Financial Strategy Analysis on Shell (draft)
Autor: Akinloluwa • June 9, 2015 • Coursework • 3,162 Words (13 Pages) • 1,261 Views
FINANCIAL STRATEGY ANALYSIS REPORT
ON
ROYAL DUTCH SHELL PLC.
[pic 1]
Source: www.shell.com
In partial fulfilment of the requirements for the
Global Financial Strategy Module
on the
Master of Business Administration Programme
at the
UNIVERSITY OF THE WEST OF ENGLAND, BRISTOL, ENGLAND.
in
May, 2015
WORD COUNT: 2,895
INTRODUCTION
This report entails a strategic outlook on Royal Dutch Shell Plc (RDS Plc), one of the super-major oil companies in the world. RDS Plc is involved in the exploration and production of fuels and alternative fuels, renewable energy, chemicals and lubricants and also development of innovative technologies to improve energy efficiency in operations and support customers in managing their energy demands (RDS Plc Annual Report, 2014). She has her presence in more than 70 countries of the world – with major operation in Oman, Nigeria, USA, Netherlands and UK.
STRATEGIC FOCUS AND BUSINESS MODEL
The company’s strategy can be summarily described as:
- Investing 80% of the company’s capital investment in the upstream business via upgrading of assets and investment in technologies, acquisition of assets, investing in research and development. This action is supposed to increase their competitive advantage and also increase their ability to give increasing returns to investors – now and in the future;
- Investment in research and development of innovative technologies that support the various businesses and reduce environmental footprint of the company’s operations and products;
- Maintaining a strong leadership position in the oil and gas industry;
- Balancing growth with returns by growing cash flow and delivering competitive returns through economic business cycles, financing a competitive dividend pay-out ratio and fund investment for future growth;
- Completion of the organisation’s divestment of non-performing/non-profitable assets and continuous assessment of the company’s asset to risks such as market risk, political risks and impairments;
- Improving energy efficiency in operations and support customers in managing their energy demands;
- Keeping up with the intense competition in the industry (especially within the super-majors) by maximising and optimising their differentiators – Technology, Operational excellence and project delivery capability.
SEGMENTAL AND GEOGRAPHICAL ANALYSIS
The oil and gas industry’s market structure is classified into upstream, midstream and downstream. RDS Plc has been a major player in the upstream and downstream sector of the industry with strategic partnership in the midstream sector and in a bid to optimise her profitability and returns, the company has established a new subsidiary- Shell Midstream Partners LP (RDS Annual Report, 2014). RDS Plc operates a vertical integration business model. Her business cycle is represented in the diagram below:
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