Introduction to Shell:
Royal Dutch Shell is a large business that operates in the oil and gas industry and trades in the EU. Shell operates in a worldwide scale via working in 70 different countries, it produces 3.7 barrels of oil daily with 44,000 stations operating daily. Shell makes a revenue of 345 billion Dollars (£251.8 billion in 2019). Shell’s market value is 1,469 GBX (£14).
Pestle Analysis of Shell:
A political factor refers to how and what degree government intervenes within the economy. Due to Brexit, there will be barriers to trade, meaning that prices will increase, and quantities will decrease making the UK less value to Shell even though Shell is an important producer to the UK by producing 10% of the country’s oil and gas. Another political factor for Shell is political stability, this is important as it affects investor and consumer confidence, which has a wide impact on the economy. Malaysia is a country that has a high political stability, meaning that Malaysia can be a key country for Shell as there will be more foreign investors willing to invest into Shell and there will also potentially be more clients having an interest in Shell. Government support is also another political factor as it can affect business positively or negatively, for example Malaysia set a tax which promoted the oil and gas industry, which will affect Shell as they have reduced costs making it easier for Shell to operate in Malaysia. Another factor is wage legislation. This is important to Shell as they know what the minimum wage is, so they do not end up breaking any laws which can damage Shell’s reputation as a company.
Economic factors that impact Shell are exchange rates. Exchange rates in different countries impact Shell because it determines how much Shell’s oil will cost within the country, so if the country has a higher exchange rate, Shell can put its oil prices at a much higher price range. This may also may Shell consider operating more in countries that have a high exchange rate as Shell can renovate a much higher income. Another factor is efficiency of markets, this is important to Shell as the efficiency of markets exemplify how well the market is doing, if an industry is doing well it will lead to interest from more investors, which provides more financial backing for the company, which Shell will want. Another factor is recession. This is important as some countries have hit recession due to the pandemic (such as the UK), this impacts Shell as Shell may struggle much more to stay afloat working in countries that are going through a recession due to fact that their costs will decrease, meaning that Shell’s market value will diminish to which can impact how Shell trade, buy, negotiate, and spend their money.
Social factors that impact Shell are demographics and coronavirus Demographics are important as it provides a study of the population, meaning Shell can use demographic data to show how many people (based on gender/sex) have an interest or work in the oil and gas industry, so Shell can try and effectively appeal to those people. Coronavirus has impacted Shell as they are unable to function as normal due to quarantines and lockdowns, coronavirus also may have impacted Shell’s suppliers; making it scarcer for Shell to have Oil and gas, which can lead to increased price of oil and gas. Coronavirus also has stopped/prevented face to face interaction due to social distancing and other prevention methods to stop the virus spread, which makes it increasingly difficult for Shell to trade and negotiate. However, Oil prices are decreasing, and oil markets (such as crude oil) are crashing due to the pandemic, meaning that Shell has lost market value much more than it did (averagely) amongst its previous years. Another factor is responsible consumption. This is key as people are becoming much more aware of the vitality responsible consumption brings and people are becoming more aware of the effect oil and gas has on the world, such as global warming, carbon dioxide emissions and people are trying to stop the impact of these by becoming much more eco-friendly. This means that Shell will have more social pressure when it comes to production of its oil and gas products and must show that they are responsible when it comes to the production of oil and gas whilst presenting themselves positively; Shell made a video in October 2020, referring to how they are striving to be a net-zero energy business, also in February 2020, Shell made a video citing about how they are building a “lower carbon power business” which provides Shell with a positive image/brand name as they may have influenced people to trust more in Shell and know that Shell are making practical decisions which will help them make more responsible consumption decisions.
Technological factors that affect Shell are advancements to technology. Technology is consistently advancing at a rapid speed, meaning that Shell must consistently stay up to date amongst its technological developments. The oil and gas industry have hugely received help from technological advancements as they use new machinery and equipment which will help them extract oil in a more productive and efficient manner however, the machinery and equipment used may be expensive and a lot of capital will need to have to gain the technological advancement, but it comes with the benefit as Shell is known for investing in advanced technologies that efficiently extract oil and gas such as enhanced oil and gas recovery.
Legal factors that affect Shell are antitrust and competitive laws in the country. Antitrust laws and competitive laws are laws that prohibit companies from conning to make profit and ensure fair competition. These impacts Shell as due to the laws, they must maintain price fixing, which is Shell and its competitor selling at the same price to ensure the customer has the fair right to choose from any company at the same fair price, meaning that Shell cannot use tactics such as reducing the price momentarily so the price can gain customer attraction. Competition law may benefit Shell as it creates a business culture that maintains competition, thereby enabling companies to improve and develop to remain a strong competitor in the field. Competition law also ensures that this role cannot be abused to the detriment of other companies by one organization in a dominant market position, it also encourages companies such as Shell to improve themselves whilst providing a plethora range of products/services which appeal to consumers/customers/clients. Another factor is Emission and Carbon regulations. For all oil and gas companies, including Shell, environmental security and carbon emission regulations have increased. With the growing worldwide concern about the drastic changes in the environment due to global warming, the government poses tough questions against the major global warming companies, the oil and gas companies. When such claims are put forward, Shell is often on the main screen as to what they are doing to help the environment, Shell show often show this through advertisements, videos and campaigns showing they are creating cleaner energy solutions as seen in the “make the future campaign” by Shell.
An environmental factor that impacts Shell is weather and climate change. This is because Shell operates in the oil and gas industry and the processing of oils create an elevated level of carbon emission and Shell’s products downgrade the environment. Shell must keep this factor important as climate change is a consistent problem, climate change also affects weather by having increased temperatures, rain, and snow; and Shell are not doing anything but escalating climate change. Also, climate change also provides unpredictable weather meaning it will be harder for Shell to figure out the weather which deters them from potential extraction for its products. Another factor is ethical trends. These impact Shell as ethical trends influence Shell as a business, its customers/consumers and employees working in the environment as well; both meaning ethical trends have a direct and indirect impact on Shell, ethical trends also show how customers/consumers act/work and Shell may want to look at how its customers/consumers operate so Shell can appeal to them more.
The internal environment of Shell:
Corporate culture often refers to the culture, beliefs, and behaviours of the business. Shell often has a positive environment with employees, as their beliefs and values consist of respect, honesty, and integrity. Royal Dutch Shell also makes it a priority to promote trust, teamwork, and professionalism, which is particularly important for a good corporate culture as it is very team oriented. Shell has a great corporate culture as Shell also promotes diversity and inclusion; Shell have done this by accepting people for who they are based on their gender, religion, ethnicity, physicality, and sexual orientation. This also helps Shell as diversity brings ideas and experiences, which helps creativity, which then also benefits the efficiency and productivity for Shell as a company. Shell also has a good corporate culture as it promotes to its employees to work as hard as they can, and they are not scolded when they say no or have a differing opinion to someone else or even sharing innovative ideas, this once again presents inclusion and innovation friendliness and adaptation and finally growth orientation as employees has a right to say and feel much more comfortable in expressing their beliefs. Corporate social responsibility is responsibility amongst all stakeholders. Shell has effective communication amongst stakeholders as it undergoes engagement amongst stakeholders through collaborations. Shell also knows and takes accountability in terms of its destruction and impact on the ecosystem. Shell also takes this responsibility by investing in renewables, such as wind, solar and electrical energy, so they can take more care of the environment, Shell also has projects and plans for better environmental sustainability such as project Pearl GTL which is turning gas to liquids plant and reducing carbon intensity. Shell also asks its stakeholders/employees for feedback on Shell operations.
However, Shell often has negative feedback and response (it has also been portrayed as the “world’s most hated company by newspapers such as the Guardian) due to its consistent problems of oil spillage, which has always created dilemmas for Shell. Such as consistent oil spillage in Nigeria delta, which creates problems for the people of the local area as they can no longer use the rivers they had once used for drinking, swimming, and fishing they cannot use anymore due to the oil spillages and people in the villages must flee as some of the places they live in have to be desolate. 17.5 million litres of oil were spilt in 2014 according to Shell reports. Niger delta is also one of the most polluted areas in the earth, portraying Shell as unethical as they are ruining the environment and climate of the world. The main reason for the oil spill was due to a lack of maintenance. Niger delta, the most important oil region is Africa; is the most polluted, presenting Shell with a negative image because the values Shell say they follow are not being followed. Shell also demonstrates unethical behaviour as it hid the damage of the oil spills and made evident false statements about them so they could end up paying less of a fine, it portrays Shell’s image negatively as they were unethical enough to be dishonest about the length of the oil spillage.
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