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 government debt because of Covid-19 spendings, increasing energy prices, digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, customer relationship management is fast transforming because of increasing concerns over data privacy,
geopolitical disruptions, there is increasing trade war between United States & China, 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 -
Strong track record of project management
– Sakhalin Shell is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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.
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.
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.
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.
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.
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.
Effective Research and Development (R&D)
– Sakhalin Shell has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Journey to Sakhalin: Royal Dutch/Shell in Russia (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
Ability to lead change in Global Business field
– Sakhalin Shell is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Sakhalin Shell in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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 -
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.
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 operating costs
– Compare to the competitors, firm in the HBR case study Journey to Sakhalin: Royal Dutch/Shell in Russia (A) has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Sakhalin Shell 's lucrative customers.
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.
Skills based hiring
– The stress on hiring functional specialists at Sakhalin Shell has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
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.
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.
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.
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.
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 -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Shortening product life cycle
– it is one of the major threat that Sakhalin Shell is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Journey to Sakhalin: Royal Dutch/Shell in Russia (A), Sakhalin Shell may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
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) .
Increasing wage structure of Sakhalin Shell
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Sakhalin Shell.
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.
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.
