Contact Energy's Business Environment In New Zealand - A Comprehensive Essay.

The Reformed Electricity Industry in New Zealand

Contact energy deals in the leading generators and retailers and providing electricity, natural gas, and LPG to about 562000 customers nationwide. The New Zealand electricity industry has reformed from past 20 years. The first reformation in 1987 when Electricity Corporation of New Zealand (ECNZ) provided the electricity generation, retail, and transmission (Contact, 2017). It was distributed through local electricity supply authorities. The last significant reforms were the separation of lines and energy business of the former business companies and the split of ECNZ into three companies in the state i.e. Meridian Energy Limited, Genesis Power Limited and Mighty River Power Limited. These reforms in the industry indicated that the industry is dynamic and generate competitive environment into the generation, distribution and retailing of electricity and gas industry (Stats, 2017). Moreover, the demand of the power industry in New Zealand is increased at 2% per annum due to strong economic growth and population in the year 1990-2004.Currently, the slowdown in the electricity demand i.e. is 0.5% per annum due to the weak global economy and Christchurch Earthquakes. The global electricity and natural gas demand are weaker due to low oil prices globally. As a result, the New Zealand’s natural gas supply is restricted (Switch Me, 2017).    

The business environment of an organization consists of the internal and external environment. The external environment includes six factors such as political, economical, social, technological, legal, and ethical factors. Changes in the environment puts direct impact on some activities while put indirect impact on some other activities at the same time. For example, change in fiscal and monetary policy directly influences the policies and decisions of the financial department but it also influence marketing and production policies and decision indirectly (Bhasin, 2016). Similarly, change in the economic factors can cause change in the attitudes and purchasing power of the customer that may lead indirect impact on the organizational sales and profitability. This may affect the investment and financial decision of the organization.  The change theory states that organizations has to change its strategies and processes according to change in the business environment (Burke, 2017). The change theory states that if change takes place in the economic factors, the company has to revise its policies regarding investment and financing, budgeting, pricing, marketing and production and others.

The business environment of any organization consists of external environment and internal environment. Therefore, the business environment framework of Contact Energy is defined below:

The Impact of External Environment on Business Activities

There is high political risk in the New Zealand due to political instability. After every three years, new government comes in ruling position and develops new policies that may affect the policies of Contact Energy (MRR, 2014). At the same time, labour force is expensive and lending rate is very high in New Zealand. Apart from this, the legal rules and regulation related to labour, health and security, consumer law, competition may affect the businesses there.

There are different kinds of cultures and religions are accommodated in New Zealand however it is dominated by the Christians. The life standard of people is somewhat high and during Christmas the demands of energy sources are very high. The literary rate is also higher in New Zealand that affects the industry (MRR, 2014).  The employment is increasing over the years that support the growth of the industry. At the same time, New Zealand relies on the trade with its nearest countries. The inflation is lesser in the country and the GDP rate is good. However, the global financial crisis can affect the progress and growth of industry. The corruption level is also very high and invests very less amount in R&D activities that push it depends on the external sources for acquiring new technologies. The change in external demand may cause fluctuation in the economic situation of the New Zealand.

The New Zealand has been ranked as 7^th best country in terms of education in science and technology. Low investment in the R&D causes the dependency of New Zealand on external technologies. This affects the energy industry in New Zealand. Lack of technologies may affect the energy industry in New Zealand. However, the digitalization and use of the technology advanced technology supports the growth of the industry (MRR, 2014).  At the same time, ethical issues such as wastage, pollution, carbon emission, and others must have to control. The electrical vehicles have been used by the organizations in energy industry to control the emission.

Employees are the core assets of any organization. The Contact energy has skilled and unskilled employees to carry out its operation. It employs more than 1000 employees across its units nationwide (CEN, 2014).

The management is an important part of the organization that determines the success. The vertical management is used in the Contact Energy. Contact Energy uses centralized management and controlling system to manage and control over the operation and resources (CEN, 2014). There are three levels in the management of the company include top level, middle level, and lower level. At the top level, board of directors and CEO are included. At the middle level, head of business unit and departmental managers are included.

Contact Energy's Business Environment Framework

The management of the Contact Energy focuses on zero harm at the workplace and ensuring extreme safety and healthy working environment for employees. The well being of customers, employees, suppliers, and other stakeholders are most priority of the management (CEN, 2014).  Apart from this, Contact Energy focuses on the team work culture rather than individual work culture.

Customers are the people purchase products and services of the companies. There are 562000 customer of the Contact Energy throughout the New Zealand. It provides products and services both business customers and personal customers (Contact, 2015). It has the 21% share of the market of ht electricity connections. It uses customer centric approaches. The households, businesses, factories and others are the customers of the Contact Energy.

Competitors are the business and companies providing products and service same as the competing company. Contact Energy had loss of profitability and market share due to intense competition in the market of New Zealand (Weir, 2015).  Wellington Electricity Lines, Transpower, and lines companies are the main competitors of Contact Energy Limited that have led loss to the company.

Due to the high competition in the market, it is identified that the current demand of the suppliers are also high. The demand and consumption of the electricity, energy, and gas are high so that the prices of the suppliers are also very competitive. It is identified that the renowned suppliers in the current New Zealand market i.e. KCE energy, Nova Energy, Power shop and Electric Kiwi in the retail and distribution sector of the country (TrustPower, 2017). The company purchased the electricity, gas, and energy to these leading suppliers at competitive rates according to the demand and consumption of the market. The bargaining power of suppliers is high due to huge demand and competition in the market. Moreover, they also provide the innovative services in the field of electricity and gas industry. Due to the high bargaining power of the suppliers the company can reduce its margin to purchase the energy at high prices to satisfy the demands of the market (NZ Herald, 2017). It affects the profitability of the company in the particular period of time.    

The labors are very expensive in the New Zealand but they are very productive and skilled that can improve the effectiveness of the Contact Energy. As per the current analysis of the unemployment rate i.e. 5.3% is fell down in 2015.In most of the states the employment rate like Canterbury, 3.9%, Southland, and Taranaki are 4.1% and the employment rose by 13% it means that an increase of 31000 people in the market. Moreover, as per the Labor statistics report of New Zealand, it is identified that the employment growth will grow at an average of 2.1% a year (MBIE, 2017). The strongest growth is forecasted by the government of New Zealand in the areas of Power and Energy sector, construction and hospitality industries. As per the overall analysis of this information, it is identified that the demand of the labor market is good and the Contact Energy needs to pay the good compensation and benefits to attract the skilled labor in the company.               

Customer and Competitor Analysis

The external micro and macro environment can put the influence on the internal environment of the Contact Energy. The political instability can affect the strategies and polices of the Contact Energy regarding pricing, advertising, and others. Apart from this, the legal environment of the New Zealand is also very restrictive that can affect the operation of the Contact Energy. At the same time, the labor in New Zealand is very expensive that in turn increases the cost of the company. But the labor is qualitative and productive that at the same time can improve the performance and productivity of the organization (iEdunote, 2017). The economic instability is also the critical problem for the Contact Energy.  The economy of the New Zealand totally depends on the trade with other countries that may put impact on the performance of the Contact Energy if the economic growth goes down.  The economic factors have great impact on the performance of the organization. If the demand in foreign market decreases, the economic condition of the country goes down. This can in turn cause unfavorable situation to the Contact Energy.  The change in the economic factors may influence the

Along with this, Contact Energy serves both business and households that provides its large market share and increased profitability. There are various competitors available in the market providing services at discount (Bhasin, 2016). The stuff competition can decrease the profitability and market share of the Contact Energy. Therefore, Contact Energy should focus on reduction of the cost so that it can provide services at lower price to improve its profitability and attract large number of customers. At the same time, people from the different cultural background lives in the New Zealand that can cause the challenges in determining the policies and strategies for market mix (iEdunote, 2017). Apart from this, the lesser investment in the research and development activities causes the dependency of country on other countries for importing the technologies. This affects the competitiveness of the economy that in turn affects the growth of the organizations. Along with this, the Contact Energy has to focus on reduction of the emission and wastage of the resources to ensure its ethical compliance. Along with this, the changing demand and preference of the customer, lifestyle of the consumers, and other factors can affect the policies and strategies of the Contact Energy. 

References:

CEN, (2014). Contact Energy. Retrieved from https://mail.google.com/mail/u/0/#inbox/15ca624c5bfab2f9

MRR (2014).  PEST analysis of New Zealand. Retrieved from https://www.marketresearchreports.com/countries/new-zealand 

Contact (2015). Contact’s retail business. Retrieved from file:///C:/Users/sd/Downloads/cen-investor-presentation-november-2015%20pdf.pdf

Weir, J. (2015). Competition hits Contact Energy profit. Retrieved from https://www.stuff.co.nz/business/industries/66229699/competition-hits-contact-energy-profit

Bhasin, H. (2016). Impact of environment on the organization. Retrieved from https://www.marketing91.com/impact-of-environment/

iEdunote (2017) Internal and External Environment Factors that Influences Organizational Decision Making. Retrieved from https://iedunote.com/organizational-environment-elements

CEN, (2014). Contact Energy. Retrieved from https://mail.google.com/mail/u/0/#inbox/15ca624c5bfab2f9

CEN, (2014). About us. Retrieved from https://contact.co.nz/corporate/about/our-company/health-safety-and-environment

Burke, W. W. (2017). Organization change: Theory and practice. USA: Sage publications.

Switch Me (2017). Looking for the best power company for your home?.Retrieved From: https://www.switchme.co.nz/

 Stats (2017). Energy. Retrieved From: https://www.stats.govt.nz/browse_for_stats/industry_sectors/Energy.aspx    

MBIE (2017). New Zealand’s Energy Outlook Electricity Outlook.Retrieved from: https://www.mbie.govt.nz/info-services/sectors-industries/energy/energy-data-modelling/modelling/new-zealands-energy-outlook/electricity-insight/electricity-insight.pdf

TrustPower (2017). Unlimited data broadband. Retrieved from: https://www.trustpower.co.nz/  

NZ Herald (2017). Power companies: Which is the best? Retrieved from: https://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&objectid=11477170

Contact (2017). New Zealand electricity industry. Retrieved From: https://contact.co.nz/corporate/about/about-electricity/nz-electricity-industry