Polymer Production Company Expansion, Research Paper Example

Abstract

This paper describeschallengesin the expansion process of a company. Every country is uniquehavingcultural, social and ideological differences. A company while expanding should understand and evaluate these differences.Our client, a polymers company based in US, had expansion plans in both Europe and Asia. The CEO of the company was apprehensive aboutcultural disparity between countries, which could damage their expansion plans. Our group was asked to research challenges faced by industries in global expansion. In our effort to do so, we adoptedthe expansion path of Royal Dutch Petroleum (Netherlands)
(RDP) as our example. Royal Dutch Petroleum (Netherlands)evolved winner in global operations, after its initial strife in humanitarian and political issues of the country of expansion. RDP reacted in tandem by acknowledging their global social responsibility.

The Royal Dutch Petroleum (Netherlands) is the fifth largest company in the world, renowned for its global oil and gas production. It operates in 90 countries and produces approximately 3.1 million barrels of oil. It has its headquarters in Hague, Netherlands, and controls their international operations from there. The company was successful in its international operations, primarily for its strategy of a broad social agenda. It clearly defined the social responsibility that comes with the business.

The first challenge the company faced was to incorporate strategies for the changing demographics of the global population. If we take the case of RDP in Nigeria, there a list of hurdles faced by the company. According to Naanen, “The most conspicuous aspects of life in Ogoni are poverty, malnutrition, and disease.” Ogoniland produces oil worth as much as $30 billion but Ogoni villages suffer miserably. According to Michael (1997), Ogoni had poor health care, no clear water, poverty, no jobs for displaced farmers and fisher persons, negligible electricity, with severe environmental pollution. In 1996, Shell employed only 88 Ogoni (0.0002% of the total Ogoni population) workers, which made Nnadozie (1995) to write, “ Oil has been a curse to Nigeria which implied only hunger, disease, poverty and exploitation”.

The second big challenge was to manage the environmental damage. In 1958 when RDP began drilling oil in Nigeria, the pipelines went through the farmland and aquatic bodies. According to Nigeria Environmental Action Study Team, “Endemic oil leaks in these pipelines killed fishes, smothered cultivable land with oil and acid rain led to devastating health hazards.” (1991)

The third big challenge was health impact of the population. The Nigerian Environmental Study Action Team observed that heat, fumes and combustion gases led to respiratory diseases, bronchial asthma, gastro-enteritis and cancer among the people.

The fourth challenge was opposition of the local people. The human rights and environmental activists Ken Saro- Wiwa and 8 other activists were against the operations of the company. In 1995, they were hanged to death by a fictitious special military tribunal (Human Rights Watch, 1995)

Adaptation to the changes:

Companies change in response to both external and internal pressures, to opportunities and threats. Shleifer and Vishney (1990), “ as sophisticated techniques of change emerged, strategic planning especially focused on firm’s adaptation to its future environment.”It is argued that structural feature of RDP makes it vulnerable to embrace evolving social agenda. The bulk of the upstream activities of RDP are in countries with civil violence, corruption and human rights abuses. RDP’s downstream structure makes the company vulnerable to the public sentiments. In 1995, Shell Reports openly accepted the fact that “company was ill prepared for public reactions to the Spara and Wiwa incident” (Jennings, 1996)

Working closely with public sentiments:

In 1996, RDP started working closely with human right organizations like Pax Christi and Amnesty International, to help develop relation between the company and external world. The main reason for the communication strategieswas poor understanding of public mood in the past. According to Jennings, (1996) “RDP has to be good as NGOs at listening to the public sentiments, understanding their underlying concerns and fears.”

Diversity and Inclusion Program (D&I):

RDP had begun its Diversity and Inclusion program (D &I) in the mid-nineties. The company by then realized that with such workforce, customers, joint venture partners, and governments, representing diverse nationalities and cultures, it is essential primarily to participate in diversified programs.

After the inclusion of (D& I) program, RDP points out that all individuals from un-represented groups and their opinion gets value. Josefine van Zanten, VP (D&I) said that “ This is a long-term journey, and to reach our goals, we need to constantly work and review progress with D&I values. The process would increase more local recruitment, increase women in jobs and improve process of inclusion in work culture” (Scribd)

Broader Social Agenda:

RDP has reacted strategically to the social agenda of its country of expansion. Its new “strategy” involves encompassing social objectives. This redefines the mission of the company, by strengthening relations with local people, government, NGO’s and its increased transparency to its social performance.

Social Accountability Committee:

In 1997, a twelve-member Social Accountability Committee was created to conduct its business operations, “as responsible members of the society, to observe the laws of the country in which they operate, to express support for fundamental human rights in line with the legitimate role of business… “(The Rainforest Action network). In 1999, RDP in its second report entitledPeople, planet and profits – an act of commitment. ‘We believe that our commitment to contribute to sustainable development holds the key to our long-term business success…We will strive to build a better world with our first choice for our shareholders, our customers, our employees, those with whom we do business, society and future generations’(The Shell Report 1999)

Inclusion of Human Rights in Principle of the Company:

RDP operates in countries like Asia, where there is tremendous abuse of humanitarian issues like child labor. De to the inclusion of human rights in business principles, RDP does not collaborate with companies that fail to meet the guidelines on human rights, environment and child labor. The company rejected more than 95 contracts because the collaborating companies did not meet up to the standards (Human Rights Watch, 1999).

Contribution to local communities:

In 2000 RDP had spend approximately 85 million USD on social agenda, e.g. money for medical services, education, and environment etc. The highest amount went to Africa and the Middle East (32%: 27 million USD). RDP also states that it has actively played a role in increasing the share of oil revenues distributed to local communities (Human Rights watch, 1999).

Conclusion: RDP as a global company initially cornered on reaping profits from its oil collaborations. Eventually, with time, cases like Sara- Wiwa, Nigerian uprisings and various humanitarian issues, RDP concluded that people support was imminent in the expansion process. Thus, the key points of expansion in a global system essentially meant inclusion of local workforce, understanding their diverse ideas and requirements, setting humanitarian standards, and following the local protocol. The company has to be a part and parcel of the development determinants of the country in association.

References

Ben Naanen, Oil and Socioeconomic Crisis in Nigeria, 1995, pg. 75-6

Human Rights Watch (1999) The price of oil, New York: HRW, 161.

Human Rights Watch, The Ogoni Crisis, report 7/5, New York: Human Rights Watch, 1995.

John Jennings (1996) The millenium and beyond – some issues that will shape our future. London: Shell Nnadozie, Emmanuel, Oil and Socioeconomic Crisis in Nigeria, Lewiston: Mellon University Press, 1995.

Nigeria Environmental Action Study Team (NEST), Nigeria’s Threatened Environment, Ibadan, 1991.

Shleifer, A. and Vishny, R.W (1990). ‘ The Takerover wave of the 1980’s’, Science, 745

Scribd, http://www.scribd.com/doc/50867421/Diversity-Journal-Peter-Voser-CEO-Royal-Dutch-Shell-PLC-Nov-Dec-2010

The Rainforest Action Network: www.forests.org/ric/wrr39/shellperu.htm

The Shell Report 1999: People, Planet and Profits. An Act of Commitment, London: Shell, 1