Analysis of the challenges facing the merger of the Royal Dutch Petroleum Company and Shell Transport and Trading, and recommendations on how these should be confronted
The merger faced many challenges ranging from political to economical which made the management distort the company’s core values and objectives. The areas of business operation were marred with violence which affected the smooth running of the businesses as well as other social-environmental works such as community development. The management team was viewed as incompetent since they fostered a poor management approach characterized by a lack of transparency in business deals betraying good relations between the business and stakeholders. However, the merger of the two companies led to the change in management structure, whereby the company was now under a single-board structure (Litvak, 2009, pp 149-161).
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Clashes amongst the communities within the Niger Delta affected the merger since employees of the company were some of the victims of the warring communities. The company faced major challenges when the civil rights movement ganged against them to protest Shell’s support to dictatorship rule in Nigeria. Civil rights personalities from various groups termed as friends of the earth attacked the company’s premises complaining of their disregard for the effects of environmental pollution (Mortished, 2005). The Shell group was also forced out of major operational territories such as Ogoniland in the year 19993 due to uncontrolled threats to their employees as well as contractors. At some point local organizations, ethnic leaders, politicians and guerrilla leaders ganged up against Shell owing to pollution rates it caused Niger Delta communities (Litvak, 2009, pp 151-154).
The above challenges could well be handled through the adoption of principles that will foster unity in the diverse community and religious differences. The government with the help of international bodies should ensure provision and enforcement of adequate security organs for the purposes of protecting its citizens, public and private investors.
Discussion on what has made Shell’s operations in Nigeria more at risk and simultaneously more valuable
Shell operations in Nigeria became more at risk due to prevailing violence amongst communities and religious groups. The company also faced protests from environmental rights organizations due to what they termed as Shell’s environmental irresponsibility. A larger percentage of Nigeria’s population lived in abject poverty making it difficult for the company to obtain skillful workers from the community.
They relied heavily on expatriates for the major company positions which looked a bit expensive based on maintenance issues. On the positive side, Shell enjoyed high revenue collection since Nigeria’s economy depended heavily on the oil sector. The country’s richness in oil and gas resources makes the company more valuable owing to its ability to extract these minerals to finished products (Litvak, 2009, p160). The company operations were based on the group’s business principles of honesty, integrity and respect for humanity (Litvak, 2009, pp 149-161).
The ever-shifting coalitions amongst the community and religious groups affected the smooth operation of Shell businesses within the country. This is since every group demanded opportunities that seek to advance their own selfish ambitions at the expense of peaceful coexistence with other groups (Mortished, 2005). Uncertainties caused by power vacuums allowed defilement of law and legal order-making revenue collection to be more at risk since their valuation could not be accurately established (Litvak, 2009, pp153-154).
Examination on the implications of the economic system found in Nigeria and an explanation on the political risks that Shell faces in this country
Shell Company faces the political risk of lawlessness. The Nigerian economic system is characterized by bribery, corruption and insecurity. Such an economic system promotes social irresponsibility amongst multinational companies since it proves more costly to be honest under such environments. Recognized economic behavior defying such vices within such an environment would make the company lose business since the force of shareholder value promotes the violation of integral business ethical standards. Lack of business integrity has made it easier for individual employees to siphon off finances set aside for the purposes of community development (Litvak, 2009, pp 149-161).
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The corrupt economic system has thence led to rising fuel prices which have since triggered labor unrest within the country. The rising fuel prices had negative impacts on company businesses as well as the Nigerian economy since the majority of civil servants threatened not to work (Samuelson and Solow, 1990). Clashes between the government forces and ethnic militias forced workers to migrate from the affected areas and this affected oil production rates on a daily basis. The nature of disputes and conflicts led to wholesale unemployment amongst the nationals leading to such community uprising as that experienced amongst the Kula people (Litvak, 2009, pp 149-161).
The influence of government on Shell’s Nigerian investments, operations, and a future stake in the oil industry
The government’s role provides a very important aspect within any industry in Nigeria including the oil industry. Since Nigeria is Africa’s largest oil producer and amongst the top list in the world, government intervention would ensure appropriate laws reinforcing good international relations with trading partners such as the United States and European countries. Promotion of peace amongst the warring communities within the Niger Delta region would secure shell’s confidence on security matters hence invest heavily within the regions they had deserted owing to lack of laborers who also feared for their lives.
The government would also ensure legislation of laws safeguarding sustainable development which would ensure workable environmental regulations. This would ensure peace between Shell, friends of the earth and the affected communities. Ultimately the trust would enable Shell to gain lots of ground within the community for expansion purposes. Enforcement of the law would enable Shell and other companies to operate with integrity since vices such as corruption/bribery would have been tackled within the offices hence a country with people of integrity.
Explanation of the underlying assumptions, observations, and recommendations Benjamin Aaron should include in his final brief
Some of the assumptions to be included are considerably based on companies and the Nigerian government’s strategic planning principles. This since for growth and development to be realized in any business entity crucial principles and objectives have to be clearly stated. Management and execution of duties within oil and gas fields based on business ethical principles are necessary for the achievement of goals. Stability in economic, political and social activities demands the creation of unity based on integral rules of law within the society. This would enable good governance and management of resources hence saving the country lots of losses through unjustifiable violence (Visco, 2000).
Multinational companies such as Shell should always focus on internal strengths which could be of great assistance in dealing with strange environments such as the oil industry in Nigeria. This is because it is easier to establish an organization’s future in relation to the current status. In most instances, the organization’s strengths are determined based on the nature of the country’s economy, the environment of operation, available skills and expertise as well as the organization’s principles and objectives. Merging external principles with native cultural beliefs is also one of the crucial issues which should be addressed by any multinational company with the aim of investing in foreign economies (Visco, 2000).
Litvak, A. (2009). Royal Dutch Shell in Nigeria: Operating in a Fragile State. Ivey Publishers: London.
Mortished, C. (2005). Shell’s woes mount as it admits cost overturns and delays. Times Online. Web.
Samuelson, P. & Solow, R. (1990). The Analytics of Anti-Inflationary Policy. American Economic Review, (5), 177-194.
Visco, I. (2000). Global Economic Integration: Opportunities and Challenges. The Economist, (2), 1-12.