Enel America SA, is an energy company who is affiliated in generating, transmitting, and distributing the electric power in the four major countries of South America, which are; Brazil, Peru, Columbia, and Argentina. It is known to be one of the biggest private companies in the Latin America and add up the aggregate installed capacity of about 11,257 MV, which was supplied to over 24.5 million consumers. The controlling shareholders of the Enel America is an Italian company named Enel S.p.A, which is a global energy Company and known to be a one of the major integrated operators in natural gas and energy sector across the globe (Enelamerica, 2019). It is necessary for the company to analyze and evaluate the industry and competition level there to make sure its strategies are right and helps in decision making. This could be easier for the company with the help of Porter five forces which determines the underlying levers of the profitability in the industry. Enel America can use the Porter five forces model to understand the strategy development process and profitability level to maintain its position in the industry both at domestic and international level. Here is the detailed Porter five force analysis of Enel America.
Bargaining Power of Buyers
Bargaining power of buyers is a weak force in the case of Enel America, because of the low switching cost. There are not many alternatives available for the customers other than Enel America to get the electricity from. The prices are set according to the demand and supply mechanism, which makes sure prices should not be too high to lose customers, or too low to compromise on the profitability of the company. Enel America needs to diversify the risk from electric power to other renewable and non-renewable energies. This will help in increasing the customer base and attract those customers who are using other sources of energies (UK essays, 2018).
Bargaining Power of Suppliers
There are many private and government energy companies in South America who supply electricity to major companies of the continent. Hence, this shows suppliers are limited in this industry, hence the power of bargaining supplier has have more value. However, the switching cost is high for the company because mainly the suppliers are government organizations. It is necessary for the Enel America to maintain good relationship with the supplier in order to maintain the profitability level of the company. The company should diversify the risk so that more suppliers from different areas can help the company in maintaining efficient supply chain (Henry, 2018).
Threats of New Entrants
Threats from the new entrants is moderate for the Enel America, because new entrants are not only the companies starting their operations from the scratch, but also include the companies who are already operating in other countries and want to enter in the South American market after seeing the profit opportunity. Threats from such companies are high, as many companies are willing to invest in Argentina or Brazil for electric power or other non-renewable energies. It is necessary for the Enel America to grab the market, and introduce new schemes, products or service line, or offers to attract customers (mentorimcgroup, 2018).
Threats from the Substitute Products
Threats from the substitute products are high in energy industry, mainly for the companies who are focusing majorly on one energy like electricity and so for Enel America is the case, because consumers are now looking for different renewable and non-renewable energy resources like wind mills, or solar energies which cost them low in the long run. It is necessary for the Enel America to consider the opportunities in different alternative sources of energies and start involving there too to diversify the risk in long run (Henry, 2018).
Rivalry of Existing Players
There are many rivals in the existing industry where Enel is operating, and major of them are; Energent, Chevron. Total, Eni, etc. who are giving tough competition to the company. In order to stay in the market at international and domestic level, it is necessary for the Enel America to analyse the industrial competition level and introduce new and differentiated service lines for the consumers (UK essays, 2018).
References
Enel America, 2019. About the company. [Online], Available at: https://www.enelamericas.com/es/conocenos/a201609-Conocenos.html, [Accessed on: 25th June, 2019].
Henry, Z. 2018. Enel Americas S A Porter Five Forces Analysis. [Online], Available at: https://www.case48.com/porter-analysis/6333-Enel-Americas-S-A, [Accessed on: 25th June, 2019].
Mentorimcgroup, 2018. RENEWABLE ENERGY IN LATIN AMERICA – ATTRACTING THE WORLD’S ENERGY GIANTS. [Online], Available at: https://www.mentorimcgroup.com/2018/08/24/renewable-energy-in-latin-america/, [Accessed on: 25th June, 2019].
UK essays, 2018. Power Sector Analysis: Porters Five Forces Mode. [Online], Available at: https://www.ukessays.com/essays/economics/power-sector-using-porters-five-forces-model-economics-essay.php, [Accessed on: 25th June, 2019].