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Strategic Choices

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.



Energy Edge now provides some tailored products that will help you understand how these energy sector challenges will impact your company and take steps to gain competitive advantage:

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