Factors That Promote or Demote the Continuity of the Company - Assignment Example

Transferable learning By Management of Introduction Fundamentally, Centrica plc is a British multinational company whose headquarters are situated in Windsor in the UK. The company’s primary activity involves supplying of electricity and gas to enterprises and consumers in the UK. Centrica is the largest energy supplier to domestic customers in the UK. Besides gas and electricity supply, the company is actively involved in exploration and production of natural gas, generation of electricity and provision of domestic services such as plumping (POWER ENGINEERING INTERNATIONAL, 2009). This company is among the UK companies listed in the London Stock Exchange with a market capitalisation of £15billion as of December 2011. This paper intends to examine into details the external and internal factors that promote or demote the continuity of the company. The analysis is intended to be done by use of PESTEL analysis. Moreover, the Porters Diamond Concept is intended to be applied in examining the strategic planning; the five forces of an industry set up and value chain because of differentiation advantage particularly in creating and sustaining the market niche (POWER ENGINEERING INTERNATIONAL, 2009). Centrica’s market niche is complex because it occupies both local and global market spaces. Numerous factors of sustaining the market nice will be discussed. Furthermore, the paper intends to explore diverse competition mechanisms used by the company’s management in sustaining the competition level with other players in the same industry. It is imperative to note that, the dynamic nature of the global market the overall company development ion diverse sectors requires specific skills to full realize the whole potential of resource utilization (HUMAN RESOURCE MANAGEMENT INTERNATIONAL DIGEST, 2009). The said skills should be embraced by the managers who are required to possess exemplary abilities to detect the company’s trends and act in tandem with the market demands within the same industry (POWER ENGINEERING INTERNATIONAL, 2009). The managers should not only rely on the internal resources but also the attributed environmental considerations, which affect the operations and trends of the company. Some of these factors include fundamental market features, which can affect and dictate the strategic business implementation and sound decision making from available options. The forecast of subsequent political, social, economic and technology implications in tandem with the company’s vision and ambition will ensure successful and purposeful development of the organization and achieving considerable public’s welfare (HUMAN RESOURCE MANAGEMENT INTERNATIONAL DIGEST, 2009). Background information about the company Centrica emerged from the split of the British Gas plc in 1997. The British Gas plc split into the Centrica plc and BG plc. The year 1997 saw Centrica taking over; the gas sales and gas productions at the Rampside Gas Terminal while the BG plc concentrating on gas supply in the overseas market. Centrica begun to diversify in late the 1999, because of market competition. It was under the management of Sir Roy Gardener, the then CEO (POWER ENGINEERING INTERNATIONAL, 2009). The first historical move was the development of the Goldfish credit card and acquiring the AA. In addition, the company acquired OneTel, which served as a residential telecoms operator. The acquisition of the Direct Company based in Canada is a major move that saw the company diversifies to the North American market. However, this kind of diversification strategy changed in 2003, when Centrica started selling some of its subsidiaries and concentrating within the limits of the energy sector, upstream and downstream. The new strategy did well in expansion of the business within the energy. More overseas branches were opened (HUMAN RESOURCE MANAGEMENT INTERNATIONAL DIGEST, 2009). The company is committed to implementing strategies that are intended to improve its general customer service and operations. This move is intended to satisfy the clients wherever they are. The company recognizes the globalization trend that calls for stiff completion ads well as an extensive stable business operation mechanism with the aim of meeting both long-term and short-term goals. The effect of exemplary global competition in energy production and energy related services has gradually led to unpredictable and complex trade milieu in the global energy industry and market. For instance, some of these challenges include dynamic market trends, non-renewable features of considerable extent of energy sources, which limits the life span of the entirety of the company existence (POWER ENGINEERING INTERNATIONAL, 2009). These conditions are inevitable in the global energy industry and the associated market space and it requires Centrica to position itself in a strategic manner to cope with the economic trends. The primary international and management operations strategies include extensive client commitment and associations, maintenance and continuity of competitive supply cost, operational aptness through intensive research and best practice. Centrica’s Ambition and Governance structure Centrica is committed in ensuring that its customers are treated with outmost fairness, securing affordable energy supplies and ensuring reduced carbon emission. The following diagram indicates the Centrica’s structure of governance. Courtesy of (2009). Energy Security To help leading UK utility Centrica meet its strategic goals, Baringa Partners worked with the company in the implementation of a energy trading system. POWER ENGINEERING INTERNATIONAL. 17, 50-53. PESTEL analysis of the internal and external environment Focus remains one of the fundamental features of any successful company or organization. The commercial milieu have become complex and have rapidly embraced dynamic trends and this requires businesses to concentrate on a few primary elements that are central for firm’s survival (POWER ENGINEERING INTERNATIONAL, 2009). It is imperative to note that, the success of accompany involves a comprehensive understanding and assessment of political, social, economic, technological and legal factors which control development and incessant operations of the firm. The analysis of these factors is intended to the sustenance endeavour. This study observes that, studying the fundamental considerations attributed to the organization to execute the purpose and goals of the company will determine its success. In essence, the company’s decision makers should remain sensitive of the overall trends and dynamism in the industry (HUMAN RESOURCE MANAGEMENT INTERNATIONAL DIGEST, 2009). This includes the energies to maximize the available opportunities as well as reducing risks that may form economic impediments to the organization. The detailed discussion on the mentioned factors is as follows. Political The political milieu and government stand on the general commerce contributed immensely to the success of the companies. The political structure and stability of a nation is essential when making primary decisions involving investments. Investors consider the political situation of a nation before making a decision to make a venture or diversifying its operations. Unwavering governments and ensuing national political stability is a primary ingredient to investments and economic growth (POWER ENGINEERING INTERNATIONAL, 2009). For instance, the government unswervingly influences the energy business in the political pacts, agreement and contracts done by policymakers with the intent of improving the economic and social milieu of the government. When examining the feasibility and competitive benefit of the organization, a distinction amid the public corporations and private companies should be considered since, the two forms the segments of the market niche and they are constantly privy of the present business milieu trends. Of fundamental concern, the energy companies should be in apposition of determining the business relations and contract pacts amid and among the competitors for easier projections of perceived changes in the industry (POWER ENGINEERING INTERNATIONAL, 2009). This practice eases initiation and implementation of strategic business plans intended to serve the interests of the company in any situation when carrying out trading activities. It is evident that politics play a fundamental role in determining the economic status of a nation. Economic trends The process of leading and directing the procedures within an organization through exhaustive available resources with the intent of achieving the corporation’s objectives is characterised by business administration and management (HUMAN RESOURCE MANAGEMENT INTERNATIONAL DIGEST, 2009). This practice requires deep conceptualization of the trade plans and monitoring its implementation for appraisal and assessment of the efficiency and efficacy of the business dealings. This study observes that, strategic management should recognize and itemise the objectives of the organizations to design apt business policies and plans intended to maximize the business’s profits. On the same regard, proper allocation of funds and investments on trade ventures should be practiced to achieve the desired outcome of a particular business plan (POWER ENGINEERING INTERNATIONAL, 2009). Moreover, conceptualizing of business plans should be done in tandem with the obtainable resources of the firm, with careful recognition of the conditions of every business action, which the firm will be accountable in the future. It is imperative to note that, the strategic benefits in a business milieu contextualised in the energy industry, determine the success of the conjured business plan. This is possible through a sustained focus on controlling overheads and rising competence by putting the organization into a spot that will propel its mission to reality. In addition, the size of a market is fundamental for vertical integration. This is evident, when considering small electricity systems constructed around a few large power stations, which do not compete naturally with one another because of their smaller customer base (POWER ENGINEERING INTERNATIONAL, 2009). This implies that the burden of introducing new generation capacity should be borne. Social trends The consumer populace of energy related products such as electrify include the residential and commercial areas (GREAT BRITAIN, FREEMAN & SAUNDERS, 2012). They depend immensely on the power source to carry out daily activities, which encompass of the spotlight of assessing Centrica Energy’s financial positioning. This study observes that, the service or product’s viability is explicitly determined by the consuming end of the supply and demand chain. Furthermore, this research elucidate on this by noting that additional benefits of having strong customer base involves less expenditure in maintaining acquiring new customers. Consumer studies should be conducted to maximize the procedure of identifying the company’s target market, which includes determination of clients’ needs and preferences. With the dynamism embraced in the global market, Centrica should use online surveys to gather pertinent information. Technological trends The power firms should embrace technology particularly in exploration and handling transactions since form the essentials of success of any energy company. Embracing of technology contributes to the strengthening of the firm’s market benefit in offering products and services that are not offered by the competitors in the same industry (GREAT BRITAIN, FREEMAN & SAUNDERS, 2012). On the same regard, the company’s increased competitive advantage is wholly exhausted and maximized. Continuous provision of service to the consumer populace is fundamental in sustaining the company’s long-term goals through immense investment on energy exploration ventures. Centrica should initiate and embrace a commitment to a meticulous milieu management through community discussions, positive planning, fulfilment, sustainable expansion and auditing for incessant development. Legal trends This study establishes that, the present plan in the fuel supply souk extensively determines the scope to which effectual competition in production can be attained (POWER ENGINEERING INTERNATIONAL, 2009). It is imperative to note that building up a substantial customer base should prevail, particularly by resolving sensitive matters such as creation of strategic significance of fuel assortment as well as contractual commitments on large gas resources. The effectiveness of legalities of such commitments and affiliated contractual terms amid companies are attributed to significant trade, permissible and negotiating resources into any fuel-contracting condition. This environment contributes immensely to the strengthening of the energy power companies. This is because of the absence of depth on the fuel market. More over, the companies contribute to the overall benefits to the government and state economies as well as inclination to cross possession between resources (GREAT BRITAIN, FREEMAN & SAUNDERS, 2012). However, the legal leeway provided to small producers to engage in the energy market ensures stiff completion for purchases of small trenches of fuel (HUMAN RESOURCE MANAGEMENT INTERNATIONAL DIGEST, 2009). This legal status described in this context is fundamental for Centrica because of its level of economies of scale. It is notable that, Centrica is well positioned to benefit from the large economies of scale made conducive and applicable by the legal framework. On the same regards, Centrica Energy requires to align its existing contractual commitments for full benefits attributed to the legal foundation. Porters Five Forces model The Porters Diamond concept indicates that there may be inherent reasons, why some countries are aggressive than the rest. The model indicates that the state home base of a business plays a fundamental role in creating benefit on the international scale. In essence, the domestic trade provides the essentials to which a business will erect upon to provide a tactical benefit in the global market place (GREAT BRITAIN, FREEMAN & SAUNDERS, 2012). Consider the following diagram of the porters’ theory. The porter’s concept explains explicitly on how diverse but linked factors contribute to the overall product differentiation. In addition, the diagram gives direction on how managers are intended to evaluate latent level of profitability, prospects and risk. This is founded on the long-term prosperity of a market niche. In establishing the viable management Strategies in the UK’s economy, particularly in the energy industry, the porter’s theory is essential. The ascribed factors that sway both the interior and exterior market trends and client’s taste are examined (POWER ENGINEERING INTERNATIONAL, 2009). The firm’s strategy and competition from the contender firms within the energy industry play a gigantic role in output of cutthroat brands. The segmented dissemination with international market niches, which reacts to the business “Push” in a choosy manner and subsequent mixing with the customers, creates a certain consumer connection (GREAT BRITAIN, FREEMAN & SAUNDERS, 2012). The market prototype of the energy industry in the UK is principally recognized by the intricate and resourceful strategies, which are in tandem with the forceful trends of the local and global economic standing (POWER ENGINEERING INTERNATIONAL, 2009). Furthermore, the foundations and ascribed home base benefits advance a firm to set up and protract a niche in the international market niche. This is detrimental to those countries with less incentive base support. Porter argues that, such firms are unable to protract the already occupied niche. The market strategy in the current dynamic and exceedingly globalised business space require firms to appreciate use of online marketing approaches. Creating a global market for the energy products and global brand needs use of online advertising approach (PORTER, M. 1990. Taking on of technology in doing business dealings saves time and money. Suppliers A company that offers goods as well as services immensely depends on suppliers for delivery of the company’s raw materials. This transaction contributes to the buyer-supplier association within diverse industries. Such association is directly influenced by the change variables ascribed to supply and demand (GREAT BRITAIN, FREEMAN & SAUNDERS, 2012). This is normally based on the accessible needs of the consumer populace. The ability to dictate cost and control availability of materials defines the suppliers’ influence. Porter asserts that numerous strengths are ascribed to the suppliers thus positioning them strategically to perform such functions as increasing costs without affliction from a decline in volume, lessen the amount supplied, contend in an milieu with comparatively few substitutes, provide a material that is a significant part of the end-product and amalgamate downstream by buying or scheming the distribution channels. It is notable that, every corporation that depends on the services and resources from primary suppliers are required to be susceptible on the variables that are highly significant and measured by the suppliers. For the case of the energy industry, predominantly in the state that, confront Centrica Energy, managers of the corporation should have a comprehensible perceptive of the industry dynamic trends in which suppliers are unswervingly involved in (GREAT BRITAIN, FREEMAN & SAUNDERS, 2012) .These include the suppliers’ attentiveness or their focus and primary commerce interests, multiplicity of products, plan and services offered, and the substitute resources that are accessible. It is imperative to note that, building win–win interaction with suppliers is fundamental in protecting the interests of both ends Buyers The influence of buyers describes the effect clientele have on a business. When buyer influence is steadfast, the association to the manufacturing industry becomes nearer to market environment wherein the consumer has immense persuasion in determining the cost (GREAT BRITAIN, FREEMAN & SAUNDERS, 2012). This study establishes that, the bargaining control of buyers increase when they have the aptitude to make pacts with other corporations which provide comparable products and services, purchase a product that represent a substantial portion of the company’s expenditure, purchase of undifferentiated products, sustain low trends in overheads when change of vendors takes place, be cost susceptible by bearing in mind the available choices, and amalgamation to buy the products of the suppliers (POWER ENGINEERING INTERNATIONAL, 2009). For the case of Centrica Energy, sustaining its incorporated organizational arrangement wherein differentiations between the energy production, transmission, and retail activities are component of one all-inclusive market participant (GREAT BRITAIN, FREEMAN & SAUNDERS, 2012) . The consumer influence will be elevated because it will direct the cost of its raw materials incurred from the suppliers. In addition, a primary contemplation is the huge souk size that the corporation caters in relation to the company’s position of being a primary market competitor in terms of global energy generation and services business. New Entrants The likelihood of new firms’ incoming the industry influences the speed of the rivalry. Thus, the key is to appraise the methods of entrance and departure for a new competitor to the business. Though any business should be able to penetrate and depart the sector, each industry presents diverse level of complexity prejudiced by economics (GREAT BRITAIN, FREEMAN & SAUNDERS, 2012). These distinctive features of each business are referred to as obstacles to entry which may come from different aspects of the business range from supplies to technology. They seek to lessen the rate of admission of new entrants which lead to continuance of a particular echelon of proceeds for the existing players. For the case of the energy industry, barriers to entry are high because of the limited energy deposits that can be harnessed by a new company (GREAT BRITAIN, FREEMAN & SAUNDERS, 2012). Besides, large corporations particularly Centrica Energy is a difficult electricity provider to compete. The expensive cost of venturing into the energy industry likewise contributes to the challenge that a new market player should overcome to emerge victorious in the business (HUMAN RESOURCE MANAGEMENT INTERNATIONAL DIGEST, 2009). Substitutes and product development “Substitute products” as those that are available in other industries that meet an identical want for the end user. As more substitutes become accessible and inexpensive, the demand becomes more resilient since customers have supplementary alternatives (GREAT BRITAIN, FREEMAN & SAUNDERS, 2012). The treat of substitutes often affects price-based rivalry since alternate products may limit the aptitude of firms within an business to elevate prices and advance margins. A segment is unattractive when there are definite or possible substitute for a product. In the case of the energy industry, there are several existing energy sources that are concerted to electricity which can serve as alternatives. Solar energy is captured through solar panels to generate electric power that will enable appliance and other electric equipment and devices to operate. Other sources of power energy which can be converted to electricity include wind energy, tides, geothermal and biomass (POWER ENGINEERING INTERNATIONAL, 2009). For the case of Centrica Energy, the accessible energy sources which proved capable to the corporation have been entirely explored and revealed which made it the foremost market player in the energy industry. On the same regards, the viability of providing substitutes to the services and goods offered by the business will be intricate and could be almost impracticable. But if new technology will enable the accessibility of substitute products and services, there will be new opportunity to increase entry in the business (HUMAN RESOURCE MANAGEMENT INTERNATIONAL DIGEST, 2009). Moreover, as the new products enter the market, Centrica has endeavored in developing its products to better brands. Through its leading integrated energy structure, the company has ensured delivery of the right product composition. The product development management has worked to ensure efficient end delivery of the company’s products from the very initial stage of opportunity, through concept stage, design and implementation. Industry Competitors and market penetration Firms endeavor to gain a cutthroat benefit over their rivals. The intensity of competition varies within each business and these differences can be significant in the advancement of strategy. Industries that are “strenuous,” versus “disjointed,” often display the maximum level of competition (GREAT BRITAIN, FREEMAN & SAUNDERS, 2012). For this context, it is notable that, Centrica Energy is confronted with numerous rivals in the UK energy market in terms of generation, transmission, and distribution. Some of them include Armeda, and Gas, Basic Power, Atlantic Electric among many others. The companies form a primary threat for the market share and product and serve provision. On the other hand, Centrica has maintained a constant rate of market penetration. The company’s interest in Qatar market is motivated by its vast financial base and strong supply chains. The aptness of Centrica’s supply chains has promoted remote market penetration efforts by the company. Centrica Plc has managed to occupy and sustain a large international niche through proper management of the supply chains (GREAT BRITAIN, FREEMAN & SAUNDERS, 2012). This study observes that Centrica is commitment to further market penetration so as to maintain its positional competition against the co-players in the energy industry. Market segmentation and positioning Centrica Plc Company is a purely integrated energy corporation, which operates in four primary segments. They include, Upstream UK, Storage UK, Downstream UK and North America. The Upstream UK involves Centrica Storage operations while the Downstream UK involves of British Gas. On the other hand, Storage UK deals with Centrica Storage operations and the North America involves the operations of Direct Energy. This pattern of market segmentation is advantageous in numerous ways (GREAT BRITAIN, FREEMAN & SAUNDERS, 2012). The company has been able to occupy a large market niche both locally and internationally. Segmentation has enabled Centrica’s management to reach clients of all levels and meet their needs in an efficient manner. This kind of market segmentation has put Centrica at a highly competitive level with other energy companies. It is imperative to note that, through apt business network, modern technology, delivery of superior services, Centrica is able to sustain its vast market segment. On the same regard, Centrica has positioned itself strategically with the intent of expanding to various nations. For instance, Centrica agreed to buy the Norwegian continental shelf at a cost of $1.6 Billion (GREAT BRITAIN, FREEMAN & SAUNDERS, 2012). This was expansion investment intended for strategic positioning on the global market niche. Presently the company is negotiating to take its operations to Qatar. Communication model adopted by Centrica Company Centrica has embraced a highly rated communication model of Triple bottom line. A proper and systematic mode of communication contributes to numerous gains to the company. Some of them include customer sustenance through meeting their desires in time and at the right place. Indeed a genuine commitment to sustainability needs adoption of a relatively broader perspective of the full life cycle of outcomes of business decisions (HUMAN RESOURCE MANAGEMENT INTERNATIONAL DIGEST, 2009). The Triple bottom line model enables Centrica Energy Company to trace the product development trends both locally and internationally. Moreover, the model helps in ascertaining the effectiveness of the supply chain systems. Consider the flow and functionality course of the model. Courtesy of (2009). Diversity policies fuel business success at Centrica: Company wins award for anti-ageism initiatives. Human Resource Management International Digest. 17, 21-24 This study observes that, the Centrica has applied this model in ensuring the sustainability of its products through proper checks aimed at reducing unforeseen resource constrains and wastage of generation (HUMAN RESOURCE MANAGEMENT INTERNATIONAL DIGEST, 2009). This control checks have seen the company attain considerable levels of economic value, which is directly attributed to the competitive nature of the Centrica. This practice is beneficial to all aspects of the surrounding, for instance, the model aids in ascertaining and checking of the rates of resources replenishment and level of waste generation, which should not surpass a certain carrying ability of the immediate ecosystem. This ensures the company continued survival. Conclusion In conclusion, Centrica Company can be said to be a competitive player in the energy industry both in the local and international market. This research has indicated that Centrica has a complex system of management with well-outlined functions and indeed the reason for the company’s prosperity. The diverse management departments work harmoniously with the common goal of putting the Company at the right position. In addition, the Triple bottom line model enables Centrica Energy Company to trace the product development trends both locally and internationally. Moreover, the model helps in ascertaining the effectiveness of the supply chain systems. The company’s’ continued culture of expansion and customer satisfaction will see it grow tremendously and compete aptly with other players in the energy sector. In essence, sustenance of the current strategic management of all the Centrica departments is fundamental to a more prosperous company in 2020. List of references (2009). Diversity policies fuel business success at Centrica: Company wins award for anti-ageism initiatives. Human Resource Management International Digest. 17, 21-24 (2009). Energy Security To help leading UK utility Centrica meet its strategic goals, Baringa Partners worked with the company in the implementation of a energy trading system. POWER ENGINEERING INTERNATIONAL. 17, 50-53. GREAT BRITAIN, FREEMAN, P., & SAUNDERS, D. (2012). Review of undertakings given by Centrica following its acquisition of the Rough gas storage facility. London, The Stationery Office. Read More