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

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Added on 2024/07/24

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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
1

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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
2

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.
3

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).
4

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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 52nd rank. For starting a new business it was
ranked 16th (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).
5

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 52nd 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).
6

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.
7

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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).
8

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
9

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)
10

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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).
11

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)
12

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.
13

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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.
14

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.
15

 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.
16

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APPENDIX
Appendix 1: Foreign Direct Investment in Belgium
(Source: UNCTAD, 2018)
17

Appendix 2: Belgium Foreign Direct Investment of past years
(Source: Trading Economics, National bank of Belgium, 2018)
18

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

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