The Case Study on
“Organizational change at Royal Dutch/Shell”
This case study on “Organizational Change at Royal Dutch/Shell” deals with the organizational change that the world’s largest non-state-owned oil company made to respond its operating environmental changes in 1990s (Hill, C 2005, pp. 476-477) While there are a few different structures of global organizations such as worldwide area structure, worldwide product divisional structure and global matrix structure, the Anglo-Dutch company Royal Dutch/Shell (hereinafter Shell) decided to be structured with a matrix structure from the 1950s until 1994. Under the matrix structure, the head of each operating company reported to two bosses; one boss was responsible for the geographical region or country and the other was responsible for the business activity worldwide (Shell’s business activities included oil exploration and production, oil products, chemicals, gas and coal). There were two major benefits that Shell enjoyed from this matrix structure for about 40 years. First, their decision making process was based on the consensus building between the two bosses. Because of its side effects such as slow and cumbersome process, it might be not proper for some organizations. However as the nature of Shell’s business environment is that most big decisions are long-term ones that involve huge capital expenditures and as a result they could review thoroughly all the big decisions, this decision making process was beneficial to the company. Second, this slow decision making process caused substantial decentralization by default to the heads of the individual operating companies. Thanks to this decentralization, Shell could respond to local differences in government regulations, competitive conditions and consumer tastes. Even though there were drawbacks such as slow and cumbersome process, the matrix structure fit the environment of the global oil and chemical industries in the 1980s.
In the 1980s, Shell...
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