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As
in any business field, building successful strategy in the energy
sector might be likened to playing a game of chess, where your side's
strengths and weaknesses, as well as the opportunities and dangers
inherent in each move, must be evaluated beforehand, carefully and with
a clear eye.
Which Markets to Focus On
Many producers of fuels start out marketing locally or nationally and,
as they reach a certain level of growth, attempt to expand into export
markets or to diversify into other products. This can be a
challenging transition, as witnessed by the retreat of the oil majors
from coal and, complementarily, the lack of mining major investment in
power production.
Expansion and diversification present many risks along with the
possible rewards. However, the player seeking to lock
in market volume can be helped immensely by clear self analysis. By
examining the assets that will help and the liabilities that will
hinder them in building their margin, for instance, by marketing coal
with specific qualities, and by locking in that margin through careful
contract structuring, the business can avoid becoming just another
swing or spot supplier.
Balancing Cooperation and Competition
Energy companies seeking to expand through merger or acquisition should
ask themselves various questions about the companies with whom they
seek to develop non-competitive relationships. Both the essential
health and the relation of the other company to the core business field
in which you will be operating should be examined.
Additionally, there are issues of compatibility which should be addressed:
- Objectives: Do the goals of the companies align?
- Culture: Do they share the same business "logic"?
- Resources: Can they bring the necessary resources and competencies to the table?
- Organizational: Can the companies merge their decision-making and control mechanisms?
Energy Edge Chairman Peter
Williamson is a renowned academic and business strategist and is
Professor of International Management at Cambridge, UK. He is the
author of several well-known books and numerous articles on
international strategy.
If you have questions concerning strategy decisions in the energy sector, please feel free to contact him today.
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