Centrica PLC: Evaluating Global Business Strategy and Performance

This report provides a comprehensive analysis of Centrica PLC's global business strategy and performance. It includes a strategic audit of the organization's financial and business performance over the past three years, utilizing profitability, liquidity, and efficiency ratios to assess the company's financial health. The report explains and justifies strategic actions through frameworks like PESTLE analysis and Porter's Five Forces, examining the political, economic, social, technological, environmental, and legal factors impacting Centrica PLC. Additionally, it analyzes competitive rivalry, bargaining power of suppliers and customers, and the threat of new entrants. The report concludes with a critical reflection and recommendations aimed at enhancing Centrica PLC's strategic positioning and business performance in the global market. Desklib offers a wealth of similar solved assignments and past papers for students seeking academic support.

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.