. It is the largest oil company in the world. Shells seek to maintain its position in the industry by meeting the global energy demand in a very responsible way. They aim at providing competitive returns for the shareholders. The company also seeks to develop a competitive edge, so that they can retain the best position in the industry. In new downstream markets, access to upstream resources has become very difficult as there exist high competition. But for Shell the main competitive advantage is their capability of project delivery and the operational excellence along with their concentration in the upstream businesses. The company has invested 80% of the capital in the upstream business in 2013. In the upstream business, the company focus on the exploration of new liquids and natural gas reserves. They aim at developing new projects where the technology and the know-how of the business can add value to the resource holders (Deloitte, 2013). The downstream and upstream engines are generating cash and developing the business, which is strengthening the financial performance of the company.  The company makes investment in few selective growth regions. It thus applies distinctive technology to the growth regions and provides with excellent operating performance for extending the productive lives of the assets of the company and hence increases profitability. Their major strategies are the deep water, integrated gas and the resources that play an important role, such as shale oil and gas. The themes provide them with medium term growth and they expect to make the themes to be their core engines of the business in the near future. The future opportunities of Shell include the potential oil reserves of Iraq, Arctic, Nigeria and Kazakhstan. The opportunities are to be exploited by the company in order to develop their business. Shell believes in meeting the increasing demand of energy worldwide, so as to minimize the social and environmental impact for the global oil industry. They concentrate on improving energy efficiency in their operation and focus on supporting the customers by managing the demand for energy. Shell continuously research the market condition and aims at developing more improved technologies, so as to increase their efficiency and reduce the emission of natural gas production and liquids (KPMG, 2013). Shell’s main commitment lies in their innovation and technology. With the passage of time energy projects are becoming more technically dependent and complex, so the engineering expertise of the company will be the deciding factor for the business. Shell’s strength lies in the advanced technology they are using and the project management skills, which permits them to deliver the large field development projects (Shell, 2013). c. AC 1.3 Organizational auditing Financial auditing The financial statements of the company are prepared in accordance with the provisions of the Companies Act, 1965 and the Financial Reporting Standards (FRS). It also complies with the guidelines of the Malaysian Accounting Standards Board (MASB), which is the approved Accounting Standard in Malaysia for the private entities and the other entities. The financial statements require the use of certain accounting estimates that affects the amounts of assets and liabilities that are disclosed for the financial year. Marketing Auditing The marketing auditing is similar to the financial auditing in the way that it also reviews the marketing activities that exists. It gives the opportunity for the company to assess the past performance with the present in order to understand the current position of the company. The marketing audit of Shell can be divided into three parts: economic environment, market environment and competitive environment. A notice was issued from the US Environmental Protection Agency to Shell Oil Company for the infringement of the Clean Air Act. According to the report issued by the agency, Shell has loaded 28.4 million gallons of gasoline on the barges without the required important recovery equipment in 7 days in 1977, which resulted in the emission of 56 tons of volatile organic compounds. Thus, the company has to check upon the issues, so that their operations are not affected further due to the same reason (Shell, 2013). For a successful marketing audit to take place, the manager has to concentrate on the following: 1) Prepare a customized checklist according to the levels of organization. 2) The basis should be in the form of the organization’s management information system. 3) The managers must not be provided with vague terms like poor economic conditions. 4) The managers should include the marketing tools in the audit i.e. the product life cycle and the product portfolios. d. AC 1.4 The external factors that can affect the marketing plan of the company are the following: Supply and demand of the company The oil and petrochemical business is basically a commodity business. This identifies the fact that the operation and earning can significantly affect the change in the oil and gas prices and by the changes in the margins of the refined products. The price of oil and gas depends on the regional, local and the global conditions that are affecting the demand and supply of the relevant commodities. Thus, the marketing plan of the company can get affected by the demand for the oil and energy. Economic Conditions The general economic growth rate of the country relates to the demand for the oil and petrochemical. The sudden occurrence of the recession and other negative economic growth has typical impact on the operation of the company and can cancel the marketing plan of the company. Population growth rates at the time of the civil unrest also have an adverse impact on the marketing plan of the company. Other supply and demand related factors The price of the commodity like the oil and gas vary depending on the number of factors that are affecting the supply. The other factors that can affect the demand of the oil and gas are the technological improvement and the change in seasonal patterns. Thus, the company should take these factors into consideration before formulating a marketing plan. Political and Government Factors The government regulation and the political issues can affect the marketing plan of the company. The business results depend on the effectiveness of the management that how well it can manage these factors successfully. Access limitations Sometimes the marketing plans are affected by the limitations that are possessed on the access of different resources. A number of countries do not give permission to access their gas and oil resources. The restrictions imposed on foreign investment in oil and gas sector tends to increase the commodity prices when the national government do not need outside resources of the private capital. Many countries also give restrictions in the import and export of certain products. Thus, in these cases Shell can face severe problems in executing the marketing plans. Restrictions on doing business Being an U.S. company, Shell has been subject to the laws that have prohibited some U.S. companies from setting their business in certain countries. Such restrictions have provided competitive advantage to the US competitors unless the government posses restrictions to the national companies. Shell has also faced this type of problem in executing their plans due to the restrictions in the business. Legal uncertainty In some countries where Shell has set its business, lack in well developed legal system and have not adopted strong regulatory systems for the development of oil and gas. Legal uncertainty has exposed the operation of Shell to the increased risk of unpleasant or unpredictable actions by the officials of the government. Thus, these can have an adverse effect on the marketing plan of the company. Regulatory and litigation risks In the well developed countries with stern legal system in which Shell operates, they are exposed to amendments in law. The regulations include from international treaties and accords that could adversely affect our results, such as increases in taxes or government royalty rates (including retroactive claims); price controls. Others are the changes in environmental regulations or other laws that increase our cost of compliance or reduce or delay available business opportunities (including changes in laws related to offshore drilling operations, water use, or hydraulic fracturing). The adoption of regulations mandating the use of alternative fuels or uncompetitive fuel components, government actions to cancel contracts or renegotiate terms unilaterally and expropriation are the other options of the legal systems that they are exposed to. Legal remedies available to compensate use for expropriation or other takings may be inadequate. The companies also may be adversely affected by the outcome of litigation or other legal proceedings, especially in countries such as the United States in which very large and unpredictable punitive damage awards may occur. (Pitney Bowes Inc., 2013) e. AC 2.1 The main barriers to marketing planning in Shell are the following: 1) Systems and procedures: The main problem lies in the systems and procedures that are set up by the managers during the marketing planning. The managers target to sell their products to the customers, who are willing to buy it and offer least resistance to sell. The development of a short term tactical marketing plan can lead to the fulfilment of short term goal, but it fails to look forward for the long term issues and procedures. Thus, a preparation is needed for the long term fulfilment of the plans too. 2) Isolation of the marketing function form the operation: The concept that marketing planning is what a marketing person does in the office is not quite right. The operational part should also be included in the process of marketing planning. The driving force which is centred on the customer satisfaction has made them ignore the operational part of marketing. 3) Organizational Barriers: The organizational barriers are most important barriers for a marketing plan. The team that will be executing the plan has to focus on the main aim, which is the customer satisfaction rather than only on their functional areas. The managers should have the ability to drive all their employees in the way of fulfilling the goals of the team as a whole. 4) Lack of in-depth analysis: The managers often do the mistake of not analyzing the market properly. Deeper investigation is needed in order to fulfil the marketing plan and thus the managers have to collect in-depth knowledge about the market condition, market share of the competitors etc. The managers lack in observing the market trend and understand the marketing environment and thus do not fulfil their market plans. 5) Difference between process and output: The confusion of identifying the difference between the process and output can lead to the failure of a successful market plan. More often the plans are very huge and thus the line managers find it difficult to handle it. They often skip some of the process to obtain the output which can lead to destruction of the market plan. 6) Lack of Skill and Knowledge: Sometimes lack of enough knowledge and skills can make a marketing plan fail. The managers should possess proper qualification for identifying the proper marketing techniques, so as to make the plan successful. The managers who lack in the indentifying the customer behaviour and the segments of the market according to the market cannot devise a successful market plan. 7) Lack of the systematic approach in planning: Different planning systems are required by the firms in order to devise a successful market plan. But the managers are not often lack in taking in a systematic approach and follow the definite planning systems, which lead to failure of the plan. 8) Failure of the managers to prioritise the main objective of the plan: These are the most important barrier of any successful market plan. Often it is seen that the managers do not concentrate on the main objectives of the plan or rather they fail to understand the real requirement of the plan. They focus on their responsibility as a manager and lack in understanding and prioritising the main objective of customer satisfaction. 9) Aggressive corporate culture: Often the corporate culture can lead to the failure of the marketing plan. The plans are often affected by the status quo and power structure that changes with the change in the management. f. AC 2.2 The following points identify the ways implemented by Shell and other organisation to overcome the barriers to market planning: 1) Shell is a petrochemical and energy company and thus it will undertake strategies that are different to other organisation. To overcome the barriers to market planning, the manager of Shell must identify its powerful competitor. Shell itself is a giant and successful company and thus to maintain its position in the industry the company must identify the most powerful competitor and work on their strategies. Petrochemical and energy is such commodity which cannot be avoided by the mass. Thus, the market for these products or services is applicable to all. Other organisations that are new to their respective industries need to gather all the information about the market and the potential threats to the companies. These companies have to choose their potential customers. 2) Shell is an established petrochemical provider giant, thus promoting their products or commodities is not a compulsory. The company thus overcome their barriers only by focusing on the responsibility and the main objective of the employees. Other organisations need to focus on their employee’s responsibility and also on the promotion of their products and services (Sambandam, 2012) Part 2 Task 2 a. AC 3.1 Shell is introducing a new product in Nigeria, which is Liquefied Natural Gas (LNG). Nigeria’s leading LNG providers in Nigeria have earned huge profit by giving the households of Nigeria cooking gas, which comes in form on LNG. Thus, Shell has decided to penetrate the market of Nigeria by introducing LNG. The product is highly used in households for cooking. It is a gas which is converted to liquid form for easy storage. Nigeria LNG Limited will be the main competitor of Shell as it supplies around 70% of LNG in Nigeria. The increasing demand of LNG will create a wide market for Shell. The company has to just make a good marketing plan in order to penetrate the market and also capture a significant amount of market share. The supply of the product will depend on the demand of the product which is relatively high in Nigeria. Thus, Shell will get the opportunity to operate in a demanding market like Nigeria. The price of the product will also depend on the demand for the product and thus the price of LNG will be kept at high (Udo, 2013). b. AC 3.2 The importance of the marketing plan in the strategic planning process for the newly suggested products is the following: 1) Through the marketing plan, the company must analyse the market situation and divide the market into segments which will help them to target the potential customers easily. 2) Through marketing plans the company can set their targets and work upon it. 3) Marketing plan will help the company to make advertising plans for their products and thus their products will be communicated to the mass. 4) The company can also make strategy in order to create a good reputation in the market and satisfy the customers, so as to make them their permanent customers. c. AC 3.3 The following are the techniques that are to be followed by Shell Nigeria or Shell global for the new product development: 1) Idea generation: There are many techniques for idea generation of new products like brainstorming, Delphi Techniques and focus groups. Smart incentive approach will give creative idea generation in following a particular step for the development of the product. 2) Feature development: These are the technique of identifying the feature of the product that attracts the customer’s interest. Those features are concentrated and are developed so that the customers are satisfied with the products. 3) Product Development: In this technique combination of features are used to create or evaluate the product. 4) Product Testing: The products are to be tested and seen whether it is meeting the required criteria of the customers. It is also examined that whether it is fruitful for the market simulation or not. d. AC 3.4 The pricing strategy that should be used by Shell Nigeria or Shell Global is Cost plus Pricing. Cost plus pricing is the simplest of all pricing techniques, where the company should calculate the cost of producing the products and add-on the percentage of profit to get the selling price of the product. It does not take in account the demand for the product. LNG in Nigeria has a demanding market for the companies, which will be proving it. Thus, being a new provider of the product, the company must stick to cost plus pricing method for attracting customers and later on raise the price according to the demand for the product. The advertisement of the products is to be done through hoardings, banner and posters beside the road so as to attract the attention of the mass. The company must also promote in television advertisement. e. AC 3.5 The main barriers to the implementation of the marketing plan in Nigeria are the political disturbances, military dictatorship and the government’s inability to provide with the basic development in the projects that are undertaken by the companies. Shell must overcome these barriers in order to make their marketing plan successful in Nigeria. The company must contribute to Nigerian economy by paying taxes and royalty fee; so that the government is benefited from their operation and the company can continue a sound business in Nigeria (Nazemi, n.d). Task 3 a. AC 4.1 An ethical marketing plan always starts with the managers and the owners of company ascertaining as to what they consider the ethical standards and morals that are applied to the business models. The ethical standards help the company to design a clear mission statement for the employees as well as for the society. The ethical standards help in attracting the attention of the consumers. The consumers believe that the companies which genuinely follow ethical standard will provide with good products and they can run their business uninterruptedly. b. AC 4.2 The most important ethical issue that is confronted by Nigeria is the problem of corruption. There are three types of corruption that can be seen in Nigeria, which can pose to be a threat for Shell. i) Bureaucratic corruption can make the marketing plan of Shell weak. Bribery, Looting, Nepotism can lead to the bad image for the company which can decrease sales. ii) Electoral Corruption can cause a sever harm to the marketing plan of the company as the political leaders play an important role over here. They pose potential barrier to the execution of the marketing plan as they want their demand to get fulfilled. iii) Economic and business corruption can make serious damage to the marketing plan of the company, tampering of the official information; theft and robbery are the few examples of ethical issues (Chimakonam, n.d). c. AC 4.3 The company must follow specific ethical standards in order get the customer attention and run a successful business. The ethical issues can make a company ruin its business. The marketing plans of the company should include clear ethical standards, so that the company does not face any problem in the near future. It should also plan for the near future, so as to make their business successful. Reference List Chimakonam, O., n.d. Corruption In Nigeria Ethical and Biblical Consideration. [online] Available at: < http://www.academia.edu/997581/CORRUPTION_IN_NIGERIA_ETHICAL_AND_BIBLICAL_CONSIDERATIONS > [Accessed 15 October 2013]. Deloitte, 2013. Oil and Gas Reality Check. [online] Available at: < http://www.deloitte.com/assets/Dcom-BruneiDarussalam/Local%20Assets/Documents/oil_gas_reality_check_2013.pdf > [Accessed 10 October 2013]. IHS, 2013. IHS CERA North American Gas & Power Scenario. [online] Available at: < http://www.ihs.com/products/cera/energy-research/north-america-gas-power.aspx> [Accessed 10 October 2013]. KPMG, 2013. Marketing Strategy for BC Oil and Gas Sector. 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New Product Development: Stages and Methods. [online] Available at: < http://www.trchome.com/about-trc/press-releases/223.html> [Accessed 10 October 2013]. Shell, 2013. Our Strategy. [online] Available at: < http://www.shell.com/global/aboutshell/careers/professionals/job-areas/commercial/sales-and-marketing.html > [Accessed 10 October 2013]. Udo, B., 2013. Nigeria LNG Increases Volume of Cooking Gas to Domestic Market. [online] Available at: < http://premiumtimesng.com/business/141820-nigeria-lng-increases-volume-of-cooking-gas-to-domestic-market.html > [Accessed 10 October 2013]. Read More