Magazine article Marketing

Brand Health Check: Shell

Magazine article Marketing

Brand Health Check: Shell

Article excerpt

The oil company is no stranger to bad PR, but the revelation that it had overstated its reserves damaged its credibility with shareholders as well as the public.

Royal Dutch/Shell, one of the world's most respected oil companies, is facing the biggest crisis of its 97-year history. In January it shocked shareholders and rivals when it slashed estimates of proved oil reserves by 20%. Overnight, pounds 3bn was wiped off the firm's market value. The embarrassment deepened when Shell was forced to make four oil reserve restatements totalling almost 4.5bn barrels - enough to supply the world for about six weeks.

Confidence in the company's leadership has since nose-dived, resulting in the ousting of chairman Philip Watts - who received a widely criticised pounds 1m payoff - and chief financial officer Judy Boynton.

Although Shell did not knowingly mislead investors, the restatements were a public relations disaster, shattering Shell's credibility and its reputation for caution. The company has weathered PR storms before: it was heavily criticised over human rights issues in Nigeria and was shaken in the mid-90s when a Greenpeace campaign forced it to abandon plans to dump the Brent Spar loading facility in the Atlantic. But neither of these seriously threatened its bottom line.

Financial figures for 2003 indicate that the company is in great health, with net income up 28.5% on 2002 to pounds 6.8bn. The past six months, however, suggest serious underlying problems. For much of the 90s Shell was the world's biggest publicly traded energy group, but it has now fallen to third behind ExxonMobil and BP. With the collapse in oil prices in the 90s, the sector saw massive consolidation, but Shell missed out on mergers with the most suitable candidates. As Marketing went to press, Shell's shares were trading 10% below BP and 30% below ExxonMobil.

We asked Miles Murphy, chief executive of promotional agency Red Cell Response, which works for ChevronTexaco, and public relations consultant Mark Borkowski, how the company can bounce back.

DIAGNOSIS 1

Miles Murphy, Chief executive, Red Cell Response

Shell has weathered corporate storms throughout its history and is still one of the world's most formidable brands. But it needs to restore investor confidence. Simplifying its complex management structure will improve corporate governance and show shareholders that it is serious about resolving underlying problems.

Shell also needs to innovate in retail formats and develop deeper relationships with customers. …

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