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Market Share Dynamics in Energy Sector

The document discusses the market dynamics of energy suppliers, highlighting the average market share of 8.33% among 12 suppliers. Good Energy differentiates itself through its unique selling point of renewable energy, while Ecotricity benefits from an ethical pricing policy and reinvestment of profits into renewable energy, fostering customer loyalty. However, market share restrictions can benefit smaller suppliers like Ecotricity by allowing niche operations, while larger firms like E.ON hold significant market power, impacting smaller competitors negatively.

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alanrynkiewiczyt
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14 views1 page

Market Share Dynamics in Energy Sector

The document discusses the market dynamics of energy suppliers, highlighting the average market share of 8.33% among 12 suppliers. Good Energy differentiates itself through its unique selling point of renewable energy, while Ecotricity benefits from an ethical pricing policy and reinvestment of profits into renewable energy, fostering customer loyalty. However, market share restrictions can benefit smaller suppliers like Ecotricity by allowing niche operations, while larger firms like E.ON hold significant market power, impacting smaller competitors negatively.

Uploaded by

alanrynkiewiczyt
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

HOMEWORK

1) 12 suppliers, therefore average market share: 100/12 = 8.33% (2d.p)


2) One way in which Good Energy differentiates itself, is that they have located a gap in
the market. To explain, the example of their unique selling point is “electricity
produced on its own wind farm and bought from other renewable sources”. This
means that demand for the company is higher, as more consumers will be willing and
able to pay a higher price. For example, “one customer said that knowing all my
energy is coming from something sustainable, I’m happy to pay more”. This allows
Good Energy to sustain a competitive advantage.
3) One advantage that allows Ecotricity to have top customer satisfaction surveys is due
to them having an “ethical pricing policy”. To explain, this is differentiated from other
monopolistic firms in the market, and allows customers to be put on to the best tariff,
which gives them a competitive advantage due to lower pricing. Another advantage
that compliments Ecotricity is their non-financial motive point of view. To explain,
“all profits are ploughed back into additional renewable energy generation” which
allows the firm to have constant loyal consumers.
4) On the one hand, restricting market share may benefit small energy suppliers such as
Ecotricity because it allows them to operate in a niche market. To explain, although
smaller firms in the supply chain cover only 25% of the market, they are able to keep
loyal and repeat customers. This is because their customer service is based on a
smaller scale, which allows them to retain a closer relationship with their customers,
for example, “automatically puts customers on the best tariff available”. Ultimately,
this means that smaller firms know that they have guaranteed customers for a
prolonged period of time.

However, on the other hand, restricting market share may affect smaller energy
suppliers such as Good Energy adversely. This is because larger firms such as E. ON
have much more market power over consumers and suppliers in comparison to
smaller firms. For example, “each firm is vertically integrated, combing operating,
wholesale trading and retail operations”. Such power ultimately allows them to
contain influence on the supply chain. To explain, such firms are able to secure
preferred access to resources, or getting better terms from suppliers, which is
subsequent to effective cost savings, enabling the firm to have a stronger competitive
position, as stated that the energy market is an oligopoly “there are six dominant UK
retail energy suppliers.

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