Royal Dutch Shell in Nigeria Operating in a Fragile State free essay sample

Multinational companies have to â€Å"engage in business practices to avoid negative consequences to their stakeholders† (Cullen, Parboteeah, 2011, pg. 127). Multinational companies have to retain basic rights such as: pursuing fair profits and indicating duties provide equal wages for the employees. Prescriptive ethics is to direct multinational managers what they should and should not do. However, Chapter 1 in the text â€Å"Royal Dutch Shell in Nigeria: Operating in a Fragile State,† will provide information and recommendations pertaining many challenges that Royal Dutch Petroleum and Shell Transport and Trading. Subsequently, the analysis will discuss Shell’s operations in Nigeria more at risk and simultaneously more valuable. Furthermore, the analysis will provided an explanation of the implications of the economic system found in Nigeria and what political risks that Shell facing in this country. Explanation will be providing of how important the role of the government is influential of Shell’s Nigerian investments, operations, and future stake in the oil industry. History The Royal Dutch/Shell Group is one of the leading producers of oil, gas, and petrochemicals â€Å"Shell Oil Companies,† which have â€Å"distinguish itself through its commitments to the industry innovation. † The merging of both companies operates as the leading and gas produces in the deep-waters of Gulf of Mexico. Both companies contains four major operational segments includes â€Å"oil and gas, exploration, and production, downstream gas, oil products, and chemical product† (Hague, 2013). Shell Oil Operates as a secondary of the Royal Dutch Group whereas, it the second largest oil company in the world. In 1999, Shell Oil and its U. S. based on colleagues secured 22 percent of the Group’s revenue (James Press, 2001). Revelations of overestimated oil reserves in 2004 impelled a big push for greater transparency in the company’s organizational structure. However, this activity led to the 2005 merging of former publicly trading owners â€Å" Royal Dutch Petroleum and the Shell Transport and Trading Company into Royal Dutch Shell†(Hague,2013). Challenges and Merging of the Royal Dutch Petroleum Once the merging begins, Royal Dutch Petroleum and Shell Transport and Trading proceed; the company will be faced with several challenges. One of the challenges that the company was facing was prescriptive ethical situation developed. Because of the â€Å"Shell Petroleum Developmental Company received the unwelcome award made on the opening day of the â€Å"World Economic Forum (WEF), (Cullen Parboteeah, 2011 pg. 149). The company was named an irresponsible company. However, March 3, 2004 due to these circumstances and Royal Dutch Shell Company was having a difficult time in conducting business, â€Å"Sir Phillip Watts, chairman of the company; was pressed into resigning because of an internal organization proceed to do an investigation and it reveal that Royal Dutch Shell overstated its and natural gas reserves by 20 percent† (Cullen Parboteeah, 2011pg. 149). The only recommendation that could be made was taken care of. The chairman was persuade into resigning because of he could not create a strategy plan whereas; everyone could come to an agreement. However, another challenges that developed was the increasingly gas prices. The Dutch Shell Company was faced with the Nigerian unionized declared a four-day strike against the rise of gas price. The Nigerian union declares a warning strike against the government or the strike would go nationwide. Furthermore, in order to prevent a nationwide strike, the government had to create a plan that would decrease the gas prices at a cheaper cost. The government have to set up multiple meeting so this situation can possible be resolved. Shell’s Operations in Nigeria The Royal Dutch Shell’s operations in Nigeria more at risk because of issues that have been developing over the years. One participant risk that have been continuously an ongoing situations is; political and social strife which have been affecting the Royal Dutch Shell’s oil extraction efforts† (Nigeria, 2010). Another concerns and risks that develop pertains from the militant armed efforts of the movement for the deliverance of the â€Å"Niger Delta, which have been attack over the last several year; forcing Shell to declare force majeure and suspend production† (Nigeria, 2010). Implications of Nigeria’s economic system After examining the implications of the Nigeria’s economic system; Nigeria’s economic system is one of the eleventh largest oil-producer in the world. However, Nigeria’s economic system producers an extremely large percentage of Nigeria’s population are living in poverty. Nigeria’s economic system depends on the oil-sector revenues which represent approximate â€Å"80 percent of the Nigerian government and 95 percent of its export earnings† (Cullen Parboteeah, 2011pg, 152). Nigeria’s oil resources produce about 32 barrels. The multiple risky politics that the Shells could be facing in Nigeria’s is; dealing with different religions and ethnic rivalries, local bullies, and warlords. Local bullies and warlords focus on certain situations to rise, so they will take the opportunities and create their own goals. As a broadband of generalization power beings to develop tends to create potential lethal uncertainty, especially when the rule of laws and legal order was absent† (Cullen Parboteeah, pg. 54). Influential of the Shell’s Nigerian Government The role of the government has a significant impact on the influential of Shell’s Nigerian investments, operations, and the future stakes in the oil industry. The oil-produces† 85 percentage of the economic system revenue and it produces 95 percent of the Nigeria’s economic exports. †(Cullen Parboteeah, 2011, pg. 152). However, most of Nigeria’s oil and g as industries come from the Niger Deltas. Majority of the operational fundamentals are operated by Shell Petroleum Development Company and the other majority of the oil and gas industries are owned by Nigeria’s National Petroleum Corporation and production half of Nigeria’s crude oil. The Nigerian government has some serious influential methods in governing the Nigeria’s growth and creating new techniques for the country. Underlying assumptions, Observations, And Recommendation for Benjamin Aaron The consultant for Royal Dutch Shell, Benjamin Aaron is facing some difficult and major decision to appropriate ways to expand the operational fundamentals in Nigeria. The Nigerian environment has been a highly unstable considering the social, economic, religion, and political conditions are persist there. Furthermore, the Nigerian’s oil-resources were eye-catching to Shell to discard the Nigerian project. However, Shell’s need to figure out suitable strategies for operational in Nigeria since its political costs of continuing business in Nigeria was increasing compared to other regions of operations. In conclusion, the analysis addressed challenges that Royal Dutch Petroleum was facing because of the merging. Included in the analysis, it identified details of Shell’s operation in Nigeria risky. The analysis addressed and explained the implications of the economic system and political risk in Nigeria that Shell was facing. Finally, the analysis addressed the role of the government influenced Shell’s Nigerian resources and identified Benjamin Aaron’s decisions from his underlying, and observations of Nigeria’s government. ? Reference Abuja, N. (2010). Shell’s Nigerian Delta Operations at Risk. Retrieved on May 2, 2013, from http://www. energy-daily. com Cullen, J. Parboteeah, P. (2011). Multinational Management. 5th Edition. Retrieved on May 2, 2013, pgs. 127,149,152 and 154 Hague. (2013). Royal Dutch Petroleum Company the â€Å"Shell Transport and Trading Company† P. L. C. History. Retrieved on May 1, 2013, from: http://www. findinguniverse. com/history International Directory of Company Histories, Vol. 41. St. James, 2001. Retrieved from://www. findinguniverse. com/company history of Shell Oil Company.