Macro and Micro-Environment Surrounding the Operations of Centrica Plc - Case Study Example

 The paper "Macro and Micro-Environment Surrounding the Operations of Centrica Plc" is a perfect example of a case study on marketing. Centrica Plc was formed in 1974 as a result of the dismantling of British Gas Plc. Initially, the group comprised of the gas supply, retail businesses, and services of the British gas selling white goods and related items as well as the gas production business of the South and the North Morecambe gas fields in the United Kingdom.

The company has undertaken major acquisitions. In 1999, Centrica acquired the UK’s Automobile Association (AA). This gave the company a foothold in the distress rescue market as well as in the car insurance. The company made a major milestone in the telecommunications industry after entering into a strategic alliance with Vodafone UK Limited, to provide mobile telephone services across Great Britain and reached an agreement with Torch Telecom and Cable $ Wireless Communications for the provision of residential telecommunications services.

The rest of the analysis looks at the macro-Environment as well as the micro-Environment surrounding the company’s operations. Macro-environment analyses consist of PEST analysis while Micro-environment analyses consist of SWOT, BCG matrix, Ansoff Matrix 7S, value chain, and the product life cycle. (Brandenburger and Nalebuff, 1995).

1.1Product Umbrella

Centrica Plc

Telecommunications British Gas GoldfishAutomobile Association Broadband

1.2 PEST

The pest analysis of the company’s operations consists of the political, economic, social the technological factors surrounding Centrica’s business activities.

1.3 Value chain analysis

Research and development

Increase the value of the existing business.

Enhance product offering

Design of products, services or products

Design products desired by the customer in various market segments.

Improve the features of the product.

Improve the quality of services offered.

Production

Carry out production of goods and services to satisfy customer’s needs.

Marketing and sales

Carry out marketing of goods to enhance sales in all market segments.

Distribution

Ensure easy accessibility of the company’s products to all customers.

Customer service.

Ensure close contact with the customers to address the customer needs in order to improve the company’s sales.

1.4 PORTER’S 5 FORCES

The threat of substitute products

The propensity of customers to switch to an alternative such as Energies, Free service, Tiscali, Cable $ Wireless

Loss of 78,000 customers to other companies

The threat of new entries

The decrease in market share and profitability.

For example, entry of Danish energy group Dong and the Norwegian power company Statkraft

Competitive rivalry intensity

Due to increased regulatory changes to increase competition

Bargaining power of customers

Customers encouraged to make suggestions about their dissatisfaction especially price changes

The sensitivity of customers to price changes

Bargaining power of suppliers

Low firm to the supplier concentration ratio

Termination of gas sale and purchase contracts from Amerada Hess, Enterprise Oil, and OMV.

2.1 7S’s

These are other microenvironmental factors close to the company that affects the company’s operations. These include,

Shared values

Based on attitudes such as a passion for customers, pride, support for customers, developing and maintaining trust and continuous improvements

Staff

Relationships with staff based on trust and respect,

Staff drawn from various backgrounds regardless of their religion, race, culture or ethnic affiliations

Skills

policies aimed at attracting high-quality people with adequate skills to perform their duties with minimal supervision

Style

Culture is built upon six fundamental items. the products which are targeted towards all customers, an organization that is product-driven, a process that is single transaction focussed, targeting which involves random customer recruitment and volumes of acquisition and delivering service standards.

Strategy

Allocation of resources in the acquisition. Diversification of activities

Structure

Units are managed centrally where all key decision is made at the head office, divided into various departments such as the corporate center, finance, legal secretarial and regulatory, human resource, marketing, corporate affairs, and information systems.

Systems

The company’s financial systems, information systems, recruitment and performance review systems, and other systems are carried out in the respective departments. For example, the human resource department is responsible for recruitment and performance review.

2.2 Product life cycle

Introduction stage

Growth stage

Maturity stage

Decline stage

Build product awareness

Develop a market for products –through advertisements, competitive pricing, selective distribution and establishment of branding and quality levels.

Increase market share and build brand preference.

Promotion through advertisements is aimed at a wider audience

Fights stiff competition in order to defend its market share and hence maximize profit.

Promotion in this product life cycle is aimed at emphasizing product differentiation

Discontinue the product or the service by disposing of it.

For example, on 30th September 2003, the Centrica Plc announced the sale of Goldfish credit card and personal loan businesses to Lloyds TSB.

2.3 Swot Analysis

The company’s swot analysis looks at the strengths, weaknesses, opportunities, and threats that face the company’s operations.

Strengths

Weaknesses

Opportunities

Threats

Diversification of business activities.

Values that are customer focussed.

Passion for customers.

Failure to change the customer’s negative perceptions about Gas and electricity which are perceived as rather boring and low involvement services.

Lack of competitive measures aimed at raising equal awareness of both young and old people particularly in One Tel which records greater awareness among younger respondents aged 20-24 (45%).

Opportunities to expand its activities in North America and other Scandinavian countries.

Stiff competition from other players in different industries, for example, British Gas faces stiff competition from PowerGen and npower.

2.4 BCG matrix

BCG matrix shows various units that the company needs to concentrate on due to their potential cash generation.

Cash cow

Units with high market share and typically generate excessive cash.

Need to be milked continuously. For example, residential gas.

Dogs

The unit is able to break even and generate cash to maintain the business market share. For example, Motoring services units with a total of 12.2 million customers.

Question marks

Units have low market share but have the potential of gaining market share and become a star by becoming a market leader. For example, Residential electricity and home services which make 5.8 and 5.2 million customers respectively

Stars

Units have a high market share in a fast-growing industry. For example, Telecom services, other loans $ credit and the Credits cards in issue

2.5 Ansoff matrix

This matrix is a useful tool that will help Centrica Plc decide its product and market growth strategy. It will also help in suggesting whether the company intends to grow its new or existing products in new or existing products.

Existing products new products

Market penetration

Sell existing products into existing markets. For example, selling its existing Gas products, Goldfish, Integrated Financial services, Automobile Association, First Resort Ltd Travel Agency to the existing UK market.

Secure dominance of growth in this market.

Product development

Introducing new products into existing markets. For example, One. Tel is a new brand that Centrica has introduced into its existing markets.

New brand rolls out in its existing markets...

Market development

Selling its existing products into new markets.

For example, the company has managed to get its foothold in many diverse international markets such as Canada, the US, Belgium, and Spain. Direct Energy and Energy America are some of the examples of companies based in Canada and the USA respectively supplying electricity to Canadian and USA consumers.

Diversification

Selling its new products into new markets.

The company has introduced its new Brand One. Tel into new markets such as Ontario and Texas with Ontario recording 1.3 million gas customers.

Penetrate into these new markets due to the availability of clear ideas about what to gain from the strategy as well as an honest assessment of the risk

Existing

Markets

New markets

2.6 Segmentation and Implementation

Segmentation

Implementation

The segment must be identifiable and measurable, it must accessible, the segment must be profitable, the segment must be actionable in relation to the company’s capabilities and resources and the segment should be defensible against competitors. Examples of market segments, Europe, in North America

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Ensuring that the company does not only remain profitable but also competitive in the market.