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