First of all, it is necessary to define and understand the significance of a transnational corporation, as well as to identify the features that qualify Shell as a transnational corporation. A multinational corporation envisions as a commercial enterprise that supports direct investment abroad and supports value-added holdings in more than one country (Shah et al. 2012: 29).
Royal Dutch Shell has more than twelve major subsidiaries around the world, with operations in more than ninety countries around the world, making it a multinational corporation.
Royal Dutch Shell, commonly known as Shell, is a large vertically integrated oil and gas energy company specializing in all activities in the energy sector, from oil and gas production to transportation and distribution of fuels and lubricants to consumers.
Royal Dutch Shell is a British-Dutch energy company headquartered in The Hague, The Netherlands. Shell’s history dates back to the early 90s when it was first founded in February 1907 in London, UK.
Since its inception, Shell has undergone many structural changes in its organizational structure and in its operations.
It was formed from the merger of two competing firms: Shell Transport and Trading Company and Royal Dutch Petroleum Company.
Despite the fact that the two companies merged, Shell operated as a dual-listed firm, which means that while they operated as a single entity, the two companies chose to maintain their individual identities legally and decided to have separate listings on the stock exchange (Colm, 2013). It wasn’t until 2005 that Shell decided to end its operations as a unified capital structure.
Its main subsidiaries include Shell Hong Kong, Shell Australia, Shell South Africa, Shell Canada and Shell Egypt.
Shell is vertically integrated, which means that it is responsible for its operations from producing gases and oils to refining, shipping and ultimately selling fuels and lubricants to consumers. Zhang (2013: 1) defines vertical integration as “the degree to which a firm controls the production of its inputs or supplies and controls its products or finished goods.”
Thus, Shell, as a vertically integrated lubrication business, is active at all stages of its operations. user (Peter, 2012).
Shell’s motivation to go international is focused on one main goal; which must establish itself and establish itself as a renowned leader in the energy sector around the world, with a competitive edge in its ability to meet the growing energy needs of consumers. This is the main reason that pushed Shell to enter the international market.
Moreover, like any other multinational company, Shell seeks to reap the benefits of working for a multinational company. Thus, establishing itself as a global sector in the energy sector means gaining more market share, which in turn will lead to increased revenues, and the other benefit is in the sharing of risks through diversification. This is because working as an MNC allows Shell to spread risk by investing in different countries around the world, with each country specializing in a specific area of the manufacturing process; it is beneficial to Shell in the sense that if one country is not doing well, it is can be offset by operations carried out in another country, which distribute risks (Screekumar, 2013).
Another example of Shell’s decision to go international was pressure from competitors like British Petroleum. This is because in this era, when the world functions as a global market, it essentially means that the level of provision of products and services is measured globally; and nothing less will be enough. This put strong pressure on Royal Dutch Shell to expand internationally to become competitive in the energy sector.
Other reasons Shell has chosen to go international is to benefit from the economies of scale and low production costs in some countries in oil production and refining (Colm, 2013).
In 1833, Marcus Samuel decided to expand his London business. He decided to sell oriental shells and began to import them from the Far East. The import of oriental shells laid the foundation for an export-import business that eventually became a well-known energy company today. Then in 1880 the business was expanded by his sons Marcus the Younger and Samuel, who became interested in the oil trade.
The company’s first oil tanker sailed through the Suez Canal in 1892. Moreover, post-war expansion began in 1946 when Shell launched new exploration programs in Africa and South America after the war. The company later opened refineries in the UK. The company’s very first commercially viable well was drilled in Mexico in 1947. New oil discoveries have been made in the Niger Delta and Borneo. Commercial oil production in Nigeria began in 1958 and has grown rapidly since then; expands its activities around the world (Screekumar, 2013).
Shell’s main problems can be categorized as finance, contracting and procurement. When it comes to financial transparency, Shell discloses the amount of money it pays the government to extract natural resources so the public knows how much the government gets to extract natural oils and gases. Financial disclosures are subject to US or European jurisdiction.
Most companies, in particular those involved in the protection of financial information, such as Shell, fall under this jurisdiction, so they face the challenge of financial disclosure in their efforts to reduce corruption (Screekumar, 2013). As for piracy, these are attacks and robberies of oil ships at sea. Shell faces a jurisdictional issue as pirates caught outside of its jurisdiction cannot be prosecuted.
In addition, when entering the international market, Shell also faced contracting and procurement. Shell contracts are time-consuming and wasteful of management and legal entities. Shell has over 100,000 different contracts in over 100 different jurisdictions because it has to negotiate different terms and prices for the same products in different geographic locations.
Other challenges Shell faces are operational, including oil theft, attacks on oil infrastructure, pipeline vandalism, fires, security concerns, financial stability and many more. For example, Shell lost more than 100,000 barrels in the second quarter during its operations in Nigeria due to oil thefts and vandalism. Shell, in partnership with Saudi Armco, faced a pesky fire in June.
Royal Dutch Shell debuted on the Fortune Global 500 in 2013 and was declared the fifth largest company in the world by revenue in 2018. Moreover, Shell is the largest company in Europe, significantly behind its main competitors British Petroleum in terms of revenue by 22%. As if it were, Shell is listed at 484,489 billion US dollars (Zhang, 2013).
In addition, Shell is currently ranked among the first in the ranking of securities in the London Stock Exchange, New York Stock Exchange and stock exchanges in euros. This shows to what extent Shell has succeeded in establishing itself as a recognized world leader in the energy sector, because the numbers bear witness to it;
Shell is investing heavily in technology, especially in oil and gas processing, because it is constantly looking for new ways to improve its operations to minimize costs and maximize its performance, allowing them to outperform their competitors such as British Petroleum and Total. For example, in 2009 Shell invested a huge $ 1.2 billion in technology development for its operations (Colm, 2013).
Moreover, Shell has benefited from the first mover advantage, which simply means that Shell was able to successfully enter new markets in foreign countries ahead of its competitors; this allows Shell to acquire significant market share, build rapport between Shell and their customers, and establish itself as the number one company in the energy sector in the minds of consumers.
Thus, the first mover advantage has given Shell a competitive advantage in the sense that it is now recognized as the brand of choice worldwide as the number one company in the oil and energy sector.
In addition, Shell invests in the development of new projects aimed at meeting the needs of continuous consumers. growing demand for energy, while competitors such as Total are focusing primarily on their core products and services, giving Shell a competitive edge.
In terms of financial performance, Shell posted $ 484,489 billion in 2018, while its main competitor British Petroleum recorded $ 396,183 billion, indicating that Shell has outperformed its competitors (Screekumar, 2013).
“Marketing can be defined as the process of transferring goods through commercial channels from producer to consumer.” (Brunswick, 2014: 106). Shell’s success depends on its ability to leverage strategic alliances and partnerships to market its products. This is Shell and Ferrari’s Formula 1 partnership. It benefits Shell in two ways, in the sense that Formula 1 provides Shell with the most suitable environment for developing and testing their fuels and lubricants, as well as working with Ferrari. … Ferrari is a premium car brand and Shell also uses its TV, Internet and magazine commercials to sell a wide range of products around the world.
Shell stimulates the work environment for its employees by implementing team development programs that consist of regular seminars, team building programs and workshops. Shell also uses group discussions, case studies or hands-on exercises to achieve its goals (Zhang, 2013).
In addition, Shell provides training and development opportunities. Shell assists students in completing an individual development plan with the help of mentors. They also provide students with competency-based challenges that help them discover their strengths, work on their weaknesses, and develop their skills. In addition, Shell provides on-the-job training opportunities that improve work skills, efficiency and employee productivity.
Shell’s core business is geological interpretation and risk management. Geological interpretation simply means deciding where to drill and this is a very good geological company. Shell has an average of about 50-75% drilling success, which gives the company 5 times the oil per dollar it spends on oil exploration. Shell is constantly finding more oil to prevent a final recession, and this is one of the reasons Shell has been able to maintain its global position as the world leader in the energy sector (Brunswick, 2014).
In addition, from a risk management perspective, Shell knows how to keep the company safe from a range of dry wells other than smaller oil companies.
Risk management is a vital key to any successful company. Shell is also considered an integrated company.
Thus, it can withstand heavy losses without being destroyed. Shell also understands that its cumulative exposure to risk can therefore withstand big losses / bad days through significant investment in advanced technology and R&D that has minimal chance of risk.
Thanks to its many advantages, internationalization can offer an enterprise perspective with great growth prospects. However, internationalization also presents many functional and regulatory challenges. It is important for multinationals in Europe and beyond to continually formulate business strategies, adapt them to these different business environments in countries, and revise them to overcome the operational, structural regulatory and regulatory challenges associated with internationalization. … Of course, Shell was able to state this successfully, so she was able to establish herself as a world leader in the energy sector.