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 - – increasing transportation and logistics costs, increasing commodity prices, increasing energy prices, there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels,
central banks are concerned over increasing inflation, technology disruption, 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 -
Operational resilience
– The operational resilience strategy in the Journey to Sakhalin: Royal Dutch/Shell in Russia (A) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Training and development
– Sakhalin Shell has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Journey to Sakhalin: Royal Dutch/Shell in Russia (A) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Innovation driven organization
– Sakhalin Shell is one of the most innovative firm in sector. Manager in Journey to Sakhalin: Royal Dutch/Shell in Russia (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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.
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.
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.
Ability to recruit top talent
– Sakhalin Shell is one of the leading recruiters in the industry. Managers in the Journey to Sakhalin: Royal Dutch/Shell in Russia (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
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.
Successful track record of launching new products
– Sakhalin Shell has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sakhalin Shell has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
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.
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 -
No frontier risks strategy
– After analyzing the HBR case study Journey to Sakhalin: Royal Dutch/Shell in Russia (A), it seems that company is thinking about the frontier risks that can impact Global Business strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Products dominated business model
– Even though Sakhalin Shell has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Journey to Sakhalin: Royal Dutch/Shell in Russia (A) should strive to include more intangible value offerings along with its core products and services.
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.
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.
Interest costs
– Compare to the competition, Sakhalin Shell has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
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.
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.
Aligning sales with marketing
– It come across in the case study Journey to Sakhalin: Royal Dutch/Shell in Russia (A) that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Journey to Sakhalin: Royal Dutch/Shell in Russia (A) can leverage the sales team experience to cultivate customer relationships as Sakhalin Shell is planning to shift buying processes online.
High bargaining power of channel partners
– Because of the regulatory requirements, Rawi Abdelal suggests that, Sakhalin Shell is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Sakhalin Shell is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Journey to Sakhalin: Royal Dutch/Shell in Russia (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
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 -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Sakhalin Shell can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Building a culture of innovation
– managers at Sakhalin Shell can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Global Business segment.
Using analytics as competitive advantage
– Sakhalin Shell has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Journey to Sakhalin: Royal Dutch/Shell in Russia (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sakhalin Shell to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
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.
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.
Creating value in data economy
– The success of analytics program of Sakhalin Shell has opened avenues for new revenue streams for the organization in the industry. This can help Sakhalin Shell to build a more holistic ecosystem as suggested in the Journey to Sakhalin: Royal Dutch/Shell in Russia (A) case study. Sakhalin Shell can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Sakhalin Shell can use these opportunities to build new business models that can help the communities that Sakhalin Shell operates in. Secondly it can use opportunities from government spending in Global Business sector.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Sakhalin Shell in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
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 -
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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Sakhalin Shell will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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.
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.
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.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Sakhalin Shell with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
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.
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) .
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.
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.
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.