Shell’s external and internal stakeholders

Question1

According to Trevino and Nelson (2007, P. 216), a stakeholder is any individual or group that has one or more stakes in an organization. In another words, a stakeholder is an individual or group that can affect or be affected by business decisions or undertaking.

As for Shell, the internal stakeholders are the shareholders, employees and suppliers of Shell. And the external stakeholders are the customers, local communities as well as those interest groups related with Shell’s business such as governments, business community, other related oil companies, the media and some NGOs.

As there are so many stakeholders involved, it is seemed difficult for Shell to balance the needs of its stakeholders. While, as the case mentioned, to best balance these needs from the stakeholders, Shell has recognized and tried every means to meet five areas responsibilities for its stakeholders.

) Internal stakeholders

Since the importance of shareholders for this company, Shell has also tried its best to meet the needs.

The board of directors is one of the expressions of Shell to balance the needs of its shareholders with other stakeholders, which work as a middle man to lead this company function in the right direction under the expectation of those shareholders. Meanwhile, in fact the major aim or expectation of these shareholders of Shell is to make money or gain more money. Due to this, the reward and the dividend taken from the annual revenue of Shell to these shareholders are also aimed to best balance the needs of the shareholders. Moreover, these strict principles and philosophies including environment friendly, engaging in many meaningful activities such as the building new supply lines of oil and gas as well as the refineries, offering help for young entrepreneurs, schools and universities are all aimed to enhance the reputation and image of Shell Company which can bring more profit and prestige. In a word, this kind of reputation and prestige can bring more individen income to these shareholders to meet their needs to a large extent. (Palmer 2009; Trevino, Brown, & Pincus 2003)

Secondly, under the proper operation of Shell, the needs of the employees are also well balanced. As Cascio (2010) mentioned the employees are one of the determinants for the success of a business. Due to this golden principle, Shell has engaged in building and fostering a satisfied working environment for its employees all over the world. For example, Shell offers its employees with both good and safety working condition and environment compared with other companies. At the same time, the efforts Shell devoting to strengthen its position and reputation in the society also can be defined as the ways it adopted to meet and balance the needs of its employees. Just as Cascio (2010) advocated only the steady, safe and harmonious working environment can largely motivate the employees working morale and ambition. At the same time, the sound profitability competency of Shell also works as a good protection means for employees to meet their satisfaction. By and large, for the employees of Shell, their needs are also balance for the most part.

Thirdly, in the side of the suppliers as the internal stakeholder of Shell, their needs are also balanced in a significant measure. The core values cherished by Shell work as the key requirements for these suppliers who want to have a cooperation relationship with Shell in the long run or else they will be kicked out. Although, these principles and core values may be a little bit tough for these suppliers, it will be so helpful and benefit for the long term development of the business of these suppliers. Trevino and Nelson (2007) claimed that only functioning properly and responsibly, can a business have a better and bright future. Due to this, these principles and core values for the suppliers of Shell are good for their future. In the meanwhile, these activities to build good reputation of Shell Corporation are also benefit for the suppliers. The more customers of Shell indicate the more profit for the suppliers as well.

) External stakeholders

The major concerns of customers when purchasing is the cost performance, namely they prefer the products with high quality and relatively cheaper and reasonable price (Kotler & Armstrong 2008; Ethics Resource Center 2005). To best meet and balance such kind of needs from its customer, Shell has set up the objective that to win and maintain customers by developing and providing products and services which offer value in terms of price, quality, safety and environmental impact, which are supported by technological, environmental and commercial expertise. Under the guidance of this objective, Shell has concentrated on the environmental issues so much that it builds up a series of global environmental standards to maintain the product safety for the customers. And it has also been taking part in these activities executed by NGOS and government to reduce the environment pollution and improve the cost performance of its products with less CO2 emissions.

To meet the needs and requirement of the local communities especially these living near to the oil refineries of Shell Corporation, Shell has been working hard to minimize these side effects and enhance the lasting benefits for the local communities. As the case mentioned, there are four major benefits offered by Shell to the local communities to balance their needs including to develop these necessary facilities for the locals including the health and education facilities, to offer assistance to the young entrepreneur, to provide and create jobs for the local as well as to use local contractors, which are all beneficial for local communities.

The last external stakeholders are the society namely those interest groups. According to the information in the case, we can also make the conclusion that the needs of these interest groups. These public benefits activities joined by Shell under the guide from the local governments and NGOs are all fit for the needs of these parties, which can be defined as a win-win practice.

Generally speaking, although the needs of the stakeholders of Shell are not so easy to balance, Shell also tries every means to reach the balance to the large extent.

Question 2

To best take the needs of these stakeholders into consideration so as to make the wise decision, Shell emphasizes the ongoing communication and dialogue as much with all of these stakeholders, which is also a proper way.

In the internal stakeholders’ aspect, it is no doubt that Shell has done a good job. Figure 1 .0 shows the good communication and dialogue basis for the shareholders to show their requirements to Shell in order to make their needs being best fulfilled. In figure 1.0 we can see the shareholders often have the right to appoint the board of directors who are responsible to formulate and implement these business strategies for Shell. And then the board of directors is also responsible to present the annual report for the shareholders to examine the overall performance of this company. Such kind of communication via the board of directors and reports often helps the shareholders to show their ideas, suggestions or even the complaints thoroughly. The annual General Meeting of shareholders for instance works as the face to face communication base for the shareholders and Shell to communication effectively and properly, which can not only enhance the mistakes or misunderstanding between shareholders and Shell but also facilitate the decision making of Shell under the suggestion and scrutiny of the shareholders (Leopold, Harris & Watson 2005).

Figure 1.0 The needs meet process for shareholders

choose who create

who

create

submit

Source: http://www.thetimes100.co.uk/case-study–internal-stakeholders–76-403-2.php

In the employees’ aspect, Shell also operates effectively. Since the employees are affected by Shell but also have influence on the operation of Shell, the two part communication and dialogue become so necessary and crucial for this organization to form and make the right decision (Millmore et al. 2007; Plender 2002). On the one hand, employees obey the standard of work and commitment to health and safety and excellence strictly to show Shell their profession and commitment to Shell’s guidance. On the other hand, Shell shows great respect to the employees via the fostering the good and harmonious working and employment environment to return the good performance of its employees. Such kind of effectively interaction and dialogue of the two parties and the concerns on the welfare of employees result in that Shell must and have to keep its employees’ benefit in mind when making decision.

For the suppliers, Shell also interacts with them properly. For example, Shell requires these core values required shared and respected by Shell and its suppliers or else it will stop the partnership or contract with these suppliers, which indicates Shell should have a good communication with the suppliers thorough before building the steady relationship. And then it shows Shell not only concern its behaviors but also its partners’ behaviors when making the decision such as the business partnership building issue.

In terms of the consideration on external stakeholders’ needs when making decision, Shell also works actively.

Customers are always the big concern of Shell when making the decision. The communication and dialogue to get the direct feedback of he customers become the first choice of Shell to understand the real needs of its customer. As the case mentioned, when get the feedback from customers that most of them prefer the environment friendly products such as the liquid biofuel, Shell respond to the needs of customers actively. In brief, when getting the real needs of customers from the communication, Shell orientates its business objectives to assist customers to use less energy and emit less CO2.

Meanwhile, Shell is also good at the communication and having a dialogue with the local communities. Via this means, it gets the understanding of the needs of this group in the concerns with their benefits and safety. Shell immediately forms the decision and plan to invest to the long term benefits of the local communities.

Furthermore, to better understand the needs of this interest group, Shell has also developed a thorough research and communication with these groups. For example the concerns of governments on employment and tax, the concerns of NGOs on environment are all gained by Shell via the properly communication with these group, which are also taken into account when Shell operate its business.

In fact, the Computer manufacture company, Lenovo, I worked in before also is a good practicer to take the needs of its stakeholders into account via Ongoing communication and dialogue when making decision for the present and future development (Ackerly & Larsson 2005). Let’s take its decision in acquisition of IBM’s PC division for example.

To make the above decision to acquire the IBM’s PC division, Lenovo did a lot of works mainly focus on the needs of its stakeholders via the ongoing and relatively communication and dialogue with them.

According to the survey of Lenovo, China’s joining in WTO gave Lenovo the Chinese computer great pressure with the competition from the foreign brands such as HP, Dell and so on (Ackerly & Larsson 2005). To explore the market and maintain the dominant position in Chinese market, Lenovo conducted a thorough research. For example, it collects information including the suggestions and expectations of Chinese customers on its brand. It shows the customers prefer the high quality and cheaper price PC. And from the communication with its business partners such as the Texas Pacific Group (TPG), Newbridge Capital and General Atlantic Partners (GA) as well as the communication with its shareholders, Lenovo found out the advantages in acquiring the PC division of IBM which can not only offer the technical supports but also the reputation supports for Lenovo in its future development. Based on the proper communication and dialogue with these stakeholders, Lenovo really took their needs into account and then decided to acquire the PC division of IBM, which was proved to the successful later. (Ackerly & Larsson 2005)

Question 3

According to Trevino, Hartman and Brown (2000), it isn’t an easy job to properly balance every need from each stakeholder, some conflicts of interest may occur during the business process of Shell. As the case mentioned, there are internal and external stakeholders for Shell to balance their needs including the shareholders, employees, suppliers, customers, local communities, and other interest parties. Let’s take a close look at the measures taken by Shell to remove these conflicts.

Strategies and company values

The first measure, Shell adopts is to adequately design and plan its business strategies and company values. Due to the characteristic the product of Shell that is the essential component for the world’s needs but is the non-renewable products, Shell forms its aim to offer the product safely and responsibly companied the balancing most of the stakeholders’ needs for the most part.

The first aim of Shell is to make this organization to take part in the businesses which are efficiently, responsibly and profitably. And the second aim of Shell is to engage in the R & D (Research and Development) program in search of other available energy so as to meet the needs of the world on the energy aspect.

The two aims building and setting up stand out the key concern of the welfare of all its stakeholders and also give the clear guidance for its future business strategies building in these areas. And under the guide the core value of Shell focuses on the environment and sustainable development which also become the criteria for Shell to do business with its partner.

With the assistance of the clear direction for its business strategies and major concerns in the core values, Shell properly manage its business with least side effects to reduce the conflicts between its activities and its stakeholders. On the one side, these strategies and core values are fit for the needs of most stakeholders such as the environment protection, the efforts in substitutes of energy resources and so on, which may reduce the chance of arousing conflicts. On the other hand, the core values cherished by Shell also works as the guidance and standard for its business partner to behave them at the beginning of the cooperation with Shell, which can also restrict both Shell and the business partners’ activities to largely avoid the conflicts between the two parties (McGeehan 2002).

Social, economic and environmental consideration

Trevino, Hartman and Brown (2000) advocate the importance of ethics in doing business, which can not only help the business run in a longer time but also benefit for the entire health of the business environment and welfare of the human beings. For Shell, it understands this fully and makes it as one of its business criteria to operate the organization. Shell takes great care of the society, economy and environment aspects in running the business which are all followed the business ethics and assist this company solve these conflicts with its stakeholders as well.

Figure 2.0 Shell’s consideration

Shell's external and internal stakeholders

 

Source: http://www.thetimes100.co.uk/case-study–shareholders-and-resolving-conflicts–76-403-5.php

As figure 2.0 shows, the social impact of Shell is on the stakeholders including the employees and local communities. The environmental impact of Shell is towards the stakeholders such as the planet. And the economic consideration of Shell is mainly on the shareholders. Since there are so many stakeholders who are connected with different aspects and issues, to balance the three aspects so as to remove these conflicts between Shell and the stakeholders or even among the stakeholders themselves become the major concern of Shell.

At first, some part of the profit gained by Shell is used to research and development the new product and form new forms of energy, it indicates Shell takes the social aspect into consideration. The research and development practices on new product and new forms of energy are all aimed to find out those available and environment friendly products to fulfill the needs of the society such as the safety of the local communities. And these jobs offered and education as well as business assistance by Shell in the local communities also increases the employment rate of the region which is also good for the society. Since the local community concerns their interest so much, these assistance and measures adopted by Shell can calm down their emotion and reduce the conflicts as well. And for the employees, the concerns for the working environment safety and the correct corporation values are also so helpful to reduce the anxiety of employees towards their job which is useful to move the conflicts as well.

In the economic aspect, Shell always holds the belief to protect the interest and profit of these shareholders. Based on this, it properly maintains the profitability of these shareholders via its efforts. Moreover the environmental friendly and sustainable developments way implemented by Shell are all good for the future profit of these shareholders. So via these means, Shell may relative easy to move the conflicts between it and the shareholders.

In fact, the social consideration, the economic consideration and the environment consideration overlap among each other. As the figure 2.0 shows, the economic consideration includes the concerns both in the environment such as the investment in the R&D in new products and in the society aspect such as the investment in education and employment. When we realize this aspect, we can get that the wisdom of Shell in balance the concern of the social, economic and environmental aspect to meet the needs of the stakeholders so as to reduce and solve these conflicts between its activities and the stakeholders, which is relatively successful.

By and large, just as the case claimed that Shell has done a relatively good job in minimize the conflicts between its actives and stakeholders via the clear and proper strategies and value building and the concerns on social, environmental and economic aspects.

Reference

Ackerly, J, & Larsson, M. 2005, The emergence of a global PC giant Lenovo’s acquisition of IBM’s PC division, electronic version, Harvard Business School, Harvard, viewed 9 August 2011,
<http://people.hbs.edu/mdesai/IFM05/AckerlyLarsson.pdf>

Cascio, W.F. 2010, Managing human resources: Productivity, quality of work life, profits, 8th edn, McGraw Hill,

Ethics Resource Center 2005, National business ethic survey, Ethics Resource Center, Washington,

Kotler, P. & Armstrong, G. 2008, Principles of marketing, 12th edn, Pearson Education International, New Jersey,

Leopold, J., Harris, L. & Watson, T.2005, The strategic managing of human resources, Prentice Hall, London, p.211,

McGeehan, P. 2002, Washington insider, but Wall Street pariah, New York Times,

Millmore, M., Lewis, P., Saunders, M., Thornhill, A. & Morrow, T. 2007, Strategic human resource management: Contemporary issues, Prentice Hall, England,

Palmer, A. 2009, Introduction to marketing theory and practice, 2nd edn, Oxford University Press, New York,

Plender, J. 2002, Inside track: Morals pay dividends, Financial Times,

Trevino, L.K., Brown, M. & Pincus, H. L. 2003, A qualitative investigation of perceived executive ethical leadership: Perceptions from inside and outside the executive suite, Human Relation, vol. 56, no. 1, p.5-37,

Trevino, L.K., Hartman, L.P. & Brown, M. 2000, Moral person and moral manager: How executives develop a reputation for ethical leadership, California Management Review, vol. 42, no. 4, p.128-142,

Trevino, L.K. & Nelson, K. A. 2007, Managing business ethics: Straight talk about how to do it right, 4th edn, John Wiley & Sons, Inc, New Jersey, P. 216,

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