Weller International Business School

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WELLERINTERNATIONAL BUSINESS SCHOOL

MR. JOSIN JOY

CROSS CULTURAL MANAGEMENT

ACADEMIC YEAR 2008 2009

DATE: 26 /05/09

WELLERMBA10

WELLER INTERNATIONAL BUSINESS SCHOOL

PROFESSOR: BARAKBEN-AVINOAM

TUESDAY, MAY 26, 2009


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The given is a research report about the western oil companies performing operations in

Nigeria for oil discovery, exploring, mining, retrieving and refining and finally which raisesthe violation of ethical principles for the sake of organizational goals.

History

Royal Dutch is Netherlands based Oil Company founded in 1890 by Aeilko Jans Zijlker afterthe discovery of oil and continue its operations by specializing in oil discovery, refining,

production operations. Shell is a UK based company specializes in transport, storage(warehouses) and marketing are certain operations of the shell. In 1907 the two differentcompanies were merged with the stake of 60 and 40 percent with single name called SHELLCorporation. The merge has the basic and hidden reasons number one the threat of under

capitalization of royal Dutch by standard oil corporation due to that reason royal Dutchcorporation makes the decision for collaboration with shell. After the collaboration the twoorganizations emerged as the market leaders because of good production, refining, transport,and marketing strategies, which plays vital roles. During the World War II Shell Corporationsupplied the oil to Adolf Hitler on credit. At the organizational level two companies has thereown chairman and operating officers which answers to committee of managing directorswhich is consist of people from both the companies to make the final decisions. After themerge it has became one of the most profitable and fast growing companies. After the WorldWar II the combined companies emerged as the market leaders by expanding its operations todifferent nations for the discovery of oil.

In 1959 the two companies merged as the single company and at all levels of managementbecause of the Mckinsey & companys consultants suggestion. The purpose is to make more

Global warmingOil companies choose to burn

the gas instead of reinjecting the

gas into the ground or selling it,

saying this is the most economic

option. The Nigerian

government wants flaring to be

stopped by 2010, as it wastes

energy and contributes to global

warming. Shell is

committed to ending itsflaring by 2008, but is

backsliding on thiscommitment due toexpense, says Friends

of the Earth.


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fast decisions with autonomy and speed. By 1991 the revenues has reached to $103 billion,which resembles one of the fast moving organization with effective management. In 1994SHELL corporation ranked third place by financial times survey of Europe under mostrespected companies. Shell Corporation is operating in more than 130 countries with 101,000employees. Working efficiently through out the century shell has reached at the peak position

where it reflects as the most successful company in generating revenues and expanding thebusiness to other countries. But at the beginning of mid 90s there is steep decrease inrevenues by7.9%, which makes the top management to overview the organizational structureand design strategies to overcome the slight decrease in revenues. But in 1995 shell founditself in the producing environmental hazards, which puts oil on fire of slow revenues.Basically when the oil extracted or refine from the crude form it produces huge hazardous

pesticides waste, which is very dangerous for the human life. The pesticides are aldrin,dieldrin, endrin which altogether may considered as BRENT SPAR for its disposal companyhad faced long time problems with the environmental groups for the organizational practices.

In 1995 shell found itself in the environmental controversy for the disposal of the Brent sparin the north sea and unethical utilization of the Nigeria natural resources after the long time ofexperiments and research geologists has gave the permission to sank the waste in the northseas deep waters. The Green peace organization had worked behind the protest and actionagainst the shell for producing environmental hazards. When the information came to public itresults in the hatred, protest and boycott of the shell products and reflects in the decrease ofrevenues to 50%.

SHELL IN NIGERIA

Highly flammable

About 10,000 barrels of oil were spilt in the nine states that make up the Niger

Delta last year. A leaking oil head (left) spews oil and gas in Ogoniland. The oil

heated b the sun becomes hi hl lammable.


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Shell entered Nigeria in 1937 for the discovery of oil pools with British petroleum with theequal share. After the hard work of twenty years in 1958 it discovered in the Niger Delta inthe south of Nigeria. The discovery oil gave a hint to proceed for the searching team to findmore pools in the specified location.

In 1973 shell entered in the three-way joint venture with British petroleum and governmentwith each holding 35% stake in the profits and expenses. For the Nigerian government it is alucrative opportunity for the development of the nation after the long colonisation of theBritish Empire. And for British petroleum it is an opportunity for reducing the cost ofinvestment in search of oil in Nigeria. But shell corporation emerged as SPDC stands forShell petroleum development company Nigeria limited which has gave a new image to shellcorporation throughout the world and for shell it is another mile stone of success which has

been achieved through hardworking dedication and perfect planning.

In 1995 NNPC stands for Nigeria National Petroleum Corporation owns 55% of the SPDC

and shell own 30% and rest ELF and AGIP owns 10 and 5 percent each. On the other handafter the decolonisation of Nigeria government thought that it was a cash call means earningof wealth for the nation through the natural resources, which will improve the stability. In oil1991 oil prices were calculated approx $12 to $23.

Three way joint venture by BP and shell where NNPC has 35 percent of stake which is variedby the time means at the beginning of the contract NNPC holds 35% varied to 80% since1974 to 1988. The oil explored through the operations each party is responsible for its ownstake of oil. The government is charging the royalties and direct taxation of the oil revenues of

the participating oil companies. During the 90s Nigerian oil revenues at the highest in the

Burst pipeLocal people are compelledto cope with oil spill after oilspill.

A rusting network of pipesand a slow response from oilcompanies to leaks areblamed.

A high pressure oil pipeline

ruptured in December lastyear in Rukpokwu, an hour'sdrive from Shell'sheadquarters in PortHarcourt.


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world compare to other governments. At that time Shell is not the only company, which areexploring the oil in Nigeria. The others are U.S. oil firms chevron, Mobil and Texaco in thelate 60s and the early 70s. There are certain companies still in operation in 1995.

Beside the other oil companies are exploring the oil resources and the government had it ownrole and share. SPDC is the major among all are operating in Nigeria because from thefigures of operations means 60% of the ventures are controlled by shell employing nearly5000 people nationals and 270 non Nigerians. The shocking figures i.e. producing 930,000

barrels per day from nearly 94 oil fields. Shell has developed its network of distributionsupply and retrieving with pipeline of 6200 kilometre. If we focus on shells net income itcomes around $235 million from SPDC.

NIGERIA

Nigeria is an African country located in the north of the continent. The country has very richnatural resources. It consists of more than 240 ethnic groups i.e. tribal groups. The

information indicates that each group id different from the other in traditions. According to asurvey in 1995 there were 100 million population. And 50 percent of population is growing atthe rate of 3 percent, which means that the growth is very slow, which is important for thenations development. Nigeria consist of 50 percent Muslims and 40 percent of Christians.

In 1960 after the decolonisation of England analyst thought that this country will be majorplayer in oil production because already many companies are existing in the country who areproducing the oil and have the evidence of more oil in the fields which attract manycompanies to start there operations.

Forest destroyedThe Rukpokwu firestook six weeks toextinguish anddestroyed muchfarmland and a local


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According to a survey during the mid of 90s Nigeria considered as the 10 th largest oilproducer in the world and 7th largest oil exporter. Beside they have many other resources foroccupation like agriculture many of the tribes main occupation is agriculture, producers of

palm oil and exporter of yam. Most of the people are uneducated means after the

independence of the nation the governments main intension is to increase the wealth of nationthrough natural resources i.e. petrol. Due to that many of the occupations has been neglectedand results in the export of the food product mainly the non oil sectors such agriculture has

been affected because lack of literacy rate to adopt and change according to requirement.Results in the improvement of poverty, illiteracy, unemployment, crime and corruption.

In 1996 Nigeria is considered as the most corrupt and dangerous place to travel. As thediscovery of high quality of oil in Nigeria brings the wealth for the nation producing $10

billion in that year as the revenues for the government and overall accounted 90 percent of thecountrys foreign exchange.

NIGERIAN GOVERNMENT

The Nigeria government has entered in the three-way joint venture considering the equalshare of profits with others. But when there is oil price shock in 1972-73 the government hassignificantly increase its share in the venture and which results in the evolution of the

Nigerian economy through the oil revenues but the government is unable to manage the oilrevenues in the development of nation and the development of other non oil resources for thedevelopment of the nations standard in terms of living and literacy. Government paid lessattention to second major occupation of the nation i.e. agriculture results in major exporter ofthe foodstuff for the survival. And finally Nigeria becomes the net importer of the food

products reflecting on the Nigerian economy, which one has become; the super developing

currency of the world unfortunately faces the problem importing the food products improperutilization of the revenues. While the currency value has increase at the same time otherexport sectors prices also increased implementing more dependency oil resource.


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At the national level government is unable to control the differences among the statesbasically there are 4 states at the beginning of independence but it splits in 30 and by 1999 it

has became 36. As we have discussed above there are more than 240 ethnic groups this wasthe basic reason for the split of states. The central government tried to control and maintainsthe stability over the economy but every states demanding for its own infrastructure,universities and other basic amenities.

As a result focus on the oil leaves Nigerian GDP backward comparing to world oil prices andfinally the country totally depending on the oil revenues. Which has improved the rate ofcrime and unemployment. A survey conducted in 1996 claims that Nigeria is most corruptcountry in the world. Results in the deployment of the foreign forces for the security

purposes. Shell has hired a German based security agency. Foreign companies are obliged tohire the special forces and companies are the sole responsible for the training equipments and

has the authority to dismiss the official they called as supernumerary police force which istotally operating on the companies funds.

POLITICAL SITUTION

Nigeria is colonized in 1861 and gave the designation of Crown Colony of Lagos by Britishthe geographical boundaries has been designed in 1914 and defined in 1995. Nigeria is the

part of the common wealth.

After the independence differences in the ethnic groups erupted and results into the riots andthat had taken shape of civil war and end s with the assignation of the prime minister. Military

took the whole control of the nation and the civil war which last till 1970s. The improperbalance of the political infrastructure results in the lack of economic development in the

A fighter in the Movement for the Emancipationof the Niger Delta at the militia's creek camp in

the Niger Delta in 2008. Nigeria's main rebel

group said it destroyed several major oilpipelines in southern Nigeria early on Monday

in response to a military offensive.

http://news.yahoo.com/nphotos/Movement-for-the-Emancipation-of-the-Niger-

Delta/photo//090525/photos_wl_afp/f1a6218d88b247757210d5c026267155//s:/afp/20090525/wl_

afp/nigeriaoilunrest
http://news.yahoo.com/nphotos/Movement-for-the-Emancipation-of-the-Niger-Delta/photo//090525/photos_wl_afp/f1a6218d88b247757210d5c026267155//s:/afp/20090525/wl_afp/nigeriaoilunresthttp://news.yahoo.com/nphotos/Movement-for-the-Emancipation-of-the-Niger-Delta/photo//090525/photos_wl_afp/f1a6218d88b247757210d5c026267155//s:/afp/20090525/wl_afp/nigeriaoilunresthttp://news.yahoo.com/nphotos/Movement-for-the-Emancipation-of-the-Niger-Delta/photo//090525/photos_wl_afp/f1a6218d88b247757210d5c026267155//s:/afp/20090525/wl_afp/nigeriaoilunresthttp://news.yahoo.com/nphotos/Movement-for-the-Emancipation-of-the-Niger-Delta/photo//090525/photos_wl_afp/f1a6218d88b247757210d5c026267155//s:/afp/20090525/wl_afp/nigeriaoilunresthttp://news.yahoo.com/nphotos/Movement-for-the-Emancipation-of-the-Niger-Delta/photo//090525/photos_wl_afp/f1a6218d88b247757210d5c026267155//s:/afp/20090525/wl_afp/nigeriaoilunresthttp://news.yahoo.com/nphotos/Movement-for-the-Emancipation-of-the-Niger-Delta/photo//090525/photos_wl_afp/f1a6218d88b247757210d5c026267155//s:/afp/20090525/wl_afp/nigeriaoilunresthttp://news.yahoo.com/nphotos/Movement-for-the-Emancipation-of-the-Niger-Delta/photo//090525/photos_wl_afp/f1a6218d88b247757210d5c026267155//s:/afp/20090525/wl_afp/nigeriaoilunresthttp://news.yahoo.com/nphotos/Movement-for-the-Emancipation-of-the-Niger-Delta/photo//090525/photos_wl_afp/f1a6218d88b247757210d5c026267155//s:/afp/20090525/wl_afp/nigeriaoilunrest


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nation. An Ibo general considered, as rightful candidate for the presidency but this was thebeginning of the second revolt and another military government. Many of the small tribegroups in Niger delta joined the Ibo and this led to serious civil war ended with dead of morethan one million. But the fact is Nigeria is led by military for most of the duration headed byHausa Fulanis directly or indirectly.

Again another General Sani Abacha seized the power in 1993 and destroy the democratic

form of government system and minimize the powers of the state government and jailed thewinner of 1993 presidential election Moshood Abiola. The total system of the governmenthas been disturbed and were trying to overcome from the problems. Externally Nigeria isconsidered as the wealth for foreign without any system a land without rules and regulationto extract the oil from the fields on the negligible price because already the system is corrupt.

NIGER DELTA

The Ogoni is a tribe located in Niger delta the group is consist of 20 other minority groupconsist of 500,000 population surrounding 404 square kilometre of land in the Niger deltaThe tribes mainly dependent on the farming and fishing. There are very few jobs and hospitals

and illiteracy rate is high.

Dirty water

Nigeria earns some $10bn everyyear from oil but Niger Deltaresidents remain mired in poverty.

Less than 20% of the region isaccessible by good roads, even inthe dry season, and hospitals andschools are seriously under-

funded.

Poor sanitation and pollutionmeans that access to safe drinkingwater is a major problem facinglocal communities.


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Living on oil

The production of oil, discovered in the Niger Delta 40 years ago, is having a devastating effect on

Nigeria's largest wetland region.

Niger delta is considered as the home of the oil exploration because most of the oil pools werelocated in this region. The main occupation of the tribal people is production of palm oil.After the colonization in the eighteenth century there were business of slaves which has takenthe spark and leaders of the tribes were neglected. And most of the palm oil business wascaptured by the English government but the existence of the leaders as the middleman for thetransaction this leader look for more autonomy and power. But in the beginning of thenineteenth century British expeditionary forces face tough resistance from these tribes. Earlierogoni land is considered as the middle kingdom and leader wants to restore their importancein the country after the discovery of oil in early nineteenth century.

OGONI and SHELL

By 1995 the ogoni land is house for more than 100 oil wells where 96 belongs to shell andsome to chevron. Beside of these figures there is petrochemical plant, fertilizer plant and tworefineries belongs to Nigerian government. According to the figures the output of the ogoniland d has fallen to 1.5% compare to total production in Nigeria. The oil produced from ogonigenerated $5.2 billion dollars as revenues and out this shell has received only 4% major

player is the government who received 79% of the revenues and other oil companies hasreceived 2% and operating cost has calculated as 15% of $5.2 billion.

A percentage of the oil revenues should be distributed among the ogoni region the rules has

been established and decided 1.5% of the revenues generated by the oil of ogoni should begiven for the development of the infrastructure and other development projects the schemecame into act by 1983. But pressure from the top management of the companies to increasethe percentage of the amount from 1.5 to 3% worked and came to act. At the government levelnew organization were established to monitor the funds utilization. The results were

disgusting incomplete projects and the situation of poverty is worsen year after year thegovernment claims that the local corruption and poor investments. The local governmentclaims to the central government for insufficient supply of money. At the public level people

thinking that they are not retrieving the benefits from the oil explored from their region.

Principally the three-way joint venture has invested in various community developmentprograms such as agriculture, health and education in delta. Under agricultural developmentproviding free seeds, fertilizers, cutting and cultivation equipments, training for theagriculture, for health the venture has developed hospitals, small clinics to fight against thechildren diseases provides supplement salaries to doctors and nurses, provide developmentfunds schools, colleges and universities with learning scholarships, salaries to teachers andother staffs. According to sources in late 80s shell and venture invested $4 million in thecommunity development, which is further increased to $13 million in the early 90s andfurther increased to $ 22 million by 1995. But the amount is insufficient due to that shell

begins the mission to search NGO non-governmental organizations for help in terms of fundsfor the community development.


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Environmentalist claims that the oil spill and oil water separation causes the dangerousproblems this process destroyed the natural life of the Niger delta means almost the plantslife destroyed fishing is affected due to oil spills and drainage of contaminated water.

Furthermore environmentalist claims that oil companies are the leading contributor to globalwarming. According to a journalist who travelled Nigeria during 1995 claims that the flaringof natural and burning of that gas produces huge heat and moreover destroying the natureresults in the form of acid rains. According to a survey during 1975-84 figures of 111 oilspills.

Moreover the native people ogonis land surviving to overcome from the problems that shelland other companies are created for the benefit of the organizational goals. According to

journalist of Harpers magazine travelled to Nigeria claims that huge pipes are snaked invillage, fields, yards of yam tree people are climbing over to reach there destination and thespills are destroying the cultivated crops. When the program aired Shell Company faces the

environmental legislation, prior to 1992 Nigeria doesnt have any law of environmentalmisconduct and many of the evidences were misplaced. And finally Nigeria introducelegislation according to US and European standards. According to the American Institute OfPetroleum most of the oil infrastructure will the validity of at least 15 years. And after thatSPDC claims the it was working on $100 million a year series of projects to metenvironmental standards much of its infrastructure is of late 70s and the company doesntwant to invest in building with heavy amount while the revenues of the oil reduced due to thatreason they doesnt want any investment. From the survey it came out that most of the flaringgas could be safe by re injecting it in the oil reservoir. If the flaring controlled properly than ithas the capability to provide energy to a nation like Belgium. But the lack of properequipments and investors these project was neglected for long time. In 1995 Nigerian

government agree to co invest $3.8 billion with shell, elf and Agip for LPG liquefiedPetroleum gas. Through the estimation and calculation shows that the project will take fouryears and will not show any profit till 2007.

MOSOP MOVEMENT FOR SURVIVAL OF PEOPLE

The purpose of the MOSOP is to gain rights of the people of ogoni against the multinationalcompanies. The movement has been started by ogonis chief son ken saro wiwa. He was bornin 1941 educated in missionary school and completed his further education by winning ascholarship to the university of Ibdan near Lagos. During the civil war of Bifran he served asthe administrator in the late 1960s. Saro-wiwa also served as the administrator of the Bonnyoil depot. In 1968 he started operating as regional educational commissioner. After that hestarted his own business of real estate and grocery. Later he founded a publishing companyand was a successful writer. He wrote number of novels and autobiography of Bifran war. He

produces a TV series how to get rich quick and fast which has viewer ship of 30 million

people.


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the damage cause to Ogani region and $4 billion dollar as the share of the revenues from theoil has been explored. The protest continues by April it has taken the shape of violence andSPDC declares the No-go Area because of danger to local field workers. Further improvingthe protest Saro-Wiwa and the group started protestation, demonstrations and moving furtherstopped the construction of trunk line in Ogoni. On may 21 1994 police stopped Saro Wiwa

on his way to a reception honour to number of ogoni elected leaders. And finally in a caraccident the founder of MOSOP , Saro Wiwa where died. Most of the private rumours tellsthat they had been killed.

But overall there should be a international monitoring system to control the

multinational companies before exploiting the human ethics for the sake of personal or

organizational goals Nigeria is an example of poor countries but very rich with resource

lack of proper education most of the companies exploit the principle by corruption

which leads to unemployment and crime.

HOFSTEDE GRAPHS OF CULTURAL MANAGEMENT

Nigeria


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UK


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Comparison by Hofstede Five dimensions theory

Shell is UK based organization and performing operations in Nigeria due to that hofstedetheory of five dimensions is used to understand people. The five dimensions are

Comparing very first point PDI of Nigeria is very high compare to UK because the power isunequally distributed at organizational or the family level all the societies are treated as toeach other unequal.

Individualism is very high in UK as compare to Nigeria due to lack of resources availabilityof fund and education which increase unemployment, hunger and crime. Masculinity is lesscompare to England.

The level of uncertainty avoidance is very high in Nigeria because people are very curiousabout the availability of chances to get success or to survive are very less in other wordopportunities are very high in UK compare to Nigeria.

Under long term orientation, people are very dependable on the government and other nonprofit organization operation to meet the basic needs of the survival, whereas in UK peopleare more independent and highly educated.

SOURCES

REQIRED READING

GIVEN CASE

www.bbc.co.uk

www.nigeria.com

http://www.geert-hofstede.com/hofstede_west_africa.shtml

http://www.globalissues.org/article/86/nigeria-and-oil

http://allafrica.com/stories/200012200004.html

http://news.bbc.co.uk/1/shared/spl/hi/picture_gallery/04/africa_polluting_nigeria/html/1.stm
http://www.bbc.co.uk/http://www.nigeria.com/http://www.geert-hofstede.com/hofstede_west_africa.shtmlhttp://www.globalissues.org/article/86/nigeria-and-oilhttp://allafrica.com/stories/200012200004.htmlhttp://news.bbc.co.uk/1/shared/spl/hi/picture_gallery/04/africa_polluting_nigeria/html/1.stmhttp://www.bbc.co.uk/http://www.nigeria.com/http://www.geert-hofstede.com/hofstede_west_africa.shtmlhttp://www.globalissues.org/article/86/nigeria-and-oilhttp://allafrica.com/stories/200012200004.htmlhttp://news.bbc.co.uk/1/shared/spl/hi/picture_gallery/04/africa_polluting_nigeria/html/1.stm


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