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Module: Corporate Management in Action


Course: PG Diploma in Business Management (ABP Level 7)
Institute: Essex college of Management and IT
Submitted To: Dr.Andrew Boocock
Submitted By: Muhammad Husnain






April, 2011


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Declaration of own work



I verify that the artifacts and narratives included in this report were
produced by me alone. In the event that any artifact was produced as
a result of a collaborated activity with others, a statement is attached
indicating my contributions to the work. Additionally, I realize it is my
responsibility to appropriately cite all resources, used Regardless of
how the resources were pictures, images and tests obtained. This
Includes, but is not limited to this statement is signed as a verification
of my professionalism as a student and my academic honesty. Should I
violate the academic dishonesty policy, ECMIT reserves the right to
refuse to grant me the credentials and/or assign a failing grade in the
course.

Signature of Student:
Student ID:
Subject:
Submission Date:
_________________________
_________________________
_________________________
_________________________





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Table of contents

S. No Topics Page No.
1 Acknowledgement 5
2 Executive summary 6
3 Companys Slogan 7
4 Goal of Shell 7
5 Product Mix 8
6 Product line
I. Fuel
II. lubricants
8
7 Product life cycle
I. product life cycle stages
II. introduction stage
III. growth stage
IV. maturity stage
V. decline stage
8-9
8 Pricing
I. Strategies of pricing
II. Market skimming price
III. Market penetration price
9-10
9 Target market 10
10 Market targeting 11
11 Market segmentation
i. Demographic segmentation
ii. Geographic segmentation
11
12 Level of market segmentation
i. Mass market
ii. Positioning
12
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13 The BCG Matrix
i. Stars
ii. Cash cows
iii. Question Marks
iv. dogs
12-13
14 The SWOT Analysis
i. Strength
ii. Weakness
iii. opportunities
13
15 Environmental Analysis
i. External environment
ii. Political forces
iii. Economic forces
iv. Socio-cultural forces
v. Technological forces
vi. Internal Environment
14-15
16 The change process in SHELL 15
17 Organizational Resources
i. Human resource
ii. Hard and Soft system
iii. The training and education
16-17
18 Financial Performance
i. Sale analysis
ii. Stock performance
iii. Profitability Analysis
17-18
19 Competitor Analysis
i. Pakistan State Oil
18
20 references 20
21 Appendices 21
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Acknowledgement

I dedicate this work to my great parents who put lot of
efforts in my success the whole life. I thank to my Allah
Almighty who enabled me to do all this and thanks to
the ABP and Essex College of Management and IT.
Secondly I thank my teacher
Dr.Andrew Boocock who taught and guided me through
to the end of the course.


Muhammad Husnain








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Executive Summary
Shell ls u better-quullty brund nume wlth more thun 100 yeurs hlstory ln thls reglon, lnfect
the compuny ls stlll ln ownershlp of u fuel storuge tunk from 1899. However, the
documented hlstory of the Royul Dutch/shell group the Indo-Puk subcontlnent dutes buck to
1903 when u purtnershlp wus struck between the shell trunsporter und trudlng compuny und
the Royul Dutch petroleum compuny to supply petroleum products ln Aslu.

Wlth thelr key lndlcutors of progress ulreudy hlgh-celllnged to new helghts, Shell ls
commltted to dedlcute ull lts energles, resources und the tlme to brlng hlgher vulue und
fulflllment to thelr customers, employees und shureholders.

The gruph of Shell ls golng up every yeur. The rutlo of proflt ls lncreuslng ut good proflt.
Shell ls servlng the people ut hlgh level of stundurd by golng uccordlng to the wlshes of the
customers.
Shell has an over 100 years presence in the Subcontinent













The Shell trade name enjoys a 100-year history in this part of the world, dating back to 1899
when Asiatic Petroleum, the far eastern marketing arm of two companies: Shell Transport
Company and Royal Dutch Petroleum Company began importing kerosene oil from Azerbaijan
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into the subcontinent. Even today, the legacy of the past is visible in a storage tank carrying the
date - 1898.

The recognized history of Royal Dutch Shell plc in Indo-Pakistan subcontinent dates back to
1903 when partnership was strike between The Shell Transport & Trading Company and the
Royal Dutch Petroleum Company to supply petroleum to Asia.
In 1928, to improve their distribution capabilities, the marketing interest of Royal Dutch Shell
plc and the Burmah Oil Company Limited in India were amalgamated and Burmah Shell Oil
Storage & Distribution Company of India was born. After the independence of Pakistan in 1947,
the name was changed to the Burmah Shell Oil giving out Company of Pakistan. In 1970, when
51% of the shareholding was transferred to Pakistani investors, the name of changed to
Pakistan Burmah Shell (PBS) Limited. The Shell and the Burmah Groups retained the remaining
49% in equal propositions. In February of 1993, as economic liberalization began to take root
and the Burmah divested from PBS, Shell Petroleum stepped into raise its stake to 51%. The
years 2001-2 have seen the Shell Petroleum Company in succession increasing its share, with
the Group now having a 76% stake in Shell Pakistan Ltd (SPL) - an expression of confidence.


Companys Slogan

You can be sure of Shell


Goal of Shell

The goal of the company is to position itself as the preferred oil company in Pakistan, leading
the field in its commitment to safety, customer service, quality and environmental protection.



Product Mix

Product mix is the set of all the products offered for sale by a company.
The structure of product mix has both width and depth. Its breadth is measured by the number
of product line approved and its depth by the variety of sizes, colors and models offered within
each product line. Thus the two main products which Shell Pak. offers are fuel and lubricants.
These have further classifications in a variety of constituents which form the product line.

Product line:
Shell has two product lines namely, fuel and lubricants.
Fuel:
Shell offers a wide range of fuel. These are:
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Hi-Octane
Super Unleaded
Super
Hi-speed Diesel
CNG
Lubricants:
The various lubricants offered by Shell are:
Rimula C
Rimula D
Rimula X
Helix Plus
Helix Super
Helix Standard
Shell Helix(CNG)


Product Life Cycle


Product Life Cycle Stages:
Product Life cycle means the changes in the sales volume of the product over the life the
product. In market there is always ups and downs are nearby because this is a self-motivated
world. Everything will have to finish after definite time period, by finishing their life, so the life
cycle of Shell is.

We differentiate a product as anything that is capable of fulfilling customer needs. This
definition includes both physical products e.g. Cars, Washing machines, DVD players as well as
services e.g. insurance, banking, private health care. Business should manage their products
suspiciously over time to ensure that they deliver products that continue to meet customer
wants. The process of managing groups of brands and product lines is called portfolio planning.
The stages during which individual products develop over time are called Product Life Cycle.
The classic product life cycle has four stages.

Introduction Stage:
At the beginning stage market size and growth is slight. It is possible that considerable research
and development cost have been incurred in getting the product to this stage. In addition,
marketing costs may be high in order to test the market, go through launch advertising and set
up distribution channels. It is highly improbable that companies will make profits on products at
the beginning stage. Products at this stage have to be carefully monitored to ensure that they
start to rise. Otherwise the best option may be to leave or end the product.

Growth Stage:
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The growth stage is characterized by quick growth in sales and profits. Profits start due to an
increase in output [economies of sales] and possibly better prices. At this stage, its cheaper for
business to inset in increasing their market share as well as enjoying the overall growth of the
market. Accordingly, major promotional resources are traditionally invested in products that
are firmly in the growth stage. Shell Pakistan beginning stage is successfully done because it
comes from the international market and enters in Pakistan market. Now company has about
40-45.5% of market share and still rising.

Maturity Stage:
The expansion stage is perhaps the most common stage; it is in this stage that competition is
most zealous as companies fight to maintain their market share. Here both marketing and
finance becomes key activities. Marketing spend has to be monitored carefully, since any
significant moves are likely to be copied by competitors. The maturity stage is the time when
most profit is earned by the market as a whole. Shell Pakistan not yet enters in maturity stage.

Decline Stage:
In the decline stage the market is reducing the overall amount of profit that can be shared
amongst the remaining competitors. At this stage great care has to be taken to manage the
product carefully. It may be possible to take out some production cost, to transfer production
to cheaper facility, sell the product into other cheaper marketplace. Care should be taken to
control the amount of stocks of the product. Shell Pakistan is a brand name and company is not
in decline stage because their sales increase day by day.

Pricing

Price is the amount of money for which a product is presented in the market. The amount of
money charged for the product of services of sum of the value that purchaser exchange for the
regulars exchange for the remuneration for having or using the product of services price is only
which brings revenue in the market, so it plays a significant role in the market.

Strategies of Pricing:
There are two types of strategies present in marketing.
y Market skimming price
y Market penetration price

Market skimming price:
This is high price settings for a new product to skim maximum profits layer by layer from the
segments willing to pay the high price the company makes favor but more profitable sales
marketer prefer to this type of price strategies because there is every product that comes in the
market will have to go out from the market every product that comes in the market will have to
go out from the market every product have its limited life and after spending certain period of
time product leave from the market like the computer software program that comes in the
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market has the time period of 6 or 3 months in the past but now there is soft ware programs
that have limited life period of eighteen days, and after eighteen days there strategy because
there point of view is that product have to go out from the market then they comes up with
high prices to earn profit that minimizes the cost that spends when it was made and finally out
of the market.

Market penetration price:
Settings a low price for a new product in order to attract a large number of buyers and large
market shares. Companies also adopt this strategy when they enter in the market. Shell
Pakistan limited also comes up with the penetration strategy because it is an international
market and they just want to enter this market now this company enjoying the high profit and
continuums in the product life cycle.

Target Market

A target market is the market segment which a particular product is marketed to. It is often
defined by age, gender socio-economic grouping.

Targeting strategies is the selection of the customers u wish to service. Including;
How many segments to targets
Which segment to target
How many product to offer
Which product to offer in which segments

There are three steps to targeting:

y Market quality
y Target choice
y Product positioning

Targeting strategy decision is influenced by:

y Market maturity
y Diversity of buyers need
y The companies size
y Strength of the competition
y The volume of sales requires for profitability


Market Targeting

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It is the process of evaluating each market segments attractiveness and selecting one or more
segments to enter. Market targeting depends upon the financial positioning of company. If
company is strong financially then he must go for market targeting. Shell in Pakistan produces
verities of products. All these products are available urban as well as rural area.

Market Segmentation

Market is the processing which dividing a market in to distinct group of buyers on the basis of
needs characteristics or behave who might requires separate products or marketing mixing.
Market consist of buyers and buyers differs in one or more ways they may differing their wants,
resources, locations, buying attitude and buying practice.
Shell Pakistan ltd. Divide his market in to following segments:

y Demographic segmentation
y Geographic segmentation
y Psychographic segmentation

Demographic Segmentation:
Demographic segmentation is dividing the market in to groups based on demographic variables
such as:

y Age
y Gender Education
y Income
y Family size
y Occupation
y Social class
Shell introduces their product for upper class, upper middle class and middle class. In other
words shell produces its products for everyone who have automobile.

Geographic segmentation:
Geographic segmentation is dividing the market in to different geographical units such as.
y Region
y Density
y Cities

This is all about the segmentation of shell. Shell provides facilities of petroleum to urban as well
as rural areas. Segmentation basically depends upon
Population of that area
y Living standards of people

Levels of Market Segmentation
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There are three levels of market segmentations
y Mass marketing
y Segment marketing
y Niche marketing

Mass Marketing:
Shell Pakistan limited go for the mass marketing because its distribution is very extensive.
Internationally its products are goes into international market.

Positioning:
The process of arranging of product to occupy clear distinct and desirable place related to
competing products in the minds of target consumer. Shell Pakistan companies lies its growth
stage in the market and enjoys 65% shares. Now gradually with the increase of growth rate is
expands its products line and also its distributions.


The BCG Matrix

The business portfolio is the collection of business and products that make up a company. The
best portfolio is the one that fits the companys strengths and helps to exploit the most
attractive opportunities.
The company must:
y Analyze its current business portfolios and decide which should need more or less
investment.
y Develop growth strategies for adding new products and businesses to the portfolio while,
at the same time, deciding which products and businesses should no longer be retained.
An SBU is a unit of the company that has a separate mission statement and objectives and
that can be planned independently from the other businesses. An SBU can be a company
division, a product line or individual brands.

Stars:
Stars are high growth businesses competing in the market. Often they need heavy investment
to sustain their growth.

Cash Cows:
Cash cows are low growth businesses with relatively high market share. These are mature
successful businesses with relatively little need for investment.
Question Marks:
These are the SBUs with low market share but which operate in higher growth market.

Dogs:
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Dogs refer to businesses that have relatively low share in unattractive low growth markets.
Organizations prefer to divest from dogs.

Shell in BCG Matrix

We put Shell in Stars in the BCG Matrix because shell has a good market share and it has the
opportunities to grow more.

The SWOT Analysis

SWOT stands for Strengths, Weaknesses, and Opportunities &Threats. In which, Strengths and
weaknesses are related with internal environment of the organization and opportunities and
threats are related with external environment of the organization.

Strengths:
Shell strengths mean what are the positive points of the organization. The strengths of shell
Pakistan Ltd are:

y The managers regard their sub ordinates.
y Main focus of the organization to increase their customers.
y Managers use participative approach.
y Their employees are highly motivated.
y They hire local employees.
y No clash with GOVT. or any agency.
y They care about the hygienic factor.
y Shell is using effective means for the promotion of its products.
y Shell provides in time deliver to their petrol pumps.
y Incentive based policies for motivating employees.
y Shell has international Standard petrol pumps.
y Mobile training units keep the staff up-to-date.

Weaknesses:

y They are not offering any package to their regular customers.
y They are not offering any bonus package scheme.
y Shell has eight regional retail managers. They are insufficient to handle the problems.
y They have no proper shades and sitting arrangement at the filling stations.
y There is no proper drainage system at filling station.

Opportunities:

y Shell is an international company so it should introduce packages.
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y Company has an opportunity to give special packages to its employees.
y Company has opportunity to install more CNG as well as petrol pumps in rural areas of
Pakistan.

Threats:
Threats are actually competitors.
y PSO and CALTEX improvement.
y Installation of stations by TOTAL.
y The smuggling of petrol in Baluchistan from Iran.
y Entry of new companies in the refinery sector.

Environmental Analysis

External Environment:
For the analysis of external environment following are important factors (PEST).

y Political forces
y Economic forces
y Socio cultural forces
y Technological forces

Political forces:
In Pakistan there are rapid changes of Government since poison. Each government that came in
power condemned the planning work done by the precious government. The slow development
due to political instability but now the preset government is very stable to grow because govt.
is providing incentives to different industries.

Economic forces:
In Pakistan GNP is 5.41 and inflation rate is very high which is 12.7. The balance of payment
position in Pakistan is -3.5%. The employment rate is 34.94 million.

Socio-cultural forces:
In Pakistan population is increasing and social values are also changing so the demand of fuel
consumption is also increasing. People are coming from rural areas to cities and their motor
cycle for traveling.
Pakistans attempt to raise the living standards of its citizens has meant that economic
development has largely taken precedence over environmental issues.

Technological forces:
Pakistan environment regarding the technology is not very advance due to the lack of
resources. Natural gas, because of its environmental qualities, efficiency, and technological
advances are going to play an increasingly important role in meeting demand for clean energy.
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Internal Environment:
y Customer
y Supplier
y Labor component
y Competitors

Customer:
Our customer is high class, low class and also middle class, because every class is used petrol for
consumption.

Supplier:
Our suppliers are Pakistan refinery, National refinery and Attock refinery and Dhodak refinery.

Labor component:
Labor is frequently available in Pakistan because of high unemployment rate. Skilled and
unskilled persons are available at lower wages.

Competitors:
Major competitors of Shell are PSO with petrol pumps and Caltex with petrol pumps. But shell
Pakistan limited operates in the petroleum refinery sector. Shell Pakistan limited also competes
with three other petroleum refiners in Asia


The Change Process in SHELL:
Shell brought some necessary changes the organizational objectives the worked on invocation
to introduce HR system, improved the services to win the customers loyalty as the business has
been globalized. The shell really trained to be customers focus who are the real drivers of the
business to improve their business in the globe. ( The detailed change process can be studied in
the appendices)



Organizational Resources

Shell has established 1404 petrol filing station in different areas of Pakistan. But now the
company is trying to reduce the number of petrol filing station because they do not need that
filing station, whose monthly sales are less than 500000 liters. Up till now about 50 pumps are
renovated in different cities of Pakistan.

Number of Depots in Pakistan:
Shell has got 14 depots in different areas of Pakistan.
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Types of Resources:

1) Marketing
2) Financial
3) Research and Development
4) Human Resource
5) Operation
6) Information System


Human Resources:
Shell provides the training facilities to their labor and management to create the good relation
to their employees. Shell Company also motives its employees and provides different incentive
on their good performance.

Hard and soft system:
Human resource management is a path way towords business progress as well as human as it is
very necessary part of any organization. It has two major parts hard system methodology (HSM)
and soft system methodology (SSM) both the function are two main pillar of the organization.

Hard system:
Hard system deals with the procedure, rules and regulations and mechanical system of the
organization. It is rather instrumental technical and procedural. It deals with basic function and
recruitment and selections system of the organization as well.

Recruitment and selection:
Recruitment and selection plays very crucial role in the organization it is directly related with
human beings. It follows some strict rules while hiring employees. It relatively believes in the
very true statement Right person for Right job here following the tough system the people
have to go through a procedure that brings out perfect intellectual capital.

Soft system:
Soft system (SSM) deals with tapping into human capital through this system the employees are
given necessary training. This system believes in utilizing the human intellectual capital in a
right way. It shows deep concerns about human psychology, human needs and their fulfillment.
In the system the employees problem and their solution are dealt with.

The training and education:
SSM actually emphasiss the necessary training of employees after they have been hired.
Through this system the employees are trained and educated according to their job description
so that they could meet the challenges to achieve the organizational targets.

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Cultural training:
Human resource management is very keen to type into intellectual capital the is human brain,
as the business world has been out starched across the world therefore lot of people are
needed to be hired to perform as the part of the organization helping achieve the
organizational objectives. So the employees need some cultural training to know the
psychology of the customer need, their satisfaction level and cultural demand of the area.
Therefore soft system methodology works here.

Operation:
Operation of the company is based on continues improvement is the acknowledgement that
workers experience and knowledge can help to shoe production problem and contribute
towards tightening variances and reducing error.

Information System:
Shell design and manage high-class information system that improves the productivity and
decision-making. In organization information may be collected, stored and synthesized in such
manner that answers important operational and strategic questions.
Information system is one of the strength of the organization. It provide aid in environmental
scanning and in controlling activities, it can also used as a weapon in gaining competitive
advantage.

Financial Performance

Sales Analysis:
Shell Pakistan Limited reported sales of 63.63 billion Pakistan rupees for the fiscal year ending
June of 2001. This represents an increase of 76.2%, versus 2000.When the companys sales
were 36.12 billion Pakistan rupees.

During2001, the companys sales increased at a faster rate than all three comparable
companies. While shell Pakistan limited enjoyed a sales increase of 76.2% the other companies
saw smaller increases; Chennai Petroleum Corporation Limited sales were up 29.1%, National
Refinery Limited increased 15.9%, and Mangalore Refinery & Petrochemical Limited
experienced a sales decline of 6.3%. Shell Pakistan Limited currently has 608 employees with
sales of 63.63 billion Pakistan Rupees.

Stock Performance:

In recent years, this stock has performed terribly. In fiscal year 2000 the stock traded as high as
367.50 Pakistan rupees. During the past 13 weeks the stock has fallen 803%.
During the 12 months ending 30/06/01, earnings per share totaled 30.12 Pakistan rupees per
share. Thus, the price/Earnings ratio is 5.48. Earnings per share fell 18.7% in 2001 from
2000.The Companys price to book ratio is higher than that of all three comparable companies,
which are trading between 0.25 and 0.97 times book value.
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Profitability Analysis:

On the 63.63 billion Pakistan rupees in sales reported by the company in 2001, the cost of
goods sold totaled 44.75 billion Pakistan rupees, or 70.3% of sales. This gross profit margin is
significantly better then the company achieved in 2005, when cost of goods sold totaled 91.1%
of sales.
Shell Pakistan Ltds 2001 gross profit margin of 29.7% was better than all three companies.


Competitor Analysis

Shell Pakistan Limited Operates in the Petroleum refining sector. This Analysis compares shell
Pakistan Limited with three other petroleum refiners in Asia.

Pakistan State Oil:
The past of PSO dates back to mid-70s when the Government of Pakistan amalgamated three
Oil Marketing Companies: Esso Eastern, Pakistan National Oil (PNO) and Dawood Petroleum
as part of its Nationalization Plan.
The company is the only public sector entity in Pakistan that has been competing effectively
with three multinationals (Shell, Caltex and Total). PSO is currently enjoying over 73% share of
Black Oil market and 59% share of White Oil market.

It is engaged in import, storage, distribution and marketing of various petroleum products
including mogas, high speed diesel (HSD), fuel oil, jet fuel, kerosene, liquefied petroleum gas
(LPG), compressed natural gas (CNG) and petrochemicals. PSO also enjoys around 35% market
participation in lubricants and is blending/marketing Castrol brands, in addition to a wide array
of its own. It is considered as one of the most successful mergers in the history of Pakistan. The
company has retail coverage of over 3,800 outlets, representing 80% participation in total
industry network. The company has been the winner of Karachi Stock Exchange Top
Companies Award for many years and is a member of World Economic Forum.
PSO serves a wide range of customers throughout Pakistan including retail, industrial, aviation,
and marine and government/defense sectors. PSO has been meeting the countrys fuel needs
by merging sound business sense with national obligation.
The Government of Pakistan (GOP) holds approximately 54% stake in Pakistan State Oil
Company Limited (PSO), including both direct holdings of the Federal Government and
indirect holdings through GOP owned institutions. The GOP is in the advanced stages of
divesting 51% of the in PSO to a strategic investor.

Bench mark
Equities research analysts at The Benchmark Company Downgraded shares of Royal Dutch Shell
plc (ADR) (RDS.A) to a Sell rating in a research note released to investors today.
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Royal Dutch Petroleum Company owns 60% of the Royal Dutch/Shell Group of companies.
These companies are involved in all phases of the petroleum industry from exploration to final
processing and delivery. Royal Dutch Petroleum Company has not operations of its own, and
virtually the whole of its income is derived from its 60% interest.
Shares of Royal Dutch Shell plc (ADR) (RDS.A) are trading up 0.63% as of 4:03PM EDT, hitting
73.50. Royal Dutch Shell plc (ADR) has a 52 week low of 49.16 and a 52 week high of 73.85. The
companies last released earnings were 6.55 per share. were The company has a market cap of
and a price-to-earnings ratio of 11.19.






















References:

www.blackwellpublishing.com/grant/docs/07Shell.pdf - Similar

Armstrong, M. (2006) A hand book of Human Resource Management Practice, UK, Cambridge
University Press, p. 03, 53
Durai (2010) Human Resource Management, India, Pearson Education, p. 36
Johnson, G., Scholes, K. & Whittington, R. (2008) Exploring corporate strategy: text & cases,
UK, Pearson Education, p. 06
20

Harder, B. T. (1994) Management training and developmental programs, USA, Transportation
Research Board, p. 15
Menon, A. et al. (1999). "Antecedents and Consequences of Marketing Strategy Making".
Journal of Marketing (American Marketing Association) 63 (2): 1840. doi:10.2307/1251943.
JSTOR 1251943.
J. Scott Armstrong (1982). "The Value of Formal Planning for Strategic Decisions". Strategic
Management Journal 3 (3): 197211

















Appendices:

Within Shell, proponents of organizational change, including the heads of several of the
Operating companies, the finance function, and Group Planning, had had little success in
Persuading the Committee of Managing Directors of the need for large-scale change. In May
1993, Cor Herkstroter took over as Chairman of the CMD. A Dutch accountant, who had spent
his entire career at Shell, Herkstroter was an unlikely pioneer of change. Fellow executives
Described him as a private, Old World personality without much charisma, and with a
preference
For written communication. Nevertheless, Herkstroter was widely respected for his intelligence
and courage. Hes Shells Gorbachev, said Philip Mirvis, a consultant working with Noel
Tichy at Shell
.5 Faced with growing evidence of suboptimal financial performance and an over-complex,
inward-looking organizational structure, Herkstroter called a meeting of Shells 50 top
managers
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at Hartwell House, an English country manor, in May 1994. The meeting was a shock for the
CMD.
The corporate center was castigated for taking months to approve
operating company budgets and for the general laxness of financial controls. E&P coordinator
Robert Sprague tossed a blank transparency onto the overhead projector and commented, I
dont know what to report, this issue is really a mess. The meeting had a powerful impact on
the CMD: We were bureaucratic, inward looking, complacent, self-satisfied, arrogant,
observed then-Vice Chairman John Jennings. We tolerated our own underperformance. We
were technocratic and insufficiently entrepreneurial. The outcome was the appointment of
a high-level team to study Shells internal organization and come up with options for redesign.
The team, set up in July 1994, was headed by Ernst van Mourik-Broekman, the head of HR,
together with Basil South from Group Planning, Group Treasurer Stephen Hodge, an executive
from Shell France, and the head of Shells gas business in the Netherlands.
During October and November, a series of workshops were conducted, mainly in London, to
explore in greater detail the specific dimensions of
change and to clarify and evaluate the available options. Each workshop team provided input
on a specific area of change. The results of this exercise were written up towards the end of
November, and a report was submitted to CMD which identified the areas for change and the
options.
During December 1994, the team spent two away days with the CMD to identify the
objects of change and how the different options related to these. The result was a blueprint
which the team wrote up mid-December. After six or seven drafts, the report was approved by
CMD during the weekend of Christmas
The driving force:
The driving force behind the redesign was the desire to have a simpler structure in which the
reporting relationships would be clearer and thus to allow the corporate center to exert more
effective influence and control over the operating companies. A simpler structure would help
eliminate some of the cost and inertia of the head office bureaucracies that had built up around
Shells elaborating committee system. For Shell, achieving integration between the different
businesses within a country or within a region was less important than achieving integration
within a business across different countries and regions.
The Downfall of Shell caused the Change:
Two totally unexpected events only increased the internal momentum for change. While Shell
faulted itself on its ability to produce a return on capital to meet the levels
of its most efficient competitors, in managing health, safety, and the environment and in
responding to the broader expectations of society, it considered itself the leader of the pack.
Consumer boycotts of Shell products resulted in massive sales losses, especially in
Germany. Within a few months, Shell was forced into an embarrassing reversal of its decision.
Again, Shell was found to be flat-footed and inept at managing its public relations over the
incident.
The change:
The handling of the Brent Spar and Nigerian incidents convinced many that Shells top
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Management was both unresponsive and out of touch. We had to take a good look at
ourselves and say, Have we got it right? said Mark Moody-Stuart, then a Managing Director.
Previously if you went to your golf club or church and said, I work for Shell, youd get a
Warm glow in some parts of the world that changed a bit.

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