Journey to Sakhalin: Royal Dutch/Shell in Russia (A) SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Global Business
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Journey to Sakhalin: Royal Dutch/Shell in Russia (A)
Operations of Royal Dutch/Shell in Russia included a strategic alliance with Gazprom, the country's natural gas monopoly, the development of the Salym oil fields in Siberia, and a small retail refilling network in St. Petersburg. Focuses on the Sakhalin II project. Sakhalin II is the reason for the existence of the Sakhalin Energy Investment Co. (SEIC), owned by Royal Dutch/Shell (55%), Mitsui (25%), and Mitsubishi (20%). Worth approximately $10 billion, the second phase of Sakhalin II would be the single largest investment decision in the history of Royal Dutch/Shell, as well as the single largest foreign direct investment in Russia's history. Sakhalin II would also be the largest integrated oil and gas project in the world. The project, however, faces a number of challenges, however. A production sharing agreement (PSA)--a commercial contract between the foreign investor and a host government that replaces the country's tax and license regimes for the life of the project--governs Sakhalin II. Although Sakhalin II's PSA enjoys the status of Russian law, other Russian laws conflict with the terms of the PSA. PSAs have also become controversial within Russia. After several years of waiting in vain for "legal stabilization," Shell and SEIC executives must decide whether the project should go forward.
Swot Analysis of "Journey to Sakhalin: Royal Dutch/Shell in Russia (A)" written by Rawi Abdelal includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Sakhalin Shell facing as an external strategic factors. Some of the topics covered in Journey to Sakhalin: Royal Dutch/Shell in Russia (A) case study are - Strategic Management Strategies, Globalization, Joint ventures and Global Business.
Some of the macro environment factors that can be used to understand the Journey to Sakhalin: Royal Dutch/Shell in Russia (A) casestudy better are - – digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings,
talent flight as more people leaving formal jobs, increasing commodity prices, etc
Introduction to SWOT Analysis of Journey to Sakhalin: Royal Dutch/Shell in Russia (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Journey to Sakhalin: Royal Dutch/Shell in Russia (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sakhalin Shell, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sakhalin Shell operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Journey to Sakhalin: Royal Dutch/Shell in Russia (A) can be done for the following purposes –
1. Strategic planning using facts provided in Journey to Sakhalin: Royal Dutch/Shell in Russia (A) case study
2. Improving business portfolio management of Sakhalin Shell
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sakhalin Shell
Strengths Journey to Sakhalin: Royal Dutch/Shell in Russia (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sakhalin Shell in Journey to Sakhalin: Royal Dutch/Shell in Russia (A) Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Sakhalin Shell in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Sakhalin Shell has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sakhalin Shell to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Sakhalin Shell in the sector have low bargaining power. Journey to Sakhalin: Royal Dutch/Shell in Russia (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sakhalin Shell to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Sakhalin Shell is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Sakhalin Shell is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Journey to Sakhalin: Royal Dutch/Shell in Russia (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Analytics focus
– Sakhalin Shell is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Rawi Abdelal can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Organizational Resilience of Sakhalin Shell
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Sakhalin Shell does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Sakhalin Shell is present in almost all the verticals within the industry. This has provided firm in Journey to Sakhalin: Royal Dutch/Shell in Russia (A) case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Sustainable margins compare to other players in Global Business industry
– Journey to Sakhalin: Royal Dutch/Shell in Russia (A) firm has clearly differentiated products in the market place. This has enabled Sakhalin Shell to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Sakhalin Shell to invest into research and development (R&D) and innovation.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Sakhalin Shell digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sakhalin Shell has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
High switching costs
– The high switching costs that Sakhalin Shell has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Highly skilled collaborators
– Sakhalin Shell has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Journey to Sakhalin: Royal Dutch/Shell in Russia (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Sakhalin Shell are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Weaknesses Journey to Sakhalin: Royal Dutch/Shell in Russia (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Journey to Sakhalin: Royal Dutch/Shell in Russia (A) are -
Low market penetration in new markets
– Outside its home market of Sakhalin Shell, firm in the HBR case study Journey to Sakhalin: Royal Dutch/Shell in Russia (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Sakhalin Shell products
– To increase the profitability and margins on the products, Sakhalin Shell needs to provide more differentiated products than what it is currently offering in the marketplace.
Increasing silos among functional specialists
– The organizational structure of Sakhalin Shell is dominated by functional specialists. It is not different from other players in the Global Business segment. Sakhalin Shell needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sakhalin Shell to focus more on services rather than just following the product oriented approach.
Capital Spending Reduction
– Even during the low interest decade, Sakhalin Shell has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Journey to Sakhalin: Royal Dutch/Shell in Russia (A), is just above the industry average. Sakhalin Shell needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Sakhalin Shell supply chain. Even after few cautionary changes mentioned in the HBR case study - Journey to Sakhalin: Royal Dutch/Shell in Russia (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sakhalin Shell vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Sakhalin Shell has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Need for greater diversity
– Sakhalin Shell has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Workers concerns about automation
– As automation is fast increasing in the segment, Sakhalin Shell needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow decision making process
– As mentioned earlier in the report, Sakhalin Shell has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Sakhalin Shell even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Slow to strategic competitive environment developments
– As Journey to Sakhalin: Royal Dutch/Shell in Russia (A) HBR case study mentions - Sakhalin Shell takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Opportunities Journey to Sakhalin: Royal Dutch/Shell in Russia (A) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Journey to Sakhalin: Royal Dutch/Shell in Russia (A) are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Sakhalin Shell can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Sakhalin Shell in the consumer business. Now Sakhalin Shell can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Sakhalin Shell to increase its market reach. Sakhalin Shell will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Buying journey improvements
– Sakhalin Shell can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Journey to Sakhalin: Royal Dutch/Shell in Russia (A) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sakhalin Shell is facing challenges because of the dominance of functional experts in the organization. Journey to Sakhalin: Royal Dutch/Shell in Russia (A) case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sakhalin Shell to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Sakhalin Shell to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Sakhalin Shell to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sakhalin Shell can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Sakhalin Shell has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Manufacturing automation
– Sakhalin Shell can use the latest technology developments to improve its manufacturing and designing process in Global Business segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sakhalin Shell can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Journey to Sakhalin: Royal Dutch/Shell in Russia (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– Sakhalin Shell can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Sakhalin Shell can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Sakhalin Shell can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Threats Journey to Sakhalin: Royal Dutch/Shell in Russia (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Journey to Sakhalin: Royal Dutch/Shell in Russia (A) are -
Technology acceleration in Forth Industrial Revolution
– Sakhalin Shell has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Sakhalin Shell needs to keep up with the evolution of technology in the Global Business sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Sakhalin Shell business can come under increasing regulations regarding data privacy, data security, etc.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Sakhalin Shell.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Sakhalin Shell in the Global Business industry. The Global Business industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Regulatory challenges
– Sakhalin Shell needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Global Business industry regulations.
Environmental challenges
– Sakhalin Shell needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Sakhalin Shell can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Consumer confidence and its impact on Sakhalin Shell demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
High dependence on third party suppliers
– Sakhalin Shell high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Stagnating economy with rate increase
– Sakhalin Shell can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Sakhalin Shell needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sakhalin Shell can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Journey to Sakhalin: Royal Dutch/Shell in Russia (A) .
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Sakhalin Shell in the Global Business sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Journey to Sakhalin: Royal Dutch/Shell in Russia (A) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Journey to Sakhalin: Royal Dutch/Shell in Russia (A) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Journey to Sakhalin: Royal Dutch/Shell in Russia (A) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Journey to Sakhalin: Royal Dutch/Shell in Russia (A) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Journey to Sakhalin: Royal Dutch/Shell in Russia (A) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Sakhalin Shell needs to make to build a sustainable competitive advantage.