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    National Grid

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    Pranav Bahl
    National Grid plans to use proceeds from selling part of its UK gas distribution business to expand in countries like the US with better growth prospects. It faces moderate competitive rivalry and threat of substitution in the US market as renewable energy grows. However, buyer power is low due to the necessity of electricity and gas, and threat of new entry is low given high capital requirements in the industry. National Grid is investing in renewable technology and startup companies to adapt to changes in the energy industry and become less risk-averse.

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    National Grid

    Uploaded by

    Pranav Bahl
    23 views2 pages
    National Grid plans to use proceeds from selling part of its UK gas distribution business to expand in countries like the US with better growth prospects. It faces moderate competitive rivalry and threat of substitution in the US market as renewable energy grows. However, buyer power is low due to the necessity of electricity and gas, and threat of new entry is low given high capital requirements in the industry. National Grid is investing in renewable technology and startup companies to adapt to changes in the energy industry and become less risk-averse.

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    National Grid plans to use proceeds from selling part of its UK gas distribution business to expand in countries like the US with better growth prospects. It faces moderate competitive rivalry and threat of substitution in the US market as renewable energy grows. However, buyer power is low due to the necessity of electricity and gas, and threat of new entry is low given high capital requirements in the industry. National Grid is investing in renewable technology and startup companies to adapt to changes in the energy industry and become less risk-averse.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    23 views2 pages

    National Grid

    Uploaded by

    Pranav Bahl
    National Grid plans to use proceeds from selling part of its UK gas distribution business to expand in countries like the US with better growth prospects. It faces moderate competitive rivalry and threat of substitution in the US market as renewable energy grows. However, buyer power is low due to the necessity of electricity and gas, and threat of new entry is low given high capital requirements in the industry. National Grid is investing in renewable technology and startup companies to adapt to changes in the energy industry and become less risk-averse.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 2

    Pranav Bahl Fy.

    A Roll 24
    Sales Maximisation
    Having sold part of its UK gas distribution
    Oligopolistic National business in 2017 concerned with slowing
    Market growth it now plans to use the proceeds in
    Grid countries like the USA for better growth
    prospects.

    CHANGING SITUATION: RENEWABLE ENERGY UNDER FOCUS

    #1 Competitive Rivalry(Moderate): National grid has substantial competition in the


    US where it aims to expand, with the likes of Exelon corporation, Unitil corporation
    and Dominion energy all vying for market share. Here, however only Dominion
    Energy is bigger than Nation Grid in terms of valuation. Nation Grid is also
    investing huge amounts in renewable sources of energy, thus competition that it
    faces is not very fierce.

    #2 Buyer Power (LOW): The products being produced, namely electricity and gas,
    are undifferentiated since there is no “quality” difference for the buyer in obtaining
    them from one place or the other. This increases buyer power. However,
    dispensability of the product is low (you cannot do without both). Switching costs
    between different companies is also high in the US. These decrease the buyer’s
    power.

    #3 Threat of Substitution(Moderate): Substitutes like Solar Power, Wind Energy


    and Nuclear Power are going to give stiff competition to traditional power sector
    companies in the near future. The reason I will rate this as just a moderate threat is
    because National grid seems to be investing heavily in renewable sources of energy.
    For instance, they have allocated $250 Million to invest in growth stage tech start-
    ups to boost their innovation and growth pace.

    #4 Threat of New Entry(LOW): Entry into this industry requires huge capital
    investments and specialized technology. Also the existing firms enjoy the first mover
    (ok early mover) advantage and enjoy economies of scale as they become bigger. For
    example, the average cost of fuel (both electricity and gas) network transmission is 35
    Pound per household in the UK for National Grid, a figure that is achieved due to
    extensive mapping of pipes and a scaled production process something a smaller
    firm cannot achieve.

    Conclusion: A revolution is taking place in the energy industry. Change is


    happening at an unprecedented rate, creating opportunities for the industry and
    challenges too, which will affect how National Grid works.
    National grid looks to expand and enter newer segments of the power industry. It
    plans to spent $250 million on start-ups bringing innovation to the energy industry.
    Over the years it has built up a reputation of being slow in growth and risk-averse
    but the company is changing that as we can see through it’s sale of the gas

    1
    distribution system and investments in renewable sources of energy. I believe it
    should continue down this road of expanding the usage of sustainable energy as
    environmental laws become more stringent with time and extracting fuels, like
    natural gas, becomes a highly regulated activity.

    This graph shows the number of employees of national grid


    and its competitors thus giving us an idea of the size of the companies.
    Note that National grid is the only company here which has experienced a
    reduction in the number of employees around the 2017 mark. This is most
    likely due to it selling off 25% stake of the gas transmission division in UK
    in that year.

    Graph Link: https://craft.co/national-grid/competitors

    References (Information and Data):

    https://www.ukessays.com/essays/economics/power-sector-using-porters-five-forces-
    model-economics-essay.php

    https://www.nationalgrid.com/group/about-us/what-we-do/national-grid-
    ventures/accelerating-clean-energy-future

    https://www.nationalgrid.com/sites/default/files/documents/NGAR18_1_Full-
    Report_Web.pdf

    *****
    2

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