E-on Uk Porters 5 Forces

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. 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…show more content…
This means they are naturally dependant on the ever-changing price of oil and gas particularly in light of political changes and terrorism. The uncertainty of these prices makes future planning difficult but due to the high concentration of suppliers costs are felt by the industry as a whole. The biggest problems in terms of cost is that of oil, at the beginning of 2008 oil prices reached a record of $100 a barrel. These costs can either be reflected in terms profitability or the cost to customers. Therefore to reduce this affect upon profit it is essential that the company looks at other cost savings that can be made both internally and externally of the business. Gas, unlike electricity is retailed rather than produced by Eon. They do not have the same flexibility as they do with electricity and their ability to switch suppliers is limited. A concentration of suppliers and a lack of substitutes create dictation rather than choice for Eon and their competitors. When any market begins to show an increasing profit, it is inevitable that new or existing firms from outside the industry make look to take advantage of the profits. Companies already in the industry have a number of methods available to counteract this change defined by Porter as ‘barriers to entry’. The nature of the energy production industry is not one with easy entrance, the high fixed costs and complexity of production helps to deter

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