CASE STUDY

Case Study on the Royal Dutch/Shell Group



Case Study on the Royal Dutch/Shell Group

Q.1. a. The threat of new entrants and substitutes in emerging markets.

The Royal Dutch/Shell Group has been long known to work on a global basis. It is known about the organization that it continuously strives to look beyond the horizon. If new firms enter the same industry and market with the Royal Dutch/Shell Group, competition will increase and cause a drop in profitability because on one hand it will cause to lower prices and the others will cause an increase in costs because if the company wishes to maintain or increase their market share, it will incur additional costs (advertising campaigns, improving transport network) (De Wit, Meyer, 2010, p. 34-36).

Therefore, it is said that when there is no sunk costs, the companies "use" the sector, in the sense of not being interested in their survival and growth, but its benefits can contribute it at any given time, and that made them (Johnson, Scholes, et al, 2005, p. 12). To avoid the vulnerability of sectors, entry barriers are created, which are:

Investment Required

In certain sectors, investment is needed just to be part of it is so huge that companies cannot afford it, however great they are (Lynch, 2006, p. 15).

Economies of Scale

There are areas where small-scale production is not efficient for the company; you have to produce on a large scale (Lynch, 2006, p. 15).

Absolute Advantage in Costs

Being the first to arrive in a sector, together with other factors such as supply of raw material or the economies of learning, cause the company is already in the sector has cost advantages, which is a major impediment for companies that want to be part of that sector (Lynch, 2006, p. 15).

Product Differentiation

It is very difficult for a company that enters into a new sector to compete against others already settled in it (Lynch, 2006, p. 15).

Access to Distribution Channels

This barrier is very important because the consumer will have no opportunity to purchase the product if you do not see the point of sale (Lynch, 2006, p. 15).

Administrative and Legal Barriers

These are imposed by governments and higher organisms, and are related to the obtaining of licenses issued by public authorities, patents, copyrights, requirements related to the environment, safety (Lynch, 2006, p. 15).

Retaliation

Concerning reprisals could take existing companies in the sector, according to interpret the entry of the new company (Lynch, 2006, p. 15).

Effectiveness of Barriers To Entry

When discussing the effectiveness of entry barriers should be considered different opinions (Lynch, 2006, p. 15).

As Royal Dutch/Shell Group is an oil producing organization, it can be said that when it enters a global market, it has to face the threat of new entrants and the already existing substitutes available in the same market. This is said because of the fact that the local government would also promote and support local organizations entering the oil industry in the country, which would in turn be a concern for the Royal Dutch/Shell ...