Shell and Ethical Issues

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The following analysis evaluates the challenges faced by Royal Dutch Shell Oil Company involving their monumental proposed investment into their Nigerian operations. When global companies experience extreme criticism such as Shell, they are usually tasked with identifying optimum solutions to reverse the negativity. In addition to assessing the challenges, this analysis provides some potential strategies that can be implemented to resolve the issues within this case.

Problem Statement

Royal Dutch Shell Oil Company proposed to execute the largest industrial investment ever made in Africa. Their proposal was a response to three separate issues. However, there were problems with the proposal. A major problem was that two critical entities that Shell proposed to share in the investment, made it clear that it would take some time before they could even consider Shell's proposal. Other major problems included political and social instability within regions where Shell operated. Shell acquired a very negative public image, and it was primarily due to the following: Shell had also been accused of waging an ecological war against natives and the natural habitat. Furthermore, the company was accused of being responsible for the deaths of natives from the land in which Shell procured oil.

Situation Analysis

Shell Oil is one of the largest oil traders in the world. With extensive international operations their largest African operation existed in the country of Nigeria. In this case, Shell's operations in Nigeria created a very complex situation, thus creating numerous factors for the various components included in the environmental scanning analysis.

The economic factor consists of Shell proposing an $8.5 billion integrated oil and natural gas investment, making it the largest industrial investment ever made in Africa. Shell estimated that their proposal would bring an additional $20 billion to the government of Nigeria over a 25-year period. The proposal also called for 70 percent of the cost to come from private companies (mainly Shell), and the other 30 percent from the Nigerian government. A government owned company named the Nigerian National Petroleum Corporation (NNPC), which is a joint venture partner in all Nigerian petroleum projects contributes to Nigeria having more foreign direct investment than any other country in Africa. Another important economic issue is that the European Union actually withheld $295 million in aid to Nigeria while protesters attempted to boycott the purchase of Nigerian oil, and while considerations were being made to implement an embargo on business with Nigeria.

The political, legal, and regulatory issues are closely related in this case, and therefore are grouped together. Many companies including Shell Oil have often been skeptical about doing business in Nigeria because of the political and social instability that exists in the country. This instability creates optimum opportunities for corruption to occur, contributing to Nigeria being one of the most corrupt countries in the world today. This instability also made doing business risky within Shell's existing Nigerian facilities. Shell had been severely criticized outside of Nigeria for its Nigerian political activities and environmental policies. This criticism was more than likely caused by the knowledge of unethical business practices in Nigeria. The NNPC also plays a role in the political component, being a government owned business.

The natural resource issues include Shell selling in Nigeria as early as the late 1920s. In 1937, Shell formed a joint venture with British authorities that had exclusive rights to explore for oil. This venture found oil for the first time in Nigeria in 1956. This oil was found in a 404-square-mile area in the southern part of the country near the delta of the Niger River known as Ogoniland. Shell's oil procurement operations took place in a large number of...
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