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Abstract Our global economy is no longer local or national in scope. Resources, product markets and business competition are worldwide in nature. Many businesses have grown in size and have successfully tapped into these global markets and gained huge profits. Some of the countries which have stood to gain from globalization include the “BRIC” countries Brazil, Russia, India and China(Schermerhorn, 2011). The report provides an outline on the impact of globalization on MNC’s while focusing on three key areas of study including global organizational culture, internationalization strategy and the IR framework of the organization. The report focus on Royal Dutch Shell (RDS) which is the largest MNC in the world (CNN Money 2013) which operates in more than 70 countries and territories while providing more than 80,000 direct employment opportunities (Royal Dutch Shell 2013 ). The major findings in relation to this report can be listed as below  The identity of RDS is been shaped away from being a traditional oil company to a global energy corporation while continues integration and cross field collaboration among subsidiaries has paved way for RDS to take on more complicated projects under its wings.  The international strategy of RDS is of a dynamic transnational nature while continuing be relatively flexible to meet the needs of its scenario planning mechanism  In RDS the need for RDS to standardize it products remains minimal while continuing to standardize operations by centralizing operations to respond to cost pressures in the post 2007 era.  The RDS has been able to be locally responsive through heavy involvement in the local communities and CSR while not compromising its operational standards’.

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Contents Acknowledgment.............................................................................................................................1 Abstract............................................................................................................................................2 Contents...........................................................................................................................................3 List of Abbreviations.......................................................................................................................4 List of Figures..................................................................................................................................5 List of Tables...................................................................................................................................6 Introduction......................................................................................................................................7 1.0 Globalized Organization Culture of MNC’s..............................................................................8 2.0 Internationalization of Shell.....................................................................................................11 3.0 The IR framework of shell.......................................................................................................13 Conclusion.....................................................................................................................................17 Reference list.................................................................................................................................18

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List of Abbreviations CNOOC – China National Offshore Oil Company HQ – Headquarters HRM – Human Resource Management IR – Internal Responsiveness IT – Information Technology IUCN – International Union for Conservation of Nature RDS – Royal Dutch Shell SCRM – Shell Cost Reduction Mechanism SNEPCO - Shell Nigeria Exploration and Production Company SNG – Synthetic Natural Gas USA – United States of America

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List of Figures Figure 1 Global Perspective of RDS …………………………………………………………………………………………,10 Figure 2The IR Framework………………………………………………………………………………………………………14 Figure 3The organizational structure of RDS…………………………………………………………………………..16 Figure 4 Integrated Organizational network of RDS…………………………………………………………………17

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List of Tables Table 1 Global Scenarios of RDS…………………………………………………………………………………….11 Table 2 Workforce breakdown of RDS…………………………………………………………………………..15

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Introduction Globalization is the process of growing interdependence among elements of the global economy (Schermerhorn, 2011). Our global economy is no longer local or national in scope. Resources, product markets and business competition are worldwide in nature. Many businesses have grown in size and have successfully tapped into these global markets and gained huge profits. Some of the countries which have stood to gain from globalization include the “BRIC” countries Brazil, Russia, India and China. These are currently the world’s fastest growing economies (Schermerhorn, 2011). The content of the report focus on understanding the global identity of shell, the internationalization of shell and the response of the organization to cost and local responsiveness pressures of royal Dutch shell as it continues be one of the truly transnational organizations of our time. The methodology of the research is based on books and articles written on royal Dutch shell, research articles published by other scholars on RDS, news articles published on RDS as well as the extensive use of the RDS corporate website. The report begins with an extensive review into the global organization culture with RDS while evaluating it based on integration, standardized ethical mechanism and the achievement of a global identity. The report then focus on internalization strategy of RDS .The final segment of the report focus on how RDS is responding to pressures of local responsiveness and cost pressures while providing an apt conclusion that summarizes the findings. The report provides a mere guideline for further extensive research on the subject while this is the biggest weakness in this report it also provides some curious findings on one of most dynamic MNC’s of the business world.

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1.0 Globalized Organization Culture of MNC’s A global organization will display several key attributes that will differentiate it from international organizations. The global identity of Royal Dutch Shell (RDS) has evolved from an oil company into a multidimensional energy company. The change of RDS’s identity over the past two decades was a closely coordinated in an effort to minimize the PR disaster it faced in the Niger delta region coupled with United Nations report (Ekenedirichukwu, 2011). The identity’s of global organizations are being shaped by visionary leaders who have the ability to reshape the identity’s of the business through innovation, fortitude and their desire to change the status quo ( Ikelenfeldt,2011).The leadership of Henri Deterring who laid the foundation of the current business model of RDS which is based on decentralized power where the parent company enters into strategic alliances with the regional/country subsidiary which in return has assisted in RDS establishing itself as the market leader in the energy and petrochemicals industries ( Boyle, 2002). The energy industry as whole is facing increasing demands to reduce its impact on the environment and consider the issues of climate change in their decision making (the Guardian 2013). The RDS is responding to this by aims to improve its energy efficiency, while continuing to satisfy global consumer demand and also continuing its investment into research that would find technologies that improves efficiency and reduce emissions in production of liquids and natural gas (Royal Dutch Shell 2013).

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Figure 1 Global Perspective of RDS (source; Royal Dutch Shell 2013)

The RDS headquarters is situated in Hague, Netherlands, with subsidiaries spread over 70 countries and regions with more than 44,000 service stations. The RDS use its expertise in on technology and innovation which provides a platform to use its integrated value chains to deliver large felid development projects which are complex and technically demanding. This integrated network of subsidiaries and their commitment to centrally devised plan by RDS headquarters provides the opportunity to leverage its diverse and global portfolio and customer focused business (Royal Dutch Shell 2013). The above mentioned attributes of RDS has enabled itself to be recognized as brand that is spread across construction industry to aviation, chemicals to shipping. The marketing team of shell is credited with constructing a state-of-the-art marketing platforms, which has enabled RDS to interact with its corporate and retail customers on a 24/7 basis (Royal Dutch Shell 2013).

In 1965 the RDS adopted pioneering approach called the

scenario planning to engage with an uncertain future. This is not predicting the future but the aim is to shape the company’s global thinking related to energy and other matters (Harvard Business Review 2013). This is an extremely important tool that helps RDS to maintain its position as the market leader even though the value of scenario planning is not reflected in the bottom line.

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Year 2015

Scenario  China overtakes U.S. as  major CO2 emitter  Flight into coal  Strong growth in CO2 emissions.

2020

 Mandated bio fuels  Strong growth in unconventional energy sources.

Expected response  Worldwide emission trading  scheme evolving post Kyoto  Nuclear slowdown.  Global CO2 trading scheme deployed commercially  Electric vehicles enter  mass market

Table 1 RDS Global Scenarios 2015-2020 (source authors work based on Shell scenarios )

The MNC‘s response to ethics is a curious one as Hodgetts,Luthans and Doh (2006) discuss multinational firms such as shell need to adopt there ethical standards and practices from one country to another due to socio cultural differences they possess. The other main obstacles in does the subsidiaries prioritize ethical standards over financial performance and will in such a situation the management of the HQ protect the employees (BusinessWeek 2013). The management of shell specifies that the employees need to prioritize ethical standards over financial performance and such behavior would be considered in the decision making process of RDS. The code of conduct (Royal Dutch Shell 2013) of provides its global workforce with a detailed outline of practices expected and not expected of the employees. The employees of shell also have the opportunity to use the global hotline to sort any ethical dilemmas anonymously. The MNC Royal Dutch Shell has developed a global organizational culture through all the facets discussed above to leading multinationals of our time.

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2.0 Internationalization of Shell The enterprise established during the first period of globalization, and its activities were right from the beginning spread over the world, ranging from the colonies of the Far East to the Americas. The company used a home replication strategy when it was moving into Mexico, USA and Eastern Europe by appointing managers from home countries (United Kingdom and Netherlands) to all the key positions with responsibility (Sluyterman, 2009). The contemporary internationalization strategies of shell is where it attempts to maintain a moderate level of internationalization in its operations while offering a uniform global product and for this purpose shell uses four contrasting modes of entry into its markets(Grant, 2005). This step heralded a new strategic direction where the management “recognizes the need for strong operating companies whose management have the responsibility to develop and achieve plans and targets that capitalize on strong local positions and take advantage of global opportunities. The cornerstone of the organizational structure is a system of self-appraisal, complemented by a number of mandatory standards and policies and of effective checks and balances (Shell international, 1996). The organization has been able expand through joint ventures which was best illustrated when Shell in collaboration with cosan created the largest sugar-ethanol producer in the world (wall street journal 2011). The new strategy also resulted in shell being able to penetrate the largest market for petrochemicals by forming a joint venture with CNOOC which continues to be cash cow to shell. The other form of entry where Shell has been able to stamp its transnational strategy best illustrated by establishing Shell Nigeria Exploration and Production Company Ltd (SNEPCO) and Shell Nigeria Gas Ltd (SNG), which were established respectively in 1993 and 1998 (shell Nigeria 2013 ). The above two strategies focus on direct entry into counties RDS uses its licensing arm Shell Global Solutions where a client could get a particular technical assistance or operational consultancy to upgrade its own business performance. There services range from initial and basic consultancy to full guide through all phases in a project (Powell, 2009).

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The internationalization strategy of Shell has enabled it to centralize its operations to five external centers in Glasgow, Krakow, Chennai, Manila and Kuala Lumpur. These centers cover functions ranging from finance, HRM, customer service, procurement, IT to supply and distribution functions (Excellence in leadership. 2013). The secret to Shells flexibility lies with its core ideology where scenario planning has enabled it to transfer its core business from oil and petrochemicals to production of green energy. The international strategy of has enabled the organization to enhance benefits of the management challenge” where senior executives were encouraged to visit foreign plants and question the host management team about policies and procedures so that fresh opinions on possible problems could be found and collective knowledge used to gain competitive advantage over rival (Royal Dutch Shell 2013).

The scenario planning mechanism of shell which aided shell to move into transnational strategy remains to be one its greatest strengths (Hoffman, 2005). This is best illustrated in china where, Shell is expanding investment in petrochemicals, natural gas, renewable energy and many other projects in China. It has established partnerships with several major oil and gas companies in the mainland market. The ability of Shell to focus on all three core competencies have been impressive from 2010 onwards the organization has been focusing on flexibility and learning in order to transform RDS from an oil corporation to an Green energy corporation by 2025 (Royal Dutch Shell 2013).

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3.0 The IR framework of shell According to Bartlett and goshal (1995) any firm operating in an international context faces to pressures of cost reduction and pressure of local responsiveness.

Figure 2 The IR Framework (source; Innovation)

The pressure for local responsiveness in the context of RDS the pressures for it to be locally responsive is represented in a different ways, one of the main pressures it faces is to consider the ecological environment it operates or in others to be ecologically sustainable (Sustainability Report Royal Dutch Shell, 2013). The management of RDS uses several tools such as investment in communities where shell helped to create more than 2500 new business ventures in Iraq in 2012, while continuing its investment into local economies in 2012 more than 90% of shell’s employees was local and working with international organizations such as IUCN and Earthwatch to tailor its productions in a environmentally friendly manner. The other pressure in terms of local responsiveness is “giving back to the community “, for this purpose shell uses CSR to satisfy the needs of the local communities. This is illustrated by RDS’s $145million in 2012 11 | P a g e

across 70+ countries(Sustainability Report Royal Dutch Shell, 2013). The CSR expenditure of RDS remains focused on long term infrastructure solutions to the communities in Brazil, Nigeria and the arctic region while continuing to tailor operations according different local scenarios the organization faces (Annual Report Royal Dutch Shell, 2013).

The Netherlands UK other Europe Asia, Oceania, Africa USA Other Americas Total

2012 8 6 10 24 31 20 12 87

2011 8 10 25 33 20 12 90

2013 8 7 13 28 34 20 15 97

(‘000)

Table 2The workforce Breakdown OF RDS (Source; Annual Report Royal Dutch Shell,2012)

The global economic crisis in 2007 forced shell to adopt more globally integrated structure that would facilitate more fluid inter organization communications(Wining in a downturn, 2010, p. 4). According to Bartlett and Goshal (1995) the most appropriate way to minimize costs is through global integration and coordination. The RDS response to integration pressures was to implement SCRM where the organization streamlines operations in key areas by eliminating wastages while continuing long-term fixed costs spending(Wining in a downturn, 2010, p. 4) . RDS can afford to focus on standardizing production activities because as an energy corporation the need for product customization is minimal while the need for global integration of operations continues to grow. In response to integration pressures shell has continued to increase its investments into research and development into improving interdependency in a global context where the organization expects will lead increased global integration in operations while continuing while continuing its market domination in the petrochemicals industry (Annual Report Royal Dutch Shell. 2013).The centralizing of operations to centralize its operations to five external centers (Glasgow, Krakow, Chennai, Manila and Kuala Lumpur). These centers cover functions ranging from finance, HR, customer service, procurement, IT to supply and distribution functions has enabled the regional subsidiaries to focus on core competencies while marking a major step towards globally centralized operations mechanism(Excellence in 12 | P a g e

leadership. 2013). The continued pressures for global integration forced shell to adopt a new organizational structure which emphasis more on process standardization rather than product divisions within shell (Henry, 2010).

Figure 3 The Organization Structure of RDS (source; Oil and Gas Financial Journal)

The IR strategy of RDS therefore can be twofold or in other words being locally responsive while continuing to globally integrate operations through standardization of process (shell sustainability report 2012). The organization ability to be ethically and socially responsibly can be an overlooked source of competitive advantage (Buller and Mcevoy, 1999) The policy of being locally responsive via CSR and other social commitments has helped RDS address some of the short comings of cross-cultural training is cross-cultural team building for transnational teams (Buller and Mcevoy, 1999).The unique and flexible responsiveness strategy of RDS has enabled it to effectively respond to climate change which has and will continue to change the business landscape that organizations encounter currently and in future (Hastings, 1999). The success of this strategy is based on the interpreted network of subsidiaries and HQ through regional HQ’s (see figure 4). All the above facts discussed has ensured that RDS will remain one of true global MNC’ of our time.

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Figure 4 The Transnational solution Of RDS (source; Journal Of international business Studies )

Conclusion The report which has been prepared with the objective of studying the impact of globalization on a MNC such a RDS resulted in the author arriving at the following findings 14 | P a g e

 The identity of RDS is been shaped away from being a traditional oil company to a global energy ...