Analysis of External Influences on British Gas Company Report

This report provides a comprehensive analysis of the business environment affecting British Gas Company. It begins with an introduction to the concept of the business environment and its various factors, including micro and macro elements. The report then delves into Task 1, offering a detailed overview of the primary external influences on British Gas, utilizing PESTLE analysis to examine political, economic, social, technological, environmental, and legal factors. It also incorporates Porter's Five Forces model to assess competitive risks. Task 2 analyzes the relevance of these factors to the organization, focusing on how climate change, carbon reduction, international politics, and government regulations influence policies and decision-making. The report critically evaluates the effectiveness of the organization's response to these challenges and identifies areas for improvement, concluding with a summary of key findings and recommendations. The report emphasizes the importance of adapting to external changes for business survival and growth within the energy sector.

Business Environment

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Brief overview of the primary external influences of British Gas Company.............................1
TASK 2............................................................................................................................................4
2.1 Analyse its relevance to your chosen organization and how it influences policies and
decision-making .........................................................................................................................4
2.2 Critically evaluate the effectiveness of the organization’s response.....................................5
2.3 Areas of improvement for British Gas Company.................................................................6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Business environment includes all those factors which has influence on the working of
the company. An organisation does not work in isolation and its performance is affected by the
environment around it. The micro factors includes suppliers, employees, customers, competitors
and intermediaries. There are certain elements which are outside the control of the business like
economic, cultural, demographic, natural and political factors. It is very important for a business
to analyse its business environment to ensure survival and growth in the industry. The research
report contains the analysis of British Gas Company and its external influences (British Gas
Company, 2016). British Gas Company is the biggest supplier of energy in UK and it is
considered a dominating force in electricity and gas market. Along with this, the impacts and
areas of improvement for the British Gas Company has been included in the report.
TASK 1
Brief overview of the primary external influences of British Gas Company
Macro or external factors are the most important aspect in business environment as it is
out of the control of the company. British Gas Company has to analyse lot of factors to ensure
that the performance of the business is not affected. They can use PSETLE analysis which will
take into consideration the legal, political, social and regulatory aspects of the business (PESTLE
Analysis, 2016). It is also important for decision makers to study the trends and implement it in
their organisation.
Political Factors: The government has the power to intervene in the business of British
Gas. So they have to consider the services and the products that the government has allowed. The
political conditions also affect many essential areas of business like infrastructure, health of
nation and safety (Hittand et.al, 2002). The government also enters into many contracts and
agreements for the benefit of the nation. Such contracts have direct impact on the business of gas
and electricity industry. The new tax rates, change in fiscal polices and export tariffs can effect
the business of the company.
Economic Factors: High interest rates and inflation will impact the business of British
Gas. A powerful currency will make the exports more costly and it would ultimately increase the
cost of the products. So the company has to change policies according to the economic condition
in UK (Hodgkinson, 1997). The income growth rate is high in UK as such it increases the
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demand for gas and electricity. Furthermore the purchasing power, demand, supply, growth
patterns, exchange rates all have to be carefully evaluated.
Social Factors: The demand of the product, culture, population, migration of income,
demography and ideology of people also influence in the business activities of British Gas. But
the gas and electricity companies are considered important for a country and for its future
evolution. As such there is no vulture which is against this industry (Kim and et.al, 2014). But
there could be situations where such companies are considered as a threat to the society.
Technological Factors: The British Gas company has to continuously adopt new
technologies, R & D, process and methods in the organisation. These days the companies are
focussing on energy efficient and eco friendly products. The use of obsolete methods would
effect the business of the company. So it is essential to adopt new innovative ways of marketing
and focus on reducing the cost of the products.
Environmental Factors: The British Gas Company has be well aware about the
environmental factors. If any activity is harmful to the environment then the future of the
company would be in problem. So the climate, global changes, location, weather and
environmental all have be analysed.
Legal Factors: The rules and regulations are very strict for gas and electricity companies
like British Gas. So it is important for them to follow all the rules, regulations, laws and
constitution of the recognised authority (Reddy, 2016). Both national and international rules have
to be complied with if a company has to continue its operations in a particular country.
These are the primary factors that can affect the business of British Gas company. The
prices of natural gas is dependent on supply and demand of the market. But these resources are
limited and the government has to keep a check that no company exploit it (Craig and Campbell,
2012). The government and international authorities can drastically affect the entire business of
British Gas Company. Furthermore the prices of petroleum in the international market puts
pressure on the companies to change its activities accordingly (Shokri and Nabhani, 2015). The
government can also resort to substitutes of gas and its services and in this situation the entire
business would be affected .Apart from these factors the British Gas Company has to face fierce
competition and risk from substitutes. All the countries of the world have started giving
importance to the environment and the activities which causes harm to it are not supported.
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The British gas company does face pressure from its buyers, suppliers, competitors and
substitutes. As such it is important for them to analyse this potential threats as well. There are lot
of external factors that can affect the business of the British Gas Company. The management
has to make sure that the company has adopted all the changes that are necessary for its survival
(Groza. And Ragland, 2016). They have to remain proactive and expect the changes in the
environment. It is essential for them to use these external factors as an opportunity to grow their
business and not as threat. The Porter's five forces model is helpful is accessing all those risks
which can affect the company:
Buyers: The British Gas Company has a dominant position in the gas and electricity
industry. The power of buyer is high as they would be able to bargain the prices of the natural
gas and other raw materials. The company also has a large market cover which benefits them.
Suppliers: The suppliers of the raw materials are limited and the resources are also
scarce. The British Gas company has to ensure that the suppliers provide the raw materials to
them on a regular basis (Porter Five Forces Model, 2016). The changes in the global economic
conditions can effect the supply of the essentials for the company as they don't have any
substitutes for it.
New entrants: The barriers to entry is high in gas and electricity industry. The rules and
regulations are also stringent so it is difficult for new companies to enter in this industry very
easily. It is for the same reason that there are only few companies who have been successful in
the industry as there are so many restrictions and rules.
Substitutes: The substitutes are constantly increasing as the world is getting more
concern to the environment. The energy substitutes like solar, wind, thermal, tidal and biomass
are available in the market (Hamilton and Webster, 2015). So there are ample of alternatives that
are available. The availability of substitutes mean that the customers have more options to
choose from. They would choose the environment friendly product and services.
Competitors: The British Gas Company has to face tough competition from companies
like EDF energy, SSE, Scottish Power, npower and E.ON Energy. The company has to be
prepared for the moves of their competitors like change in prices, substitutes, new channels of
distribution. increasing suppliers and product differentiation.
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TASK 2
2.1 Analyse its relevance to your chosen organization and how it influences policies and
decision-making
The British Gas Company has to face lot of challenges as it uses the resources which are
scarce in the world. The external factors have to be taken into consideration while formulating
the policies and decision making for the company. These component play an important as these
have to be incorporated in the business activities of the organisation.
Climate change and carbon reduction: The majority of companies in gas and
electricity industry believes that the climate change will cause downfall in the business. It
would lead to system failures and there would be safety risks in the organisation. The British
Gas company would face operational problems as they use water as a raw material. The
increased pressure on water bodies is creating lot of pressure on the companies (Daniels and
et.al, 2011). There has been shortage of water, droughts, floods and change in rainfalls in many
parts of the world. The existing plants and various equipments have been structured on the basis
of present climate conditions. As such any change in the environment would cause problem in
communication, energy resources and other methods of business process (Upton, 2010). The
working conditions in the extreme environment can cause problem to the health of the
employees. Furthermore, if a company fails to properly monitor the climate change then its
reputation would be at stake.
The UK government has also made a committee which ensures that the companies
reduce the carbon (CO2) emission. The British Gas company mainly deals in gas and electricity
which has the highest carbon emission. The industrial process also emits carbon. The electricity
is the most significant source of energy in UK and it gives power to houses and commercial
buildings (Carroll and Buchholtz, 2014). But it is the largest source of carbon emission in the
country and even the natural gas produces large amount of CO2. The government and many
institutions in the world are looking for other alternative sources of energy which would not
harm the environment. As such the British Gas Company has to comply with the rules of
carbon emission committee in UK. The operational activities has to be changed so as to reduce
its impact. They should adopt energy efficient, energy conservation, changing the fuel and other
methods which would reduce the emission in the environment (Cavusgil and et.al, 2014). The
company has to constantly change its process to comply with the guidelines of the government.
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It increases their costs and expenses as they have to implement the changes in the organisation.
So the climate change and carbon emission guidelines plays a vital role for British Gas
Company. If they do not comply with it then the government would take strict actions against
them.
International and global politics: The international and global politics also creates problem in
the business of British Gas Company. There have been many incidents around the world which
has caused changes in the prices of oil and natural gas. The natural resources are limited to
some countries and the British Gas Company has to import it in UK. If the prices or supply of
these essential resources change then it would directly impact the business of all the gas and
electricity companies (Czakon and et.al, 2014). They would have to increase the cost of the
finished product and become more efficient with zero wastage. This would not be possible
without changing the technology and process.
Government regulation of market: The government also change their rules and regulations.
All these regulations have to be complies with. The government has laid down rules for carbon
reduction, use of renewable resources, climate change etc which the British Gas Company has
to follow. The government ensures that there is competitiveness in the industry. The market is
regulated by Gas and Electricity Markets Authority in UK and they provide the license to do the
business (Triple Challenge, 2016). It also protects the interest of the consumers and keeps a
check on them. The rules are changed and they ensure that their is no monopoly in the market.
The British Gas Company has to change their policies and adopt the new guidelines. This
effects the business of the organisation as it consumes lot of time (Dickinson and et.al, 2014).
The government has recently introduced carbon emission vat, use of renewable sources vat and
climate change vat to keep a check on the market of the gas and electricity.
2.2 Critically evaluate the effectiveness of the organization’s response
The British Gas Company has been a market leader for a long time in the gas and
electricity industry. It is because they have adopted the changes that are coming in front of
them. The climate changes have been taken seriously and they have made the required changes
from time to time. The company has tried to remain efficient in their process whereby not
allowing wastage of resources (Reddy, 2016). They have found innovative ideas and methods to
ensure that the business continues to grow. The retrofitting, optimization, use of renewable
sources and micro generation are some of the techniques that they have introduced to ensure
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that they maintain competitive edge. The global and international politics cannot be controlled
by any company. This creates burden on the process of the company and their efficiency is
reduced. So it is important for British Gas Company to find more suppliers from different
countries and use alternatives for the most essential elements. The rules and regulations of the
government cannot be overlooked (Daniels and et.al, 2011). The company has been doing
exceptionally well in maintaining all the regulations. They have also fulfilled their social
responsibility. Even though the company has to implement lot of changes in their business yet
they have been able to maintain their market leadership. British Gas Company has been
carrying out their operations in an efficient manner by adopting with the environmental
changes. They have been proactive and the policies are altered according to the need of the
business. They have been constantly trying to develop and improve their business process and
operational activities (Carroll and Buchholtz, 2014). The competition has been fierce among
the top six gas and electricity companies in UK and British Gas Company has been able to
maintain its top position in the industry. The customers have also been satisfied by the services
that have been offered to them and it is essential for the company to provide the quality of
services every time. This will ensure their survival and growth.
2.3 Areas of improvement for British Gas Company
The British Gas Company has to ensure that they remain competitive in the business. If
there is any price drop in the gas and electricity industry then they have to be the first mover to
reduce the prices. The company has to invest in new sources of energy as well. The world is
moving towards eco frinedly and renewable sources of energy. The British Gas Company has to
include the new solar, tidal, wind and biomass sources of energy. This will give them the
dimension if there are too many restrictions on the existing business (Kim and et.al, 2014 ).
Transparency has to be maintained by the company. So all the details about the operating costs,
taxes, government obligations and transport costs should be known to the customers. They have
to adopt and behave in more sustainable way. The supply has been falling which is a major
concern for the entire industry and there is need to introduce new alternatives in the business.
Furthermore, the method of selling energy to the customer has to be changed (Hamilton and
Webster, 2015). It has never evolved and all the companies are following the same channels of
distribution. If British Gas Company introduces innovative ways of distribution it will not only
reduce their costs but it will help them in maintaining their current position. The company still
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lags behind in the IT department which is completely outsourced. It is essential for them to
simplify the process as it would be easier to make changes in it. There are some challenges that
they are facing and which needs improvement:
 Restoration of trust in the brand
 Exploring the new markets and industries
 Guiding customers to use energy efficient products that the company is offering
 Generating revenues to invest in infrastructure that improves the efficiency
 reducing the carbon emission
CONCLUSION
The micro and macro environmental factors plays an important role in the working of any
organisation. The micro factors can be changed but the macro factors are out of the control of the
business. The external factors can cause lot of problem in the business as there are few options
with the company. All the companies have to take these factors into consideration no matter
what. It they are overlooked then the performance of the business would decline So it is
important for British Gas Company to expect changes and adapt itself with the ever-changing
business environment. The management has to keep a control on all such issues to ensure that
the company the policies are formulated accordingly. The gas and electricity industry is highly
affected by the external factors as such they have maintain quality and efficiency in their
operations. This will not only make them more competitive but it will also increase their
revenues.
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REFERENCES
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strategies. International Journal of Business Environment. 6(1). pp. 1-10.
Daniels, D.J. and et.al., 2011. International Business: Environments and Operations. Pearson
Education/Prentice Hall.
Dickinson, J. R. and et.al., 2014. A seminal inventory of basic research using business
simulation games. Developments in Business Simulation and Experiential Learning. 31.
Groza, D.M. And Ragland, B.C., 2016. Developments in Marketing Science: Proceedings of the
Academy of Marketing Science. Springer.
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Reddy, S.K., 2016. Regulatory framework of mergers and acquisitions: A review of Indian
statutory compliances and policy recommendations. 58(2). pp.
Shokri, A. and Nabhani, F., 2015. LSS, a problem solving skill for graduates and SMEs: case
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Six Sigma. 6(2).
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Upton, S., 2010. Creating a Positive Business Environment for Wales: IWA Response to the
Welsh Government's Economic Renewal Consultation. Institute of Welsh Affairs.
Online
British Gas Company. 2016. [Online] Available through: <http://www.britishgas.co.uk/>.
[Accessed on 31 March 2016].
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framework/>. [Accessed on 31 March 2016].
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