You are on page 1of 4

UNIVERSITY OF ZIMBABWE

FACULTY OF COMMERCE
GRADUATE SCHOOL OF MANAGEMENT
ASSIGNMENT
MODULE CODE
CHAPTERS COVERED
DUE DATE
TOTAL MARKS

:
:
:
:
:

THE ROYAL DUTCH/SHELL CASE STUDY
MANAGING CHANGE  MBA 543
30 April 2011
100

Lecturer
Email
Contact
Office
Location

:
:
:
:
:

Dr. Sam Ruturi
samruturi@yahoo.com
0734 371 341 / 2911905/750447/8
6th Floor Throgmorton House
Cnr. J. Nyerere & S. Machel

INSTRUCTIONS FOR COMPLETING AND SUBMITTING ASSIGNMENTS:
1)

You are required to submit TWO Individual Assignments and ONE Group Assignment for this subject.

2)

The individual and group assignments will each contribute 10%. Thus, a total of 30% towards the final examination
mark, and the other 70% will be made up from the examination, however the examination papers will count out of a
100%.

3)

Although your assignment will contribute towards your final examination mark, you do not have to earn credits for
admission to the examination; you are automatically accepted on registering for the exam.

4)

Read the question carefully: This is to test your APPLICATION of knowledge and THEORY.

5)

Note the mark allocation per section of the question and structure your output accordingly.

6)

Be careful to check your final submission for appearance, spelling, and grammatical errors – remembering this is
your Masters Degree Level Assignment and as such, detail and presentation are important.

7)

Your answers to this assignment should be between 4 500 – 5 000 words, or between 15 - 18 typed pages. (Arial
font, 12 font size, spacing between lines must be 1.5).

8)

Number all the pages of your assignment and write your student number at the top of each page. Make sure that this
is done correctly before you bind the pages into the assignment cover.

9)

A separate assignment cover page, which indicates the University of Zimbabwe, GSM, Student Name, Student
Number, Course, Lecturer, Programme, Assignment Number and Title must be attached to the front cover of a
neatly bound assignment.

10) Retain a photocopy of the assignment before submitting, in case the original does not reach the GSM.
11) The assignment due date refers to the day up to which assignments will be accepted for marking purposes. Late
assignments will NOT be accepted.
12) If your fail to follow these instructions carefully, the University of Zimbabwe, GSM cannot accept responsibility
for the return of the assignment. It may even result in your assignment not being marked.

NOTES:
You will be penalized for copying the work of fellow learners, or simply copying passages from the text book,
study or other texts.
It is only when you use your own words that the Course Leader or Markers are able to establish whether you have
understood the concepts outlined in the study notes. The Markers are then in a better position to offer you constructive
feedback.
Students are reminded that Individual Assignments should reflect individual effort and group submissions will be
penalized.
Results will be available from the University of Zimbabwe, Graduate School of Management.
Deadline date: 2nd Year, 2nd Semester: Friday, 30 April 2011
Results Release Date:

Monday, 24 May 2011

NB!! PLEASE SEND ORIGINAL ASSIGNMENTS, NO FAXES OR E-MAILS WILL BE ACCEPTED

which had become more centralized. Nyerere & S. becoming the largest oil company in the world in 1998. which at last forced the company into action. the company’s problems were unchanged and the barons – the managing directors of its national companies – were still there. they were in fact members of one of its various subsidiaries. Although managers and employees referred to themselves as members of the Royal Dutch/Shell. ‘There is a committee culture’. global leadership was lost in 1999 – as we shall see. J. But would it be enough to bring change? Background Royal Dutch/Shell is one of the world’s great oil companies. In 2004.com 0734 371 341 / 2911905/750447/8 6th Floor Throgmorton House Cnr. the world’s largest oil company Royal Dutch / shell announced a radical reorganization in 1995 that it would sweep ‘barons out of fiefdoms’. measured by turnover. Until 2002. The company had been much admired over the years for ‘breeding the right corporate types and fostering a co-operative atmosphere’. The nearest that the company came to full co-ordination was the central management forum called “the conference”. The obvious strategic weakness was that this massive oil company could never use its shares – since they did not exist – to acquire another company. This meant that all decision making was slow. said Mr. the collegiate style of committee of managing directors had limited powers to resist such demands. However. the combined enterprise grew. In 1999. Asia and many other areas. This arrangement had originally been negotiated when the group was founded. It is based on a joint holding company set up in 1907 between UK Company Shell Transport and the Dutch Oil company. Over the years. one of the senior human resources managers in the company. Unlike other oil companies. But by 1998 the structure ‘has become part of the problem – reducing accountability. nor any combined board of directors. commended stockbrokers BT Alex Brown. The national companies were legal entities and demanded a share of capital budget. Enst Van Mouvik. There was no overall holding company but two owners of all the subsidiaries: Royal Dutch owned 60% of each subsidiary and shell owned 40%. Royal Dutch. Proposed Strategy and Organizational changes in 1995 The result of the company’s consultative style was that it had no chief executive to take final decisions. regardless of whether they could make the best strategic case. the company had major corporate problems. laborious and careful – not necessarily a bad thing in an industry where time horizons for oil investment are typically 30 years. Sam Ruturi samruturi@yahoo. This was the meeting of the management boards of the two operating companies but it had no legal existence. blurring responsibility and increasing costs’. The co-operative style extended around the world to the company’s interests in North America. Australia. Decisions on capital expenditure were often decidedly odd. There was a committee of managing directors but decisions were achieved by consensus and its chairman was simply ‘the amongst equals’. There was no strong central core. the delicate balance between the UK and Dutch interests was still perceived up to 1998. .UNIVERSITY OF ZIMBABWE FACULTY OF COMMERCE GRADUATE SCHOOL OF MANAGEMENT ASSIGNMENT ONE (1) MODULE CODE CHAPTERS COVERED DUE DATE TOTAL MARKS : : : : : THE ROYAL DUTCH/SHELL CASE STUDY MANAGING CHANGE  MBA 543 30 APRIL 2011 100 Lecturer Email Contact Office Location : : : : : Dr. Machel ASSIGNMENT ONE (1): THE ROYAL DUTCH / SHELL – CASE STUDY Read the case study below and answer the questions that follow: Royal Dutch / Shell – what does it take to bring change? In a bid to improve growth and profitability.

 Sale of underperforming subsidiaries. the barons were still in power through their membership of the new business committees and the company’s profitability was declining. Atlantic Richfield had Castrol-Burmah. Germany. Moreover. Total had merged with Fina and then with Elf. especially in Netherlands. BP had acquired Amoco. For many years. the company’s return on capital was stuck below 10% and was set to decline further.  Oil prices had declined from US$15 per barrel in early 1990s to around US$10 in the late 1990s because supply worldwide outstripped demand. so it announced the following:  Closure of its national company headquarters in the UK.  Rival companies like Esso (US).5 billion by year 2001. The annual cost savings from reorganization were projected by the Royal Dutch/Shell as being US$2. Mr. However. “I am absolutely clear that our group’s reputation with investors is on the line”. Although some 900 staff jobs were cut.  Write-off the US$4. Royal Dutch / shell realized that new and more drastic strategies were required. there were four main reasons to this.  Political uncertainty was higher in some leading oil-producing countries such as Russia and Indonesia. this had served the company well. It also meant that there were large numbers of staff in London and Rotterdam whose job was to coordinate the national policies associated with the regional barons. The national companies would report to series of global operating companies and some 1170 coordinating jobs would go at the centre. . But the reorganization quickly ran out of steam. The 1998/99 Strategic Reorganization By the late 1990s.  Higher environmental standards meant that the capital investment in oil refineries was much higher than in earlier decades. namely the barons referred to above. The 1995 reorganization was supposed to sweep away such a decision-making structure and its consequences in terms of poor investment decisions based on national company interests rather than global good of Royal Dutch/Shell. over time. BP (UK) and Total (France) were requiring or merging with rivals in order to gain further economies of scale.  The chairman of the committee of managing directors would be given new powers to take final decision on capital expenditure. The subsequent success of these moves made Royal Dutch/Shell look weak strategically. He also used a phrase that in the past has been rarely heard at senior executive levels in Royal Dutch/Shell: he stressed the importance of “executive accountability” when commenting on the 1998 reorganization. According to many outside observers. even below US$10 per barrel. by mid 1990s. his position would emerge as that of the dominant chief executive. it was much more difficult for all the world’s oil companies to make profits than earlier in the decade.  Several substantial acquisitions around the world that had been made earlier in the 1990s would be put up for sale. especially 40% of its chemical business. France and the Netherlands. The consultation culture of the company led to laborious negotiations with staff. much more drastic change was required. The aim was to save costs and focus decisions on regional and global decision-making. said the chairman of the committee. there was considerable resistance to the proposed changes.  Cutbacks in annual capital investment from US$15 billion to US$11 billion per annum. He also said that the company had immense financial strength and flexibility to withstand further falls in the price of oil. Mark Moody-Stuart.5 million assets. It was expected that.In practical terms this meant that the key strategic decisions either took lengthy periods to emerge or were lower down in the organization by the powerful national companies that made up royal Dutch/Shell Empire. Exxon had acquired Mobile.

[20 Marks] Assignment Format  Word Limit: Your assignment (excluding index.  References – At least 15 sources of reference (textbooks. the company had been forced to cut its proven oil and gas reserves by 23%. [30 Marks] Question 2 “Those that are in charge of change are themselves tied to the old culture” Define the concept of organizational culture discuss the approaches to changing culture with part reference to this case. cover page and appendices) must not exceed 5000 words. the company’s chairman resigned.  You MUST use theory/literature to support your discussion/observation and opinions.  Text: Font: Arial or Times New Roman (12). the financial officer lost her job and Royal Dutch/Shell was the subject of major investigation by the US Securities and Exchange Commissions (SEC) – it is difficult to imagine a more serious situation in one of the world’s largest companies.The 2004 Strategic Problems In 2004. journals. internet. With relevance to the case. . The seeds of the difficulty were sown in the years around time of the 1998 reorganization and its related cost savings. press reports.  Your assignment should include a Table of Contents page. charts. It was not until 2000 that Royal Dutch/Shell raised its level of investment to US$9 billion per year.  Ensure that readings are not merely reproduced in the assignment without original critical comments and views. much closer to that of its rivals. the invested US$6 billion per year exploring for new oil and gas deposits when it should have been spending around US$8 billion. [30 Marks] Question 3 According to Lynch. In the period 1996 – 99. Assessment Questions Question 1 Critically analyze the failure of the change efforts at RDS. tables or exhibits necessary to support your analysis and recommendations. 2 specific strategies driving organizational change in the 1990’s were de-layering and business process re-engineering. explain the elements of these techniques. Spacing: 1½ lines.  The Harvard system of referencing and bibliography must be used. etc) must be included in your bibliography. [20 Marks] Question 4 Discuss the human resource aspects of strategic change that can be drawn from this case. During 2004. Do not merely extract informat from the case Study.  Your answers must include any theories.