Hi, need to submit a 2500 words paper on the topic Business Strategy of Shell Group. When Shell has diversified into other businesses, such as petrochemicals and renewable energy, the former is a natural extension of its involvement in oil, while forays into renewable energy forms are quite negligible to the company’s overall investment and assets pie. And yet, Shell by starting to invest in cleaner, non-hydrocarbon energy will be one with among with first mover advantage, in terms of technology and know-how should the time come when such energy forms become affordable for the market, and thus, profitable, for the company. Today, Shell, operating in 140 countries, with revenues of US$318.8 billion in 2006 makes it the third biggest multinational corporation in the world and with profits of US$26 billion, the second most profitable – has stuck to its main business of exploration of oil and gas, that serves the downstream sector of the industry, including its own operations in production, processing, transportation and marketing (Royal Dutch Shell, Wikipedia entry, 2007). Shell’s total oil market share as of 2004 stood at 11.6% and which in combination with those of other oil majors such as ExxonMobil, BP (British Petroleum), TFE (TotalFinaElf) and Chevron Texaco control almost 60% of the world’s oil and gas markets (The Energy Insider, July14, 2004). The group seeks to capitalize on what it calls its current business strategy of “more upstream and profitable downstream” which basically sees that it would continue to look for and pursue sources of gas and oil all over the world while it considers the demand side covered by the growing appetite for oil by the developing countries, especially Asia Pacific (Shell.com 2007). .Honed by 100 years of experience in oil and gas exploration, with its technological expertise, Shell’s viability on both ends of the supply chain remains due very much to the continuing demand for energy. This is the reason why Shell, despite the giant mergers that occurred in the oil industry remains very much profitable. Since oil, a fuel whose sources could be depleted anytime and only found only in certain parts of the world – its supply has been subject to political forces that companies engaged in oil production naturally must build economies of scale to recover high costs of investment. At the end of the supply chain, markets are expanding in developing economies especially China which has only begun its manufacturing stage of development in which oil and gas are necessary fuels. Thus for a corporation with an international scope of operation like Shell, vertical integration remains a viable strategy. In recent decades, however, the Shell Group responded to the changes in the industry by focusing to maintain its foothold on the upstream, while downstream operations were relatively restructured to give way to a focus on core competencies. . The Shell Group’s unshakeable and steady hold on the upstream portion of the petroleum industry despite the changes in the oil industry was due largely to its supplier strength and its ability to negotiate the terms of potential barriers to entry.
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