Origin Energy - SWOT Analysis

Strengths

‘Origin Energy has a strong presence within Australia and New Zealand; their permits allow the exploration of new resources onshore in the Otway and Perth basin, whilst offshore Bonaparte Bass Basin, and the onshore Cooper/ Eromanga and Surat and Bowen Basins in Australia; and in the Taranaki, Northland, and Canterbury Basins in New Zealand’ (Origin Energy Limited SWOT Analysis, 2012).

‘Origin has production interests in the Cooper Basin, which is the principal supplier of natural gas to New South Wales, South Australia, and Queensland. It is one of the largest producers of coal seam gas (CSG) in Australia and has interests in major CSG fields at Spring Gully, Fairview, and Peat in central Queensland. The company’s major projects include Kupe Gas Project (New Zealand), Otway Gas Project (Victoria), and Spring Gully expansion (Queensland). As of June 2011, the company’s total 2P reserves amounted to 7,041 petajoules equivalent (PJe), reflecting an increase of 13% over that in the previous year. Origin Energy’s significant upstream activities strengthen its business (Origin Energy Limited SWOT Analysis, 2012).

Weaknesses

‘Whilst Origin’s Energy operations are booming in Australia they haven’t pushed the global barrier to push its operations elsewhere. The company generates more than 80% of its revenues from Australia. The company operates two power stations, a retail natural gas, electricity, LPG, and a coal seam gas plant in Queensland. It has oil and gas exploration and production facilities in Victoria and three power stations in South Australia. It also has oil and gas exploration and production activities and retail LPG in Western Australia.

Outside Australia, the company operates in New Zealand through its subsidiary Contact Energy.

The company's high dependence on Australia increases its business risk and also exposes it to local economic and operating conditions among other increasing business risks’ (Origin Energy Limited SWOT Analysis, 2012).

Opportunities

Over the years Origin Energy has strengthened its business platform through targeted acquisitions and strategic agreements. The company continues to enter into agreements and acquire companies to enhance its business portfolio.

‘In June 2014, Contact Energy reached an agreement to supply Fonterra with steam and electricity from the Te Rapa cogeneration plant for a term of eight years commencing 1 July 2015.

Further, in May 2014, Origin Energy, together with Sasol, signed a conditional farm-in agreement with Falcon Oil & Gas Australia Limited (Falcon) for three onshore exploration permits in the Northern Territory's Beetaloo Basin. Upon completion of the farm-in agreement, Origin Energy and Sasol will each hold a 35% interest in the three permits and Falcon will hold a 30% interest. Located about 500 kilometers south-east of Darwin, the permits cover an area of more than 18,500 square kilometers within the Beetaloo Basin, which is highly prospective for shale gas and associated liquids (Origin Energy Limited SWOT Analysis, 2012).

These strategic acquisitions and agreements will provide a strong platform for growth for Origin

Energy across markets by expanding its business portfolio and also help in the long term growth

and sustainability of the company (Origin Energy Limited SWOT Analysis, 2012).

Threats

‘Origin Energy is facing increasing competition in New Zealand and Australian market. The company faces competition from AGL Energy, BHP Billiton, Caltex Australia, Country Energy, Delta Electricity, Energex, EnergyAustralia, Integral Energy, Santos, and TRUenergy. The increasing competition in these markets could lead to a decline in the company's market share’ (Origin Energy Limited SWOT Analysis, 2012).

‘The potential discovery of significant new gas resources in eastern Australia could have a significant impact on the supply and demand dynamics of the eastern Australian gas markets, resulting in changes in gas prices and therefore Origin Energy’s future revenues and purchase costs.Furthermore, Origin Energy’s customer accounts marginally declined by 3,000 accounts in FY2014.

The net position includes a reduction of 41,000 electricity customer accounts. This was due to restricted customer win and retention activities, as well as because of the increased competition in New Zealand and Australian markets. Thus, the increasing competition in these markets could lead to a decline in the company's market share and erode existing customer base’ (Origin Energy Limited SWOT Analysis, 2012).

Global Forces and the European Brewing Industry – by Mitchell Formica

The mid 2000’s saw some major shifts in the European brewing industry. At the time, Europe was inundated with drunk-driving accidents and many people were succumbing to health and fitness complications due to excessive alcohol consumption.This led to the government campaigning against the people’s predisposition to drink beer in restaurants and pubs resulting in the on-trade sales of beer (bars and pubs) shifting to off-trade sales (retail). This caused changes in the brewing industry landscape that meant brewers had to re-think their sales, marketing, branding and distribution strategies in reaction to the changing conditions and a significant increase in the import of specialty beers. At the same time, other brewers were producing premium lagers to combat the falling sales in beer products and this was placing further pressures on Heineken’s sales.

This essay uses the Pestel analysis methodology, Porter’s Five Forces and a SWOT analysis to explore how Heineken adapted its business strategies to become the world leading brewing company that it is today.

Pestel Analysis 

Political/Legal

Governments tend to regulate the brewing industry for four reasons. “(a) Taxation; (b) protection of local brewers' interests; (c) market power concerns; (p.349) and (d) health concerns”. (Johan F.M. Swinnen, 2011, Pg. 349). Working against Heineken was the government’s agenda to campaign against alcohol consumption to reduce drink driving incidents and health related problems. To counter this, Heineken had to re-think their marketing and distribution strategies to combat the government’s campaign against alcohol consumption in public places by introducing a premium lager.

Economic

By 2006 Heineken also experienced an 11% increase in the cost of packaging. To reduce costs they took on different markets globally and this helped to increase their economies of scale. They also outsourced beer to other countries, such as China or Brazil, where labour is cheaper and drinking beer was still considered socially acceptable. They also undertook acquisitions, alliances and take overs in order to be more profitable and to compete. (Mark Blee, Richard Whittington, Global Forces and the European Brewing Industry, pg. 90).

Heineken is now the biggest European brewery with three quarters of its sales coming from the region. It has also expanded its sales operations into the Asia Pacific and American markets and this, combined with the increase in imported beers, as evidenced by the graph below, Heineken now has a global market. 

  

Technological/Socio-Cultural/Environmental

All the while, due to social pressures, Heineken’s customer base shifted from restaurants to supermarkets where people could purchase cheaper beers and then consume it at home, abiding by the government’s wishes. Heineken’s growth also relied on its technological advances. One of the company’s four priorities was to accelerate revenue by improving efficiency, accomplished by implementing machinery and robotics.

Heineken has also been affected by environmental changes. “Heineken, the world’s third-biggest brewer, said poor spring weather in Europe led to weak second-quarter revenue and predicted that earnings this year won’t grow as consumers in the region curb spending”. (Clementine Fletcher, Bloomberg, 2013). To reverse this, they used the acquisitions of small businesses to use local beer labels as a means of distributing and expanding sales of Heineken’s beer in other regions.


References:

Clementine Fletcher, Bloomberg, Heineken Sees Weak Europe Beer Consumption Weighing on Sales, august 21, 2013
http://www.bloomberg.com/news/2013-08-21/heineken-expects-annual-profit-in-line-amid-european-struggles.html

Johan F.M Swinnen, 2011, The Economics of Beer, pg. 249 http://www.oxfordscholarship.com.ezproxy.lib.swin.edu.au/view/10.1093/acprof:oso/9780199693801.001.0001/acprof-9780199693801

Mark Blee, Richard Whittington, Global Forces and the European Brewing Industry, pg. 90