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Strategic Challenges Faced by Shell Company in Global Environment

University: University of West London

  • Unit No: 1
  • Level: Post Graduate/University
  • Pages: 21 / Words 5368
  • Paper Type: Assignment
  • Course Code: BUMGT5920
  • Downloads: 736
Question :

This assessment will cover following questions:

  • Shell company is the largest oil company in world. Examine the key factors which drive globalisation.
  • Discuss the strategic complexities associated with operating in a global environment.
  • Analyse how operating in a global market influences structure, culture and functions of the Shell company.
  • Explain the influence of globalisation on organisational decision-making and strategy.
Answer :
Organization Selected : Shell Company


Globalization is process in which companies and government of different countries are trading with each other. It can be said as integration of market in global economies which will increase connections in different countries. Business are affected by global environment which is due to the local and international interactions. Global business environment is environment of different sovereign countries with exogenous factors to home environment or organisation. It will influence decision-making on the resources use and capabilities. Shell company is the largest oil company in world. It was founded in 1912 by Gretchen Watkins. It is regarded as largest oil company and natural gas marketers in America. Organization has expertise in exploration, production, refining a marketing of oil and natural gas as well. Company is operating in 70 countries and around 82000 employees are working in company. It is operating 21 refineries and around 3.7 barrels of oil equivalent. Report is discussing global business environment key factors and drivers which are affecting company. Complexity of strategic challenges which have faced by organisation while operating in global environment is also discussed as well. Influences of globalization on organisation governance will have impact on working of company. Influences of globalization on organisation decision-making process of employees is discussed as well. Routes and key barriers which are affecting company is discussed along with that it will provide knowledge regarding global business environment (Kasemsap, 2018).

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P1) Analyze key factors which drive globalization

Globalization is free movement of good and services in all countries of world. In globalization countries liberalizes their protocols for import and by welcoming foreign direct investment in countries. Globalization have its positive and negative effects which will have impact on company. Shell international energy is planning to work and strengthen the position of company in global Market which will increase value of company. Due to globalization competition is increasing because of new companies are entering in market along with local  companies are also trading in that market which will increase competition. Through entering global market company will incur less cost on products and sell it in market at cheaper rate. These will help company to increase market share and increase sales. Through globalization mergers and joint ventures are increasing because foreign companies are investing in global market which will develop the economics of developing countries. Drivers which are increasing globalization are provided below(Lechner. and Boli, 2020).


Cost is main driver which is increasing globalization because single market of country is limited. Along with entering market organisation will require promotion and advertising of companies in other market. Foreign companies are investing in other economies through which they will gain more profits. Companies are investing in other economies by way of controlling cost which will include overheads, research and development as well. Companies are using alternatives strategies by way of product differentiation which will increase sales. Foreign direct investment is helping develop economies because they are able to trade with foreign companies by way of mergers and joint ventures.


In local country market is different and limited so, by way of globalization market in large and customers will have variety of products and choices. Customers are changing their preferences and attracted towards any type of new technology which will benefit them. There are various factors which will affect customers decision is income, lifestyle and aspirations. In globalization foreign companies can provide their products to customers in any corner of world. In other way local companies can expand their business by way of globalization. Local will be able to sell their products all over the world and it will increase sales of company as well as productivity (Pieterse 2019).


Environment is affected by globalization because it is improving lifestyle of people and bringing innovation in countries. People are buying products of foreign brand which is changing the lifestyle of customers. Companies are preparing products as per need of consumer because consumers have different types of choices and cultures which will increase sales of companies. Shell is engaged in oil refineries which can harm environment. So, company is taking effective measures for protecting environment. It will emphasize on health and safety of people because oil refineries are affecting the environment on large scale.


Technology is beneficial for company because these will have impact on sales of organisation. Due to increase in globalization technology is increasing along with competition is also increasing. Company is trying to fight competition by way of using the latest technology in their products. So, company has started using new technologies in oil refineries which will not harm environment and provide original products to customers. Technology has been made by company or tackling with the problems of environment like low carbon energy along with many more strategies (Pikhart, 2017).


Competition is affecting global environment because many companies are entering market by way of globalization which will increase competition. Competition is affecting globalization process because company is introducing new products in market and also upgrading products as well. Companies are using new technologies for increasing their business and fighting competition in market.

M1) Critically analyze impact that key factors upon the global business environment

There are visors factors which will have impact on the sales of the company. There are global factors which will include legal, political, social, technological, and economic factors. Company is planning to enter the global market and it will have impact because of political environment of country. Shell is using the latest technology but many countries will not have the knowledge of technology which is used by the company in other countries. So, company have to use the technology and look after that technology will not harm people and environment of country. Social factors is also the ma jot factors which will have Impact on the company sales. Country has different cultures and values and beliefs which will have impact on the organization working in global environment (Shageeva, and et.al., 2017).


P2) Explain complexity of strategic challenges faced by organisation in global environment

There are various strategic challenges which have faced by company in global environment.

Communication and technology

Shell is facing one of the biggest problems in communicating with employees regarding operation. Company have started centralized communication system which will hep company to work in effective way. Company has used the latest technology for communicating with employees but employees will face problems relating to the protecting environment. Organization is oil refinery and it has impact on marine life and also environment as well. Organization is taking effective measures for protecting environment and so it will have impact on company brand image (Tallman Luo and Buckley 2018). So, company is using new technologies for protecting environment but it can protect environment at very low cost.

Rising demand and fewer emissions

shell have entered Global market and demand for oil is been increasing but there are fewer emission which will not fulfill demand. Energy demand is rising effectively which is having impact on sales of company. In order to fulfill demand of customers company is building energy systems which will provide them energy. Oil, and petroleum products are extracted by company but these products are decreasing at large level. Excessive use of products is having negative impact on sales of products. These all will have impact on environment and company as well. Fewer emissions is one of the biggest challenge faced by company while trading (Steger 2017).

Energy reforms

Company is gaining huge profits because prices of oil is increasing constantly which will have impact on company. Customers cannot stop buying products but these customers can eliminate the use of the products. The company is building energy reforms for providing more and ore energy to customers which will have impact on company. Increase in price of oils will increase profit margin for company but price need to be decreased because it is having impact on lifestyle of people. So, company is making more and more energy station which will produce more products and it will decrease the price of products. Organization is also looking after reducing emission targets which will have positive impact on company image. Cost of oil is not in control of company and these will have impact on company image (Hamilton and Webster 2018).

Foreign laws and regulations

Foreign laws and regulations will have impact on company sales because company will face problems relating to the laws. Different countries will have different rules and legislation which will have impact on the sales of company. UK will have different rules and other global countries will have different rules regarding oil refineries. Company have to follow these rules and regulation which will help them to work in effective way. Company have to follow rules regarding environment protection and all laws which are applicable on company. Organization have to follow rules regarding employment and labor laws along with it will have to make employees aware about these rules. Every country has different laws and act along with they will also have different penalties for different crimes committed (Eriksen, 2018).

Supply chain

Company have around 82000 employees which are working in organisation. Mangers and employees are facing problems in communicating with suppliers. It will increase the chances of unethical and illegal work done in company. It is big risk for company which with help them to work in effective way. In supply chain employees need to knowledge about company and how its works. In some case employees are exploited, and they are not provided proper facilities in working areas. These unethical behavior can have negative effect on company performance and company brand value as well. Unethical behavior of supplier will lend company in big trouble.

M2) Critically analyse strategic challenges in context of risk and diversification strategies

Strategic challenges which will faced by company in global business environment. The challenges will include risk relating to the energy reforms. Energy is in demand in market so, company have to prepare strategies which will help them in overcoming challenges in effective way. Organization is facing problems relating to the communication and technology as well. Technology is used by the company but the company have to use the technology in protecting the environment. Company is dealing with the problems of protecting the environment and company will have to use environment protection models (Doh Luthans. and Slocum 2016).

D1) Critically evaluate global business environment including opportunities and challenges faced by organisation

Company have opportunities of expanding the business in various countries. It will increase business and sales of company at large scale. Shell will face problems relating to the culture change and change in laws of other countries. Countries will have problems relating to the laws because it is oil refinery and it is dealing with the environment protection laws. Organization have to look after factors that work of company will not pollute the environment of company.  


P3) Evaluate influences of globalization on organisation governance and leadership

Influence of globalization on organisational governance and leadership

Globalization has major impact on organizational governance and leadership. Leaders are one which are managing the work and employees in company (Damarwulan and Farida 2018). Leaders will spread knowledge among employees which are working in an organisation regarding cultural differences and many more. Due to globalization talented employees are hired by company which are working in other countries. These employees are the face of company in that country. Good leaders are one which are solving conflicts among employees and motivating employees in effective way. There are large numbers of employees working in shell and every employee is firm different culture and different areas or country.

Leaders have started looking after employees and solving the conflicts among employees. These have increased organisational governance and many foreign companies are investing in these companies which are providing large number of funds to company. Foreign direct investment is having major impact on company because the com any is not able to enter the market without funds and these funds will be collected by foreign market. Corporate financier are investing in com any because they want to earn more interest on by investing on these companies. Employees nee motivation and in case of company is entering global market the employees are motivated, and they will give their best in their performance (Chasdi, 2017).

Influence of globalization on structure

Organization structure will include organisational departments, functions and how organization is accomplish goals. Organization will not develop its own structure by way of  organizing the work in effective way. Company structure is deciding the performance of company in market. So the company will use these models for identifying the structure and working of company in effective way.

McKinley model

The model has 7 s which are divided into soft skills and hard skills. Hard skill are strategy, structure, systems while in soft skills will include skills, staff, style, shared values. Strategy will include strategy of organization plan for building and maintaining competitive advantage. Structure will focus on the structure of company which is organized. Systems will include daily activities and procedures of staff used by employees while doing the job. Shared values will include core values of company. These can be identified by employees by way of general work ethics which need to be followed by employees. Style will include style of leadership which is used by leader in managing employees of organization. Staff of company will include general employees of company and their general skills and abilities which will affect company in the future (Bedianashvili 2016).   

Influence of globalization on culture and functions

globalization has its impact on company culture and functions. All employees of company are working which will help company to survive in globalization. Organization is under going major type of changes which will have impact on employee performance. Organization culture will change behavior of employees and values of organization. Due to these the employees will not be able to work in effective way. Employees will face problems because of company polices are changing and conflicts will rise between employees. Unethical behavior of employees will have negative impact on company performance.

The organization will imply culture model for overcoming these problems in efficiently. In the Hofstede culture model there are five dimension which will help company to mange culture and functions of employees. In power distance index it will state about extent to which power will be given by the members of organizations and how much it has distributed in organizations. Individualism and collectivism will state about degree to which people in society are integrated. In uncertainty avoidance index it will state about accepting different types of thoughts which will be used by employees in company. In masculinity vs femininity it will state about gender discrimination which must not be done between employee which are working in company. Indulgence vs restraint it will state abut dimension which will be affecting employee performance (Beck 2018).

M3) Critically evaluate global market influences in application to theories and appropriate models

Company will focus on the global market because company is planning to enter the global market. So, organization is using hofstede models for improving the culture of organization. Company can also implement McKinley structure models for improving the structure of organization. Shell is not performing well in market which and also planning to enter the global market which will change the culture and structure of company. So, company can use these models and improve the performance of company and productivity as well. It will increase sales of company and also company will be able to build brand image in market.

D2) Critique strategies which can be adopted by company while operating in global business environment.

Company will use the latest strategies which will improve the performance of company in market. Shell will use mode for improving structure of organization by way of McKinley model which will state about 7 s. It will discuss the structure of organization in detail. Shell can use Hofstede models which will build the strong and positive working environment in company. So, company will use strategies and models which will motivate employees so, that they will improve their performance and give their best (Barac Gammie Howieson and Staden 2016)

P 4 Influences of ethical and sustainable globalisation on organisational functions.

Ethical code to guide sustainable business practices-

In order to increase their level of profit company cuts their cost and take the help of those methods which leads to those practices which are not ethical and not sustainable. For instance exploiting the labour, increasing the level of pollution and manipulate the local government (Kozubikova and et.al., 2019).

Voluntary corporate initiatives-

Shell is loosing the trust of public which is influencing the shift in profit in a negative manner. This industry deals with the factor of transparency which results in negative image from public and lead on to maintain the level of difficulty between the public and the company. This step will help the company to take an initiative which is more towards the side of sustainable level and will lead the company to a right path. There are many factors which breaks the trust between the employees of Shell and their consumers such as corruption or violation of laws (Barr, and et.al., 2018).  

Promotion of unsustainable corporation-

Promotion of unsustainable resources were promoted by the companies and now they are blamed for it. Companies such as Shell serves in the industry of providing energy which considers profit as their aim. They focus on increasing their sales on a global level and find a way to reach to a wider area.

Accountability of unsustainable consumption-

Shell operates on a wide level and they are under the scrutiny of violating the rights of human which influences the regulations and agreement made by government. Company is under a lot of pressure to support the approach of sustainable development in ethical manner.

Reaching the people-

Demand for the information of sustainable development is on a high level. Shell presents the information in such way which captures the attention, interest of people. Shell must communicate to people in such a way by which they can make them aware how they are affected (Deasy and et.al.,  2016).

Good governance-

In order to reflect the values, ethics and prioritize the company they need to maintain the governance on national as well as international levels. By this way Shell can improve their operations and participate in making it more transparent for the public so that they can serve their operations with justice and make it more efficient.

P5 Evaluate the different ways decision making can work effectively in a global context.

Define what decision is making

Royal Dutch Shell in order to successfully establish their market share globally, they have made decision that to power progress together with more and cleaner energy solutions. Company is engaged in making use of resources effectively so that sustainability aspects can be addressed. They are involved in increasing quality of their services so that their operational performance rises. Company has made the decision that they will enhance the safety requirements, security and performance of their assets. This decision will assist company in growing and achieving their goals and objectives.

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Briefly state the importance of decision making

This decision which is been taken by Royal Dutch shell is very important as this will help them in increasing their operational efficiency. Providing safe and secure environment to workers globally can assist them in creating employee’s loyalty, it will also reduce employee turnover in firm. Also effective utilization of resources can assist them in reducing the waste. In order to establish globally Shell has also implemented various waste management strategy so that their operational performance can be raised. This decision will help firm in getting competitive advantage.

Methods of decision-making

Delphi method

This is one of the most important decision-making method which Royal Dutch shell can use in order to make the effective decisions regarding their operations. In this method, the questionnaire is generally sent to the members of group where members are required to provide their feedback regarding various aspects. For example- In order to enhance its safety as well as security system, Royal Dutch shell can prepare the questionnaire for employees to receive their feedback and have effective decision (Ma and et.al.,2018).


This is the another important and remarkable decision-making technique which plays an essential role in helping the organizations to take an effective decision for employees and organization. In this method, each and every employee are usually encouraged to present their innovative ideas. In this, basically the leaders present specific problems on which members are required to state their opinions. This method can be used by Royal Dutch shell and thus fill help them to devise new ways of utilizing resources effectively (Ishizaka and Siraj, 2018).


This is the another less used yet highly significant decision-making technique wherein the group members are generally required to present their opinion regarding certain issue. In this method, employees are generally required to raise their hands in relation to solution of problem and thus majority of votes decides what action to take. Royal Dutch Shell for example can decide that what way will help them to increase their operational efficiency by the votes given by the employees on each strategy (Wittmer, 2019).

Nominal technique

This is the another decision-making technique which can be used by Royal Dutch Shell in which members are allowed to state their views for problem on paper. The views are then gathered and hence discussed. Later on, the employees ranks these opinions on the preset scale that have numbers from one to five. This technique will help Royal Dutch Shell to take effective decision by having a pool of ideas from which they can select the best.

Decision tree

This is an important mathematical tool which allows the organizations to take reliable and effective decisions. The decision tree assists the organizations with different courses of the action as well as possible outcomes along with risks associated. This method will assist Royal Dutch Shell to follow the optimum and efficient path which will bring favourable outcomes if risks are being taken (Ishizaka and Siraj, 2018).


The various decision-making methods have their own advantages as well as disadvantages which affects the decision-making process. Like the biggest advantage of all these methods is that all these techniques helps the organizations to have a great pool of ideas as well as opinions from which the firms can select the best one which will help them to achieve competitive advantage. On the other hand, the biggest disadvantage of for example Delphi method is that it is somewhat time-consuming and does not provide quick feedback when organizations have to take instant decisions. Besides this, the biggest disadvantage of nominal method for example is that there is no flexibility because in this, organizations can only deal with single problem at a time (Ma and et.al.,2018).

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P6) Five ways to enter Global Market

Company can make use of various methods in order to enter global market, this includes the following:

Franchising: Franchising is based on a marketing concept which can be adopted by an organization as a strategy for business expansion. Where implemented, a franchisor licenses its know-how, procedures, intellectual property, use of its business model, brand, and rights to sell its branded products and services to a franchisee. Royal Dutch Shell can make use of this technique to enter the market. In this technique the responsibility can be shared by other person to whom Franchisee is being given. When company is making use of Franchising it has lower rate of failure, as all the task and responsibility is being performed by other individual. It can assist firm in establishing their market in global area. It will help firm in growing and assists in achieving their goals and objectives firmly. There are also some disadvantages which are being faced by company when they are Franchising, like for example ownership will be transferred by them that can create chaos between franchiser and Franchisee. Other problem that can be faced by company is that franchisee fee can be expensive that can increase operational cost (Fabus, 2018).

Joint Venture: Royal Dutch Shell in order to enter global market can also make use of Joint Venture. Like they can combine with any other firm which has already been established in global market. This mode of entry will be really easy for them; it also reduces the market entry risk which is attached. It can also increase goodwill of firm. Company can also have engaged in exploring large amount of resources and opportunities that is beneficial for their growth. They can also share risk with their partner (Kasemsap, 2016). More new technology can be used in this.

Merger: In order to enter the new market company can also make use of merger, they can merge with any international company and make it into one. In this they can have benefits of technology, resources and even human resource. Royal Dutch Shell can expand their market share by merging with any existing firm. They can also bring new and innovative ideas together so that their goals and objectives can be achieved. Also when merging with some other company, Shell needs to motivate employees as there might occur chances that work environment can get hamper because of it.

Licensing: In this Royal Dutch Shell can engage in giving some of the rights to other company in international market to deliver and make their products. This can reduce the burden of licensor to look upon the activities going in host company. It can assist firm in expanding their market in international market. This can also reduce political risk, as the organization is usually locally owned. Company will not need to engage in doing market research as needs and demands of consumers will be known by Licensee. It can help them in expanding quickly. Less risk is associated with licensing (Peracek, Noskova and Mucha, 2017).

Strategic alliance: It can be defined as type of cooperative agreements between different firms. If Royal Dutch shell is engaged in strategically aligning with any other firm, they can share technology. In this firm can increase their financial capabilities. They can also have benefit of skilled lab our that is being employed in different firm. This can increase the performance of organization. It can help them in growing and achieving their goals and objectives. It can also help them in exploring new opportunities. Strength can be gain by firm while aligning with one another (Benmamoun and et.al., 2016).

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M4 Key barriers

Increased Competition-

There is a lot of competition in the market and to make their operations on an international level they need to consider all the factors which can help the company to survive the competition.

Marketing and Customer Loyalty-

This barrier is the most strongest among all as company needs an effective marketing so that they can promote their products and increase the networking of the business. It is necessary to increase the reach of the business but it is difficult when it is concerned on an international level. Apart from this companies such as Shell has a strong customer base in the market but when it comes to expanding the operations of the business and achieve growth in new markets this factor is the most important because if the company is not able to generate loyal customers then they will not be able to get repeated sales (Wittmer,  2019).

Borrowing of cash and management of resources-

In order to meet the requirement of capital this is considered as the most important aspect and if this factor is in the form of receivables then the company won't be able to survive in the market. If the company don't have enough of this resource then they won't be able to market their business on an international level.

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From the above report it has been concluded that the global business environment which is having impact on the company. There are various factors which are having negative impact on company like no use of technology and not identifying the challenges in effective way. Technology is must for the company because company is dealing in oil refineries and gas related products. These products are need to be extracted form the land and it will have negative impact on the environment. So, company have to use the latest technology for protecting environment and increasing sales as well. These will also increase productivity as well. There are key drivers of globalization which are increasing the competition in global market. Globalization is increasing and due to that competition is increasing as well. Technology, cost and competition are the key drivers of globalization. These all will have impact on the global business environment as well.

Hence forth company will also face challenge because of the entering the global Market. Company can use the latest strategies for working in effective way and protecting the environment. There are various complexities of strategic challenge which will be faced by company in effective way. These challenges are energy reform because energy is in demand and company is not able to fulfill the energy on the large scale. So, company is taking effective measures for fulfilling the need of the customers. The ethical issues and unethical issues have been discussed in report. Company is also looking after the route for entering the market which can be classified as direct exporting, joint ventures, foreign direct investment and partnership as well. It will help company to enter the market. It will help them to overcome the barrier of the organisation. Report will provide the knowledge regarding global business environment.


  • Barac, K., Gammie, E., Howieson, B. and Staden, M.V., 2016. The capability and competency requirements of auditors in today's complex global business environment.
  • Barr, T.L., and et.al., 2018. Development of indigenous enterprise in a contemporary business environment–the Ngāi Tahu Ahikā approach. Journal of Enterprising Communities: People and Places in the Global Economy.
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