1) Identify and assess the main features of the Royal Dutch Shell Group’s approach to strategic management in 2000. Use your findings to critically evaluate the view that the group is “a prisoner of its own illustrious history” (Case p, 22), as risk of losing its leading position in the global petroleum industry. In your view, writing as if you were an analyst using the module theory to assess the situation in 2000, how could the group improve its strategy?
International joint ventures are some of the most complex units to manage due to their expanded outset that cuts across various economic, cultural, political, and social systems in their areas of operations. Effectiveness in most of them has therefore remained a key paradox mostly due to the fast changing nature of the environments they operate in. This essay provides an intrinsic exploration of the Royal Dutch Shell Group as one of the world biggest and largest venture to generate important aspects on effectiveness for managing the paradox of competition.
Importance of assessment and responsiveness to the market
One of the most evident aspects that came out from the Royal Dutch Shell Group in the case study was its poor assessment ability and responsiveness to the market demand and its forces. Grant (2008, p. 121-122) indicates that the main restructuring came as a result of the new forces in the market that indeed threatened its position as the world largest petroleum company. Therefore, the management appears to have greatly relaxed in generating a clear responsive force to address the changes that emerged in the petroleum industry after 1970. As other companies assimilated key strategies to counter the emerging forces, it was not until 2000 that Royal Dutch Shell Group realized that its position was threatened (Grant, 2008, p. 121-122). As Porter’s five forces model indicate effective assessment of the market forces generates the needed urgency for addressing new demands in the market.
Notably, assessment of organizations and generation of the need for clear responsiveness acts as a key cultural enrichment unit in the management by providing a platform for change. Grant indicates that emergence of the new market forces especially the national oils and unstable prices prompted the need for greater emphasis on decentralization of decision making to the business unit levels and shifting of organization’s structures (2008, p.128). It was this responsiveness that made Royal Dutch Shell Group competitors emerge with key forces that threatened its global ‘giant’ rated position.
Essence of transformational leadership in an organization
Management as David et al (2002, pp. 61-62) indicate, should be effectively prepared to guide their organizations in achieving their key objectives. Transformational leadership acts as recipe for change in the highly dynamic global market. Since its formation, the management of the Royal Dutch Shell Group failed to generate the critical need for change to address new challenges in the market. Therefore, the management failed to consider the external forces of the market that that gave new market entrants a chance of gathering the needed momentum and emerge as forces in the petroleum industry. Due to its highly decentralized structure, it was hard to create an effective transformational leadership for the group. Gomez-Mejia, David and Robert (2008, p. 74) argue that international joint ventures must have leaders that are able to integrate new ideologies towards devising mechanisms of defeating their competitors. Following the realization that Royal Dutch Shell Group was at the height of losing its international market, the chairman of the Committee of Managing Directors and his successor, Moody-Stuart initiated key transformations that sought to centralize over 200 companies (Grant, 2008, p. 122).
The role of learning in an organization management
Competition encountered by multinationals is usually highly dynamic and therefore demands effective learning to generate new ideologies for countering it (Hyder and Ghauri, 2000, p. 210-212). Managers of different multinationals must therefore generate a culture of continued improvement where even the best system is reviewed for possible improvements. According to Grant (2008, p. 123), the formation of Royal Dutch Shell Group failed to invoke the need for higher levels of learning. As a result, the ready market characterized by low competition created the perception that they were indeed on the right track. However, this rigidness gave the competitors an easy route-path in devising mechanisms for emerging as new powers in the petroleum industry (Grant, 2008, p. 128). While emphasizing on the role played by learning in international joint ventures, Delloitte Consulting (2005, pp. 35-36) indicate that it creates the need for empowering the different units in promoting greater creativity and innovation.
Importance of integration and effective structuring
According to Porter’s five forces model, the strength of an organization is very critical in addressing the competing forces in the market (Carr, 2004, pp. 65-67). Therefore, organizations’ management should consider mergers as an important notion towards generating new control while creating the resources base for improvement. Following the management of the Royal Dutch Shell Company parent companies realization that there was market for their products, they sought to consolidate their individual resources to concur the market. As a result, it easily became the world largest petroleum company.
Diagram 2: Porter’s five forces
(Michael, 2008, p. 52)
However, it is critical that joint ventures employ the correct structures that generate the needed response to the market forces if they have to maintain the needed lead. Notably, the structure should create a strong sense of centrality in planning on a top down approach while emphasizing effective identity for the lower level managers (Gomez-Mejia et al, 2008, p. 79). Grant (2008, p. 121) indicates that Royal Dutch Shell Group restructuring was largely driven by the need to articulate a top-down approach in its management as a key factor in addressing new forces in the market.
Royal Dutch Shell Group as the largest joint international venture came out as an important unit for managers to learn from. Particularly, importance of assessment and responsiveness to the market, essence of transformational leadership, and the role of learning in organization management were brought out. Finally, importance of integration and effective structuring was also emphasized.
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Diagram 1: Diamond model (Laurie, 2007, p. 75)
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Diagram ii: Porter’s five forces (Michael, 2008, p. 52)