E-on Uk Porters 5 Forces
. Strategy Concept Models and Issues- EON U.K – Porter’s Five Forces
Michael Porter created an industry analysis model to allow managers to assess the nature of their businesses in an industrial context, creating a competitive advantage over rival firms. He divided this concept into five separate entities known as 'the five forces ' which can be applied to the energy giant E-on. E-on U.K is Britain 's second largest multifaceted energy producer, distributor and retailer providing energy to over 45 million customers, part of the worldwide E.ON AG corporation.
Rivalry in the power industry is relatively low in terms of production according to the Power Economics (2007). They stated over the last decade the wholesale cost of electricity has fallen by nearly forty percent. These savings have not however been passed onto the customers suggesting that the levels of competition within their market is relatively low. Eon’s energy retail sector in comparison had faced strong competition in recent years. Many conglomerate commercial firms such as Virgin have penetrated the energy supply market by providing energy as part of a package of services in both the commercial and consumer markets. The ease for consumers to switch supplier of energy has increased the competitiveness in energy market but in order to maintain their consumer base Eon have introduced longer minimum contracts. Many rival firms buy hedges of electricity from producers like Eon U.K and then resale these units to make a profit, it is therefore essential that Eon’s own retail methods are competitive (Wolfram). In order to gain an advantage over rival firms they may benefit from lowering their prices or combining power services with other utilities to differentiate them within the market. The number of customers in the energy market remains fairly constant; the nature of the industry has shown that suppliers are more concerned with maintaining their current customer base than undercutting the
Michael Porter created an industry analysis model to allow managers to assess the nature of their businesses in an industrial context, creating a competitive advantage over rival firms. He divided this concept into five separate entities known as 'the five forces ' which can be applied to the energy giant E-on. E-on U.K is Britain 's second largest multifaceted energy producer, distributor and retailer providing energy to over 45 million customers, part of the worldwide E.ON AG corporation.
Rivalry in the power industry is relatively low in terms of production according to the Power Economics (2007). They stated over the last decade the wholesale cost of electricity has fallen by nearly forty percent. These savings have not however been passed onto the customers suggesting that the levels of competition within their market is relatively low. Eon’s energy retail sector in comparison had faced strong competition in recent years. Many conglomerate commercial firms such as Virgin have penetrated the energy supply market by providing energy as part of a package of services in both the commercial and consumer markets. The ease for consumers to switch supplier of energy has increased the competitiveness in energy market but in order to maintain their consumer base Eon have introduced longer minimum contracts. Many rival firms buy hedges of electricity from producers like Eon U.K and then resale these units to make a profit, it is therefore essential that Eon’s own retail methods are competitive (Wolfram). In order to gain an advantage over rival firms they may benefit from lowering their prices or combining power services with other utilities to differentiate them within the market. The number of customers in the energy market remains fairly constant; the nature of the industry has shown that suppliers are more concerned with maintaining their current customer base than undercutting the
Bibliography: Anon 1 (2006) ‘Nuclear power plants get go ahead’ BBC News 11.07.06 Green, R.J Griffin, J.M (1974). The Effect of Higher Prices on Electricity Consumption, The Bell Journal of Economics and Management Science, Vol. 5, No.2 p515-539 Murray, A.I (1988) Sommers P (1980) Adoption of Nuclear Power Generation, The Bell Journal of Economics, Vol.11, No.1 p283-291 Porter, M.E The Five Competitive Forces That Shape Strategy: Harvard Business Review, 86 (1) p78-93 PowerEconomics, 2007, UK Markets, things could be worse, Vol. 6 Issue 10, p8, 1/4p, E-on uk plc Director’s Report for year ending 31 December 2006