Introduction
For the success of any business enterprise, it is important to implement effective marketing strategies. Accordingly, as marketing plan helps an organisation to explicitly define its products and services, as well as its potential and existing customers. A marketing plan provides the mission statement to which a company subscribes, in addition to providing its marketing strategies in countering competition. A company is also in apposition to forecast its budgetary activities into the future using a marketing plan. More importantly, a marketing plan enhances the marketing efforts of a company. The research paper shall examine the marketing plan for Royal Dutch Shell plc, a multinational company involved in the exploration, production, transportation and marketing of gas and oil products.
Company overview
Royal-Dutch/Shell Plc is a holding that owned jointly by the Royal Dutch Petroleum Company and The Shell Transport and Trading Company PLC, a company based in the United Kingdom, on a 60 to 40 percent basis. Royal Dutch Shell plc lists on both Euronext Amsterdam and the London Stock Exchange. This conglomeration is composed of operating subsidiaries, namely Shell Petroleum Inc., Shell Petroleum NV, and Shell Petroleum (UK) Ltd (Luiten, van Jonker & Howarth, 2007 p. 34).
Shell International is responsible for managing these three companies globally, along with their operating subsidiaries. Exxon Mobil only exceeds the oil and gas reserves under the ownership of Royal Dutch Shell (âOur historyâ, n. d. p. 1). The company commands a global reserve for oil and gas estimated at 10.9 billion barrels of oil equivalent. Nigeria, Oman, the UK, and the US are the leading producers of the crude oil that Royal Dutch Oil owns. The company has also diversified its investments. For instance, Royal Dutch Shell plc is currently involved in a project that entails use of oil sands for purposes of bitumen extraction. The bitumen so extracted is
The project, dubbed Athabasca Project finds use in the manufacturing process of what is called synthetic crude oil. With operations in more than 140 countries, Royal Dutch Shell has over 45,000 gas stations worldwide under its management, in essence making it the world’s largest retail fuel network (Royal Dutch Shell plc, 2008 p. 1). Royal Dutch Shell plc is also involved in the production of refined chemicals and products. This is in addition to the processing and transportation of natural gas. Moreover, the company has interest in gas and electricity trading. The latest project that Royal Dutch Shell is involved in is entails renewable energy sources.. Royal Dutch Oil is also committed to the exploration for oil reserves. The company is always on the lookout for oil reserves to help it meet its production strategies.
In 2007, Royal Dutch Oil acquired a 22 percent controlling stake in Shell Canada. The company has already invested $ 2.6 billion in various offshore projects, and is in the process of investing a further $ 12 billion towards offshore projects (Red Orbit, 2009 p. 2). In 2009, Fortune listed Royal Dutch Shell as the largest corporation in the world (Fortune Global 500, 2009 par. 1). On the other hand, Forbes listed this company as the second largest in the world, in the same year (Forbes.com, 2009 p. 1). The Hague, Netherlands, is the headquarters of Royal Dutch Shell, although the company also has its registered office in London, UK, at the Shell Centre (Investor Centre, 2009 p. 1).
Although oil exploration, processing, production as well as marketing of hydrocarbons are the core business activities of Royal Dutch Shell, the company is also significantly involved in the business of petrochemicals. With the global demand for oil projected to increase in the years to come, and as the natural oil reserves diminish, there is a need for Oil Company to source for alternatives to fossil fuels. On its part, Royal Dutch Shell plc has embarked on the development of an embryonic sector that seeks to harness renewable energy.
Mission statement
âThe aim of the Shell Group is to meet the energy needs of society, in ways that are economically, socially, and environmentally viable, now and in the futureâ (Boston College Center for Work and Family, n. d. par. 1).
Financial summary
In 2008, Royal Dutch Shell realized an income of $26.5 billion. Of this amount, $ 20.2 billion was from exploration and production, an increase of 38 percent compared with 2007. There was an 11 percent increase for dividends that the company paid top its shareholders, compared to 2007. Furthermore, the company realized an 18.3 percent rate of return on the amount of capital employed. Moreover, there was a 27 percent increase in net cash due to operating activities, to a value of $ 43.9 billion (Royal Dutch Shell plc, 2008 p. 8).
Nonetheless, the company anticipates the current harsh economic conditions to go on as 2010 approaches. The earning for the company in 2008 reduced by 17 percent compared with those realized in 2007, when Royal Dutch Shell realized a 21 percent increase in its earnings, compared with those made in 2006. This decrease in earnings is an indication of the declining oil prices in 2008 (Royal Dutch Shell plc annual review and summary financial statements, 2008 p. 6).royal Dutch Shell plc
Marketing objectives and strategy
Royal Dutch Shell plc ranks the maintenance of sustainable and safe operations as a top priority. Further, the company believes that the fundamentals of supply and demand for gas and oil are long-term; this in essence acts as an enhancement of a positive climate for investment by Shell. Following the position of the organisation to address both downstream as well as upstream heartlands, Royal Dutch Shell Plc intends to enhance shareholder value in the long-term by employing long-term investments.
The ambitious capital-spending programme focuses on upstream heartlands, and this has resulted in the construction of a one million boe/d and 6.5 mtpa of LNG capacity. In addition, Royal Dutch Shell Plc measures its growth in terms of the capital it has employed. Royal Dutch Shell plc has invested in its downstream heartlands. The intention is for the company to realise growth in its petrochemicals Strong capital discipline appears to be the strategy of Shell, along with integration across the company, and industry-leading investment in technology (Royal Dutch Shell plc, 2008 p. 5).
By 2008, Shell had 3.2 million boe/d of oil and gas production upstream in 38 countries. As a result, the company managed to generate some of the highest margins in the industry, notwithstanding the impact of the global economic crisis. Projections are that the global deposits for natural fossil fuels are declining at the rate of 5 percent every year. The entails various technology themes, and these include tight gas, LNG, heavy oil, GTL, and traditional plays. There are new Shell positions under construction now, expected to offset the decline in natural heartlands fields currently being witnessed in the world today (Royal Dutch Shell plc, 2008 p. 6).
The aim is for the company to deliver growth within the oil industry in the next decade. The downstream strategy that Shell ahs adopted is mainly concerned with the oil reserve founds in the Middle East as well as the Asian Pacific regions. The strategy also encompasses other oil reserves in the United States and Europe. The downstream strategy has enabled Shell to enhance its market for oil products.
As the demand for Shell products increase, the company has had to build additional refining capacities to counter the demand for oil. For example, now, the company is building oil refinery plants in Singapore, the United States and Qatar. Because of these investments, the expectation is that the refining capacity for Royal Dutch Shell plc shall increase by 7 percent by 2012, compared with the 3.9 b/d capacity that the company realised at the end of 2008.
Assumptions
- Royal Dutch Shell will continue to witness increased growth globally.
- Oil prices will stabilize in coming years.
- There shall be an increase in demand for oil in the developing countries, especially India and China.
- Political stability will continue to improve in such war-torn areas as the Niger Delta where Royal Dutch Shell has oil fields.
- Natural disasters, such as terrorism and the weather, will not affect the supply of crude oil and oil products.
Marketing Audit
SWOT analysis
PEST analysis
A three-year budget forecast for Royal Dutch Shell
Competitors
In the oil industry, Royal Dutch Shell plc faces stiff competition from a number of other companies with a global reach. They include Exxon Mobil, B. P. plc, and Chevron (Corporate watch, 2009 par. 4).
BP plc
As a global energy company, BP plc is ranked as the largest corporation in the UK and fourth largest in the world. The company has interests in the exploration of oil and natural gas, in addition to the marketing of petroleum products. Also, BP plc lists on the LSE (London Stock Exchange), thereby ranking it amongst the countries that make the FTSE 100 Index (Meyer & Brysac, 2008 p. 33).
Chevron Corporation
The California-based energy company has operations in over 180 countries. Its activities are in the gas and oil sector, and they include exploration, processing, refining, transpiration and marketing of petroleum-based products and gas. The company has been listed of the NYSE (New York Stock Exchange). Moreover, Chevron is also involved the manufacturing and sales of chemicals, in addition to power generation (Chevron, 2009 par. 1). The marketing network for Texaco involves 84 countries, with a total of 24,000 retail sites for its petroleum products. The company is one of the recognized âoil supermajorsâ.
ExxonMobil
ExxonMobil is as a result of the merger between Exxon and Mobil, in 1999. Today, the American gas and oil corporation ranks as the leading publicly traded company globally, based on the market capitalisation index. ExxonMobil owns 38 oil refineries location in 21 nations. The refining capacity of these 21 oil refineries is estimated at 6.3 million barrels, on a daily basis. Out of the six recognised oil supermajors, ExxonMobil is the largest (ExxonMobil, 2009 par. 8). In 2008, the company realised a production capacity of 3.921 million âbarrels of oil equivalentâ (BOE), a figure that represents only 3 % the total world oil production.
Competitive profile matrix
Below is a table that illustrates the rating of these other oil companies relative to Royal Dutch Shell plc.
The role of Ofgem
Ofgem (The Office of Gas and Electricity Markets) is a subsidiary of GEMA (the Gas and Electricity Markets Authority) in Great Britain. The organization is mandated by the government to regulate the markets for downstream natural gas and electricity in Great Britain. Since Royal Dutch Shell is also involved in these markets, the company falls under the jurisdiction of Ofgem. There is a need therefore for Royal Dutch Shell plc to comply with the regulations by OFGEM. The principle objective of OFGEM is to ensure that the interests of consumers are protected. This is despite the fact that the organisation has no direct contact with consumers (Ofgem, 2009 par. 5).
OFGEM makes use of the GDPCR (Gas distribution price control review) to enable it regulate the distribution networks for gas. GDPCR refers to a review usually undertaken periodically by OFGEM. In this case, OFGEM specifies and sets the highest amount of revenue that a given network may recover, by providing its products to customers for a given period of time. Royal Dutch Shell plc has over the years enjoyed a cordial relationship with OFGEM, because the company is committed to adhering to the set standards and rules regarding distributing networks for products.
Energy forecast
By 2030, the demand for energy is anticipated to have increased by 35 percent, compared to the 2005 figures. This is attributable to the global improvements on the living standards, in addition to economic growth (ExxonMobil, 2009 par. 2). If at all such players in the oil industry as Royal Dutch Shell are to meet this rise in demand, it is important that these companies make additional investments, in addition to being more committed to innovation. The supply for natural gas is also anticipated to expand, meaning that there is a need to explore for alternative sources to meet the increasing demand.
Since January 2009, OPEC (Organization of the Petroleum Exporting Countries) has been involved in a massive oil production cuts. As a result, the inventories on global oil standards are at a historic high rate. Since the global economic is also expected to experience a turnaround moving on into 2010, this will further reinforce oil markets, with the expectation that the oil consumption rate shall increase by 2.6 as of 2010, compared with the 0.7 % decline witnessed in 2009 (UK Energy Research Centre, 2009 p. 3). Furthermore, the crude oil output by OPEC is projected to reach a daily capacity of approximately 30 million barrels. On the other hand, the consumption rates for oil are projected to increase by1.1million bbl/d (barrels per day), to reach the 85.2 million bbl/d mark.
In November 2009, the average price of a barrel of crude oil was $ 78, an increase of $ 2 per barrel, compared with the crude oil prices in October (UK Energy Research Centre, 2009 p. 4). As a result of this increase, this is a sing that the global economy is on its way to recovery. In addition, it is also an indication that the consumption patterns of oil offsets the existing concerns regarding the existing high level of oil inventories. Moreover, crude oil prices were not as volatile in November as they were a month earlier.
For example, in November 2009, the trading range of a barrel of oil was within the $ 5 range per barrel of crude oil, compared with an $ 11 per barrel range in October. The expectations are that by February 2010, the price of a barrel of crude oil shall have average at $ 78.43. This will be an increase of $ 18.43 per barrel, compared with a similar period in 2009.
Conclusion
In order for Royal Dutch Shell plc to maintain a competitive position in the oil and gas industry, it is important for the company to effectively implement its marketing plan. Furthermore, there is a need for the company to emphasize more on the issue of energy forecast, so that it is best paced to undertake its exploration, production and marketing efforts for gas and petroleum-based products in lien with the demand in the market. Moreover, emphasizing of energy forecast will also help Royal Dutch Shell to explore other avenues, such as alternative sources of energy, in the face of declining reserves for fossil fuels.
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