Duke Energy is one of an energy sector organization doing business in electric utilities, Gas utilities, etc. It is one of the finest organizations doing business in Electric Utilities. The company operates in different regions of the USA. It was started in 1900 as Catawba Power Company. The company has the capacity of almost 58000 MW approximately serving Southeast and Midwest of the United States. Duke Energy is supplying 7 million customers approximately. Its Headquarter is in Charlotte, North Carolina. Duke Energy service region contains 104,000 Sq. Miles. It produces almost 148 billion MW-hours of electricity. Duke Energy changed the way of doing business, registered in NYSE and owns market capital of almost 88.17 as per the closing of Nov-29-2019. [1]
Bargaining power of Buyer
The company is providing its service for electric utilities almost 7 million customers in a market and 1.5 million customers in the natural gas sector. Duke Energy does not have a large customer base, this factor puts immense pressure on the company for making policies accordingly and long term profitability of the company. A smaller customer base means higher bargaining power. Buyer always demands more value in return so when they have bargaining power, it helps them to seek more discounted rates for product. As there is less switching cost in this market, but not in the case of Duke Energy due to the company’s strategic planning for providing advanced and reliable facilities among other competitors, this factor helps the company to be ranked highest. As it is a one-time purchase for a buyer, so the buyer always needs important information regarding products and services because they have to use it for a long period. Relation among buyers and suppliers is long-term so transparent information is necessary for good business and the company is focused on it from the beginning. Duke Energy is providing clean, reliable and affordable supply in seven different states.
Bargaining Power of Suppliers
The bargaining power of suppliers in the industry relies on the company’s key performance area. If a company occupies each aspect of the value chain from power generation to retaliating it, its dependence on suppliers is high, whereas firms focus on one or two aspects of the value chain is not highly dependent on other firms. The current trend of disintegration is although decreasing suppliers’ bargaining power as new entrants are focused on specific areas and suppliers are increasing in the industry. With the growing number of suppliers, their collective power will decrease in the future.
Threat of Substitute Products
There are some substitutes available in the market. As the ultimate product is the same in this industry. So here substitute can be placed, based on quality of service by the company, supply chain efficiency of a company, price of product by company, by using different materials and methods to lower the cost and company become able to offer lower prices.
Threat of New Entrants
The energy industry requires large initial capital to develop and operate the power generation plants. It is also difficult to construct plants due to lengthy and difficult regulatory procedures. The present monopoly of well-established firms. Acquiring a new transportation grid and operating it requires a large pool of investment that makes it a difficult job for the new entrant to enter into the industry.
Competitive Rivalry within the Industry
The energy industry is well established and it is one of those industries that have high entry barriers. In this industry, competition is very high. It is due to different factors. The first factor is the primary product is the same. The second factor is companies are targeting the same segments of the single market. As product is common, so companies are trying to let down each other by targeting each other’s customers. So in this situation companies try to increase its customer by contracting other’s customer share, for this purpose different campaigns are used to win the war.
To avoid such issues companies do the following operations:
• Try to build sustainable differentiation in the market.
• By increasing its scale so the company can compete better in the market.
Cobranding or collaboration with other companies to maintain current share rather than competing for small share.
Reference
1 Anonymous, 2019, Duke Energy Market Cap 2006-2019 | DUK, [online], Available at: https://www.macrotrends.net/stocks/charts/DUK/duke-energy/market-cap