The oil industry works with one of the most expensive commodities in the world, and it includes a few large companies. Royal Dutch Shell is among them, being the top producer of this resource globally. The company has a long development history that implies a few modes of entry in the international market. In the beginning, Shell (n.d.) dealt with exporting oil by supertankers in the 20th century. However, this strategy was time-consuming and brought significant environmental concerns, which made the business look for additional ways of international expansion. The acquisition entry mode became a suitable option because of potential benefits. According to Cai and Karasawa-Ohtashiro (2018), the acquisition is a profitable entry mode. Its advantage is that a company gains immediate access to a new market. Simultaneously, the entry mode is expensive and risky, but Shell completed a few successful acquisitions that contributed to its development. For example, it refers to the purchase of the BG Group in 2015 (Shell, n.d.). This information means that the business profitably deals with the given entry mode.
The peer’s discussion post admits that the oil industry implies restrictions and embargoes that limit this resource’s production and sales. These measures are usually driven by geopolitical reasons, as in the case of an oil embargo that was introduced by Saudi Arabia in 1973 following Israel’s support by European nations. Such a state of affairs contributed to the fact that Shell focused on acquisitions. It refers to the fact that the company expands and gets a larger market share. As a result, Shell can produce and sell oil in sufficient volumes, witnessing decent benefits. Furthermore, a larger market portion is profitable for the given company because Shell is protected against unexpected fluctuations in oil prices and demand that can be caused by multiple phenomena.
References
Cai, D., & Karasawa-Ohtashiro, Y. (2018). Greenfield, merger and acquisition, or export? Regulating the entry of multinational enterprises to a host-country market. International Review of Economics & Finance, 56, 397-407.
Shell. (n.d.). Our company history. Web.