Global Business Strategy: Analysis and Recommendations for Centrica plc

This report provides an analysis of the global business strategy of Centrica plc, a leading energy services and solutions provider in the UK. It includes a strategic audit of the organization's financial and business performance over the past 3 years, analysis of strategic actions, and recommendations for improvement. The report covers various models such as PESTLE analysis, Porter's five forces, and industry life cycle stages to identify the external factors that can impact the business operations of Centrica plc. The report also provides insights into the profitability, liquidity, and efficiency ratios of the organization.

Global Business Strategy

TABLE OF CONTENT
EXECUTIVE SUMMARY.............................................................................................................3
Strategic audit of organization's financial and business performance over the past 3 years.......4
Analysis that explains and justifies the strategic actions.............................................................6
Critical reflection.......................................................................................................................17
Recommendation.......................................................................................................................18
CONCLUSION..............................................................................................................................19
REFERENCES..............................................................................................................................20

EXECUTIVE SUMMARY
A global business strategy is the method used by many companies in order to develop
and expand into the global market and gain good position. The major purpose of developing a
global strategy is to improve performance and increase sales across the world. Nowadays,
companies are always looking for best ways to improve their business performance. Every
business need effective strategic action and planning, it takes model to implement that strategy.
This can be done through finding out internal and external environment which can impact the
business operation.
In today's business environment companies are focusing on using strategic plans which
take at least one year to complete. The below report is based on Centrica plc which is a leading
energy services and solutions provider situated in UK. The firm is focusing on helping people
Live simply, sustainably and affordably. A firm provide services like supply of gas and
electricity to customers and provide services to over 26.2 million people in the UK, via brands
like British Gas. There are many engineers and technicians working in the company in order to
provide good service. As the company is having large number of customer they need to focus on
developing its business performance and financial stability. Strategic actions are projects outside
the firm's day to day operational business operations which can help the firm to achieve its
strategic goals and strategy easily. An effective Action plan will be helpful to create something
new and better for the business activities which later is useful to improve performance. Different
types of strategic actions are porter's generic strategies, PESTLE analysis and value chain
analysis. By using these model company can easily find out external environment which can
impact its business operations and influence its financial condition. It is a technique used by
companies to gain a macro picture of a business environment and make necessary changes by

adopting opportunities and reducing threats. In addition to this, porter generic strategies discuss
how a firm can easily gain competitive advantages in the market and chose effective scope.

Strategic audit of organization's financial and business performance over the past 3 years
Strategic audit is a systematic method or process used by company in order to find out
and determine the extent of implementing a firm's strategies, it goals, its aims, its purposes and
how to meet those goals effectively (Moon, 2022).
Profitability ratio
Profitability ratio analysis 2019 2020 2021
Gross Profit GP 2525 3119 1522
Net profit NP -1103 -117 1361
Sales revenue Sales 12994 12249 6918
Earnings before interest and tax
or operating profit
Capital employed
Net income
Average total assets
GP ratio Gross profit / sales * 100 19% 25% 22%
NP ratio Net profit / sales * 100 -8% -1% 20%
Profitability ratio of the business show how much the business is able to earn in the
organization out of all its operations. The profitability ratios for this organization shows upward
rising trend as it was facing negative balances which affected the growth of the organization. The
business needs to increase its sales in order to achieve the effectiveness in the performance.
Liquidity Ratio :
Liquidity ratio analysis 2019 2020 2021
Current assets 8296 10412 9826
Current liabilities 8885 7665 6877
Inventory 431 324 320

Prepaid expenses 7865 10088 9506
Current ratio
Current assets / current
liabilities 1.08 1.35 1.42
Quick ratio
(Current assets –
Inventory)/Current
Liabilities 1.02 1.31 1.38
This is the ratio which provides the analysation of the liquidity of the organization which
is considered to be affected due to the poor capacity of the business to pay its short term
obligations. This ratio shows that currently the business is moving towards better liquidity and
hence has the improved its efficiencies. Current ratio is considered to be idea if it is at 2:1.
Hence, it can be said that the business is moving towards idea current ratio.
Efficiency Ratio :
Particulars Formula 2019 2020 2021
EBIT -1034 -577 907
Interest 1306 843 840
Interest coverage
ratios EBIT/ interest -0.792 -0.684 1.080
Particulars Formula 2019 2020 2021
Account receivable 4839 2801 2926
Sales revenue 12994 12249 6918
Account receivable
turnover
Account receivable /
sales *365 135.927 83.465 154.378
Particulars Formula 2019 2020 2021
Account receivable
turnover
Account receivable /
sales *365 135.9269662921
83.4651808
311
154.378433
0731
Average collection 365/account receivable 2.685 4.373 2.364

period turnover ratio
Particulars Formula 2019 2020 2021
COGS 8358 8498 4756
inventory 431 324 320
Inventory
Turnover Ratio COGS/Inventory 19.717 26.228 14.863
In this ratio the efficiency of the organization towards the use of its resources and assets
have been explained. These ratios reflect that during 2020 when the Covid-19 was at its peak the
business was unable to focusing on increasing the efficiency of the organization (Interim results
for the period ended 30 June 2021, 2022).
Analysis that explains and justifies the strategic actions
In today's business environment, every organization from small scale to large scale firms,
is focused on improving its business performance and heading ahead. Due to heavy competition
the firm has to make effective decisions by using model and needs to find out factors that can
impact its business operation's as whole (Kalam, 2020).
PESTLE analysis- with the help of this model, Centrica plc can identify the pros and
cons of a business strategy.

Source: (PESTLE analysis, 2022)
Political- It is important to go through political factors before implementing any
decisions in the competitive market. When looking at political factors, the company need to look
at how policies made by government can influence the business operations. As Centrica Plc is
operating in utilities in more than a dozen countries and wants to expand more, it is essential to
keep track on changing policies related to trade and taxation in order to avoid any uncertainty
and risks associated with it. They need to closely analyse the following factors before
implementing any decisions and investing in a certain market. It includes: industrial safety rules
and regulations, product labelling, wages and salary laws, anti trust laws and many more.

Economic- It includes economic growth rates, inflation, exchange rates and interest rates.
(Achinas and et.al., 2019). By using this method, Centrica plc can find out economic indicators
such as customer spending in order to forecast the growth rate. For example- a rise in the
inflation rate of UK's economy would impact the way company prices their services. On the top
of that, it would also influence the buying behaviour and power of customers and at the end it
would also impact demand and supply of goods.
Social- The culture of society and social trends would impact the organizational culture
in business environment. Nowadays, attitudes, values, beliefs of the society play an important
role in the market. It is important to understand the customer needs and how firm design the
marketing message to spread awareness about trends like sustainability. Before implementing
any plan, Centrica plc should analyse the elements like culture, attitudes, demographics and skill
level of people and many more. For example- a change in social trends like health and
environment consciousness would influence people to move towards using eco-friendly and
healthy products or services. By analysing these factors, Centrica plc can make necessary
changes to its business operation and satisfy customers by more focusing on social trends.
Technological- technology and innovation play a vital role in the success of business.
Due to rapid change in the technology the company has to utilize update version to be in
competitive market, otherwise, they may lose their market position (Christodoulou and
Cullinane, 2019). Due to heavy competition in the industry from last few years, the company has
to make changes to cope up with challenges. They need to invest more on technology such as
effective product offering, recent technological development done by competitors and many
more. The firm needs to spread brand awareness through social media, market campaigns and
online marketing in order to attract more customer. However, the company is using good
innovation to satisfy its customers but can make more investment and efforts. It involves study of
technological diffusion, impact on value chain structure and cost structure.
Environmental- In today's world, customer are more concern about environment, they
are becoming environment conscious. Environment factors includes- attitudes toward renewable
energy. Due to this, the company has to be active and keep track on changing trends (Capobianco
and et.al., 2021). In the UK, the government has made environment laws which needs to be taken
into consideration by every industry. Before implementing any decision Centrica plc has to be
very careful while providing service or products to customers. They have to strictly follow the

rules and regulations made by government related to environment. It includes: laws regulating
environment pollution, wastage, recycling, plastic bags and many more. However, the cited
organization is supplying gas and electricity to customer and strictly follows the laws related to it
in order to maintain sustainability.
Legal- These factors have both internal and external sides which includes taxation, laws,
import-export, legislation and many more. Certain laws made by government have influence the
business activities. Many companies maintain their own rules and regulation and have set
standards by which staff is expected to abide by. Centrica plc should carefully evaluate before
implementing any decisions and entering such competitive market as it can lead to theft of
company's secret sauce. However, the firm is considering laws like customer protection law, e-
commerce, health and safety law and data protection act.
INDUSTRY LIFE CYCLE-
Stages includes:
Startup stage In this stage, centrica plc are likely to generate
very low revenue and may experience vary low
profits.
Growth stage Once the company enter the market, the
product slowly attracts the attention from a
customer segment and achieve profitability and
increase revenue.
Stakeout stage In this stage, firm may experience slowing
down in growth rate of revenue, profit and cash
flows as the particular industry approaches
maturity.
Maturity In this stage, the firm is well-established and
compete to protect themselves so that they can
easily maintain profitability by having new
strategies.
Decline stage In order to deal with decline, the company
must choose to focus on profitable product or

service and also concentrate on maximize
performance to stay in the industry.

Porter's five forces- In other words, it is a tool for analysing a firm's competitive
business environment. By using this, Centrica plc can boost their profitability and stay ahead of
the competition.
Source: (Porter's five forces model, 2022)
Competitive rivalry- This force of porter examine how intense the market competition is
in the market. With this analysis, the firm can find out the number of existing competitors in the
marketplace. It has been noted that competition is high when there are just a few company
selling goods or services (Min, Liangwen and Yue, 2018). In addition, when the company is

growing and when customers can easily switch to other options the rivalry competition is very
high. Due to this, cited organization has to face wars like price wars and promotional activities
wars which can impact a business performance.
Bargaining power of suppliers- It shows how many potential suppliers company have
and what are the unique offers they are providing. It has been noted that the fewer supplier there
are in the firm, the more power they have related to bargaining. For example- if the company
have more suppliers than they can easily achieve better position in the marketplace.
Bargaining power of customers- this force analyse the power of clients, and their effect
on quality and price of product or services. When clients have more bargaining power, they may
impact the market condition, driving products or service demand down. On the other side, if the
customer are more they have low buying power.
Threat of new entrants- Market position and power of the company can be impacted by
the customer's ability to enter market (Irfan and et.al., 2019). Nowadays, due to heavy
competition in the market, the company performance may get affected. When the new players
enter the market it might impact the profitability of the firm and this is a threat for the firm. For
example- new players use new technologies and enter market and also weaken market position.
since Centrica plc would be able to charge higher price for products or services and negotiate
better deals.
Threat of substitutes- This force refers to the likelihood of customers finding a
substitute. It has been said that substitute product or service of competitors can be used in place
of firm's services pose a threat (Pervan, Curak and Pavic Kramaric, 2018). Whenever other
options are available, clients will have the opportunity to buy those products or service and due
to this company's power can be affected.
By using porter five forces, centric plc can examine the ability to substitute suppliers,
uniqueness and the cost of changing suppliers etc. it can lead to a boost in performance and
profitability which also increase the interest of investors in the firm in order to raise earnings.
COMPETITOR ANALYSIS
Basis of
differentiation
Centrica plc EDF energy Goldwind
Promotion The firm focus on On the other side, To On the other hand, The

digitalization to attract
customers.
attract customers, the
firm focus on marketing
campaign names as
team green Britian to
promote environmental
awareness among
people.
company uses
advertisement, sales
promotion and direct
marketing in order to
attract customers and
promote brand
awareness.
Price Centrica plc povide
service at reasonable
proce to meet the needs
of customers.
The firm provides
electricity at an
affordable price along
with the services relate
d to services.
The firm focus on
using market
penetration pricing
Strategy when they
launch a new product
line.
Place The firm has lots of
customers as they work
for the benefit of
customers.
The company presence
can be felt at global
level as they work in
partnership with
different companies in
order to serve the
customer needs.
On this side, firm
focus on channel
management to
manage various power
centers within its
delivery system.
FOUR LINKS ANALYSIS- With the help of this model, the company can get the opportunity
for collaboration in particular industry (Ding, and et.al., 2021). Centrica plc uses this model to
identify resources which will allow company to leverage them for their own benefit.
 Formal links tend to be legally binding, the company need to determine if formal links
would be willing to help business operations.
 While government links and networks, shows that if agencies of government would be
willing to support business of centrica plc.

 Informal links can be associations in particular industry who wants to support business
operations or not. And lastly complementators tend to be other parties joining with the
Centrica to co brand goods or services offered by them.
KEY FACTORS OF SUCCESS
Strategic focus :
Strategically the planning of the Centrica for achieving the global energy and services to
the customers is going to be the way in which it satisfies the needs of the customers.
People :
Hiring employees which are talented are will help in development of the business growth.
Operations :
Key to the operational success would be to achieve cost-effectiveness that would bring
the business the growth it requires.
Marketing :
Being able to reach the target customers of this organization will be considered to be the
key success of this organization.
Finances :
Management of the financial efficiency will be the key factor that would help the
business in its growth and profitability (Fang and et.al., 2020).
CUSTOMER ANALYSIS
Segmentation :
The customers segment for this organization will be related to the organizations and
individuals which have requirements of energy for their operations. This segmentation will focus
on the demographical levels in which the segment will achieve the growth it requires.
Targetting :
Out of the segments of the customers the major focus of this business would be to target
the entities with home and business energy solutions. Entities will ensure the business with the
consistent demand of energy in comparison to the individuals (Ding and et.al., 2020).
Positioning :
This organization has been able to establish itself as the British multinational utility
company which has been able to provide the organization the success it requires.
ENVIRONMENT BASICS

Human resources :
This is the department which is very important for any organization which helps in
maintaining the environment of the organization. This is considered to be the key towards the
hiring and other human management operations in the organization.
Value system :
The value of the company determines the corporate values of the organization which
provides the business with social justice that provides the business with equal opportunities and
gender equality.
Vision and Mission :
It is the goal of the organization which it plans prior to the organizational operations and
is the key objectives needed for achieving the results
Corporate culture :
The culture of the organization is the key concept which helps the business focus on the
areas it will use to gain effectiveness.
DEGREE OF TURBULENCE
Repetitive: This is the repetitive level in which the business is stable and is practising the
repetitive performance of the organization.
Expanding : In this level the business is planning expand its operations in different forms of the
organization which will allow the business to increase its profit and develop marketing growth.
Changing : This is the level when the business is able to be successful in the organizational
operations which allows the organization in the management of the key operations that allows
the business to achieve the growth that is required.
Discontinuous: For this organization not being able to continue the operations of the business as
it was doing initially is the factor which allows the business in the growth of the organization.
Surprising levels: This is the level in which the business identifies the factors which have been
able to introduce the results that impact the organizational operations.
By evaluating the above mentioned models, it has been analysed that PESTLE analysis
would be a better option for Centrica plc. The major reason behind choosing this model is with
the help of this model, the company can assess the external factors for environment. By applying
this method, the firm can easily identify various types of factors and make necessary changes
after determining competitive benefits (Marketing theories- PESTLE analysis, 2022). It has been

justified that this model helps to provide detailed information and picture of the situation. They
also find new ways to reach their potential customer by using technology such as social media
and marketing campaigns.

Critical reflection
During week 1 learning module, I have learned various type of strategies which can be
used at global level in order to improve business performance. When the company wants to
expand its business in the global market and compete with the help of techniques then it is
known as global strategy. I have learned that, people can pursue strategies like global,
international and multinational in order to gain good market position. At the time of learning
module, I have understood the concept of strategic management. Companies use effective
strategic management in order to deal with different situation and also to enhance the
performance of the company in their external environments. By learning about strategic
management, I have also understood the purpose of using this method which says that it deals
with the fundamental problems that may impact the future stability of the firm. this management
method has two vital areas such as sustainability and value added to gain competitive
advantages. The learning says that good and effective strategy can deal with difficulties in
developing techniques. In order to have effective strategic management the business managers
need to focus on three core areas such as analysis, development and implementation of strategies.
By doing so, people can easily make strategic decisions, achieve vision and complete process on
time. During the week 2 module learning, I have also understood the concept of analysing the
strategic environment. This can be done through models like PESTLE analysis and Porter five
forces. By having this model, I can easily evaluate market position and make necessary changes.
While learning week 3 module, I have understood the purpose of developing the mission,
vision and objective of the organization. Organisation’s purpose includes resources options,
environment, choice and implementation. By having effective strategic plan, one can easily meet
its organizational purpose and deal with stakeholders because they may influence the business
objectives and strategies. It is important to have ethical consideration in order to develop
business strategy. At last during week 4 lecture, I have learned about the purpose emerging from
new resources, innovation and technologies. By using effective innovative ideas and new
technology the business can easily gain good market position.

Recommendation
 In order to meet the goals of the company, the manager of centric plc needs to set clear
goals by using SMART goals strategy. Make sure to keep track on changing trends and
customers’ needs in order to meet objectives in electricity and gas industry.
 It is advisable to monitor activities on regular basis and collect feedback from employees
and customer and make necessary changes after collecting suggestion from them.
 By hiring talented people will be helpful for the firm, along with this it is important to
provide staff development programs and training sessions to employees in order to
motivate them towards company's goals.
 with the help of effective leadership style, skills, experts and communication skills firm
can create good organization culture which is beneficial for reputation of the centrica plc.
 It is suggested to use new technology and innovative ideas to gain competitive market
position (Stepnov, 2021). This can be done through proper market research on the
invention and technology and research and development will also be helpful.

CONCLUSION
To conclude, By evaluating, the report it has been concluded that centrica plc is using
good strategic audit, the firm can easily develop its financial and business performance. Plus, it is
recommended to expand business in emerging market and other countries to gain competitive
market advantages. Now, to be successful, the firm can improve range of business planning such
as workforce planning, product development, solve issues related to service, marketing plan, and
also focus on skill shortage which may help them to improve organizational culture.

REFERENCES
Books and Journals
Achinas, S. and et.al., 2019. A PESTLE analysis of biofuels energy industry in
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Aqidawati, E. F., Sutopo, W. and Pujiyanto, E., Lesson Learned in Developing and
Implementing Global Business Strategy to Commercialize Battery Swap Technology: A
Comparative Study.
Capobianco, N. and et.al., 2021. Toward a Sustainable Decommissioning of Offshore Platforms
in the Oil and Gas Industry: A PESTLE Analysis. Sustainability. 13(11). p.6266.
Christodoulou, A. and Cullinane, K., 2019. Identifying the main opportunities and challenges
from the implementation of a port energy management system: A SWOT/PESTLE
analysis. Sustainability. 11(21). p.6046.
Irfan, M. and et.al., 2019. Competitive assessment of Indian wind power industry: A five forces
model. Journal of Renewable and Sustainable Energy. 11(6). p.063301.
Kalam, K. K., 2020. Market Segmentation, Targeting and Positioning Strategy Adaptation for
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Research and Innovation in Social Science (IJRISS). 4(6). pp.427-30.
Min, C., Liangwen, L. and Yue, X. G., 2018. New Thoughts on Porter's" Five Forces Model"
from the Perspective of Innovation. IETI Transactions on Social Sciences and
Humanities. 1. pp.105-113.
Moon, H. C., 2022. Global business strategy: Asian perspective. World Scientific.
Pervan, M., Curak, M. and Pavic Kramaric, T., 2018. The influence of industry characteristics
and dynamic capabilities on firms’ profitability. International Journal of Financial
Studies. 6(1). p.4.
Stepnov, I., 2021. Technology and Business Strategy. Springer International Publishing.
Fang, Y., and et.al., 2020. Low energy consumption compressed spectrum sensing based on
channel energy reconstruction in cognitive radio network. Sensors. 20(5). p.1264.
Ding, Z., and et.al., 2020. Energy-efficient relay-selection-based dynamic routing algorithm for
IoT-oriented software-defined WSNs. IEEE Internet of Things Journal. 7(9). pp.9050-
9065.
Online

Interim results for the period ended 30 June 2021, 2022[Online]. Available through:
<https://www.centrica.com/media/5136/interims-2021-announcement.pdf>
Marketing theories- PESTLE analysis. 2022. [Online]. Available through:
<https://www.professionalacademy.com/blogs/marketing-theories-pestel-analysis/>
PESTLE analysis. 2022. [Online]. Available through:
<https://www.analyticssteps.com/blogs/what-pestle-analysis>
Porter's five forces model. 2022. [Online]. Available through:
<https://www.mindtools.com/pages/article/newTMC_08.htm>