Business Environment Report: Cuadrilla Resources and Brexit Impact

This report provides a comprehensive analysis of the business environment, specifically focusing on the energy sector and the operations of Cuadrilla Resources. It delves into the supply and demand dynamics within the energy market, examining how factors like price elasticity and government interventions influence the industry. The report explores the controversial practice of fracking, evaluating the perspectives of various stakeholders, including investors, consumers, environmental groups, and government authorities, and addressing the conflicts and challenges associated with this technique, such as seismic activity and environmental concerns. Furthermore, it assesses the impact of Brexit on the UK's business environment, considering the challenges and opportunities for future business development within the context of the global environment. The report concludes with a critical analysis of the UK's membership in the EU and its implications for the energy sector and overall business landscape.

BUSINESS ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................1
TASK 1............................................................................................................................................1
TASK 2 ...........................................................................................................................................4
TASK 3............................................................................................................................................6
TASK 4............................................................................................................................................9
(a) Pros and cons of UK leaving EU (Brexit).............................................................................9
(b) UK's business challenges and global environment impact on future of business
development..............................................................................................................................10
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Energy efficiency is defined as the use of energy sources efficiently so that the growing
needs of population can be meet as well as their impact on environment can be minimized. These
environmental concerns are not only associated with the usage of these energy sources such as
oil, coal and natural gas but is also linked with the extraction process of these sources. For oil
and gas companies it is becoming challenging ensuring the increasing demand of these products
due to their limited availability. As a result there is significant rise in oil prices and other
demands of energy (Shove & Walker, 2014). However, with the limitations of cost and
availability different countries and energy companies can deal by exploring new technologies
and variety of energy sources.
The report will discuss the supply and demand theory used by organisations within
energy provisions. It will also evaluate the role of government interventions on price elasticity in
energy. The document will also describe the interests and perspective of various stakeholders
towards fracking development through case example of Cuadrilla Resources. This organisation
deals in production and exploration of gas and oil and has its headquarter in UK. The study will
also evaluate the business environment of the above mentioned organisation. Further the report
will give a critical analysis of EU membership of Britain.
TASK 1
Cuadrilla Resources is one of the leading supplier of oil and gas and is well known for its
efforts to explore advanced techniques such as hydraulic fracturing and fracking to extract the
natural gas from shale plays. As compare to other manufacturing or service industries the supply
chain of Cuadrilla Resources and other energy related organisations is quite complex.
Supply and energy demand theory in energy sector:
The supply and demand theory helps organisation to analyse the interaction between the
availability and requirement of any product or services are linked with price. For instance if
Cuadrilla Resources keeps higher prices for prolong period then it is possible that most of the
consumers will avoid vehicles which are fuel inefficient or they may shift to sharing or less
driving so that consumption of these resources can be minimized. Thus, it will reduce the
demand of the energy (Seyfang & et.al., 2014).
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If there are high prices or limited availability of the energy resources then Cuadrilla
Resources can also seek to explore new resources which can increase the supply. For this
purpose business organisation can use fracking and other popular drilling approaches. On the
other hand when prices of oil are very low in the national and international market then Cuadrilla
Resources may shut down its projects to balance the profit goals (Friedman, 2017).
Such approaches reduce the supply of oil and gas to a great extent. The millions of
consumers of Cuadrilla Resources have very limited power authority to influence the prices of
oil. Thus, it also leads to another concept in supply demand theory of above discussed
organisation. The higher prices of oil or gas can encourage Cuadrilla Resources to increase its
production and supply because due to higher prices marginal production cost is also enhanced
and this is beneficial for the company.
(Source:The Return of UK Fracking and What It Could Mean for the Climate, 2017)
Along with the availability of energy resources, the amount or supply of the oil is also
dependent upon price so that Cuadrilla Resources can cover up its marginal cost. The economic
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Illustration 1: Supply and demand theory of gas

expansion also enhances the demand of energy sources. There has been an increasing use of
other alternative sources of energy (Shove and Walker, 2014). For instance with the concept of
sustainability consumers and government agencies are giving more preference to renewable
sources of energy such as solar or wind energy.
The growing use of these sources also leads to the decline in the demand of sources
produced by Cuadrilla Resources. Recently when the organisation used fracking method to
extract the shale gas so that supply can be increased along with the cost associated benefits.
However, this step of the organisation leads huge conflicts and Cuadrilla Resources had to face
opposition from the local communities and environmentalists. It was witnessed that the
extraction process was not sustainable and caused earthquakes. On the other hand the judicial
bodies and the organisation are firm to continue such practices. Such contradictions in assuring
energy supply also affect the demand perspective. Consumer may not agree to use such energy
resources which are not sustainable and can cause high destruction.
Price elasticity:
It is defined as the response of supply and demand towards changes in prices. This
responsiveness can be slow for short term but for long term they tend to be highly reactive. The
price elasticity of oil and gas can be highly elastic. The changes in the price of oil can bring
significant changes in the demand. For instance if prices are extremely high then people will
reduce the use of their vehicles and thus demand will be reduced. However, this approach is
limited to only a particular type of consumer groups such as middle or low income groups. The
higher income groups are usually not affected by such changes (Walker, 2014). The easily
available substitutes of gas or oil can also enhance the price elasticity of the energy sources.
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(Source: Oil Price Scenarios For 2015 And 2016, 2014)
Impact of government interventions on price elasticity:
The government interventions plays a key role on influencing elasticity. In order to
achieve sustainability various policies are implemented by the government which aims at
improving energy efficiency of housing stock. Such efforts reduce the gas consumption even
when the prices are not increasing. The indirect taxes posed by the government such as carbon
tax or VAT have to paid by the suppliers and manufacturers. Thus, Cuadrilla Resources balances
these expenses by keeping high prices. This process of shifting tax burden greatly depends upon
the supply and demand elasticity of its oil and gas.
It is difficult for all the organisations to meet the increasing demands of energy with
emerging business projects and growth. Thus, most of the business groups are finding ways to
explore the alternative sources of energy (Friedman, 2017). Such attempts which contributes
towards sustainability are also favoured by the government agencies. Subsidies can be given to
Cuadrilla Resources for promoting the better productivity from the alternative sources which can
be helpful to meet the goals of energy sector. The solar energy and other renewable sources are
given government subsidies thus people are encouraged to use them. It can lead to price
elasticity.
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Illustration 2: Price elasticity through supply and demand

TASK 2
Fracking technique is an approach to extract gas from the earth by drilling into the earth.
At high pressure chemicals, sand and water is injected into rock so that the gas is permitted to
flow out of the well. Earlier there were technical limitations which prohibited the use of this
technique. However, Cuadrilla Resources has been actively working to use this method for
increasing its energy supply. The shale gas reservoirs are great opportunity and are in
exploratory stage. In this process rocks which are situated below the ground are fractured by
crack generations so that oil or gas can be extracted (McCormick, 2015). It is also known as the
hydraulic fracturing. The huge energy resources are locked within shale and are not used to meet
the energy requirements (What is fracking? You need to know guide to fracking in the UK, 2018).
This technique will enable to explore these hidden sources. Thus, this technique can bring energy
revolution and can produce oil and gas in abundance.
Stakeholders of energy sector and their perspective on fracking:
Stakeholders can be defined as the individuals or group of individuals who directly or
indirectly affected by a certain activity. Thus, every aspect of such activities is matter of concern
for them. In energy sector Cuadrilla Resources have various stakeholders such as its investors,
consumers, geologists, environment protestors who concern for the sustainability due to energy
extraction procedures and government authorities who regulate the energy requirements of the
entire nation. The other competitive organisations are also affected by the business policies of
Cuadrilla Resources thus they can also be considered as the prime stakeholders. Cuadrilla
Resources made attempts to accomplish fracking in its UK sites. The decision has received
mixed response from its stakeholders.
Many geologists and government believes that UK has great number of shale oil reserves
thus the practice of Cuadrilla Resources must be appreciated because it will make UK
independent in its energy requirements and cost on import will be reduced. Some
environmentalists assume that presently coal is the prime source of electricity. However, with
these sources coal dependency will be reduced and green house effects can also be minimized.
The consumers can get dual benefits. The energy obtained from shale gas is useful in sustaining
supply of energy form renewable sources as well even when unsuitable weather conditions.
Along with these the shale sites will provide employment to the people so that new growth
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opportunities can be created (The pros and cons of fracking, 2018). The energy resources
obtained from the fracking are cost effective and cheap as well. This can affect the other energy
supplying organisations.
Conflicts related to fracking:
Though the technique has several benefits but Cuadrilla Resources had to face opposition
from local people due to the adverse impact of the technique. Few years ago when organisation
performed fracking operations near Blackpool area in England the activity was marked by the
sequence of earthquakes. The earthquakes are supposed to be the result of inaccurate fracking
approach used by the Cuadrilla Resources. It has created great anger among local resident and a
new debate has started between the organisation and its stakeholders. The waste water is drilled
back to the well and it leads to earthquake (Mazur, 2016).
Though the occurred events slightly crossed the safety limits and cannot be considered as
harmful for the surrounding livings but still people are not convinced with their well being and
safety. Some protestors also believes that millions of gallon freshwater is used for the process for
fracturing one gas well. This wastage of water is not acceptable and must be discontinue. The
occurrence of earthquake has provided support to their claim of abolishing idea of fracturing.
Along with the water the noise generated and improper management of the waste
material during the process is also questionable (McCormick, 2015). Communities believing that
instead of suppressing pollution it is contributing towards air and noise pollution. Some
environment conservative groups also believes that the promotion to this approach is an attempt
to suppress the increasing role of renewable energy sources. UK must aim at improving
exploration of renewable sources instead of promoting hydraulic fracturing.
The seismic reactions in the form of earthquakes and water contamination are the key
conflicting issues which are raised by the people. Some community groups and welfare society
are also concerned about the adverse health reactions which are analysed in people living around
the fracking sites. The people are more prone to accident and hazardous exposures which can
cause serious health impacts. The contaminated water and air is leading to potential risks.
Though Cuadrilla Resources and other energy groups working in the same context presents their
opinion that the contamination is not permanent and instead is caused due to some leakage. Thus,
proper care and additional monitoring can eliminate these risks.
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Over the issue of earthquake the regulating authorities have claimed that the fracking
alone was not responsible for the earthquake. The specific geological pattern of the site also
contributed. In addition, the observed safety scale was slightly greater than the recommended 0.5
on Richter scale. It can be due to some malfunctioning or misalignment of the equipment. Thus,
the approach is safe and can be continued. The same has been accepted by the government and
judicial authorities (Mazur, 2016). Thus, it can be concluded that the stakeholders play a
significant role in execution and successful implementation of the business procedures and
planning.
TASK 3
PESTLE Analysis of Cuadrilla Resources: Energy supply plays a very vital role in
countries economy specially oil and gas production industry. Cuadrilla Resources is one of those
company which produces oils and gas which was founded in 2007. Here PESTLE analysis of
Cuadrilla Resources business environment will be done. PESTLE analysis consist of following
factors like Political, economical, social, technological, legal and environmental factors. This
analysis can help the company to understand their working nature, necessary business conditions
and regulations which they need to follow for smooth running and exploring business
opportunities for Cuadrilla Resources company.
 Political Factor: Every country have different tax and trading policy. Cuadrilla
Resources require labours to work with and for that they need to pay wedges, taxes etc.
They need to follow all the labour law, taxation policy, environmental law, tariffs, trade
restriction of that country and specially political stability is very important. Generally
government helps energy supplying industries to establish by providing them services
and goods to flourish so that they can contribute to countries economy. As many people
are associated in this business, Cuadrilla Resources need to follow labour law with
proper working hours and following wedges policies for well-being of labour(Ahmad &
et.al.,2017). Company need to keep in mind all the political factors, as they have a great
impact on this business. They need to refer all the government policies for this energy
sector and should show their contribution for countries economy. Following all the
policies can either enhance their business or can affect their business.
 Economical Factor: Search for these energy sources like petroleum has a great effect on
countries economy i.e. it affects countries economic growth, inflation rates, exchange
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rates, interest rates etc. All these factors affects business decision making and operations
like interest rate will affect the capital cost and the extend at which business can expand
and grow, exchange rate affects exporting cost of goods and supply etc. Petroleum and
gases are extracted and refined for end product to be used. So, Cuadrilla Resources need
to consider all these factors before setting up all of their operations and for the future
growth of their company.
 Social factors: Social factors in energy industry shows religion, culture, demography,
ideological views and income migration issues. Oil and gas industry is required in a
country so that all of their future demands can be meet and they can improve their
standard of living. Oil and gas industry brings changes in peoples living standards. So,
they need to adapt all the social changes and should adapt different management
strategies for the growth of the company. Cuadrilla Resources has an advantage that no
country is against oil and gas exploration as it is important for growth, welfare and
development of a country even though many people think it is main source of pollution
but cannot deny its importance. They think a pollution reduction law should be made to
impose band in creation of pollution.
 Technological factors: Technological factors includes different techniques,
technologies and how they can affect a companies activities. An organization need for
different techniques, technology and methods can be influenced with this factor. This
factor plays a major role in this industry like technology can be used for exploration of
energies like oil and gas, use of transportation like roads, oil tankers, pipelines etc.
Technology can also be used in protection of workers, environment and to enhance
management efficiency with use of new hardware and software. Cuadrilla Resources
can use new technologies for extraction of natural oil and gas and production of different
products.
 Environmental factors: Environmental factors have a great influence on energy
companies. Inverters when make investment in oil and gas industry company then they
need to understand all the environmental factors. To reduce negative effects of this
industry government has imposed some rules and regulation in oil and gas industry to
ensure environmental safety.
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 Legal Factors: If any oil and gas company do not follow government rules, regulation,
policies and law then legal action can be taken against them. Legal factors like
exploitation, exploration or any commercialization of products need to be considered.
Carroll's model: It is basically a framework which helps and organization to define how and
why they should meet social responsibilities(Rosebrock, Oke, & Carroll,2015). Basic foundation
of this model is profit then need for business i.e. how it compiles with all rules and regulations
and laws then at last they need to meet ethical duties.
 Economic responsibility: The basic need of an organization is to make profit and earn
money. And for companies like Cuadrilla Resources which is a oil and gas production
company it is important for them to firstly think of profit for the growth of their company
by maintaining high operating level efficiency. They can only contribute towards
economy of a country when they make profit .
 Legal Responsibility: It is important for a company to follow all the laws and
regulations of government and only then try to achieve their economic objectives.
According to Carroll legal responsibilities ensures the fair operation as established by the
government. They should be a corporate citizen who abide with the law(Jewsbury,
Bowden, Duff,2017).
 Ethical responsibility: Ethical responsibility is simply to follow business ethics. It
means to follow all the ethical expectation from social groups and upper layer of tacit
levels of ethical performance. According to Carroll ethical responsibilities are important
for acknowledgement of legal responsibility so that they are recognized as good corporate
citizens by doing all their work ethically and morally.
 Philanthropic responsibility: Philanthropic responsibilities are to contribute to society
projects even if they are separated form business. Generally this responsibility means to
be charitable. Organizations are expected to be an active participant in corporate social
activities like involving in human well-being program or assisting projects voluntarily for
community enhancement to be a good corporate citizen.
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TASK 4
(a) Pros and cons of UK leaving EU (Brexit).
Pros of Britain leaving European Union are:
 One of the biggest profit for UK is that they no longer need to pay membership fees to
EU, which was almost 11% of their annual GDP which was approximately 200 billion
pounds.
 Britain no longer need to follow EU's trade cost, they can set their own value added tax
and regulations for themselves.
 They will be able to influence taken in the world as an independent nation.
 UK will be able to decide how many citizens of EU to be allowed for work or any other
reason.
 UK's 85% business who never trade with European union need not to follow EU's
regulation(Baker, & Knight,2017).
 Till now because UK didn't have their own immigration law terrorists easily entered UK
from EU. EU's supremacy made it harder for UK for deportation of any violet criminals.
 Britain will be able to set their own rules, regulation and laws as till now they were
forced to follow all the rules, regulations and laws set by EU.
 Lesser regulations in UK's workplace will increase job opportunities which will decrease
migration and increase wages.
Cons of Britain leaving European Union are:
 Britain will not be able to be a part of world's largest free trade area if US and EU's
negotiation is set for market to go through.
 EU's regulations cost were beneficial for customers as they used to get the desired quality
for regulated prices. For example: Mobile data charges were same for customers who
used to travel from UK to EU but now the prices will change and also Europe flight
charges will increase.
 Energy bills of UK will be increased by almost 500 pounds as a side effect of leaving EU
because being a part of EU their energy security were stronger as energy negotiation was
done being a large part of EU but now it will create uncertainty in environmental sector's
investors(Dhingra and et.al.,2018).
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 34% of UK's finance were contributed by EU's migrants but now as immigration
restrictions will affect their society and economy.
 Around 3 million jobs in UK were linked to EU's trade and they also used to receive
almost 66 million pounds from EU for investing in jobs every day.
(b) UK's business challenges and global environment impact on future of business development.
 Because of Brexit, UK will face difficulty in future of trading relationship with EU which
may be barrier to trade because of this UK's economy will struggle to keep up with the
growth trend. Trading across borders have a huge effect on UK's economy as initially
they had standard rates and procedure would take less time as compared to OECD
counterparts.
 Impact of Brexit will be shown on exchange rates which will further increase importing
goods price for all the firms in UK. As an effect cost of business have increased above
inflation rate. This will affect financial management of all the firms specially for smaller
companies who are competing with bigger companies(Charles Jr, Schmidheiny, &
Watts,2017).
 Financial management is always important for companies regardless of market condition
but now it will be even more difficult for companies as UK's current environment is quite
volatile.
 Brexit will definitely give courage to all the other EU parties specially in heart of Europe
and as an effect UK may face referendum exit from Scotland.
 Impact of Brexit will have a huge impact on Britain's business as compared to EU as Eu
was Britain biggest trading partner almost all the exports were done with EU. So, as an
impact of Brexit Britain will have a huge impact economically.
 Many small scale organizations in UK will face financial stability problem as the
environment which they are operating is unstable because of Brexit.
 According to a report UK's economy will be affected by 2030 as a side effect of Brexit.
But the major impact on UK will be because of free trade area negotiation which is going
on between US and EU.
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 Macroeconomic consequences of Brexit will have an effect on financial market in global
economy for example rise in US dollar as compared to euro will put pressure on
manufacturing sector of US.
 Resourcing for UK will be difficult as many of EU's migrants work in UK which
contributes a big portion in UK's economy but now as immigration laws will change it
will affect UK's economy.
 Brexit will also reduce real per capita income level and it will affect UK's foreign direct
investment, immigration and trade barriers, it will create difficulty for UK to have
economic stability.
 Cost of reduced economic growth will cost UK around 70 billion pounds more than the
saving in membership fees that was around 8 billion pounds which will not get affected
by new trade deals(Epstein, 2018).
 Food products or dairy products prices will increase and supply will decrease in UK if
they follow WTO trading arrangements. It is also seen that many UK's hospitals relay
heavily on EU imported food for providing patients nutritious diet. So, it will be a
concern for UK that how healthy food will be provided to patients, schools, prisoners or
home cares. UK's economy will be benefiting only by their location attractiveness for
activity.
CONCLUSION
From the above study it has been summarized that Cuadrilla Resources is one of the
leading supplier of oil and gas and is well known for its efforts to explore advanced techniques
such as hydraulic fracturing and fracking to extract the natural gas from shale plays. In this study
supply and demand theory in energy sectors had been explained in this price elasticity is also
explained i.e. if there is change in price then there will also be change in demand, then
stakeholders of energy sector and their perspective on fracking has been explained and
stakeholders theory is also defined, then business environment analysis of Caudrilla Resources
has also been done with PESTLE and Carroll's Model and at last part firstly pros and cons of UK
leaving EU are explained and business challenges will be faced by UK because of Brexit are
explained and all the impact which it will have on global business environment has been
explained.
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REFERENCES
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sustainable development. Routledge.
Dhingra and et.al. (2018). UK trade and FDI: A post‐Brexit perspective. Papers in Regional
Science. 97(1). 9-24.
Epstein, M. J. (2018). Making sustainability work: Best practices in managing and measuring
corporate social, environmental and economic impacts. Routledge.
Friedman, M., 2017. Price theory. Routledge.
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cognition for clinical assessment. Journal of Psychoeducational Assessment. 35(6).
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McCormick, M., 2015. Conflicting Theories at Play: Chemical Disclosure and Trade Secrets in
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