Nigeria poses a set of unique business and cultural challenges to international organizations functioning in the country. Shell Oil Development Company Ltd. is one such global organization. This paper seeks to evaluate the business environment in Nigeria and the strategy followed by Shell to adapt to it.
2 Business environment in Nigeria
Nigeria is one of the most populated countries in the African subcontinent. The country has a vast wealth of natural resources, especially oil, which accounts for the numerous international businesses that have taken an interest in Nigeria despite its ongoing social, economic and political troubles . Unequal allocation of resources is common in the nation but several developments and reforms have taken place in major business sectors in the past decade that has not only enhanced financial growth but spurred a sense of optimism among the people regarding the future status of the country . Till now the country has managed to sustain the momentum admirably, overcome some of the important hurdles to the development of the business sector, and formed an environment that is conducive to business and allows Nigeria to compete on an international level.
Cultural diversities in Nigeria pose certain issues for international business and makes business operations both challenging and tedious. However, all it requires to utilize the myriad business opportunities is an understanding of these diversities and the local environment and atmosphere. International companies must realize that business is conducted differently in various parts of the country and they need to revise their strategies and principles based on their location . The country places strong emphasis on its cultural values and it would be imprudent to suppose that they will part with them for the sake of business, considering the fact that the country is abundant in mineral wealth. Therefore, international businesses that want to expand to Nigeria need to respect the cultural characteristics and adapt their strategies as per the cultural style.
3 Case Study - Shell Nigeria
Shell offers a great example of the kind of tactics that must be adopted by a multinational company to make it big in the Nigerian business sector. The ties between Shell Oil and Nigeria date back to 1956 . The company has increased its investments and operations within the nation over the years and is presently the dominant multinational corporation in Nigeria. The employee base of the company consisted of 95% Nigerian citizens in 1998 so the company provides a healthy employment opportunity to the locals .
Shell has often been criticized for the damage it causes to the environment of Nigeria but the company has developed an extensive damage control campaign that relies predominantly on corporate social responsibility to handle social concerns . Nigeria offers higher profits to the company than elsewhere while Shell occupies a large section of the market, unrivalled in Nigeria . Both the company as well as the government is self-serving; they do not pay much attention to the indigenous population. Thus, the company has found in Nigeria a like-minded ally who can further both their ambitions .
Shell established a first mover benefit during the 1950’s since the country was still a British colony until 1960 and oil companies from Britain received preferential treatment. Even after the independence of the nation, Shell remained in a position to penetrate state structures which led to the hedging of political risk in the country. The strategic approaches adopted by Shell in the country are equally effective since they lessen the significance of political instability in the nation . The company has had years of experience to adapt to the current political turmoil. Even though the general consensus is that political instability is inherently harmful to business, Shell has proven that instability in a nation’s political sphere offers certain advantages to a business and has modified its strategies to suit the purpose . Shell has been following a strategy that exploits loopholes in government policies, influences government decisions and solicits cooperation based on the FDI the company brings into the company and relies heavily on the poor environmental and human rights legal framework in the nation.
Nigeria’s business and cultural environment encourages a system of corruption amongst government agencies and a lack of concerns for the welfare of the local population on the part of international organization. This has been highlighted through the serious cases of environmental and human rights violations that Shell faces in Nigeria for its exploitative strategy.
Berg, H. (2011). Shell Petroleum Development Company of Nigeria Ltd: Better malaris diagnosis equals better business. Retrieved January 30, 2014, from Roll Back Malaria - World Health Organization: http://www.rbm.who.int/ProgressImpactSeries/docs/report6/Shell-en.pdf
Boele, R., Fabig, H., & Wheeler, D. (2001). Shell, Nigeria and the Ogoni - A study un unsustainable development: II. Corporate Social responsibility and 'Stakehoolder Management' versus a rights-based approach too sustainable development. Sustainable Development , 9, 121-135.
Datamonitor. (2010). Energy and Sustainability Case Study Series - Royal Dutch Shell Plc Sustainability Case Study. Datamonitor.
ECCR. (2010). Shell in the Niger Delta: A framework for change - Five case studies from civil society. Oxford: Ecumenical Council for Corporate Responsibility/Cordaid.
Frynas, J. G. (1998). Political instability and business: Focus on Shell in Nigeria. Third World Quarterly , 19, 457-478.
McKern, B., Meza, P., Osayande, E., & Denend, L. (2010, January 19). Case: The Business Environment of Nigeria. Retrieved January 19, 2014, from Harvard Business Review: http://hbr.org/product/the-business-environment-of-nigeria/an/IB90-PDF-ENG
Ogbonna, C. (2010). Cultural Issues About Doing Business in Nigeria: Case Study for Thurmo Oy. Central Ostrobothnia University of Applied Sciences.
Pirani, S. (2004). Shell in Nigeria: Oil and gas reserves crisis and political risks - shared concerns for investors and producer-communities, a briefing for Shell stakkeholders. Lewes, UK: Stakeholder Democracy Network.
Shell Nigeria. (2009, Juky 23). Doing busines in Nigeria: Challenges and questions - Session transcript. Retrieved January 30, 2014, from Shell Dialogues: http://www.shelldialogues.com/sites/default/files/NigeriatranscriptV2_0.pdf
The World Bank. (2010). Doing Business in Nigeria 2010 - Comparing Regulation in 36 States, Abuja FCT and 183 Economies. Washington D.C.: The World Bank/ International Finance Corporation.