NextEra Energy is a multinational company. The company is doing its operations in the United States and Canada. It is the largest company of electric utility holding according to capitalization. Headquarter of the company is in Juno Beach, Florida, United States. NextEra Energy conglomerate having multiple businesses but most of them are related to the energy sector. Its subsidiaries include; NextEra Energy Resources, 700 Universe LLC, NextEra Us Gas Assets LLC, Gulf Power Company, NextEra Energy Transmission LLC, FPL FiberNet Holdings LLC, NextEra Energy Capital Holding Inc., USG Properties Haynesville LLC, and Gateway Energy Center LLC. [1]

NextEra is a public listed company, founded in 1925 and registered in New York stock exchange. Its current market share price is US$ 234.39 as per the closing of 06-Dec. [3] James L Robo is the CEO of the company. Total assets of a company are US$ 97.83 billion and the total revenue of the company is US$ 17.20 billion (2017). There are 14000 employees doing work in this company. [2]

Threats of New Entrants

NextEra Energy is one of the holding company which owns different energy companies. The company is a Fortune 200 Energy Company. Out of total revenue in FPL, 66% of share is occupied by NEE, similarly in the energy sector 32% share of total revenue. It means the company has created a lot of barriers for new entrants and competitive advantages against its competition, investor will also invest in such type of company. The starting cost is high. There are existing well-established players in the market. The operating cost is also high. Industry is regulated by the government the most influential barrier among all other barriers. Therefore, threats of new entrant in this industry is very low. [1]

Threats to Substitutes

In the energy industry, different substitutes are offered such as; wind energy, solar energy, Biomass energy, etc. The company that is using traditional old technology can face the threat of substitutes, but when we talk about NEE, it is the largest generator and seller of energy in the United States. The company is using solar energy and some other alternatives to generate energy and the company has a positive word of mouth. As the company is a Fortune 200 Company. Therefore, the company has created barriers and competitive advantages to compete in a market. It shows threats of substitute is low for NEE.

Bargaining Power of Buyers

There are different segments using energy. The two main segments are domestic consumers and commercial industries. Energy is an essential product that is needed by everyone. Buyer, as an individual does not, represents many portions of the sale of the seller. There are a few numbers of sellers in the market. The demand for products never decreased. It keeps on increasing with an increase in industries and innovations. The world is more dependent on it. Switching cost for the small buyer is low but when we talk about commercial buyers they have to go through another procedure of negotiation with the seller for different terms and conditions. So, switching costs for those buyers are high. Therefore, the bargaining power of buyers is low in this industry.

Bargaining Power of Suppliers

When the company uses a single technology for which it has to deal with a single supplier for raw material. It helps the supplier to bargain and sell its material at a high price. NEE is one of the largest holding companies of energy, under which several energy companies are operating. It is necessary to use multiple methods for generating energy because if raw material for generating energy gets expensive company will be able to use substitutes to generate energy. Similarly NEE is using multiple substitutes to generate energy, so if the material becomes expensive company can switch to another substitute. Another point, the company is large in size and it is the largest seller in the United States. It shows that a company can use an integration strategy to integrate various small suppliers or one large supplier to create a monopoly or influence the industry. Therefore all of these facts shows that the bargaining power of supplier is less in this industry.

Competitive Rivalry

This industry is well established and matured. In the case of the United States, some of the companies are dominating the industry due to their size of total revenue and level of productivity. These companies use different strategies to create a competitive edge and to increase the market share. So these large companies acquire the small companies or merger strategy, instead of fighting for small segments they sustain their customers. Therefore, competitive rivalry exists in the market.

References

1 NEE, 2019, Our Company, [online], Available at: https://www.nexteraenergyservices.com/for-home/why-nes/
2 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549, 2017, ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2017, [online], Available at: https://www.sec.gov/Archives/edgar/data/37634/000075330818000013/nee-12312017x10k.htm
3 Yahoo Finance, 2019, NextEra Energy, Inc. (NEE) NYSE – NYSE Delayed Price. Currency in USD, [online], Available at: https://finance.yahoo.com/quote/NEE/