EDF UK: Opportunities & Challenges in International Business

This report provides an in-depth analysis of international business and globalisation's impact on Avro Energy Ltd (now EDF UK), examining opportunities and threats within the global energy sector. It explores the importance of global trade, key international drivers, and potential expansion opportunities in Europe, specifically focusing on Russia and France. The analysis includes a PESTLE framework to assess the external environment and Porter's Five Forces model to evaluate competitive intensity. The report also touches upon Ansoff matrix and entry mode strategies, ultimately aiming to provide insights for strategic decision-making in international markets. Desklib provides a platform for students to access similar solved assignments and past papers.

International Business
and Globalisation-
EDF UK

Table of Contents
INTRODUCTION ..........................................................................................................................2
TASK ..............................................................................................................................................3
Avro Energy Ltd. Overview:..................................................................................................3
The Global Energy Indusry:...................................................................................................3
Importance of Global trade:....................................................................................................4
International drivers:..............................................................................................................5
Expansion opportunities in Europe:.......................................................................................5
Russia overview-...........................................................................................................6
France Overview-..........................................................................................................7
External environment PESTLE:.............................................................................................8
PESTLE analysis - .......................................................................................................8
Entry into Russian Market:...................................................................................................10
PORTER'S Five forces Model:............................................................................................11
Porter's generic forces:.........................................................................................................12
Ansoff matrix:......................................................................................................................13
Entry mode and Market Selection:.......................................................................................13
CONCLUSION .............................................................................................................................14
REFERENCES..............................................................................................................................14
INTRODUCTION
Globalization forces are not only not affecting and influencing our daily lives but they are
also evidently visible in the sphere of international business. The rapid economic liberalisation in
the fields of carrying out trade and investments has been a driving force behind the process of
globalization. Markets are now flooded with global industrial goods due to the ease in the import
and export that is carried out between the countries. Integration of the markets has also led to

mobility of people when they travel internationally. This is driven by the global reach of satellite
channels and the increased use of internet which has helped the world to become a global village.
Globalization not only poses great challenges for business entities but also provides and opens
new opportunities for them. International business has helped them understand the global needs
and requirements of the customers. UK now has a global market where its business ventures can
carry out trade deals(Kharat, 2019). This report will analyse in detail the international business
and globalization impact with respect to Avro energy company. It shall also study the
opportunities it has and the external factors that pose threat to the company.
TASK
Avro Energy Ltd. Overview:
Avro energy Ltd. Is a company of Britain which carries out its operations with respect to
supply of energy. The company was founded and launched in the year 2015 to challenge the
existent big energy supplier company by the name of Big Six that was dominant in the energy
market. The managing director of Avro energy is Jake Brown. The company is currently located
in Brighton, United Kingdom. The energy company is regarded as the part of the Metal and
Mineral Merchants Wholesaler industry. The company thus operates as a supplier of gas and
electricity. The company generates around $ 490 million in its sales that it carries out in UK.
But the company ceased to trade in september due to which Ofgem appointed Octopus
Energy to take on the supply of Avro energy's domestic customers (Rugman, 2019).
The Global Energy Indusry:
According to IEA research, the global demand for energy is expected to increase by around
4.6% in the year 2021 which has pushed the demand for about 0.5% above the 2019 levels
that were recorded. From the overall projected increase around 70% of global energy
demand is expected to be in the markets that are emerging and in the developing
economies of the world. Whereas with respect to the advanced economies the energy use
there will be 3% below the levels that were in the pre covid period.
With respect to the demand for natural gas it is set to increase and grow in 2021 by
around 3.2%. Around three fourth of the growth in the global demand in 2021 is from the sectors
that are in the industry and buildings area while with respect to the generation of electricity from

the area of natural gas it remains below the levels that were in 2019. Moreover the demand of
electricity was due to grow and increase in 2021 by around 4.5%. and the 80% demand in this
from the emerging markets and developing economies (Global Energy Review, 2021).
Importance of Global trade:
Global trade helps the wealthy and elite countries to make the usage of their reasources
like technological advancements, labour force, capital in a more efficient manner. The countries
which have the advantage of producing the same kind of good in an efficient manner with low
cost, they may sell the good in a cheaper manner than the other countries. And those countries
who do not have the resources to produce such goods they may obtain those goods from another
country through international or global trade. It is thus regarded as global trade (Gorynia, 2019).
Thus, global trade among the different nations an essential factor which is helping to
raise standard of living, providing opportunities in employment and helping consumers to enjoy
unique types of goods. International trade has become very important due to its increasing share
in the GDP that is due to the high exchange in imports and Exports.
It is visible from the above graph that the world exports role in the percentage share of
GDP has increased due to it.
Global trade helps in making use of the abundant raw materials that are available with
some countries like oil and metals from Qatar, etc. Without trade it is impossible for these

countries to benefit from the materials that are available in other countries. It also helps in
addressing the opportunity of comparative advantage. Economy like UK has a comparative
advantage in education. Trade helps the nations to specialise in different fields with which they
can gain advantage in global trade. International trade also helps in offering variety of choices to
the customers so that they can decide their choices and preferences accordingly. Thus, global
trade has prompted economic growth world wide(Thrift, 2020).
International drivers:
Avro energy Ltd. Is required to look at the factor or drivers of trade so that they can have
an advantage among the countries in global trade. The drivers of international trade are complex
and thus require proper understanding and strategies to be successful in the market. The key
international drivers are as follows:
 Cost Drivers: Avro energy is required to increase its sales in the UK market so that it can
also grow internationally. It must open retail outlets in the market which will help Avro
to become a multinational energy player while also giving UK economic growth.
 Market Drivers- Brexit has helped United Kingdom to come out of the sphere of EU as it
is separated from the European Union and this independence will help Avro to innovate
and have unique trade deals with other countries part of the global trade (Tang, Wang &
Yu, 2020).
 Government drivers: Avro Energy Ltd. Must be in line with the laws and regulations that
are prescribed for the gas and electricity sector so that it does not have to face the barriers
in international trade.
 Competitive drivers: Market competitions in the energy industry are increasing which is
why Avro Energy Ltd. Is required to become global like its competitors by using
strategies that can be helpful in international trade.
Expansion opportunities in Europe:
Avro due to its ceasing opportunities now must look for expansion opportunities in
Europe because EU has around 28 countries in it making it one of the world's largest economies
so it offers a market where once again it can make its mark and grow its sales and profits after
suffering a severe set back (Cook and et. Al., 2018). EU offers great advantages due the benefits
it has in the global trade market which can be very helpful for Avro Energy Ltd like:

 It has largest market worldwide
 It has a wide range of consumers who are keen on consuming gas and electricity at large
 It offers simple and transparent rules for the other economies
 It has a welcoming nature that allows developing and developed countries companies to
carry out trade
By having a proper plan and strategy Avro Energy Ltd. Can increase its global trade with the
help of EU and can once again grow in the energy sector. Under Europe two countries were
reviewed for the opportunities they offer with respect to expansion.
Russia overview-
Russian economy is a mixed economy which has tremendous natural resources specially
with respect to oil and natural gas. In Europe it has the fifth largest economy and in world with
respect to nominal GDP it is the 11th largest economy. It is an essential determinant of economic
activities due to its large geographical region and thus it is estimated to have covered around
more than 305 of the natural resources of world. It also gains major revenues in the oil and gas
sector which are emerging day by day. Thus, this country is described as an superpower with
respect to energy because of its natural gas reserves.

Energy in Russia is described as the area dealing with energy and electricity. Russia in 2020
consumed around 7863 Twh energy. Russia is thus described as a rich country in its energy
resources(The world Bank- Russia economic report, 2021).
Thus, Russia offers to be a great market for carrying out global trade by Avro energy
limited. It can establish its base there and cater to the needs of the consumers by knowing their
requirements in the gas and electricity sector which are its core sectors of production. Russia is
also famous because it is the 4th largest producer of electricity after China, US and India. Thus, it
carries out imports and exports in electricity (Littlechild, 2021).
France Overview-
France has a highly developed economy which is thus majorly oriented towards the
market. According the figures of 2020, it is 7th largest economy of the world. So its share in the
GDP of the world is around 3.3%. In the European Union, it is the third largest economy making
it a prime location for carrying out trade related activities. It is also very emerging because of the
fact that it in the year 2020 was largest recipient of FDI. Thus, on the global level it is 5th largest
nation in terms of trading.
France is leading country in the world in the terms of nuclear energy. Thus, global energy
companies like EDF, Areva have their base in France. 78% of country's production of electricity
is done from nuclear power. It is also a great centre of natural gas power generation. France is
home to the world's largest electricity provider which is EDF due to its large utility base(Index of
Economic Freedom, 2022).

With respect to Avro Energy Ltd. It can expand its gas and electricity supply business in
France because of it being an emerging economy at global level. Carrying out trade will also be
easier due to their ease in imports and exports. But it is essential that the company must cater to
the needs of the consumers there so that they can capture the domestic market and increase their
volume of sales.
External environment PESTLE:
PESTLE helps in identifying the external factors which impact an organisation's decision
making. It helps a company understand the right direction where it should work and the growth
targets it must set to be successful. It helps in identifying risks to the company business and
addressing them in a proper manner (Marinakis and et. al., 2020). PESTLE analysis can help
Avro energy Ltd. To identify its external forces that shape its formation of strategies. As the
company is looking for expansion it is necessary for it to have long term objectives.
PESTLE analysis -
1. POLITICAL- Political factors exert a strong influence on profit generation of Avro.
Political instability can create chaos in the market impacting the organisational
performance of the company. When policies of the government with respect to energy

sector are changed, it harms the working of the company. High taxation by the
government also effects the profit making of Avro in the international trade.
Russia has created policies to address the demand of energy sector. It creates energy strategy
documents so that gas and electricity supply can grow for the consumers on a low price. Whereas
France has nationalised the producers and distributors of electricity to provide ease for the
energy sector. Thus, expansion in Russia can be of benefit for Avro Energy looking at their
economy.
2. ECONOMIC- Economic factors like foreign exchange rate, the conditions of labour
market, inflation rates, etc. these all determine the economic development of a company.
Growing economies offer opportunities for Avro Energy but it can be challenging to
enter the already established markets. High GDP points at the high consumer spending as
well and high unemployment signals the availability of surplus labour. Thus, operating in
such markets can be of great advantage for Avro company.
Even though the inflation rate of Russia is more than France but in Budget surplus it achieves
more than France making it a more reliable economy for a company to expand and carry out
international trade operations. Economic reforms have also highlighted the energy sector in
Russia.
Economic Freedom of Russia

3. SOCIAL- Studying the demographic patterns can help Avro to choose the right market
segment where it can have high chances of growth. Consumers preferences in energy
sector specially with respect to gas and electricity supply are based on a trustworthy
company. So it is essential for Avro Energy Ltd. to address those consumers who are
looking towards changing their company which supplies them gas and electricity.
Both Russia and France have different consumer segments whose preferences are also different
in the energy industry (Achinas and et. al., 2019) .
4. TECHNOLOGICAL- Knowing the technological advancements and trends to boost
innovation and efficiency in operations for the energy sector companies can be of
advantage. Both Russia and France consumers are active on the social media and thus
they can be reached by Avro through digital marketing techniques. So that gas and
electricity services can be provided to them on low costs.
5. ENVIRONMENTAL- It is necessary to look at the environmental impacts of the energy
sectors so that the environment laws are not broken by the company due to their energy
production method which will create a bad image for them in the market. While
producing energy Avro must not become a part of CO2 emitter as it will put the company
under government regulations.
Russia has a vast geographical area where there is less risk with respect to environment pollution
due to the energy sector. France also makes sure that the green house emissions are less when
large energy producing companies are operating and supplying gas and electricity.
6. LEGAL- carrying out proper analysis of the laws and legislations of a country is
necessary before entering in their market. It can help a company stay out of serious legal
trouble. Avro needs to look after the legislations of both Russia and France and decide on
its expansion accordingly.
Entry into Russian Market:
So with respect to the PESTLE analysis Russia seems to be a more better market for the
expansion of Avro Energy Ltd. It is a fast growing economy and majorly works in the energy
sector that makes it a proper location for the expansion(Bruijl, 2018).

Financial Freedom of Russia
It can be seen from the graph that Russia offers great amount of financial freedom which
can be very beneficial for Avro company to enter into this market.
PORTER'S Five forces Model:
It helps in carrying out the assessment and evaluation of the competitive forces which
helps in determining the strengths of a company in the market. It is a strategic tool that can help
deal with market competitions. Avro Energy Ltd can increase its profits and sales by identifying
these forces:

 Threat of New Entrants: Due to the emergence of new companies in the energy sector as
it offers more profits, this can be dangerous for Avro company. Price wars may begins
due to the new competitors supplying gas and electricity to the consumers on a fairly low
prices. Threat of New entrants is high as they get high initial capital investments. Avro
can address this threat by developing long term contracts with the consumers so that do
not switch the company easily.
 Threat of Substitutes: This threat increases when switching costs are low and if the
substitute product or service offers good quality than the other company. Avro can cope
with this threat by emphasizing on how its services are better in quality and thus the
consumers can have a better experience with them (Dawes, 2018) .
 Competitive rivalry: Avro faces competitive rivalry from the existing companies who
hold a large share in the market and as they target the same market. But it can mitigate
this risk by focusing on the needs and requirements of the consumers by carrying out
research on them and planning their move accordingly.
 Bargaining power of suppliers: It will be high when the demand for products and services
is high and the suppliers are few in number. So it strengthens the position of suppliers
against Avro company. They become its competition. Avro can tackle this by limiting its
dependency on the suppliers or by having agreements with different suppliers in the
market.
 Bargaining power of Buyers: It increases when there are large no. of suppliers in the
market which supply energy and it is easy for the buyers to switch due to low switching
costs as well. Avro company can address this factor by increasing its customer base or by
adopting successful market strategies.
Porter's generic forces:
 Cost leadership: In this the company tries to become a low cost producer in its industry.
Avro can attract its consumers by supplying its gas and electricity at low cost which can
help them create a base in the market.
 Differentiation: In this the company tries to be unique in the industry by selling products
and services which are desired by the consumers. Avro Energy company can provide
offers on its electricity supply which can help them become a unique company in the
market.