The Economic Impart on Octopus Energy: A PESTLE and SWOT Analysis

It has been globally recognised, that Economic is the pivot human lives rotates on, depends on it,  survived on it and it is part of it. Economic is a social science focused on satisfying human wants and needs,  dealing with scarcity and choice or alternative uses. This business report will address economic impart on private energy company before and during pandemic. Impart of environment factors in Octopus energy company internally and externally, micro and macro economics, how it impart businesses in energy sectors. This business report will also address important of economic and financial management in Octopus energy. PESTLE and SWOT Analysis will be used to evaluate economic impact on the private energy company.

Background

The UK energy industry is dominated by a handful of selfish dinosaurs stroking fossil fuels, price fraud and poor customer service. In 2016, Octopus entered the market and broke the status quo with good energy for the planet, for the purse and, frankly, for the soul. Since then, we have served an average of 50,000 customers a month and are now energizing (and counting) more than two million homes in the UK. To date, 92% of clients rate TrustPilot as five star superior. Which is the only supplier recommended by the consumer champion, four years in a row. Currently Today, we are responsible for your energy supply and are building the technologies that will determine the future of the industry, from big ideas to small ideas. (Octopus Energy, 2021)

Business Environment

Business environment is the environment a business operate and  business entity can not operate in isolation, rather there are many factors far and near affecting the business directly or indirectly. The relevant factors affecting the environment of a business includes customers, competitors, suppliers, government as well as cultural, social , technological, political as well as legal conditions that greatly influences the functioning of a business. In consideration of the UK energy industry, the energy market is regulated by the Gas and Electricity Markets Authority while it operates through the Office of Gas and Electricity Markets, also known as OFGEM. While holding a market share of around twenty seven percent in the year of 2020, the advent of lockdown due to COVID-19 led towards reduction in for electricity as well as commercial gas that eventually affected the overall economy of the sector (Setchell 2018). Likewise, Octopus energy has endured its share of financial hardship. In determination of the factors affecting the environment of a business relevant to that of Octopus, the following sections conducted a macro and a micro environment evaluation for the purpose of analyzing the impact of economy on the organization.

Business Environment

 Fg.1 Business Environment, Micro Environment and Macro Environment

Micro Environment

Micro environmental factors are relevant to a particular company or business and affect their capabilities, ability to achieve that goal. These factors include everything related to providing customer value. companies, suppliers (from energy sources to various support services), companies, competitors, consumers and society in the supply and distribution chain of the company itself.

In order to analyze how the micro environment factors affected the economy of Octopus Energy, the section sought to formulate a SWOT (Strengths, Weakness, Oppurtunities and Threats) analysis wherein it illustrates the internal factors influencing the financial rundown of the organization.

Strengths

As being one of the leading companies in the energy industry, Octopus Energy has considerable number of strengths with the foremost being Automation of activities that has enabled the organization to scale up and down on the basis of demand conditions of the market (Farinloye and Mogaji 2019). Furthermore, the organization has a built in expertise when it comes to entering into new markets while facilitating expansion for the organization to be able to build new stream of revenue and thereupon diversify its cycle of economic risks in the market it seems to operate. Furthermore, Octopus has been relatively successful in execution of new projects as it led towards generating new capital.

Weakness

The considerate vulnerabilities of the organization exists in its ratio of profitability which low in comparison to the average of the industry (Bobbio et al. 2021). Besides, a certain amount of deficiency exists in its investment on new technologies which is impacting its competitive growth in the relevant economy.

Opportunities

The opportunities tend to be present in the increase of customer spending for Octopus to engulf new customers and increase market share following years of pandemic (Robinson 2021). Furthermore, the new trends in customer behavior does provide scope for building new revenue streams and diversify into new product categories

Threats

Development of new technologies by competitors poses a serious threat to Octopus in the competitive energy industry that can lead towards market disruption (Keay and Robinson 2020). In addition, the changing customer behavior to online channel is also a concern to Octopus’ supply chain framework driven by its physical infrastructure.

Macro Environment

Macro factors define the level of efficiency of a country or industry. In addition, macro-level factors influence the level of development of individual industrial sectors. The efficiency of energy companies depends heavily on the integration of variable macro-level factors such as procured resources. The efficiency level of the industry depends on the integration effect of macro-level factors (energy resource demand). Decrease or increase. PEST analysis (political legal affairs, economy, social culture, technological capabilities).

Micro Environment

Political

The factor play a significant role in determining the attributes that can impact the long term profitability of the relevant energy industry. As for the UK energy industry, factors like political stability, UK pricing regulations, trade regulations as well as tariffs related to finance and taxation affects the economy of the industry (Angel 2021). From a political perspective that is seeing to uphold less carbon emissions and increase in renewable energy consumption, the energy industry is secure although there is risk associated with competing interests of the governmental parties.     

Economic

Intervention of the government in free markets as well as quality of infrastructure and economic growth rate has a considerate influence while requiring considerable investment to be made in its spectrum (Littlechild 2021). With government pitching in Renewable obligations for facilitating considerate investment generates more opportunity in terms of economic growth.

Social

While society’s culture and way of doing things influences the culture of an organization, attitudes and shared beliefs play a considerate role in how marketers of the relevant industry can understand its customers (Le Quéré et al. 2020). In that aspect, social acceptance of clean energy seems as the considerate theme with people seeking to renewables as a societal trend thus supporting the progress of the industry.

Technological

The ability to harness energy presents the UK industry with a piece of technology that can have a significant impact on the country’s overall generation. It requires ground breaking technology to distinguish as well as develop the required expertise with considerable investment to sustain in the competitive energy industry.

Legal

Present legalizations and regulations have a considerate impact on the economy of the industry while maintaining obligations being stated under the UK Department of Environment as well as the Environment Investigation Agency or EIA.   

Environment  

With the UK government seeking to uphold use of renewable while reducing carbon emissions, the concern for environment does offer scope for the energy industry if it does see to utilize renewable energy.

Environmental Analysis 

It is not only did COVID19 affect countless lives, but it also had a devastating impact on the global economy, curbing demand and disrupting supply chains. Electricity and gas demand has declined significantly in many regions, and the transportation fuel market has shrunk dramatically as planes are grounded and movement is restricted. Even with a sharp V-shaped recovery, the pandemic impact on past assumptions and future actions cannot be ignored. A slower U-shaped recovery or a longer L-shaped recession will have even more serious consequences. Whatever the future direction, the world is different and companies need to make new regular plans. (PWC Globe, 2020)

Macro Environment

Globally, Micro environment factors that imparted energy sectors during the pandemic are energy sources to various support services, companies’ competitors, consumers and society in the supply and distribution. There was shortage of manpower as result of lockdown and covid restrictions, while most staff were working from home. The pandemic crisis actually lead to decrease in demand, supply and usage of energy.

Conclusion And Recommendations

In consideration of the evaluated factors affecting the relevant energy industry of UK as well as that of the organization of Octopus energy, the relevant industry does seem to bear opportunities while investing upon technology. As much as competition seems to be intensified due to large number of players seeking to attain desired market share, Octopus requires investing more in technology if it sees to sustain its position in the market and thereupon retain its overall share. Since, the considerate strength of the organization seems to be inclined towards attracting new market for attaining more number of customers, it requires Octopus to expand its horizons and further see to establish its influence in potential markets. Furthermore, the intervention of government plays a huge role in terms of imposition of regulations, taxations as well as upholding social conventions on the basis of which it requires collaborating with government agencies for the organization to be aided in capturing new market share.

In conclusion, the report explores the business environment under which Octopus Energy seems to operate in the sector of UK as well as identified the macro and micro environmental factors that are seeing to affect the industry.  

Reference

Angel, J., 2021. The Flexibility Fix: Low-Carbon Energy Transition in the United Kingdom and the Spatiotemporality of Capital. Annals of the American Association of Geographers, pp.1-17.

Bobbio, E., Brandkamp, S., Chan, S., Cramton, P., Malec, D. and Yu, L., 2021. Price Responsive Demand in Britain's Electricity Market.

Farinloye, T. and Mogaji, E., 2019. A Typology of UK Energy Service Brands based on Size, Licencing and Source of Energy.

Keay, M. and Robinson, D., 2020, July. COVID-19: glimpses of the energy future?. In Forum, COVID19 and the energy transition (No. 123, pp. 29-32).

Le Quéré, C., Jackson, R.B., Jones, M.W., Smith, A.J., Abernethy, S., Andrew, R.M., De-Gol, A.J., Willis, D.R., Shan, Y., Canadell, J.G. and Friedlingstein, P., 2020. Temporary reduction in daily global CO 2 emissions during the COVID-19 forced confinement. Nature Climate Change, 10(7), pp.647-653.

Littlechild, S., 2021. Exploring customer satisfaction in Great Britain's retail energy sector Part I: The comparative use of Trustpilot online reviews in four sectors. Utilities Policy, 73, p.101298.

Octopus Energy 2021 available online: https://octopus.energy/about-us/  (Accessed 24/01/2022) 

PWC Globe, 2020 available online: https://www.pwc.com/gx/en/issues/crisis-solutions/covid-19/energy-utilities-resources-coronavirus.html (Accessed 26/01/2022)

Robinson, D., 2021. Energy communities and flexible demand. In Variable Generation, Flexible Demand (pp. 477-500). Academic Press.

Setchell, M., 2018. The flexible future of green energy. New Scientist, 238(3174), pp.16-17.

Setchell, M., 2018. The flexible future of green energy. New Scientist, 238(3174), pp.16-17.

Surbhi S, 2020