Capstone Assignment
International Forces Paper

International Forces

EXECUTIVE SUMMARY
Companies are under pressure to make profit that are satisfactory to the shareholders. The pressure to make profit prompts most companies to go global and look for new markets outside the country. When a company goes global, it becomes a multinational or international company because it has operations in more than one country. Multinational companies usually have increase profits and sales than their domestic counterpart.
International companies encounter different kinds of international environmental forces that impact their business. Most of the international environmental forces are; Cultural, Physical, Political, Intellectual, Legal, International Monetary system and Financial forces. These force are very important for a company to consider carefully before it ventures into any country for business. International companies that did not manage these international environmental forces properly have gone out of business. Most Multinationals in recent times have dedicated departments that handle these forces.
This capstone project will discuss the impact of international environmental forces on Shell Petroleum Development Company. Shell is a Royal Dutch company that has many locations globally, and is one of the major oil companies in the world. Most of its international environmental forces issues will mainly focus on Nigeria, where the company has been operating since 1937 and also the United States. One ethical issue the company has face in the international business environment will also be analyzed. Finally, there will be conclusion that will restate the major points of the paper and the various points mentioned.

INTERNATIONAL ENVIRONMENTAL FORCES
The seven International environmental forces are Cultural, Physical, Political, Intellectual property, Legal, International Monetary system and financial. These forces are defined and described below;
CULTURAL FORCES
Culture is the aggregate of the beliefs, rules techniques, institutions, and artifacts that distinguish human populations. Culture is not directly observed, rather it has to be learned by observing the social world in which it exists. Concepts of “Social” and “Cultural” are often combined because of their close linkage. Sociocultural is the explanation of the social world through which we observe the effects of culture. Culture is very important for any multinational company that wants to do business in any country. The company should study the culture of that area in regards to their company policies and business operations. Managers in charge of production have found out that cultural values and attitudes toward change can seriously influence the acceptance of new production methods or processes (Ball, Geringer, Mcnett and Minor, 2013).
Shell Company has been drilling oil in Ogoni, Nigeria since 1958. The Ogoni people culturally, are farmers who rely on their produce for survival. They were once the breadbasket of other communities beside them. Shell drilling in their community made most of their citizens to abandon their cultural farming methods because of oil spills. Most of the fishermen encountered problems fishing because of the pollution in their nearby swamps. For them to get fish they have to sail farther than the river, which is hard for them because their canoes were culturally designed to fish within river banks (Boele, Fabig and Wheeler, 2001).
Shell believe that the government of Nigeria should be responsible for those cultural issues in Ogoni. They also believe that the problem should not be theirs alone since they operate jointly with the government. They forgot that Nigerian Government is corrupt and the political officers’ don’t care about Ogoni peoples’ cultural wellbeing rather only their “Swiss Accounts”. Shell should have employed a better strategy like telling the government that they will start deducting funds towards the cultural restoration of the Ogoni people.
PHYSICAL FORCES
Physical forces includes the location, topography, and climate as well as natural resources. Location is where a country is situated, who its neighbors are, and how it’s capital and major cities are located. While Topography includes the surface features such as mountains, plains, deserts, and bodies of water that contribute to differences in economies, cultures, politics, and social structures wherever they occur, both in nations and regions of individual country. Climate is also an important physical force because it sets a restrain on what people can do, physically and economically (Ball et al., 2013).
Natural resources that are sources of energy are either nonrenewable or renewable. Nonrenewable energy sources include petroleum, both from typical sources and nonconventional sources such as shale, oil sands, coal, and natural gas. Renewable sources include hydroelectric, wind, solar, geothermal, waves, tides, biomass, and ocean thermal energy conversion. (Ball et al., 2013). International companies should be mindful of these forces when investing in any area. The artic is an example of area that have unfavorable topography area for oil exploration.
Shell Company has been trying over the years to drill in the Alaska Artic because of the large oil and gas reserves. U.S. Artic waters are estimated to contain 27 billion barrels of oil and 132 trillion cubic feet of natural gas. However, the new onshore oil and drilling boom have cast doubt over shell strategy to drill in the Arctic where most companies have not explored (Dlouhy, 2014).
The shell strategy to explore in the Artic did not work out well. It is not entirely a very good idea because the cost of drilling in the Artic is very expensive. One company alone should not embark on such venture, rather it should be a joint venture so as to reduce cost.
POLITICAL FORCES
Political forces comprises those challenges that stems from government controls and rules, terrorism, which the international Company encounters. Government take over firms for some reasons. These reasons are: (1) to make more money from firms; (2) they obtain cheaper financing (3) they get governmental contracts, (4) they get export assistance, and (5) they can steady wages with government assistance. Situations where government-owned companies compete with privately owned companies, the private companies sometimes complain that the government companies have unfair advantages. The transfer of public sector assets, management of state activities through contracts and leases to the private sector is called privatization (Ball et al., 2013).
Terrorism are acts of violence committed for a wide variety of reasons, including ransom, to overthrow a government, to gain release of imprisoned colleagues, to exact revenge for real or imagined wrongs, and to punish nonbelievers of the terrorists’ religion. This unlawful act introduces instability and chaos into a country, making it difficult for businesses to know what the political environment will be in the future. There are countermeasures by industries towards terrorism like insurance to cover ransom payments, antiterrorist schools and companies to handle negotiations with kidnappers (Ball et al., 2013).
Government stability is the ability of a government to maintain itself in power, or the stability or permanence of a governments policies. Government stability is important for businesses to thrive and succeed (Ball et al., 2013). An unstable government will scare away investors and hinder economic growth.
Political forces in Nigeria has been the problem of Shell oil exploration. Government instability in the past has hindered their production capacity. The military government during the era of General Sani Abacha could not quell the political uprising of Ogoni people who wants fair share of their natural resources. Shell on their own part refused to constructively negotiate with the indigenes because they believe that the government should handle it. General Abacha mishandled it by killing the “Ogoni Nine”, people that represented the Ogoni people during negotiation. The aftermath was terrorism by the host community on the pipelines (Boele, Fabig and Wheeler, 2001).
This was a flawed strategy by Shell, they should have negotiated and directly appeal to the Ogoni community because the government don’t care for their well been. Oil spills and gas flaring should have been avoided through improved technologies. They should have employed more people from the host community in other to appease them.

INTELLECTUAL PROPERTY
Trademarks, patents, trade names, copyrights, and trade secrets are known as intellectual properties. A patent is granted by the government to inventor of a product or process the total right to manufacture, exploit, use, and sell that invention or process. Trademarks and trade names are names and designs, that are registered officially, by which merchants or manufacturers designate and differentiate their products and services. The exclusive legal rights of authors, composers, creators of software, playwrights, artists, and publishers to publish and exhibit their works are called copyrights. Any information, plans or ideas that a business wishes to confidential is called Trade Secrets (Ball et al., 2013
Shell in the recent times has no problem with intellectual rights in Nigeria and United States. Their products are unique, and the theft of their intellectual rights are almost impossible. Shell is a renowned company and stealing their identity is difficult.
LEGAL FORCES
Rule of law in a country legal system encourages foreign investment because foreign businesses know that their interest will be protected. Rule of law also ensures the protection of human rights. A country with tyrant ruler will attract less companies from around the world (Ball et al., 2013).
Private international law deals with laws governing transactions of individuals and companies that cross international borders. Public international law includes relations between governments, including laws concerning diplomatic relations between nations and all matters involving the rights and obligations of sovereign states. Sources of international law comes from several sources, but the most important are bilateral and multilateral treaties. Extraterritorial application of laws is a country’s attempt to enforce its laws to foreigners or aliens and to acts and activities that take place outside borders (Ball et al., 2013).
International dispute settlement can be achieved through litigations. Litigation is a legal proceeding conducted in order to determine and enforce particular legal rights. If the consumers, companies or government feels that there right has been infringed, they can sue to against the offended party, and if adjudged they were right, the court will award compensation to them.
Torts are injuries inflicted on other people, either intentionally or negligently. Product liability concerns with the civil or criminal liability of the designer or manufacturer of a product for injury or damages it causes. In many ways, product liability is treated differently in the U.S legal system than it is in other countries (Ball et al., 2013).
The Legal system in Nigeria is bad because of the level of corruption. Six staff of the supreme court of Nigeria were fired by Federal Judicial Service Commission (FJSC) for leaking an undelivered Supreme Court judgment to the public (Bamgboye, 2013). International Companies encounter this type of legal forces in many countries, therefore they should be aware of the country they are going into.
Shell in recent times has faced many litigations because of their oil spills in Nigeria and other places. Most of this spills arises from negligence on their part. They believe that the cost of preventing the problem outweighs that of paying compensations to the host communities. Hence the employed the strategy of compensation instead of prevention. In 2002, Esther Kiobel (Kiobel vs. Shell) sued Shell in U.S. federal court for environmental damaged from the oil spill in Ogoni land. The suit also alleged that Shell in 1993 helped the military government of Abacha by providing trucks that transported the soldiers who arrested and tortured them. The suit also maintained that Shell used its property as a staging area for attacks against the Ogoni people, and also provided food to the soldiers as well as pay them (business-humanrights.org, p. 1).
Shell had another legal force problem in the U.S. Artic oil field. An appeals court ruled faulted federal regulators’ environmental analysis of the Chukchi Sea oil development. This made their new CEO, Ben van Beudern to withdraw further investment in the region because of the uncertainty of the law suit (Rosen, 2014).
Shell failed woefully in this strategy of using the government to fight their host communities. They should have engaged in arbitration and not intimidation, harassment and subjugation. They should have invited the host community for talks and find a way to solve the problems.
INTERNATIONAL MONETARY SYSTEM
Bank for International settlements (BIS) is an organization of central banks that exists to build cooperation among them to support monetary and financial stability. Central banks of major industrial countries meet at least seven times a year at the BIS in Basel Switzerland, to discuss the global financial system (Ball et al., 2013).
Fluctuating currency values affect costs and valuation, therefore they are critical factor in decision making for the firm. Factors that influence exchange rate movement include basic supply and demand of the currency, interest rates, inflation rates, expectations of the future, and the monetary and fiscal policies of the government. A government can limit the amount of its currency that can be exchanged for another currency in a particular transaction. These controls limit the amount of foreign currency purchases or exchanges made inside the country (Ball et al., 2013).
Shell in 2013 blame the exchange rate as one of the reasons for a decline rate in profit (news.sky.com, p. 1). These shows the impact of exchange rate on the profits of companies. Shell should have reduced the level of investments and watch the exchange rate carefully to avoid this decline in profits.
FINANCIAL FORCES
Fluctuating currency values affect costs and valuation, therefore they are critical factor in decision making for the firm. Factors that influence exchange rate movement include basic supply and demand of the currency, interest rates, inflation rates, expectations of the future, and the monetary and fiscal policies of the government (Ball et al., 2013).
Governments around the world generally use three types of taxation to generate revenue: income tax, value added tax (VAT), and withholding tax. Inflation is a trend of rising prices and is measured by the consumer price index (Ball et al., 2013).
The Nigeria government in 2013 made an attempt to enact a taxation bill that will reduce the profits of oil companies. They wanted to pass the Petroleum Industry Bill which will curb the excesses of the oil companies and increase government profits to 80%. Mark Edward the representative of the oil producers section said that the bill will deter further investment in oil exploration and development (Kennedy, 2013). This kind of financial force is a problem to Shell operations in Nigeria. They should reduce their investments in the country because of the belligerent laws the Nigerian government are proposing.
ETHICAL ISSUE
Shell ethical violation are numerous. The willful support of the Nigeria government to attack the Ogoni community is an ethical issue. The company should play a neutral role when it comes to law enforcements. Helping the government to eliminate ranking members of the society that are fighting for their rights is unethical. Ken Saro Wiwa and the other eight (Ogoni nine) were killed during the Military Junta of Sani Abacha because Shell refused to compensate the host community for the oil spill which damaged their land. Ironically, they cited sabotage for the spill instead of old equipment they used in drilling. If the Ogoni people were compensated for their damages, the “Ogoni Nine” could have survived today (Boele, Fabig and Wheeler, 2001).
This unethical act do not portray Christian values. They should give honor to whom honor is due. That honor entails taking care of the host communities where they operate. Concentrate in reducing oil spillage by the use of modern technological equipment. As Christians one should be his brother’s keepers, and not always going for profits in everything. Giving back to the community is essential and should not have been a problem for Shell if the operation of their business were based on Christian Values

CONCLUSION
Shell has encountered so much problems over the last decades because of these international environmental problems. They should dedicate more research work on how to eliminate these issues to avoid the decline in value of the company. More attention should be geared towards the host communities in regards to working with them in building various infrastructures they need. They should improve their human relations so that people will see them as a friendly company than a belligerent one.
They should do more towards eliminating the issues of damage settlement to avoid the bloodshed that was witnessed the last time in Nigeria. Modern technologies should be used in oil exploration and development to avoid oil spillage problems. The management should hire people that will restore community relations with the company to promote development and sustain peace
The litigations in the world are too much. The governments of the various countries in the world should make plans were they can check the excesses of the companies that are violating peoples right. Efforts should be made towards protecting the environment because the level of water and land pollution from oil spillage is very alarming. If these International environmental issues are tackled, the world will be a safer place.

Works Cited
Ball, D. A., Geringer, M. J., McNett, J. M., & Minor, M. S. (2013). International Business. New York: McGraw Hill Irwin.

(n.d.). Retrieved from Business and Human Rights resource Center: http://www.business-humanrights.org/Categories/Lawlawsuits/Lawsuitsregulatoryaction/LawsuitsSelectedcases/ShelllawsuitreNigeria
Ball, D. A., Geringer, M. J., McNett, J. M., & Minor, M. S. (2013). International Business. New York: McGraw Hill Irwin.
Bamgboye, A. (2013, July 5). Six Staff Fired for Leaking Supreme Court Judgement. Retrieved from Allafrica: allafrica.com/stories/201307051049.html
Boele, R., Fabig, H., & Wheeler, D. (2001). Shell, Nigeria and the Ogoni. A study in Unsustainable Development. Hoboken: John Wiley & Sons, Ltd and ERP Environment. Retrieved from Universitat Pompe Fabra.
Dlouhy, J. (2014, January 30). Shell Puts 2014 Artic drilling Plans on Ice. Retrieved from Fuel Fix: fuelfix.com/blog/2014/01/30//shell-puts-2014-artic-drilling-plans-on-ice/
Kennedy, C. (2013, August 25). Nigeria Oil Industry Threatened by Petroleum Industry Bill. Retrieved from Oil Price: http://oilprice.com/Latest-Energy-News/World-News/Nigerias-Oil-Industry-Threatened-by-Petroleum-Industry-Bill.html
Rosen, Y. (2014, January 30). Shell Calls off 2014 Oil Exploration in Alaska Artic Waters. Retrieved from Alaska Dispatch: http://www.alaskadispatch.com/article/20140130/shell-calls-2014-oil-exploration-alaskas-arctic-waters
Shell Blames Profits Slump on Nigeria Issues. (2013, August 1). Retrieved from Sky News: http://news.sky.com/story/1123150/shell-blames-profits-slump-on-nigeria-issues