Expansion Strategy for an Energy Company
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Presented at Microsoft's Innovation Center in Cambridge, MA, this was part of an MBA course where our team was required to identify an Energy Company's potential international expansion.
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Expansion Strategy for an Energy Company
- 1. Intelligent Energy Solutions Presented By: David Kolapudi Praveen Baghel Pranav Patil Diego Montano Mengqi Sun Shuping Lian Bingzi Deng
- 2. Agenda ❖ Company Introduction & Business Model ❖ Country Analysis (United Kingdom vs. India vs. France) ➢ Infrastructure ➢ Natural resources ➢ Economic situation ➢ Ease of Doing Business ❖ Key Market Drivers ❖ Expansion Analysis ❖ Recommendation ➢ Government situation ➢ Trade/ Investment ➢ Attracting FDI ➢ Property rights
- 3. IES Introduction Highly competitive, innovative and demanding energy industry Key Consulting Services Intelligent Energy Monitoring Energy Management and Conservation Efficiency Management Currently operating in the United States, IES has realized the need to expand abroad and has identified three opportunities: United Kingdom France India
- 4. Notification Received Main Power Grid IES Customer 1 Customer 2 Customer 3 Notification Sent Acknowledgement Signal Initiates Load Reduction Protocol
- 5. United Kingdom France India Population 64 million 66 million 1,252 million Area Size (sqkm) Land: 241,590 Water: 3,230 Total: 244,820 Land: 545,630 Water: 1,400 Total: 547,030 Land: 2,973,190 Water: 314,400 Total: 3,287,590 Bordering Countries Inclusive Countries: England Scotland Wales Northern Ireland Andorra Belgium Germany Italy Luxembourg Monaco Spain Switzerland Bangladesh Bhutan China Myanmar Nepal Pakistan Climate Temperate; moderated by prevailing southwest winds over the North Atlantic Current; more than one-half of the days are overcast Generally cool winters and mild summers, but mild winters and hot summers along the Mediterranean; occasional strong, cold, dry, N-to-NW wind known as mistral Varies from tropical monsoon in south to temperate in north Country Overview
- 7. Transportation Communication Utility UK Total Capex: £184,998.39MM 180 Transportation Project Total Capex: £22,048.00MM 7 Communication Projects Total Capex: £263,726.50MM 139 Energy Projects; 32 Water Projects; 26 Waste Projects France Ranked second in Europe for high-speed rail lines. Best road network in Europe The broadband rate--35.5% in June 2012 23.1 million subscribers in June 2012. Ranked as the second largest in Europe. The number of wind turbines in France is expanding fast. France aims to supply 23% of the total energy consumed domestically from renewable sources by 2020. India Indian government has allocated $1 trillion in infrastructure spending in the five years through 2017. Transport outlined plans for $120 billion worth of road-widening projects India is the world's second-largest telecommunications market. 933 million subscribers by the end of FY14. India is the fourth-largest energy consumer (2013) in the world. Oil and gas account for 37 per cent of total energy consumption. Infrastructure Comparison
- 8. Infrastructure Comparison United Kingdom France India United States Population 64 million 66 million 1,252 million 316 million GDP (USD per capita) 39,336.91 41,420.76 1,498.87 53,142.89 Electric Power Consumption (EPC) (kWh per capita) 5,472 7,292 684 13,246 Percentage of EPC comparison to the US 40% 55% 5%
- 9. Natural Resources United Kingdom France India Import 1. Oil and Mineral Fuels 2. Other Items 3. Industrial Machinery 4. Motor Vehicles & Parts 5. Electrical Machinery 1. Industrial Machinery 2. Aircraft 3. Motor Vehicles & Parts 4. Electrical Machinery 5. Pharmaceutical 1. Oil and Mineral Fuels 2. Precious Stones & Metals 3. Industrial Machinery 4. Electrical Machinery 5. Organic Chemicals Export 1. Industrial Machinery 2. Oil and Mineral Fuels 3. Motor Vehicles & Parts 4. Other Items 5. Pharmaceutical 1. Oil and Mineral Fuels 2. Industrial Machinery 3. Motor Vehicles & Parts 4. Electrical Machinery 5. Aircraft 1. Oil and Mineral Fuels 2. Precious Stones & Metals 3. Organic Chemicals 4. Motor Vehicle & Parts 5. Industrial Machinery
- 10. Economic Comparison United Kingdom France India United States GDP Country Rank (Out of 192, 2013) 10 8 3 1 Total GDP (USD, 2013) 2,321 billion 2,437 billion 6,774 billion 16,800 billion GDP Growth Rate (USD, 2013) 1.662% 0.214% 5.017% 1.876% GDP per capita (USD, 2013) 39,336.91 41,420.76 1,498.87 53,142.89 Inflation (2013) 2.555% 0.864% 10.908% 1.465% Real Interest Rates (5-yr Avg, 2013) -1.311% 4.845% 3.158% 1.71% Total Tax Rate (As a % of Commercial Profits, 2013) 34% 64.7% 62.8% 46.3% Currency Value (2 Dec, 2014 Rates) 0.63802 British Pound 0.80256 Euro 62.10102 Indian Rupee 1.00 US Dollar Total Labor Force (2012) 32,617,520 30,117,166 484,343,281 158,666,072 Unemployment Rate (2012) 7.9% 9.9% 3.4% 8.1%
- 11. Ease of Doing Business United Kingdom France India United States Ease of Doing Business Ranking (2014) 9 33 140 7 Starting a Business 50 25 156 41 Getting Credit 14 67 30 1 Paying Taxes 15 93 154 44 Enforcing Contracts 37 10 186 41 Trading across borders 17 11 122 15 Dealing with Construction Permits 16 89 183 433
- 12. Government Situation United Kingdom Constitutional Monarchy Parliamentary Government led by the Prime Minister. India A federal state with a parliamentary form of Government. Pro-Business Prime Minister Narendra Modi. High economic growth emphasized by business-friendly regulations and large infrastructure investment. France A semi-presidential Government divided into an executive, a parliament and a judicial branch. High earning companies subjected to higher tax collection. French companies are investing more in foreign markets than in France.
- 13. Trade/ Investment Tariffs and Taxes Ownership Restrictions ● None of the countries have restrictions in ownership for FDI in the private sector although in the UK foreign controlled companies are considered UK owned.
- 14. Attracting FDI United Kingdom Over the last five years, the UK has experienced a negative cycle. The main issues are concentrated around credit availability through the recent recessions but the government has shown a positive attitude towards business and attracting investment. France Foreign companies from 132 countries have established themselves in France throughout the sectors. The top two source countries creating jobs in France are the United States and Germany. India FDI inflows to India increased 17 per cent in 2013 reaching US$ 28 billion.The Indian government’s policy and a robust business environment have ensured that foreign capital keep flowing into the country.
- 15. Intellectual Property TYPES & DEFINITIONS OF Intellectual Property: Copyrights Authorship: literature, music, artistic works, and computer software Trademarks Distinguishable: word, phrase, symbol, design Patents Utility, Design, Plant Trade Secrets Formula, process, device, or business information → NDIs Industrial Designs An industrial design constitutes the ornamental or aesthetic aspect of an article. Global Percentile for IP Rights
- 16. Intellectual Property United .K ingdom France India Legislation: Patents Act 1977; Registered Designs Act 1949; Copyright, Designs and Patents Act 1988; Authoritative Body/ies: Enforcement & Registration: Intellectual Property Office, 2007 (former: The Patent Office, 1852) Duration: Patent (5 years, and then renewal required every year up to 20 years) Industrial Designs (exclusive right up to 25 years) Copyright (70 years after the death of the author) Trademark (renewal required every 10 years) Legislation: French Intellectual Property Code (1992) Authoritative Body/ies: Enforcement: INPI → Institut National de la Propriété Industrielle Registration: European Patent Office Protection: ● Recognition of intellectual property rights outside of France ● Recognition within the European Union by European Patents ● Recognition and protection under French Law. Duration: Rights are protected according to the date of registration. Legislation: The Patent Act 1970; Designs Act 2000; The Copyright Act 1957; Copyright Rules 1958 Authoritative Body/ies: Registration: Intellectual Property India (Controller General of Patents, Designs and Trademarks, Indian Gov); Indian Copyright Office Protection & Duration: Trademark (10 year periods) Patent (20 years, then public domain) Copyright (author’s life plus 60 years; protects expression of the idea, not the idea itself) Industrial Designs (10 years, renewable for a further 5 years)
- 17. India Fourth-largest energy consumer (2013) in the world Oil and gas account for 37 per cent of total energy consumption. India is the world's second-largest telecommunications market. Indian government has allocated $1 trillion in infrastructure spending in the five years through 2017 Government situation : High economic growth emphasized by business-friendly regulations and large infrastructure investment. Government’s Initiatives: opening to foreign investment by relaxing norms and regulations. FDI inflows to India increased 17 per cent in 2013 reaching US$ 28 billion. Investor friendly platform - Increased transparency in policies and procedures. Competitive advantage of low wage high skilled labor workforce.
- 18. India: Key Market Drivers Energy security and water scarcity are national priorities Water and waste management challenges due to rapid industrial growth and urbanization Escalating costs of conventional energy sources with depleting fossil fuel reserves Supportive government policies (subsidies) Increased investments by global corporations to reduce climate change risks and pursue new products/service opportunities A$1 trillion investment in infrastructure - 2012 to 2017
- 19. Expansion Analysis Differences in corporate culture between two organizations. Differences in Technology used between two organizations. Technical and Interpersonal skills. Primary Demand Drivers: Income of consumers Increasing customer sophistication Profitability of business customers Profitability Drivers: Gaining expertise in a particular field of knowledge Developing and marketing new products Achieving access to capital Creating a faster time-to-market process
- 20. Opportunities in India The policy environment of the country is aligning itself towards a host of Energy Efficiency Initiatives Competition remains low because of the high growth trajectory coupled with the small number of firms Knowledge and experience in efficiency technologies and their implementation pose the biggest barriers because of the technical risks
- 21. Recommendation Why EnTech? India Based Access to an established market Close to 300 skilled workers Instantly acquire the EnTech’s technology, clients and vendors. Instant branding Increase in knowledge base One less competitor to deal with! How? Aquire 51% stake in Entech company
- 22. Questions?
Editor's Notes
- United Kingdom Recent data from the National Infrastructure Pipeline 2014, a Summer 2014 updated report that details the current infrastructure projects as compiled by the government. It shows the strategic overview the UK and includes both private and public planned investment for the rest of this decade. The range of capital expenditure amounts fall between £5.56MM & £45,959MM for the 429 Pipeline Projects. The following extracted list from the report shows the breakdown of the Transportation, Communication, and Utility Infrastructure Advancements the UK has planned to pursue by 2019 including the total Capex allocated to each group. France The quality, availability and accessibility of electricity supply in France can be attributed to the expansive infrastructure network that has been built over several centuries. In the present, electricity costs are relatively low in France and is a very precious asset [ref]. *The regions of France are attractive to foreign and domestic investment due to high-performance infrastructure networks. Every region in mainland France has received new foreign investment in the last three years. See Appendix _ for the 22 Regions of France. India Given the scale of the infrastructure gap between India and more advanced nations, India is still one of the world’s most attractive markets for companies in the infrastructure business. A recent report by Business Monitor International predicted that India’s infrastructure sector will grow by 7.9% in the 2013 fiscal year. The opportunities are so extensive that money has poured in from overseas, including investments in 2011 from leading private equity firms. The following chart published by PriceWaterhouseCoopers shows a steady increase in private equity investment into infrastructure development. Evidence of this is seen through the privatization of major industries and infrastructure projects, one of which was the construction of a new International Airport in Hyderabad, South India by conglomerate GMR Group, spanning 3 years (2005 to 2008). The Indian government has allocated US$1 trillion in infrastructure spending in the five years through to 2017, with plans to build 3 airports, 2 ports, elevated rail-corridor in Mumbai, and 6,000 miles of new roads, [ref].
- This table below shows the proportionate level of energy consumption per capita in each of the three opportune countries in comparison to the United States in percentage. The data in the table should be read as: “The per capita Electric Power Consumption in the United Kingdom is 40% of the per capita consumption in the United States.” Included also is the population in each country as a relative level of comparison.
- UK Hierarchy & Decision Making Question: In the workplace, how are decisions taken and by whom? Is it acceptable to go to my immediate supervisor for answers or feedback? Decisions are made at all levels. The important thing here is to know where your decision- making boundaries are. If you are not sure then it is best to ask. Ideas on the other hand can be generated at any level at any time, though it will be down to the working relationship that you have with your supervisor to determine how far and in whose name these ideas appear. It is acceptable, and advisable to approach your line manager for answers and feedback. Again, the advice here is that if you are unsure, then ask. France Hierarchy & Decision Making Question: In the workplace, how are decisions taken and by whom? Is it acceptable to go to my immediate supervisor for answers or feedback? Strategic decision-making is done by the management committee (comprised of company departmental representatives). Managers will appreciate personal initiative in day-to-day operations; however, it is important to receive their approval. They also believe that you can bring methods of improvement to the table, as you are the person who is in the best position to understand the intricacies of your work. India Hierarchy & Decision Making Question: In the workplace, how are decisions taken and by whom? Is it acceptable to go to my immediate supervisor for answers or feedback? Power and decision-making in the work place tend to be based on rigid, hierarchical communication patterns and lines of authority, both in the private and public sectors. Face-to-face communication is preferred in India. Verbal communications in general tend to be informal and casual conversation typically precedes discussion of matters of concern.
- Patents (3 types: utility [process, machines, manufacture, matter], design [design article for manufacture], plant [new variety of asexually-produced plant]) A design may consist of three-dimensional features, such as the shape or surface of an article, or of two-dimensional features, such as patterns, lines or color.) Breeders’ Rights (Plant) Geographical Indications
- UK Legislation: Patent: Patents Act 1977 Industrial Designs: Registered Designs Act 1949; Copyright, Designs and Patents Act 1988 Copyright: Copyright, Designs and Patents Act 1988 Trademarks: Trade Marks Act 1994 Plant Varieties: Plant Varieties Act 1964; Plant Varieties Act 1997 Authoritative Body/ies: Enforcement & Registration: Intellectual Property Office, 2007 (former: The Patent Office, 1852) Duration: Patent (5 years, and then renewal required every year up to 20 years) Industrial Designs (exclusive right up to 25 years) Copyright (70 years after the death of the author) Trademark (renewal required every 10 years) France Legislation: French Intellectual Property Code (1992) (French: Code de la propriété intellectuelle) Authoritative Body/ies: Enforcement: INPI → Institut National de la Propriété Industrielle Registration: European Patent Office Protection: The protection afforded to intellectual property rights is generally presented in the following three categories: recognition of intellectual property rights outside of France recognition within the European Union by European Patents recognition and protection under French Law. Duration: Rights are protected according to the date of registration. India Legislation: Patent: The Patent Act 1970; The Patent Rules 2003 Industrial Designs: Designs Act 2000; Design Rules 2001 Copyright: The Copyright Act 1957; Copyright Rules 1958 Trademarks: The Trademark Act 1999; The Trademark Rules 2002 Authoritative Body/ies: Enforcement: <> Registration: Intellectual Property India (Controller General of Patents, Designs and Trademarks, Indian Gov); Indian Copyright Office Protection & Duration: Trademark (10 year periods) Patent (20 years, then public domain) Copyright (author’s life plus 60 years; protects expression of the idea, not the idea itself) Industrial Designs (10 years, renewable for a further 5 years)