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The Royal Dutch Shell PLC
The energy market is an ever booming and ever evolving one in many countries. The impact that energy fuel has on the varying economies of the world is to a large extent due to the fact that OIL and any other fossil fuel is regarded as one of the most precious commodities of this planet which determines fluctuations in currencies, economies, political systems, and prices of all other commodities: basic or otherwise luxurious, as it is one of the main component of production. In this paper, I will be looking at the Shell organisation in the UK. This report will cover some major economic contribution factors of that organisation to the UK economy and give an economic point of view of how the organisation operates, its conduct and performance. I will provide an in-depth analysis of its market structure, its operations, the degree and type of competition it faces and the type of competitive advantages it may offer. I will do so by using economic tools and doing a constant comparative analysis where appropriate of Shell and its competitors.
History: As brief as possible
The Royal Dutch/ Shell Group of Companies was formed in February 1907 when the Royal Dutch Petroleum company merged with the Shell Transport and Trading Company ltd. The terms of the merger gave 60% of the new Group to the Dutch arm and 40% to the British. Royal Dutch/Shell is the worlds second-largest oil company by revenue, Europes largest energy group and a major player in the petrochemical industry and the solar energy business.
Shell has six core businesses: Exploration and Production, Gas and Power, Downstream, Chemicals, Renewables, and Trading/Shipping, and operates in more than 140 countries.
OPERATION: SHELL
Known to many millions of people throughout the world as Shell, the named company is one of the worlds main distributors of crude oil and gas and other such fuel that relates to burning energy. In the UK, Shell delivers a majority of the energy that is used by the British. But Shells contribution is not only limited to fuel, but also contributes enormously towards the British Economy through employment, tax revenues as well as investments. Shell boasts the only oil refinery in the UK . Shell U.K. has a number of sub companies which are specialised in various fields of the petrol industry. Amongst these companies are the Shell U.K. Oil Products Limited, which deals mainly with processing crude oil into transportation fuels, lubricants, heating and fuel oils, liquefied petroleum gas and bitumen as well as the responsible for the refining and marketing of the said fuel. Amongst its oil products are Shell Ultra Low Sulphur Petrol, Shell Diesel, Shell Diesel Extra, Auto gas and the newly introduced Shell V-power. Then there is the second important sub company: Shell Chemicals U.K. Limited which is specialised in the manufacturing of Petroleum chemical derivatives which are in use in the daily lives of any consumer- e.g. solvents including alcohol, ethers, aromatic solvents, paraffin, and acetone and so on. They are also responsible for making other chemicals such as detergent alcohols, aromatics, glycols such as brake fluids, and the list is endless. Shell has specialised offices with people providing high-profile consultancy to petrol-chemical and other processing industries provided by the Shell Global Solutions Companies. For the purpose of this assignment, we are going to look at Shell U.K. Oil Products Limited and its competitors within the same field.
The Stanlow Manufacturing complex is the not Shells only oil and chemical production company but Britains ONLY oil and chemical production company. It is based in Manchester ship Canal near Ellesmere Port in Cheshire . It employs about 800 people and produces one sixth of Britains Petrol. Stanlows distribution is mainly via road (50%) and pipeline (30%). Twenty percent of the products leave via the Manchester Ship canal. With its wide range of products, Shell has a very huge number of target markets as one can imagine. Shell has products for three types of markets: 1) Motorists, 2) Businesses and 3) Home. Each one of these market are not mutually exclusive which means that a person using Shell as fuel for his car can also be using it at work in the form of Gas for Central heating purposes and/or as cooking gas in the home. In a nutshell, one can say that Shell has caught 3 birds with one stone. Again restricting our criteria, we are going to focus on the Motorists Market.
THE ECONOMIC IMPACT OF THE SHELL OIL PRODUCTS LIMITED ON THE MOTORIST MARKET IN UK.
Shell Oil Products Limited has strategised to provide the UK motorists with products to meet all their needs whilst being on the road. Their services include not only the Shell products but other services such as car wash, car care, and loyalty schemes all available at the Shell stations. The motorists market employs approximately 8,000 people and indirectly supports 80,000 jobs.
Table 1 gives us an overview of the Energy industries contribution to the UK economy in year ending June 2006. According to the brief, the Energy industries account for
135, 900 direct employment within the Energy market. The impact of the Energy Industries on the economy is so important in a number of aspects and I am going to provide an analysis of those aspects pertaining to Shell. The main Shell competitor is BP- British Petroleum with an annual turnover of $262 million (Year 2005) worldwide. According to some researchers, UK crude oil and gas supply remains a major industry for the economy. Capital investment by the sector in 1997 accounted for 16% of total industrial investment.
TABLE 1
Shell Plc UK employs more than 8,000 people directly. The main Shell competition in the UK is BP who employs 96,200 people. Below Table 2 has a break down of the trend in employment in the Energy sector. As we can note, there has been a net decline from the 1990s onwards in the field of Oil and Gas extraction, Gas production and refining processes.
One asks ourselves, then in such a rude and tough market, how do two giants in the Oil production market differentiate themselves.
Defining the Structure of The Market
Using