Royal Dutch Shell- (RDS) Essay
Q1. Discuss Hofstede’s cultural dimensions and how they impact Royal Dutch Shell in doing business abroad. Define culture: “culture is shared, learned values, norms of behaviour, means of communication and other outward expressions which distinguish one group of people from another”, or the collective programming of the human mind Main two theorists in Culture- Hofstede as the main and Trompenaars relational dimensions Dimensions are: Power distance, Individualism, Masculinity / Femininity, Uncertainty avoidance, Long term orientation Internal Cultural issues exist between the Netherlands and the UK.
UK is high on Individualism and Masculinity; therefore the UK counterparts will be driven by competition, individual achievement and individual success. They do not rely on others for success or consensus. Netherlands is high on Individualism and low on Masculinity, somewhat higher on Uncertainty avoidance than the UK, meaning they will be slower to take a risk than their UK counterparts and will plan to avoid any uncertainty. The Netherlands and the UK score low on Long Term Orientation, meaning they both hold great respect for tradition and history.The management structure of each is indicative of the culture of both companies origin. Q2. Identify and discuss any political risks facing Royal Dutch Shell? Political Risk is defined as;” the exposure to potential loss or adverse effects on company operations or profit caused by political/legal developments in that country” There are three types of “political risk’”- Operational, Ownership and Transfer Niger- Operational Risk through “production disruption”Feeding ground of grey Whales, moving pipes through NGO pressure no doubt environmentalists Sakhalin- Ownership risk: Russian Government claiming 50% stake in the business when they realise their profits were being eroded leaving RDS with only a 25% stake.
They could do this because Oil is a factor endowment and the government control access to it. They are more powerful in this case than RDS Niger- Transfer Risk in repatriating profits out as quickly as possible leading to poor localisation and leading to criminal activity in the local area. Key Actors here; NGO’s / Special Interest Groups, Lobbying groups, GovernmentQ3. Identify 3 issues where globalisation has impacted Royal Dutch Shell global operations? Drivers of Globalisation – Market v’s Production Localisation-No Corporate Social Responsibility (CSR) strategy implemented here, leaving local area in Niger still very poor, transferring/repatriating of 100% profits after exploiting of Factor endowment Environmental- feeding ground of grey whales, how particular species can be endangered due to exploitation by MNC’s of natural resources. Governments and lobbying power where a factor endowment is involved. No reinvestment in the local area in Niger will lead to political risk.