Business Organisations and Environments in a Global Context: A Case Study of E.ON in Belgium

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This report examines the business environment of Belgium for E.ON, a major energy company seeking to expand its operations globally. It utilizes PESTLE and Porter's Five Forces analyses to assess the external factors and competitive landscape in Belgium. The report explores the attractiveness of Belgium for E.ON, highlighting its strengths and weaknesses, and identifies prospective challenges the company may face. It also analyzes foreign investment trends in Belgium and provides recommendations for E.ON to overcome these challenges and achieve success in the Belgian market.

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Business Organisations and
Environments in a Global Context

E.ON- Belgium

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Table of Contents
INTRODUCTION
........................................................................................................................ 3
BACKGROUND OF THE COMPANY
............................................................................................ 4
BACKGROUND OF BUSINESS ENVIRONMENT AT BELGIUM
......................................................5
BODY
........................................................................................................................................6
BUSINESS ENVIRONMENT ASSESSMENT OF BELGIUM
.............................................................6
PESTLE ANALYSIS
.................................................................................................................. 6
PORTER’S FIVE FORCES ANALYSIS
......................................................................................... 9
ATTRACTIVENESS OF BELGIUM FOR E.ON
..........................................................................11
PROSPECTIVE CHALLENGES FOR E.ON IN BELGIUM
...........................................................11
FOREIGN INVESTMENTS
.....................................................................................................12
RECOMMENDATIONS FOR E-ON TO OVERCOME THESE CHALLENGES AT BELGIUM
.............13
CONCLUSION
.......................................................................................................................... 14
REFERENCES
........................................................................................................................... 15
APPENDIX
............................................................................................................................... 17
Appendix 1: Foreign Direct Investment in Belgium
............................................................17
Appendix 2: Belgium Foreign Direct Investment of past years
...........................................18
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INTRODUCTION
According to Bende-Nabende (2017), globalisation is the result of the larger building process

that is increasing in the world where societies, politics, economies and cultures are coming

closer to each other. It is the process that leads to an intensification of the worldwide

relations socially. Through the global world, it becomes easy for the organisation across the

world to gain success by expanding and establishing globally.
In this report E.ON an
electricity company is seeking to expand globally by expanding its operations in Belgium

(Harrison, 2013). So it will involve the assessment of the business environment that is

pertaining in Belgium and will also analyse E-on so that effective decisions can be taken

related to the expansion. For the analysis purpose, the analytical framework such as Porter's

five forces and the PESTLE analysis will also be conducted so as to gain better insights about

the external factors present in the business environment of E.ON.

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BACKGROUND OF THE COMPANY
E. ON UK is one of the largest investor-owned power and gas companies that are a

subsidiary of the German company E.ON. It is into operations since 1989 and is listed on the

London Stock Exchange. It is into electrical generation and distribution in the supply markets

of electricity and gas. It has an employee count of nearly 15,000 in 2011 with total revenue

accounting for
£9.22bn in 2011. The business operations consist of the energy solution,
business services, climate protection projects and many more. It is headquartered at

Coventry, England and has net income of
£406m in 2011 (Johnson and Turner, 2015).
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BACKGROUND OF BUSINESS ENVIRONMENT AT BELGIUM
Conducting and carrying a business in Belgium it is essential to gain insights into the culture

of Belgium and the business environment of Belgium so as to explore the differences and

the opportunities present in the environment. Belgium is a diverse, open and a globalised

economy to do a business in and it is ranked amongst the 190 countries in the World Bank’s

Ease of Doing Business Survey for 2018 at 52
nd rank. For starting a new business it was
ranked 16
th (Hamilton and Webster, 2015). Expatriates seeking to work in Belgium need to
address the multilingual and multicultural issues prevailing in the business environment due

to the varied population. The population of Belgium is inclined towards the international

trade and the country of Belgium has many facilities of infrastructure as well that helps it in

becoming an ideal hub for the European transit and distribution. The business environment

of Belgium has some strength and weaknesses prevailing that involve the strengths of the

well qualified working people and the multilingual availability of the workforce. It also has

an advantage of its location as it is located between France, United Kingdom and Germany.

Belgium is also blessed with outstanding infrastructural and transportation facilities. On

another hand, there also pertain some weaknesses which include the political issues

prevailing and a high rate of the structural unemployment (Harrison, 2013).

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BODY
BUSINESS ENVIRONMENT ASSESSMENT OF BELGIUM

On the basis of the comparative analysis in context to the business regulations domestic

firms and the environment of 190 countries, Belgium emerge to be standing at 52
nd rank in
the Doing Business 2018 report that has emerged to be a cheerful ripple due to its gloomy

economic spheres and business environment (Hamilton and Webster, 2015).

Figure
1: Ease of Doing Business in 2018 rankings
(Source: World Bank, 2018)

PESTLE ANALYSIS

The business environment of Belgium for E.ON will be assessed on the basis of the external

factors present through applying the PESTLE analysis which will take into account the

political, social, economic, technological, environmental and legal factors that indirectly

impacts the operations of the business carried out at Belgium (Ebert, et al. 2014).

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Political factors
Belgium is a country with a popular monarchy and a parliamentary democracy. Being a non-

EU country it will gain many opportunities of trade for E.ON. E.On has more dependence on

Europe due to which it may face the political issues as well. Across Europe, the government

interventions are also increasing which will create the intervention in the energy markets to

leading to the threat for E.ON as well. Belgium is considered to be a politically stable country

that is highly dependent on the European countries for its exports and that acts as one of

the main political challenges for it as well (Wang, et al. 2018).

Economic factors

Belgium has a service dominated economy that contributes to 79.5% of the total GDP of the

country. In 2018 Belgium scored 67.5 scores in economic freedom together with a decline in

the score of the monetary freedom, property rights and the labour freedom (Deng, 2017).

The economic factors of Belgium are such that it has a free-market competition that gets

benefits from the openness of the trade and investment at a global level. The

competitiveness of Belgium is getting increased by the reforms of the government by

changes in the labour market rules and the tax policies that have helped it in gaining

advantages. The unemployment rate has also been continuously falling since 2017 that will

affect the youth (Duprez and Van Nieuwenhuyze, 2016).

Social factors

It is vital to analyse the social factors too present in Belgium as it is essential for E.ON before

expanding in Belgium to gain enough information about the cultures and the behaviour of

the population of locals. In 2016 the Belgium population accounts for 11311 million which is

expected to reach 11.669 million by the year 2022 (Duprez and Van Nieuwenhuyze, 2016).

The unemployment rate prevailing in 2016 also accounted for 7.98% that can be used by

E.ON by generating the employment opportunities for the locals. E.ON will analyse the

social factors prevailing in Belgium by analysing the skills level of the population and the

education standard so as to ensure the effective adaption in the new market.

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Technological factors
Belgium is a player in the terms of the clean energy technologies and the renewable energy.

It has an advanced infrastructure and the technological advancements that act as an

opportunity to gain a competitive advantage. E.ON will have an opportunity in Belgium for

the production if the renewable energy as it also has a green technology and the sustainable

development in recent years that will be attractive for E.ON.

Environmental factors

The environment of Belgium is exposed to the excessive concentrations of the SO2, NO2, O3

and PM as major air pollutants. Belgium is a highly industrialised country that experiences

many environmental problems. This is a producer of the greenhouse gases that lead to acid

rain as well, but recently the air quality has been improved. European Union directive is

concerned about improving the environmental condition of Belgium related to the water

quality and treatment.

Legal factors

Before entering a new market in Belgium E.ON is required to analyse the legal factors

prevailing in Belgium. In Belgium, there are no customs duties that it will need to pay for the

goods imported into Belgium. This will add to an advantage to E.ON in Belgium. Another

factor prevailing in Belgium is that the registration for property in Belgium takes 4 times

more time than others and the construction permits take 2.7 times more than others. Thus

this can emerge to be a threat for E.ON to expand its business in Belgium (Bernaert, et al.

2014).

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PORTER’S FIVE FORCES ANALYSIS
Porter five forces will help E.ON to assess the competitive advantage of the rivalry firms in

Belgium in the industrial context. The analysis involves the following factors:

Rivalry among the existing firms

In the power industry, the rivalry is relatively high. In this industry, there is a strong force of

competitive rivalry due to the high aggressiveness of the firms and the moderate switching

costs involved in the same. There are a moderate number of firms in the same industry. This

will lead to a high force of competitive rivalry for E.ON when it will go for expansion in

Belgium (Webster, 2014).

A threat of new entrants

The threat of new entrants in this industry is low as this industry involves high cost of entry

and there is a high cost involved in the brand development. E.ON has an advantage due to

this factor as any new entrant thinking to enter this market will need high business

capitalisation and the financial resources so as to compete against the already existing firm

E.ON. So this will lead to an advantage for E.On but it still needs strategic management to

overcome this issue (Bernaert, et al. 2014).

Bargaining power of buyers

The influence of the customers also needs to be considered by E.ON by understanding the

needs of the lighting industry environment and the transportation industry environment.

Under this factor, E.ON will assess the factors and the ability of the buyers present in

Belgium which will help to make effective strategies (Dobbs, 2014). For E.ON there are

moderate switching costs involved and the low price sensitivity. The customers of E.ON have

more access to the high-quality information. This leads to an enhancement of the strategic

significance of the bargaining power of the buyers of E.ON (Webster, 2014).

Bargaining power of suppliers

E.ON has a moderate bargaining power of the suppliers due to the high overall supply and

the moderate size and population of the suppliers. There is a high overall supply of E.ON

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which leads to an intensification of the bargaining power of suppliers. So E.ON must
consider this force effectively before expanding in Belgium (Dobbs, 2014).

Threat of substitutes

E.ON has weak threat if substitution as there is a low performance of the substitutes in this

industry and there is low availability as well. There are moderate switching costs involved

which create benefit for E.ON and will effectively take advantage of the same in Belgium as

well (Webster, 2014).

Figure
2: Porter's five forces
(Source: Webster, 2014)

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ATTRACTIVENESS OF BELGIUM FOR E.ON
E.ON plans to expand in Belgium due to the high attractiveness of Belgium in terms of the

size, nature and benefits that it rendered to the new business and expatriates. One of the

several reasons to expand the E.ON considers attractive in Belgium is that it is the member

of the North Atlantic treaty organisation and the European Union which will lead to

attractive rights and legal obligations to it which are provided to the domestic firms of

Belgium. Belgium also forms the one that has low corporate taxes and the generous tax

incentives. E.ON will also gain skills and well-trained workforce in Belgium that will help it to

a great extent. It also has attractive Private Equity Country index and the venture capital

Index that is another reason for the attractiveness of Belgium (Bende-Nabende, 2017).

PROSPECTIVE CHALLENGES FOR E.ON IN BELGIUM

Besides the attractiveness and several opportunities available for E.ON in Belgium, it may

also face the underpinned challenges while expanding in Belgium. E.ON needs to consider

the following concerns as well before expanding its operations of the business which

includes the requirement for the foreign company before establishing and expanding its

business in Belgium that it needs to open a corporate bank account in Belgium (Harrison,

2013).

Another challenge that E.ON has to go through at Belgium is of the VAT registration that it

must cross effectively. Belgium's geology is also unfavourable for the energy resources

which must be a prospective challenge for E.ON as Belgium is dependent on imported

energy (Johnson and Turner, 2015). In Belgium, there is a deficit in its budget which EU is

keeping a close eye on so as to meet the deficit targets but the size of the investment is

beyond the scope of Belgium financial means so this can be another challenge for E.ON as

this will create a negative impact on the cost of energy. In Belgium, the electricity prices are

also higher as compared to its neighbouring countries which also emerge to be a challenge

and for same Belgium are focusing more on the efforts of the ‘go green’ initiatives by

introducing the green certificates. In Belgium the future of the industry is critical as the price

of energy is also critical. In Belgium, the fact matter is that it has highly uncompetitive

labour costs and a nominal corporate tax which should be considered by E.ON before

expanding in Belgium (Bende-Nabende, 2017).

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FOREIGN INVESTMENTS
Due to the attractive geographic location, Belgium attracts many foreign investors through

the foreign direct investment and for the same the FDI has been hiked to 33.1 billion USD in

2016 (UNCTAD, 2018). Belgium also has much foreign direct investment due to its attractive

infrastructure, workforce and the transportation facilities. For the same E.ON is seeking to

expand its business in Belgium through the way of the franchising that will be benefited

from the highly qualified workforce as well as Belgium. Some of the Foreign Direct

Investment figures of past years in Belgium are underpinned in Appendix 1 (Trading

Economics, 2018).

Belgium is also blessed with the high index of the investor’s interest when a foreign investor

invests here as compared to the other counties interest rates which are presented as under:

Table
1: Investor's Index
Belgium
OECD United States Germany
Index of

Transaction

Transparency*

8.0
6.0 7.0 5.0
Index of

Manager’s

Responsibility**

6.0
5.0 9.0 5.0
Index of

Shareholders’

Power***

4.0
7.0 4.0 8.0
Index of Investor

Protection****

5.8
6.5 6.5 6.0
Source:
(Source: Doing Business - Latest available data)
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RECOMMENDATIONS FOR E-ON TO OVERCOME THESE CHALLENGES
AT BELGIUM

As Belgium is a multilingual country so E.ON is recommended to overcome the local

language challenge by having at least one person on its team that is well versed with the

local language. Another recommendation or E.ON is to meet the compliance regulations

which will overhaul the business practices and will help it in finding a new niche market as

well. It also needs to be cautious of the competitors to take advantage over them before

establishing in Belgium. So E.ON is recommended to be well versed with the local businesses

and the partners by building effective partnerships so that it may bring benefits from the

sound relationships with them. E.ON also needs to be dealing effectively with the tax codes

and the other compliance issues so as to be better aware of the treading standards and the

regulations.

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CONCLUSION
In nutshell, it can be connoted that E.ON finds Belgium to be the most attractive and

prospective country to expand its operations in through the franchising option. Belgium has

many reasons for its attractiveness for the foreign investors and the businesses. In the

above report business environment of Belgium has been analysed effectively by employing

the strategic tools such as PESTLE and Porter Five Forces analysis which has helped E.ON to

gain information about the external and competitive factors present in the environment of

Belgium. These insights will help E.ON in coping with the prospective challenges present in

Belgium and will help it to gain a competitive edge as well.

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REFERENCES
Bende-Nabende, A., 2017. Globalisation, FDI, regional integration and sustainable
development: theory, evidence and policy. Routledge.

Bernaert, M., Poels, G., Snoeck, M. and De Backer, M., 2014. Enterprise architecture
for small and medium-sized enterprises: a starting point for bringing EA to SMEs,

based on adoption models. In Information Systems for Small and Medium-Sized

Enterprises (pp. 67-96). Springer Berlin Heidelberg.

Deng, P., 2017, January. Revitalizing Outward FDI from Emerging Economies: A Social
Relational Perspective. In Academy of Management Proceedings (Vol. 2017, No. 1, p.

13146). Academy of Management.

Dobbs, M., 2014. Guidelines for applying Porter’s five forces framework: a set of
industry analysis templates. Competitiveness Review, 24(1), 32-45.

Duprez, C. and Van Nieuwenhuyze, C., 2016. Belgium’s inward and outward foreign
direct investment. Economic Review, (ii), pp.45-62.

Ebert, R.J., Griffin, R.W., Starke, F.A. and Dracopoulos, G., 2014. Business Essentials.
Pearson Education Canada.

Hamilton, L. and Webster, P., 2015. The international business environment. Oxford
University Press, USA.

Harrison, A., 2013. The business environment in a global context. Oxford University
Press.

Johnson, D. and Turner, C., 2015. European business. Routledge.
Trading Economics, 2018. Belgium Foreign Direct Investment. Online available at
(
https://tradingeconomics.com/belgium/foreign-direct-investment) last accessed
August 2018.

UNCTAD, 2018. Belgium Foreign Investment. Online available at
(
https://en.portal.santandertrade.com/establish-overseas/belgium/foreign-
investment
) last accessed August 2018.
Wang, C., Hong, J., Kafouros, M. and Wright, M., 2018. Exploring the Role of
Government Involvement in Outward FDI from Emerging Economies. In State-Owned

Multinationals (pp. 75-109). Palgrave Macmillan, Cham.

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Webster, K., 2014. Michael Porter’s Five Forces And Payments Innovation. Online
available at
(https://www.pymnts.com/news/2014/a-look-at-how-e-payments-got-
to-where-it-is-toda/
) last accessed August 2018.
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APPENDIX
Appendix 1: Foreign Direct Investment in Belgium

(Source: UNCTAD, 2018)

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Appendix 2: Belgium Foreign Direct Investment of past years
(Source: Trading Economics, National bank of Belgium, 2018)

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