The Business Model of Iberdrola

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In this case, we noticed that IBERDROLA had totally changed is business model, adapting it to the evolutions of its environment. In 2001, with the arrival of a new CEO, the company decided to base its strategy on renewable energies communicating on the image of sustainable development. IBERDROLA became the leader on the electric market. However, this new business model has some weaknesses and how can we prevent them ?

1- What was the business model of IBERDROLA before the arrival of José Ignacio Sanchez Galan?

IBERDROLA is a Spanish company which was found from the merger of two companies: HIDROELECTRICA EXPANOLA and IBERDUERO in 1991. The origines of the curretn company come from twice sources. The first one is HIDROELECTRICa IBERICA, which was created in 1901, and hi score business was the hydroelectric exploitation and became IBERDUERO after 1944. The second one is HIDROELECTRICA ESPANOLA which was created in 1907. In the seventies, both companies developped new technologies and widened their activities from hydroelectricity and coal energy to nuclear power energy.

So IBERDROLA was in charge of producing and distributing electric energy and became the leader in the country. In 1992, the company want to expand his activity out of Spain and his target is the Europe and USA.

The company didn’t really take care about sustainable development until 1995, when the company created an environnemental unit & renewable energy division. In fact, the most of the executives people in the company were opposed to any kind of collaboration with NGOs. Moreover, the company produced electricty by hydroelectricty, but this technique damage the environment through the construction of dams, the displacement of population and the flooding of labour lands. So the producing technique is quite good, but the means used are not.

Later, the new CEO, the Protocol of Kyoto and the public opinion about environment will impact this point of view.

2- What are the causes of the change of the business model?

In 2001, José Ignacio Sanchez Galan, decide to change the strategy of IBERDROLA for many reasons:

Between 1980 and 2004, NGOs, public opinions, stakeholders are important. They had contact with them, but now they moved into a real strategic approach towards them.

Change of business model was made in 2 steps:

- The first one: at the social level, that means that to create a social environment with appropriate stakeholders

- The second one: at the environment level, launch renewable energy to preserve the environment and discussed and negotiate with NGOs to know how we can respond to the demand without hurt the nature. Because the fact that environment issues are becoming more and more important for the society.

- In 2000, around ½ million people were full time job in NGOs while 1 million persons were volunteers. Knowing that NGOs represented between 4% to 5% of the Spanish GPD.

- The opinion of the society which is becoming increasingly important in the country.

- Ecology groups could contribute their vision, back up some projects, and contribute valuable ideas.

- To be the first one on the renewable energy market, because there is no competitor on the sustainable development.

- Kyoto Protocol established in 1997 and signed in 2004. Government encourage firms to develop sustainable development with subsidies.

- The EU provides more than 50% of its energy: it’s a very strategic choice. It is a market that leaves room. "New energy model based on renewable energies was required."

- World Business Council for sustainable development stated in 2002 that: « Looking at the future, electricity will play an even greater transformative role in the 21st century.. Electricity will act as a...
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