Management: A Pacific Rim Focus - Essay Example

Introduction In the world oil industry, among the top and major players is the Shell brand—comprised of two parent companies which are Royal Dutch Petroleum Company and Shell Transport and Trading Company. These companies are joint venture of the Netherlands and UK, and are both publicly traded companies. In the company’s website, a more concise introduction is found as follows: “Shell is a global group of energy and petrochemical companies. With 104,000 employees in more than 110 countries, we play a key role in helping to meet the world’s growing demand for energy in economically, environmentally and socially responsible ways (shell.com).” 1. On Shell’s marketing strategy and performance from 1999-2003 Shell’s multinational marketing strategy can be assessed using the framework proposed by Johny Johansson in his book Global Marketing, which is comprised of three roles: the foreign entry role; the local marketing abroad role; and the global management role. For a multinational company like Shell, which operates in a number of countries across the globe, the framework provides essential insights into analysing its operations. In order to analyse its strategy, it is crucial to first analyse the environment in which shell operates in, and see if the difference in performance is attributed to the strategy itself, or to the strategy’s inappropriateness in relation to its environment. Environmental assessment What shapes the behavior of a business is the degree of uncertainty in its environment. In order to assess the degree of uncertainty, it is important for us to note the key dimensions that define an organization’s environment. As Stephen Robbins (2005, pp.443-444) illustrated in his book Organizational Behavior, there are three dimensions to the environment of any business, namely capacity, volatility and complexity. Using this framework, we try to assess the environment in which the company currently operates in. The environment plays a huge impact in crafting strategy and strategic management decisions an organization makes. The strategy depends on the dimensions of the environment where it operates in, as mentioned earlier, which depends on the overall objectives of an organization. This strategy should be supported by a different structure that would carry on the fulfillment of various responsibilities and tasks to achieve the organization’s objectives. However, in implementing a chosen strategy which requires restructuring within an organization, various strategic human resource management issues should be addressed. In the case of Shell, where the recommended strategies are to promote ‘competitive edge through development and leverage of the company’s ability to attract people of the highest calibre and diversity; constantly innovating to meet changing customer needs; and leveraging the company’s strongest brand, technology and extensive global reach.’ Environmental assessment: three-dimensional model of the environment Capacity talks about the ability of the environment of an organization to promote growth, which is measured through relative abundance or scarcity in the market. In the case of Shell, it is suggested that Shell’s environment is relatively limited and controlled by other larger oil-producing entities such as countries from the Middle East, Latin America and South Asia. While this scarcity is apparent in Shell’s main product which is oil, the promotion of other alternatives such as natural gas enables Shell to promote growth within the industry it operates in. With Shell’s pursuit of human resource diversity by attracting the best and diverse talents in the world, the enormity of its global operations provide abundance in its resources in terms of people. Stability and dynamism is what the volatility dimension is about—the degree of instability in the environment of the company. In the case of Shell, it operates in a relatively unstable environment: the products’ supply depends on the success of explorations in different areas across the globe. Since not so many companies are in the industry where Shell in, although there are less influences and changes in terms of trends, the fact that Shell is producing oil in countries that are not the major producers in the world, which has an overall effect on supply makes the environment really volatile. The third dimension is determined by relative homogeneity and dispersion of elements which make an environment either simple or complex. Shell operates in a relatively heterogeneous environment with dispersed elements, given that its core businesses and oil production are coupled with the changes in technology, which we all know is more rapidly-changing. When it incorporates information technology in its offering, the company becomes subject to changes in technology in the market place. Also, the company faces relative threat of new entrant as competitors that fight in terms of costs. All these comprise the complexity in Shell’s environment. The foreign entry role The foreign entry role in Johansson’s framework proposes the structure of a company as a foreign player in many other countries. In the case of Shell, its structure is comprised of strategic alliances, in the form of joint ventures in terms of exploration and distribution, and wholly owned manufacturing subsidiaries across the globe. Strategic alliances (joint ventures) In order to maintain more control among the companies which Shell invests in, the more logical structure of its entry in a foreign market, without putting too much risk of failure in varied and new markets, is to pursue joint ventures or strategic alliances. While this strategy foregoes the advantages of gaining total control among the companies and subsidiaries in other countries, this strategy reduces the risk of failure in new markets. Through these strategic alliances, local considerations for the new markets are given more priority to increase the chances of success of operations especially in varied countries. The local marketing abroad role Cause marketing By making Shell a major provider of natural gas, it has positioned itself as a socially responsible citizen, which cares for the environment and society as a whole. Shell practices cause marketing to further reinforce its positioning. As apparent in its campaigns, Shell focuses on strengthening its brand and to associate it with corporate social responsibility and a company that cares for the environment. From the point of view of consumers and other customers, choosing Shell is related to fighting a cause such as caring for the environment. The global management role Sustainable development: creating competitive advantage through innovation and diversity Among the various issues for product development that are relevant to the organization include technology evolution, competitors, return on investment, support of customers and availability resources. As a company that offers logistics services, in order to improve its products and services, it has to capitalize on the technology that is produced to become more efficient in its operations. More advanced technology, especially in terms of transportation and database systems are applied in the promises that are included when marketing the benefits of the product, to differentiate it from its competitors. To invest on technology which makes the operations more efficient, therefore leads to decreasing costs to the company. This enables Shell to maintain its profitability, in terms of ROI, while it continually discovers new, but similar markets where its products are needed by customers. Shell knows that in order to create competitive advantage, it has to attract the best talents. It widens its accessibility to resources by Performance in the market If the performance is to be gauged among the industry as a whole, Shell fares better than its competitors. However, seeing the trend for the company’s operations, its performance is not good enough if the question of sustainability is to be the question. The downward trend of Shell’s sales, although it fares well as compared to the industry as a whole, is not in effect an issue exclusive to the company. This is attributable to the oil industry as a whole as a product of the supply-demand interaction in various markets across the globe. What concerns us is that while the industry is experiencing a downward trend, there should be plenty of other opportunities that Shell can take advantage of in order to increase performance and not to rely on the current happenings. 2. On misstatement of reserves Corporate social responsibility and marketing strategy In pursuit of Shell’s marketing strategy, it aims to strengthen its business principles by gaining trust of the major public. By employing sustainable development and pursuing corporate social responsibility through various environmental campaigns, Shell is able to foster an image of being a corporate social citizen. While this effort can be considered part of its marketing strategy, this aims to enhance the corporate brand of the company by having it communicated to its various publics—customers, employees, suppliers, government agencies, media, and other stakeholders such as the financial community. Other stakeholders affected: stockholders and financial community The “misstatement of reserves” and continual lying to the shareholders prove to be inconsistent in the image that Shell tries to build in its corporate brand. The effort to communicate and build trust among the various publics of the company has proven to be sufficient, except for the communication that Shell tries to build with the financial community. Among the various publics of Shell, the one that was mostly affected was the financial community with the misstatement of reserves. This includes all of Shell’s investors—including stockholders and various banks and financial intermediaries are affected. Due to misstatement of reserves, the credit rating of Shell has been affected, greatly due to reduced trust in its reporting of its financial and operational data. Damage apparent in inconsistency of its public image and corporate brand As noted by Tom Duncan in his book Integrated Marketing Communications, any relationship is grounded on how both parties trust each other. Since brand management’s focus is on nurturing relationships with the various publics, and relationships’ foundation is mainly based on trust, the misstatement of reserves diminishes the trust of various publics in Shell. As noted earlier, the publics mostly affected in this situation are the financial community. Since the financial community is an important public to Shell and is crucial to its operations, the damage can be assessed as serious. As to the availability of funds for Shell’s operations can be determined by its credit ratings and reputation, the damage proves to be serious and relevant. As for the international image of Shell, trust in its corporate brand is limited to the inconsistency it shows to the financial community. With its marketing strategy that focuses on environmental campaigns and cause marketing, it is able to preserve its image as a socially-responsible citizen in the international field of oil industry. 3. On Shell’s future and effectiveness of marketing strategy Shell’s Future In order to answer this question, there has to be certain criteria to be determined where the decision would be based upon. In this case, very vital among the concerns of most of the stakeholders—in this case the shareholders and the employees—are relative growth and sustainability of a company in order to arrive at a decision. Although the two variables—growth and sustainability in business are both important to these two sets of shareholders, the relative emphasis differs. In terms of growth, here, we can see that in terms of growth as assessed by using Ansoff matrix, Shell is very aggressive in its plans and offers a promise of fast growth by market development and making natural gas the fuel of choice for the consumers. Sustainability is a company’s ability to sustain a level of sales and the state of its operations in a more or less steady level as it approaches the future. In terms of sustainability, as we assess Shell according to its marketing strategy, the company seems to be pretty sustainable. Since oil is a highly valued commodity in the world, only when there seems to be a very economical and viable alternative will the company be put at risk. Although Shell sees that the reserves are not forever, innovation is a concept adopted in its marketing strategy in order to gain advantage of the growing concern for the oil consumption. The emphasis on relative growth and sustainability differs according to the perspective of different stakeholders, although all stakeholders demand that there should be growth and sustainability in the operations of the businesses they are part of. From an investor’s point of view, security in the return of his/her capital is the primary concern, so sustainability is given more emphasis, although growth is still required. From the perspective of an employee, career objectives seem to be the primary individual concern, so growth within the company, through the expansion of its operations, give growth much more emphasis. The volatility of the oil industry will in the long-run push Shell to move from a sales-driven operation into a relationship-driven operation in order to thrive in the market place and retain its presence. In order to provide commoditization, especially because oil is a commodity product, it has to offer more in terms of its brand, and to know its customers better. The best companies in the world know that they cannot satisfy everyone; therefore mass marketing will reach its ability to sustain operations. In order for it to be more profitable in the long-run, it has to be more focused, know its customers first, deliver everything to satisfy them and grow through expansion, as it delivers the same promise to new customers with the same profile to its old profitable ones. Only by creating a relationship with them will it become more sustainable and surviving despite the rapidly-changing customer preferences in the apparel industry. Effectiveness of the courses of marketing action for Shell Shell should go back to the the most profitable customers as its main target market, whom it should choose to build a long-term relationship with. Then it has to re-evaluate its relationships with other stakeholders of the company, especially the financial community which has been angered by the misstatement of reserves. The first thing that it should do is to re-evaluate the company’s current mission, set a long-term vision and set strategic goals. Only when the goals are already set will he be able to craft clear and strong strategies. However, a consumer-centric philosophy in doing business should be adopted by the company—which focuses on consumers very closely to determine their needs, anticipate their wants in relation to the fashion trends and appeal to their very psyches. Strategic marketing should be employed in the overall strategic process, where focus on the consumers is vital. Marketing research is vital only to determine current perceptions about the company, and to plan strategies on how to reverse it. On the corporate-level, Shell could pursue a growth strategy in order to pursue the different segments that its three brands could cater. In the long-term, if the focus of shell is to maintain sustainability and achieve higher sales targets, it should strengthen its corporate brand and create equity. On the business-level, the company should strengthen its corporate brand. To do it, Shell has to re-establish trust in its relationship with a lot of its stakeholders, most especially appease its angered stockholders. The issue on the credibility of the brand, whether or not it can be trusted, especially by the people within the financial community, has to first be resolved. Then the Shell brand should re-establish its positioning which they find as more sustainable in the long-run, and exists in the minds of the consumers. It’s positioning as a company that cares for the environment and society is a good and sustainable positioning. A major recommendation is to pursue brand management for the Shell brand—in order to protect it from unexpected touch points such as brand contact with the financial community; as well as major integration among all the functions related to it. This calls for strategic human resources management in order to determine the structure for it. While the brands are separate strategic business units, another business unit that would take care of procurements and sourcing can be integrated into the structure that would serve the three brands. This calls for a strategic production management. This would ensure that the differences of the brands are promoted according to the promises, while maintaining efficiency and bargaining power in terms of sourcing. At the same time, strategic distribution should be kept in mind, seeing if the places where the brands are sold and distributed. The tactical plans, mainly the four p’s of the brand—product, price, place and promotions should be consistent with the target market. Its promotions should focus on creating marketing communications messages that are aimed to build lasting relationships with its target market. It has to re-establish trust, and take care of it so as not to damage equity in the long run. Bibliography Bartol, K., Martin, D., Tein, M., & Matthews, G. 2001. Management: A Pacific Rim Focus. McGraw Hill Company, Australia. Burns, Alvin A. and Ronald Bush. 2004. Marketing Research: Online Research Applications. Pearson Education South Asia Pte. Ltd, Philippines. Crosby, P. “Crosby: ‘Zero defects’ and ‘right first time’”. Management for the rest of us. Available from World Wide Web: Dessler, Gary. 2003, Human Resource Management. 9th ed. New Jersey: Prentice Hall, Inc. Jamieson, David and Julie O’Mara. 1991. Managing Workforce 2000: Gaining the Diversity Advantage. San Francisco: Jossey-Bass Publishers. 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