Royal Dutch/Shell Group - Essay Example

Royal Dutch/Shell Group Case Study Shell's Multinational Marketing Strategy and Performance When an organization operates within a smaller territory, that firm primarily or exclusively relies on local and/or domestic marketing. The goals associated with local and domestic marketing strive to focus on product and overall adaptation of the firm, product or service differences from competitors, and concentration on certain areas (Svensson, 2002). The goals also focus on the overall strength and independence of the company and its products or services, flexibility of overall offerings, and marketing differentiation. This means that an associated marketing strategy for that type of organization would primarily consider localized issues when conducting its business practices and formalizing its marketing strategy (Svensson, 2002; Svensson, 2008; and Douglas and Craig, 1993). Also according to Svensson (2008, pg. 4): An international marketing strategy is a widening of the local and domestic marketing strategies of business activities that is applicable beyond the home market's frontiers, while a multinational marketing strategy refers to marketing activities towards a wide selection of foreign markets targeted through the business activities. The international and multinational marketing strategies also recognizes the necessity for locally related issues of business activities in the different markets targeted, but worldwide diffusion is the ultimate goal. This means that international and multinational marketing strategies primarily strive to maximize standardization, homogenization, similarity, concentration, dependence, synchronization, and integration of marketing activities. Secondarily, international and multinational marketing acknowledge the potential necessity for adaptation, tailoring, difference, diffusion, independence, flexibility, and separation of marketing activities. Shell's multinational marketing strategy, like any other multinational organization in any industry, had some standardized aspects while, at the same time, differentiated other aspects of the strategy depending upon the situations that were present in the markets where they were operating (Svensson, 2008 and Royal Dutch/Shell Group, 2008). "A fundamental issue in international marketing concerns the extent to which marketing programs and processes should be standardized across national boundaries" (Walters, 1986, pg. 55). Stark differences in opinion surround this question, with one critic even stating, "Companies must learn to operate as if the world were one large market-ignoring superficial regional and national differences" (Walters, 1986, pg. 55). However, it is obvious that many disagree with such a notion, taking into account the many cultural differences that exist throughout the global marketplace (Edstrom and Galbraith, 1977). In its marketing efforts, Shell sought to be the world leader in its industry. Its industry included petrochemicals and energy. Just like any business, it also strove to maximize shareholder wealth. It also sought "profitability via solid earnings, competitive returns and strong cash generation under a variety of economic and geopolitical conditions. This would be achieved through active portfolio management, personal accountability, operational excellence, and cost leadership" (Royal Dutch/Shell Group, 2008, pg. 1). The Group aspired to strengthen the value of its portfolio through increasing the portions of the portfolio dealing with Exploration and Production and Gas and Power. Growth in profits, cash generation, and a shift towards gas being the fuel of choice would be a large part of this venture which was to take place during the key time frame that was brought into question by the case study (Royal Dutch/Shell Group, 2008 and Kim, Park, and Prescott, 2003). "Competitive edge through development and leverage of the company's ability to attract people of the highest caliber and diversity; constantly innovating to meet changing customer needs; and leveraging the company's strongest brand, technology and extensive global reach. These courses of action would operate in full alignment with Shell's 'Business Principles', including its commitment to sustainable development, which were viewed as critical to maintaining a competitive edge (Royal Dutch/Shell Group, 2008, pg. 1). Shell values a wide variety of diversity in all aspects of its business, and it shows not only within the company itself, but within its international marketing standards. The areas in which diversity is made particularly apparent include strategic plans and objectives, supporting systems and resources, human resources integration, monitoring performance, communicating results, and continuous learning business and group performance (Royal Dutch/Shell Group, 2008; Buzzell, 1968; Walters, 1986; and Doz, 1980). Shell has realized many key developments throughout the years as a result of their internal and external efforts, as well as through their international marketing efforts. During the 1950's and 1960's, Shell was supplying one-seventh of the world's oil, made discoveries of major oil reserves, and saw natural gas beginning to become one of the world's leading alternative fuels, which spiked in the 1970's. In the 1980's, Shell began to take advantage of technological innovations which allowed them to distribute new products, address environmental problems, and gain worldwide leadership by beginning to sell unleaded petrol. Lower gas prices surfaced in the 1990's, so Shell shifted its focus towards its core business (Royal Dutch/Shell Group, 2008 and Moinuddin Shahid Siddiqi, 1980). Its core business consisted of chemicals, gas, and oil. Around the center of the 1990's, the company began to look at the future of oil and what its diminishing supply could mean for the world. Changes were made accordingly, and shareholder's were kept informed of Shell's progress and alignment with its 'Business Principles.' (Royal Dutch/Shell Group, 2008). Issues Surrounding the "Misstatement of Reserves" and How it Impacted the International Public Image of the Company "Basic to many of the problems of advertising and selling is the question of consumers' attitudes toward the product and particularly their conception of the brand" (Gardner and Levy, 1999, pg. 131). That said, Shell ran into major issues surrounding the misstatement of reserves and the misstatement seriously impact the international public image of the company (Murgolo-Poore, Pitt, and Ewing, 2000). Seemingly innocent mistakes can ruin the international public image of a company (Just and Crigler, 2000 and Bensaude-Vincente, 2001). Take Firestone, for instance. Blaney, Benoit, and Brazeal (2002, pg. 1) decided that "Firestone botched its recovery efforts. Its attempt to shift blame to Ford was poorly conceived. Its corrective action was not perceived as addressing the problem at hand. Moreover, its use of Michael and Mario Andretti to bolster its product and reputation was limited by the obvious financial relationship with these professional drivers. Finally, the authors support past scholarship that scrutinizes the appropriateness of certain strategy combinations. Specifically, mortification and bolstering can be undermined by denial and corrective action." Another example of the impact of botched recovery efforts can be seen in past politics, as follows: Leadership images are built collectively by leaders and their relevant constituencies-elected officials, the news media, and the public. The process of building leadership image rests on prior expectations about the leader, policy outputs, the course of events, and the disposition of political resources. In building images of leadership, each of the three constituencies puts more weight on some aspects of image-building than on others: The public sees the president primarily in terms of his previous behavior, the media view the president through the lens of immediate events, and other elected officials focus on political resources. One of the president's most important resources is his public image. It can help him to maintain the loyalty of other officials, which in turn contributes to balanced news coverage, even in times of crisis. President Clinton was able to preserve his public image through the impeachment debacle in large part because of low public expectations about his personal moral behavior and satisfaction with his economic leadership. Conversely, President Nixon was forced to resign because of high public expectations about his personal probity and disappointment with his management of the economy. (Pugh, 1989, pg. 1) In 2004, Shell admitted that it had misstated oil reserves. They then released a 463-page report where top executives admitted repeatedly lying to shareholders about the value of the oil and gas reserves that were held by the company. When top executives admitted lying about the reserves, they were even shady in their reports to the media regarding what had happened and what they planned to do about it. This caused major concern among shareholders and with the general public (Royal Dutch/Shell Group, 2008; Ross, 1959; Pugh, 1989; and Meade, 1992). "It also transpired that Shell had only been replacing between half and 60 percent of the oil it produced between 1999 and 2004. Analysts commented that Shell had a mountain to climb to restore its position in terms of reputation and actual performance." It was very likely that it would take a full decade for the company to recover from the major mishap (Royal Dutch/Shell Group, 2008, pg. 1). The Future for Shell According to the valuable words of Jackall and Hirota (2000, pg. 11), "Advertising and public relations both have ancient roots. Dating back to antiquity, merchants, tradesman, and artisans have always found ingenious ways to proclaim the availability and virtues of their products and crafts, from public criers pitching wares, to signboards with symbols conventionally associated with certain goods or services, to handwritten and later printed handbills, to tradesmen's cards, to the public display of the implement's of one's trade." "The prevailing view of multinational companies (MNCs) is that marketing strategy is a local problem which differs from country to country. There are, however, potential benefits in standardizing multinational marketing strategy. Significant cost savings, consistency in dealing with customers, improved planning and control, and the exploitation of good ideas represent potential gains with an integrated approach to marketing strategy. In view of the trend toward at least partial centralization of marketing management, the right balance between local autonomy and central coordination is essential if marketing strategy is to encompass a multinational perspective" (Buzzell, 1968) Postmodern marketing would be a good idea at Royal Dutch/Shell (Brown, 2000) "So what exactly is postmodern marketing According to the foremost academic commentators on postmodern (consumer) society, it is characterized by five key features: hyperreality; fragmentation; reversed production and consumption; decentred subjects; and the juxtaposition of opposites" (Brown, 2000, pg. 287). "Today's body of marketing thought is expanding geometrically, pushing frontiers in numerous domains-quantitatively, behaviorally, strategically-with much enhanced technology and on an increasingly globalized basis. As this pushes forward on many fronts, however, it is also worthwhile to ask what is in danger of being left behind. What is the benefit, if any, of discerning the roots of this field On the basis of an extended look across the last century of marketing thought, this article paints a wide-ranging portrait of (1) the general course that has been taken by the body of marketing thought over its "4 Eras" and (2) how the treatment of societal dimensions of marketing has fared during each period. On the basis of these findings, the authors pose several key issues for further consideration by interested thinkers concerned with the progress of marketing scholarship" (Wilkie and Moore 2003). Shell has proposed major changes for the future. First of all, they were considering hiring a new chief executive. Second, they were considering merging Shell with Royal Dutch. Apparently, critics frowned upon the companies past history of hiring only within the group, especially amidst the chaos that had occurred surrounding the misstatement of the oil reserves, so it was hoped that this move would appease shareholders (Royal Dutch/Shell, 2008; Noble and Mokwa, 1999; Brown, 2000; Shama, 1993; and Hutt and Speh, 1998). "The group also reported the launch of a major review of its management and corporate structure-a complex committee of managing directors-in a bid to appease shareholders. It was widely expected that Jeroen van der Veer, head of the managing directors committee, would be awarded the top job at Shell. The new review had three objectives: 1. Simplification of the board and group managing structures, 2. Improvements in decision-making and accountability, and 3. Enhancing leadership of the group" (Royal Dutch/Shell, 2008). The case study mentioned that Shell is innovative with applying technological advances to many of the aspects of their business, so this should continue-and even increase-when it comes to their international marketing efforts. One area in particular that could be utilized for this purpose is data mining. Data mining allows a company to profile customers and use those results in order to make marketing decisions that can make a huge difference in market share and overall profits (Shaw, Subra Maniam, Tan, and Welge, 2001). Organizational culture will also play a vital role in the future of shell. Deshpande and Webster (1989, pg. 4) define organizational culture as "a pattern of shared values and beliefs that help individuals understand organizational functioning and thus provide them with the norms for behavior in an organization." The concept of organizational culture includes norms, values, behavioral patterns, and beliefs that are shared or held by individuals or groups within an organization. Values make up the other components mentioned above, and when people within an organization share values, it can be said that organizational culture exists. It has been duly noted that an organization's culture affects its performance (Deshpande & Webster, 1989 and Luostarinen and Gabrielsson, 2002). As popular as the term 'marketing' is, many individuals exist today that simply do not believe that marketing theory exists or that it is of any use. This puts pressure on supporters to show that marketing theory, such as has been employed at Shell, actually exists and can be used to help better a company's position in the global marketplace. This means that it has to be translated into effective practice (Gummeson, 1987). Effective marketing theory, as should continue to be employed by Shell, takes many forms. It can be traditional, meaning the type of marketing theories that are taught in traditional business schools and universities. It can be more active in nature, as is taught by local, regional, and local government entities. It can come from within a company, being internal in nature. Oftentimes, these internal marketing campaigns are based almost solely on the company's individual business objectives (Kindra and Stapenhurst, 2008). In order for a company to implement a marketing campaign, it must have a marketing plan, which is difficult to develop and implement itself. Involving employees at all levels of the company is often key to ensuring a successful marketing campaign. Learning must be both an initial and on-going process for the employees within the organization in question. Open communication throughout the organization is also vital in assuring that an effective marketing campaign gets off the ground and gets running (Kindra & Stapenhurst, 2008). Despite what critics say about the unimportance of recognizing cultural differences when engaging in international marketing, cultural differences absolutely must be taken into consideration. There are many botched examples where companies failed to consider culture differences and ended up ruining their chances of doing business in countries where they may have otherwise been completely successful. It pays for a company to do their homework before attempting to enter a country. References Bensaude-Vincent, B. 2001, A Geneology of the Increasing Gap Between Science and the Public, Sage Publications. Blaney, J.R.; W.L. Benoit; and L.A.M. Brazeal 2002, Blowout!: Firestone's Image Restoration Campaign Brown, S. 2000, Postmodern Marketing, Cengage Learning. Buzzell, R. 1968, Can You Standardize Multinational Marketing Harvard Business Review, pgs 1-11. Deshpande, R. and F.E. Webster, Jr. 1989, Organizational Culture and Marketing: Defining the Research Agenda, Journal of Marketing. Douglas, S.P. and C.S. Craig 1993, Evolution of Global Marketing Strategy: Scale, Scope, and Synergy, Readings in International Business. Doz, Y. 1980, Strategic Management in Multinational Companies, Sloan Management Review, pgs. 27-46. Edstrom, A. and J.R. Galbraith 1977, Transfer of Managers as a Coordination and Control Strategy in Multinational Organizations, Administrative Science Quarterly, 22(2): 248-263. Gardner, B.B. and S.J. Levy 1999, The Product and the Brand, Sage Publications. Gummesson, E. 1987, The New Marketing-Developing Long-term Interactive Relationships, Elsevier. Hutt, M.D. and T.W. Speh. 1998, Business Marketing Management: A Strategic View of Industrial and Organizational Markets, Thomson Learning. Jackall, R. and J.M. Hirota 2000, Image Makers: Advertising, Public Relations, and the Ethos of Advocacy, University of Chicago Press. Just, M. and A. Crigler 2000, Leadership Image-Building: After Clinton and Watergate, Political Psychology, 21(1): 179-198. Kim, K.; J.H. Park; and J.E. Prescott 2003, The Global Integration of Business Functions: A Study of Multinational Businesses, Palgrave Journals. Kindra, G.S. and R. Stapenhurst 2008, Social Marketing Strategies to Fight Corruption, The World Bank. Luostarinen, R. and M. Gabrielsson 2002, Globalization and Global Marketing Strategies of Born Globals in SMOPECs, Helsinki School of Economics. Madow, M. 1993, Private Ownership of Public Image: Popular Culture and Publicity Rights, HeinOnline. Meade, C.D. 1992, Approaching the Media with Confidence, Public Health Nursing. Moinuddin Shahid Siddiqi, M. 1980, Planning and Control of Multinational Marketing Strategy: The Issue of Integration. Ayer Co Pub. Murgolo-Poore, M.E.; L.F. Pitt; and M.T. Ewing 2002, Intranet Effectiveness: A Public Relations Paper-and-Pencil Checklist, Elsevier. Noble, C.H. and M.P. Mokwa 1999, Implementing Marketing Strategies: Developing and Testing a Managerial Theory, Journal of Marketing, 63(4): 57-73. Pugh, D.L. 1989, Professionalism in Public Administration: Problems, Perspectives, and the Role of ASPA, Public Administration Review, 49(1): 1-8. Ross, I. 1959, The Image Merchants: The Fabulous World of Public Relations, Doubleday. Royal Dutch/Shell Group 2008, Case Study. Shama, A. 1993, Marketing Strategies During Recession: A Comparison of Small and Large Firms, Journal of Small Business Management. Shaw, M.J.; C. Subramaniam; G.W. Tan; and M.E. Welge 2001, Knowledge Management and Data Mining for Marketing, Elsevier. Svensson, G. 2002, Beyond Global Marketing and the Globalization of Marketing Activities, Management Decision, 40(6): 574-583. Svensson, G. 2008, Glocal Marketing and the Glocalism of Marketing Activities, Vaxjo University, pgs 1-6. Walters, PGP. 1986, International Marketing Policy: A Discussion of the Standardization Construct and its Relevance for Corporate Policy, Journal of International Business Studies, pgs. 55-69. Wilkie, W.L. and E.S. Moore 2003, Scholarly Research in Marketing: Exploring the "4 Eras" of Thought Development, Journal of Public Policy & Marketing. Read More