The Renewable Energy Resources - Advantages of Three Methods Expanding Power Generating Capacity - Case Study Example

Case Study Table of Contents Introduction 3 Discussion 3 STEEPLE Analysis 4 Alternative Strategies for DPEG 7 German Energy Policy and Trends in the Demand for Power 8 Cost Considerations and Market Structure 9 Trade Barriers, Currency Exchange Rate and Political Stability 10 Conclusion and Recommendation 11 References 13 Introduction Germany can be considered as the leading economy in Europe. In addition to this, this country can be considered as fourth largest in this world in terms of GDP growth rate. Several industries are contributing significantly to the growth of the Economy in the Germany. Energy sector can be considered as an important economic growth driver of Germany. It is true that demand for fossil fuel energy resources is reducing among the consumers and business organizations. There are several reasons behind the reduced demand and needs. First of all, constant hike in fossil fuel price is stopping common people to consume oil and gas energy resources. In addition to this, high consumption of fossil fuel can increase the level of carbon emission. Government of Germany is trying to create awareness among the common people to use green and renewable energy resources to maintain economic and environmental sustainability. In addition to this, government is trying to motivate the energy producing organizations to manufacture green and renewable energy resources. DPEG is one of the leading Germany based organizations provides power and electricity to the consumers and different business entities. The organization is trying to expand its power generating capacity by considering three different possible methods. This essay will determine the advantages and disadvantages of the three methods and will recommend to the organization to adopt a particular method based on the result of evaluation and analysis. In addition to this, STEEPLE analysis has been conducted in this essay to undertake a detailed analysis of each and every factor that could impact on the decision making process of DPEG. Discussion It is highly important for the energy manufacturing organizations to consider the impact of several external environmental factors on the decision making process and business performance of the organization to overcome possible threats and capitalize on the potential business opportunities. A STEEPLE analysis has been conducted in this part of the essay to determine the effect of external environmental factors on the business performance of DPEG. STEEPLE Analysis STEPLE analysis can be considered as one of the important strategic marketing tools that help organizations to find out possible external environmental opportunities and challenges. In addition to this, it is highly important for the energy producing organization to conduct this particular analysis in order to maintain effective business performances. Social It is true that the social demand for renewable and substitute energy resources have been increasing among the consumers in Germany. Recent financial crisis and economic slowdown affected the purchasing power of people in Germany. Therefore, Germans are trying to reduce high consumption of oil and gas energy resources due to constant hike in fuel price. In addition to this, the people of Germany are trying to consume effective and sustainable energy resources to maintain environmental sustainability (Jacobs, 2012, p.17). Therefore, it can be stated that social demand sustainable green and renewable energy resources is significantly increasing among the target customers. Technological Germany is technologically developed country. The energy manufacturing organizations can source advanced and modern technological resources in order to integrate them in the business operation activities. Oil and gas extraction and energy production requires advanced and effective technological business operation resources so that the organizations can maintain efficiency in entire business operation process (Jordan-Korte, 2011, p.65). The government of Germany always ensures effective technological resources in order to enhance effective business operation growth of these organizations. In addition to this, the German government developed several policies to support the energy manufacturing organizations to invest in the renewable energy sources. Therefore, the government is supporting the organizations regarding this issue. Therefore, it can be stated that technological environment for DPEG. Economic Recent financial crisis and global economic recession affected the economic environment of the country. Limited purchasing power and low disposable income are the major consequences of this economic slowdown. It has been discussed earlier that constant hike in fossil fuel price is creating major concerns for the common people and several business ventures. Therefore, the business organizations are trying to reduce their energy consumption cost. The target customers and business clients are trying to use renewable energy sources in order to gain potential competitive advantages by reducing daily business operation and household cost (Komor, 2004, p.54). This adoption and implementation of cost leadership strategy can help DPEG to overcome the business risks and external environmental challenges. Environmental The government of Germany is trying to develop effective policies to control the carbon emission level in the atmosphere to reduce the impact of high carbon emission on the environment. It is true that extraction and burning of fossil fuel can provide significant energy sources to the target customers and business clients. But, negative impact on the environment can affect the environmental and ecological balance of the country. Therefore, the government of the country is trying to develop unique policies to motivate the energy manufacturing organizations to manufacture substitute, green and renewable energy resources to reduce the serious impact on the environment (Moselle, 2012, p.31). Therefore, it is highly essential for DPEG to consider new and unique business operation strategy to maintain environmental sustainability to maintain effective business performances. Political Germany is politically stable country. The government of Germany always tries to support the business organizations within the energy manufacturing and distribution industry as these organizations significantly help the national economy to attain effective growth rate. However, recently the government of Germany has developed several strict business operation policies for the energy manufacturing and distributing organizations in order to maintain social, economical and environmental sustainability. It is highly important for the organizations to maintain environmental policies, employment policies, workplace health and safety policies, and wages distribution policies. In terms of policy or regulatory violation, the organizations may face several types of legal and political challenges (Taylor, 2008, p.86). Therefore, it is highly important for the organization like DPEG to maintain and follow each and every developed policy and legislation. Legal Legal environment for the business organizations is becoming highly complicated and challenging as the governmental regulatory bodies are developing different types of business operation strategies in order to maintain the sustainability in the business and several external environmental factors. It is highly important for the organizations within the energy producing and distributing organizations to ensure high sustainability in the business process and business performance in order to gain potential competitive advantages and to avoid several future business operation threats (Buhrke, 2011, p.98). Ethics It is true that the energy manufacturing and distributing organizations always have to ensure high business ethics and corporate value in the business operation process. Energy manufacturing organizations can manufacture and provide energy to the consumers and business operation processes according to the developed corporate value in order to maintain effective relationship with several external and internal stakeholders. Maintaining strong business ethics can help an organization to overcome several possible threats and challenges. It is true that high risk factors are associated with the business operation process of the energy manufacturing firms (Mallon, 2012, p.91). Therefore, it is important for the organizations to maintain and follow the policies developed by OHSA to overcome the issues relating workplace health and safety. Alternative Strategies for DPEG There different options or methods are available for DPEG to increase its power generating capacity. First of all, the organization can merge with a French nuclear energy provider. Secondly, the organization can make a deal with Russia based oil and gas manufacturing and distributing organization to ensure effective business expansion strategy. Last but not the least; the organization has the opportunity to invest in the renewable energy resources within Germany to increase its power and energy manufacturing capacity. This part of the essay will help to determine the organization to discuss about the advantages and disadvantages of three proposed method for business expansion. Considering merger with a French manufacturing firm can help an organization to gain potential business operation resources. It can be considered as major advantage for DPEG. In addition to this, it is true that the organization will require huge business capital to increase the manufacturing capacity. In addition to this, DPEG has to face limited challenges and threats as the management of the organization can gain effective and valuable support from the French nuclear energy provider. In addition to this, the organization can gain a potential existing client base and supply chain network so that DPEG can perform effective business performances. In terms of disadvantages, DPEG cannot enjoy 100 percent profit repatriation. On the other hand, nuclear energy manufacturing activities are costly comparing to the other options. In addition to this, manufacturing and consumption of nuclear energy resource can affect environmental sustainability (Strand, 2007, p.63). Therefore, it can be stated that these are the two disadvantages of this method that can affect the business performance of DPEG. Russia can be considered as one of the leading energy manufacturing countries. DPEG can get merged with a Russian oil and gas service provider to increase the manufacturing and power generating capacity. This method has several disadvantages. First of all, the organization can gain effective business resources so that the organization can justify the expansion of power generating capacity. However, there are several types of disadvantages that can be faced by the organization. High consumption of gas and oil energy resource can increase the level of carbon emission. In addition to this, constant price hike in the oil and gas energy source can reduce the sales growth rate of the organization. In addition to this, association of high business operation cost can affect entire business operation process as it can increase overall business operation cost. Last but not the least; the organization can invest in the in renewable energy resources within Germany. It is true that demand for renewable energy resources among the common people and business organizations are increasing significantly among the target customers. There are several advantages of this method. First of all, the organization can reduce overall business operation cost by the adoption and implementation of the manufacturing process of renewable energy resources (Sokona, 2012, p.87). Organization can store and renew natural resources in cost effective manner. In addition to this, the organization can maintain sustainability through the manufacturing of renewal energy sources. In terms of disadvantages, lack of sufficient business operation resources can create difficulty for the organization to meet the market demand. In addition to this, inadequate supply chain network can affect the business operation processes of DPEG. German Energy Policy and Trends in the Demand for Power It has been discussed earlier that the government of Germany is trying to motivate the organizations to invest in the manufacturing process of renewable energy resources. It is true that several organizations are trying to follow the business operation policies developed by the organization. In addition to this, several organizations are trying to merge with other leading multinational organizations in order to develop potential client base. However, the government of Germany is getting concerned about the growing carbon emission level in the environment. It is true that extraction and production of oil and gas energy resources can create several hazards and conflicts. It is true that high consumption of oil and gas energy resources can increase the carbon emission and pollution level. Therefore, it is highly essential for several organizations to consider developed business operation policies. Government of Germany is trying to motivate the organizations to manufacture renewable energy resources in order to maintain economic, social and environmental stability. In addition to this, constant hike in fossil fuel price can affect the economic and financial condition of consumers and several business entities along with the economic environment of the country. Therefore, it will be effective for DPEG to follow the developed policies by the government of the country. It has been discussed earlier that global economic recession and recent financial crisis affected the economic environment of Germany. Now-a-days, people are trying to save money rather than consumption of goods and services. The common people have become very much calculative in the consumption process of goods and services. Constant hike in fuel price is forcing the customers in Germany to switch over the substitute energy resources (Kelly, 2009, p.86). Wind or water energy resources can be considered as the economic option comparing to the oil and gas energy resources. Consumers can source wind or water or solar energy in economic price. On the other hand, demand for sustainable energy resources have significantly increased among the target customers. Therefore, it is clear that demand for renewable energy sources is significantly increasing among the target customers and business clients. Cost Considerations and Market Structure There are three ways for DPEG to expand its power generation capacity. Each of the three processes has associated cost associated with it. First way of expanding is to increase its capacity by merging DPEG with a French nuclear energy provider. This strategy will result in considerable cost savings to DPEG. By merging with French nuclear company, they will be able to use their facilities. DPEG don’t have to invest newly in plant and machinery. Thus Increase in Plant level cost and Grid-level system costs will be zero for both the companies. But though there will be no initial cost to DPEG, they will not be able to get all the profits which is derived from it. Thus profit per cost will be low. The second way is to make a deal with Russian oil and/or gas provider. This strategy will entail significant cost to DPEG. There will be investment cost like Plant level cost and maintenance cost, decommissioning cost, operation and maintenance cost and fuel-cycle cost. DPEG has to import nuclear energy material from outside. This will result in substantial cost to the company. While entering into a deal the DPEG has to look after the profit sharing model. Thus profit per cost is lower than previous one. Finally the next strategy is to invest in renewable energy sources within Germany. This strategy will result in lowest cost since DPEG doesn’t have to import from outside country which will result in substantial cost savings. Using renewable energy sources will help DPEG to use materials within Germany. Again the profit which will be generated will be retained entirely by them. Thus profit per cost is highest among all the three. Thus renewable energy strategy is best option for DPEG. Germany follows open economic structure. Therefore, it is highly important for the government to motivate both the domestic and multinational organizations within Germany to enhance effective business operation performances in order to gain potential competitive advantages. German energy industry is highly competitive (Sawin, 2004, p.5). Therefore, it is essential for DPEG to consider differentiation business level strategy in the business operation process to reduce the threat of intense market competition. Investment in the renewable energy resources can help the organizations to maintain effective business performances. Trade Barriers, Currency Exchange Rate and Political Stability It is true that trade policies used to differ from a country to another country due to the development and existence of different trade policies in different countries. These trade barriers can affect the business performance of the organization in foreign market place. However, it is true that several developed and developing countries around the globe are trying to offer renewable and green energy resources to the people and several business entities in order to maintain sustainability. Therefore, it is true that PEG can face limited trade barriers as the government of several developed and developing countries are trying to develop and maintain strong relationship with Germany regarding this aspect. Therefore, there is a significant possibility to start business activities and transaction with other countries too. It can enhance positive economic growth of Germany. Currency exchange rate between Germany and other American and Asian countries is fluctuating due to the high volatility of global economic environment. This aspect cannot be predicted. Therefore, Germany needs to have high uncertainty avoidance index to overcome future economic challenges and threats. Germany is politically stable. The government of the country always tries to take care of the society and community within the country. The government of Germany tries to ensure sustainable economic, social and environmental growth of the nation to enhance welfare of the common people and business environment. The government knows that energy manufacturing industry contributed significantly to the economic growth of the country. Therefore, the government supports and motivates the players within the industry to adopt unique business operation strategies to achieve sustainable growth rate. In addition to this, government will support the decision made by DPEG to invest in the renewable energy resource sector to generate employment. This strategy will help the government of Germany to reduce several existing economical issues in the country. Conclusion and Recommendation It is clear from above discussion and analysis that DPEG should invest in the renewable energy resources within Germany in order to expand power generation capacity. It has been determined that the organization can meet the market demand through this method as the demand for green, sustainable and renewable energy resource is significantly increasing among the target customers and business organizations. Several organizations are trying to enter in this particular market segment, but lack of availability of sufficient business operation resources can affect the business performance of DPEG during the initial point of time. Following recommendation plans will help the organization to overcome possible challenges and threats that can developed during the business operation process. First of all, the organization will try to ensure efficiency in the supply chain management process. Secondly, the organization should find an effective supplier base top source high quality raw material and distribute end products to the business clients and target customers. It is highly important t to reduce inventory turnover and supply chain lead time to bring efficiency in the supply chain management process. Adoption and integration of just-in-time approach will help the organization to maintain efficiency in the supply chain management process. Last but not the least; it is important for the organization to maintain effective relationship with the important external and internal stakeholders. References Burkhe, T., 2011. Renewable Energy. London: Sage. Jacobs, D., 2012. Renewable Energy Policy Convergence in the EU. London: Ashgate. Jordan-Korte, K., 2011. Government Promotion of Renewable Energy Technologies. New York: Springer. Kelly, R., 2009. Energy Supply and Renewable Resources. Stamford: Cengage Learning. Komor, P., 2004. Renewable Energy Policy. New York: iUniverse. Mallon, ., 2012. Renewable Energy Policy and Politics. New York: Springer. Moselle, B., 2012. Harnessing Renewable Energy. London: Routledge. Sawin, J., 2004. Mainstreaming Renewable Energy in the 21st Century. London: Sage. Sokona, Y., 2012. Renewable Energy sources and Climate Change Mitigations. London: Kogan page. Strand, J., 2007. Energy Efficiency and Renewable Energy Supply. Stamford: Cengage Learning. Taylor, K., 2008. Renewable and Alternative Energy Resources. New York: ABC-CLIO. Read More