Business Environment Analysis of British Gas: Industry and Firm Analysis

This report provides a comprehensive analysis of the business environment of British Gas, including internal and external factors that may affect the company's growth in the future. The report uses various analysis tools such as PESTLE, Porter's five forces, and resource-based value analysis for external analysis and VRIO, value chain, and SWOT analysis for internal analysis. The report also includes a discussion of the industry and firm analysis.

Strategic Management

EXECUTIVE SUMMARY
This report cover a business environment analysis of British Gas thorough examine of
internal and external analysis to identify every existing or upcoming factor that may or may not
affect companies growth in upcoming future. To analyse external factor the tools such as,
PESTLE, Porter's five forces and resource based value analysis and to analyse internal factor the
tools such as, VRIO, value chain and SWOT analysis.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Business Environment Analysis Of British Gas..............................................................................1
EXTERNAL ANALYSIS......................................................................................................1
1 PESTEL...............................................................................................................................1
2 Porter's Five Forces.............................................................................................................2
3 Resource Based Value.........................................................................................................3
INTERNAL ANALYSIS.......................................................................................................4
1 VRIO...................................................................................................................................4
2 Value Chain.........................................................................................................................6
3 SWOT..................................................................................................................................7
CONCLUSION................................................................................................................................8
REFERENCES .............................................................................................................................10

INTRODUCTION
Strategic management is a process of procedure, objectives and setting goals in order to
give organisation a competitive advantage. (Siegel and Leih, 2018) British Gas is a home and
energy service provider in the United kingdom,(Telecom and Energy, British Gas’’) it was
founded in 1977 with headquartered in England, UK. In this report there will be a discussion of
business environment analysis of company with the help of external analysis through PESTEL,
Porter's five forces and resource based value, to understand companies competitive position with
its structure and market detail through current trends and future trends with key drives of market.
Lastly a internal analysis through VIRO, value chain and SWOT analysis, to understand the
resources and capabilities of firm that will impact on success of organisation.
MAIN BODY
Business Environment Analysis Of British Gas
Business environment analysis refers to aggregation of organisation, people and other
forces that may impact on industry with their operation and production level.(Betti and Sarens,
2020) It also helps in identifying business opportunities, resources, planning and improvements
made in performance, growth and profitability of organisation.
EXTERNAL ANALYSIS
External analysis helps in examining business environment of organisation that includes
factors as competitive structure, dynamics, history, market trends and competitive position, it
helps in analysing external factors through global, social, demographical, technological and
political analysis of company.(Erbas, 2019) To analysis external factor of British Gas with the
use of analysis tool such as,
1 PESTEL
PESTEL analysis provides a framework that can be used by company to monitor the
external factor of the organisation.
Political Factor-
Political factor has various effect on British Gas which cause risk due to different
government policies that provide a sustainable energy, low carbon and a climate resilient
development,(Alves Ribeiro Rosa, Armellini and Robert, 2021, June) Also due to recent
1

pandemic COVID-19 its impact cause major effects on operation of company, and trading
policies always has a effect.
Economic Factor-
Economic factor has huge impact on British Gas such as, monetary policy, inflation,
interest rate, economic growth and fiscal there is pressure from UK government on inflationary.
Constant changes in policies impact economic growth of the company.
Social Factor-
Social factor has a impact on British Gas as there are various aspects related to social
cultural of society education level as it is increasing there is a expansion on leverage on presence
of company, migration is also biggest factor that cause effects on operation as people are
migrating internationally which is negative impact on business.
Technological Factor-
Constant change in technology cause impact on operation of British Gas, technological
innovation has a fast disruption on supply chain because it provides access to information to
energy industry. (Jafari and Othman Soleiman, 2020)As there are various changes in production
and operation due to technology innovation such as, it lowers production cost, increase
empowerment supply chain and more.
Environment Factor-
Environmental factor has a impact on British Gas as there are various government in
protecting environment with the help of different laws regulation on pollution, safe disposal,
hazardous material, limiting carbon footprints, climate change.
Legal Factor-
There are various laws and regulation that may affect operation such as employment law
and national minimum laws, in context of British Gas company providing energy there are are
various laws impact on business operation as with every legal regulation company needs to take
them into consideration for successful operation.
2 Porter's Five Forces
Porter's five forces analysis provides a framework for organisation in competitive
environment through competitive rivals, suppliers, customers, substitute products and potential
new market entrants that will influence firm's profit & position in market.(Hafezi and et. al.,
2020) The main purpose of this analyse is to determine future potentiality of profit in market,
2

through which identify current position of organisation competitive market. The five elements
through which it take shape framework are-
Competition among existing competitors-
Competition in exiting market is high as there are various companies providing better
services offering energy and gas in market with much cheaper cost and with new technology, the
biggest competitors of the organisation are- Southern Electric, Npower, Synergy, Country
Energy, Opus Energy and ActewAGL.
Bargaining power of customers-
The bargaining power of customer is significantly moderate because of nature this
industry as British Gas is top company which make some loyal customers,(Hartmann, Inkpen
and Ramaswamy, 2021) but since there are other similar companies offering uncanny services in
market which gives power to customers shift to other brand.
Bargaining power of suppliers-
The bargaining power of supplier is significantly moderate because as brand image of
organisation is high in market which impact on supplier to provide products on term of company
but since there are similar companies available in market some supplier shift to other, which
make supplier power moderate.
Threats of new entrants-
The threats of new entrants is relatable low because getting into this industry requires
huge amount of investments and needs various permission before starting business, also
company is well established in market which proves low threat on organisation from new
entrants.
Threat of substitute product-
Threat of substitute product presence in market is significantly moderate because there
are similar service and products available in market for customers with much cheaper and low
quality products/ services, (Caineng and et. al., 2020) but since British Gas offers high quality
and less carbon produce products and service which give benefits to company to establish in
market.
3 Resource Based Value
The resource based value provides a managerial framework to determine strategic
resources of company that can be exploit to achieve a sustainable advantage in competitive,(Katz
3

and Pietrobelli, 2018) It also helps in company to achieve a visibility a efficiency in allocation of
resources, helps to maintain a advantages in competition and a cross-functional usages of
resources.
The Tangible Resources of British Gas which helps in competitive advantages are there
products as company is offering Gas, Electricity, Boilers, Central Heating, Plumbing, Drainage
System, Renewable Energy and Home appliance services with less carbon produce. Company is
taken into consideration of environment and provide service/ products according to current
situation.
The Intangible Resources are non physical assets of company that plays a significant
role for organisation's competitiveness, as it is main source to sustain in advantage of
competition.The resources of firm are valuable, difficult to imitate, rare and non-substitutable
which provides advantages in competition, and with high brand value with unique trade mark of
the organisation it gives benefits to stay on top of competitive market.
INTERNAL ANALYSIS
Internal analysis refers to identify companies internal elements resources, processes and
assets,(Anokhina, Maksimov and Seredina, 2019). To analysis internal factors of British Gas
with the help of analysis tools such as,
1 VRIO
Hence, this model is explained below;(Chatzoglou and et. al., 2018)
RESOURCES VALUABLE RARE INIMITABLE ORGANISAB
LE
COMPETITIV
E
ADVANTAG
E
Brand Image Brand value - - - Temporary
competitive
advantage
Manufacturing
Capacity
Manufacturing
capacity
Manufacturing
capacity
- - Temporary
competitive
advantage
Innovation Innovation Innovation Innovation - Sustainable
4

Capabilities capabilities capabilities capabilities competitive
advantage
Engineer staff Engineer staff Engineer staff Engineer staff Engineer staff Potential
competitive
advantage
5

VALUABLE:
 Brand image- brand image of British gas is highly valuable, its presence in market and
has a strong establishment in market.
 Manufacturing capacity- the manufacturing capacity of company is valuable which
allows benefits in market.
 Innovation capabilities- the innovation capabilities of the company is valuable which give
advantage in market.
 Engineer staff- it is responsible in developing offering in market and make new
innovation by understanding market needs, hence it quite valuable for British Gas.
RARE:
 Manufacturing capacity- the manufacturing capacity of company is rare, which allows
many benefits in market.
 Innovation capabilities- the innovation capabilities of organisation is rare which give a
benefit in competitive market.
 Engineer staff- as every engineer has their own unique quality which make them rare and
give many benefits in offering products to market.
INIMITABLE:
 Innovation capabilities- as company if offering energy and electricity in market which
make is easy to inimitable which give a sustainable competitive advantage in market.
 Engineer staff- the talent can not be limited to staff which gives potential benefit in
market.
ORGANISABLE:
 engineer staff- the employee of company is organisable which give much benefit in
operating and production level of the organisation which allow potential advantage in
competitive.
2 Value Chain
Value chain analysis refers to evaluation of each activity in firm's value chain which help
in understanding opportunity for improvement, helps in conducting a value chain analysis to
prompts each step adds and subtracts value for getting final product and service.(Ricciotti, 2020)
A value chain refers to full range, of iterative activities organisation uses to create products and
6

services, main purpose is to analysis in increasing of production efficiency to company that can
be deliver maximum value in least possible cost.
Primary activities:
Primary activities are those activities that go directly into creation and production of
services/ products in execution that includes,
 Inbound logistics- it includes all activities that are related in receiving, warehouse, and
every inventory management source such as material & elements, it also includes
sourcing of elements for making products of the organisation.
 Operation- it includes all activities related to making raw material into final products that
means all material coming from inbound logistics in operation unit those material and
components into finished products.
 After-sales services- activities that can take place after offering to customers that
includes installation, quality assurance, repair and customers services.
Secondary activities:
Secondary activities are that are more efficient and effectively in creating advantages for
competitive that includes,
 Procurement- it includes all activities related to sourcing components, raw materials,
equipments and services.
 Technological development- it includes activities that are related to development and
research which further includes market research, process development and product
services.
 Infrastructure- it includes all activities related to organisation's management and
infrastructure that includes financing, planning and land for production.
3 SWOT
SWOT analysis provides a framework that helps to identify and analysing companies
strength, weakness, opportunity and threats, its main focus is to increase awareness about factors
that can affect business decision-making or strategies. In context to British Gas the SWOT
analysis are mentioned below,
Strength:
British Gas is well established in UK, it has a domination over gas and electricity
provider in market with over 24% market share.(Hajizadeh, 2019)Company has unique
7

technological innovation that firm was first to introduce mobile controlled heating and electricity
generating boilers in market.
Weakness:
Weakness of British Gas are that it has situation on dependency on wholesale market
which sometimes cause affect company, also as government hikes price range which cause
slump situation in customer base.
Opportunities:
British Gas has huge opportunities that includes growing further in residential and
commercial market of UK with gas and electricity, since there is huge demand of such smart app
company has potentials in offering to millions of customers across globe.
Threats:
The threats that can affect British Gas growth is that there are rising of power cost in
Northern sea which led to weak in economy of gas storage fired gas power generation system in
UK region, also due to increase in electricity prices and wholesale rate of gas it affect growth of
company in future aspects. (Vikane, Selvik and Abrahamsen, 2021, September)Organisation is
facing quite competition from EDF Energy, EON, Scottish-power, SSE and Npower, also legal
challenges can cause threats on company growth.
CONCLUSION
From the above report it concluded that British Gas strong establishment in market due
which most of the external factor may not affect company but there are some factor that will
directly affects companies growth and future success. From external analysis with the help of
PESTEL, Porter's five force and resource based value analysis it shows that company has strong
base. After analysing internal factors of organisation it shows that firm has strong operation and
production level and any internal factor that may affect companies operation will probably not
affect enterprise growth but still from analysing VRIO, value chain and SWOT analysis there are
some factor that can affect organisation's growth and to resolve those situation company can take
them into consideration and develop them into new strategic plan for profits and success.
8

REFERENCES
Books and Journals
Alves Ribeiro Rosa, J.G., Armellini, F. and Robert, J.M., 2021, June. Capturing Future Trends in
Customer Needs for the Design of Next-Generation Gas Station Services. In Congress
of the International Ergonomics Association (pp. 781-787). Springer, Cham.
Anokhina, M.E., Maksimov, M.I. and Seredina, N.S., 2019. A guide to contemporary strategic
analysis.
Betti, N. and Sarens, G., 2020. Understanding the internal audit function in a digitalised business
environment. Journal of Accounting & Organizational Change.
Caineng, Z.O.U. and et. al., 2020. Shale oil and gas revolution and its impact. Acta Petrolei
Sinica, 41(1), p.1.
Chatzoglou, P. and et. al., 2018. The role of firm-specific factors in the strategy-performance
relationship: Revisiting the resource-based view of the firm and the VRIO
framework. Management Research Review.
Erbas, D.G., 2019. Identification and application of most important stages of strategic planning
on local US Business. TURAN-SAM, 11(43), pp.462-467.
Hafezi, R. and et. al., 2020. Iran in the emerging global natural gas market: A scenario-based
competitive analysis and policy assessment. Resources Policy, 68, p.101790.
Hajizadeh, Y., 2019. Machine learning in oil and gas; a SWOT analysis approach. Journal of
Petroleum Science and Engineering, 176, pp.661-663.
Hartmann, J., Inkpen, A.C. and Ramaswamy, K., 2021. Different shades of green: Global oil and
gas companies and renewable energy. Journal of International Business Studies, 52(5),
pp.879-903.
Jafari, H. and Othman Soleiman, K., 2020. Assessment of effective environmental factors in oil
and gas industry policies using PESTLE & SWOT analysis (case study: Kurdistan,
Iraq). Environmental Sciences, 18(3), pp.134-151.
Katz, J. and Pietrobelli, C., 2018. Natural resource based growth, global value chains and
domestic capabilities in the mining industry. Resources Policy, 58, pp.11-20.
Ricciotti, F., 2020. From value chain to value network: a systematic literature
review. Management Review Quarterly, 70(2), pp.191-212.
Siegel, D.S. and Leih, S., 2018. Strategic management theory and universities: An overview of
the Special Issue. Strategic Organization, 16(1), pp.6-11.
Telecom, B. and Energy, E.D.F., British Gas’’. Accounting, Organizations and Society, 22(7).
Vikane, R., Selvik, J.T. and Abrahamsen, E.B., 2021, September. Initiatives in UK Offshore
Decommissioning Following the Wood Review: Applicability for Decommissioning in
Norway. In SPE Offshore Europe Conference & Exhibition. OnePetro.
9