Centrica Plc SWOT and PESTLE Analysis

Strength

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Weakness

1. Weak corporate governance in place: Due to the temporary tariff placed by the regulators in response to shortage in consumer consumption, along with certain other players in the industry, Centrica also faced a significant loss of 446 million pounds. But in between this loss-making state, the chief executive of the company, Iain Conn was reported to receive a pay hike of 44% in the year of 2018. This led to a protest among the trade unions against the company. Although the senior management took the decision of removing Conn from his position in the annual general meeting of 2020, the events leading to such outcomes denote a weak corporate governance in place.

2. Lack of proper customer acquisition and retention programmes: Over the years, the customer retention rate of the company has remained at a higher note throughout. This can be attributed to the lack of proper promotional or marketing activities as well as absence of lucrative offers for its customers. For instance, after the announcement of low earnings, Centrica saw a customer loss of nearly 6%, that is, a total of 823,000 customers out of which, 150,000 left because of the price rise by the company. In response, the company claimed to scrap the tariffs for new customers and suggested some reforms to the UK regulator, Ofgem, although these measures did not help the company effectively

Opportunity

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Threats

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Political

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Economic

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Social

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Technological

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Legal

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Environmental

1. Target set by the government to reduce the greenhouse gas emissions: As of infographic data published by Ofgem regarding UK’s power mix in 2020, around 41.1% of Britain’s power is generated from gas-fired turbines and 33.32% from renewable sources. To reduce the carbon and greenhouse gas emissions as well as increase the number of renewable sourcing, many environmental schemes worth around 8.75 billion pounds were introduced and administered in the period of 2018-19. In line with this, Centrica promotes sustainability by offering energy solutions regarding on-site solar as well as heat and power generation and consumption patterns, to its customers to assist them in decreasing their carbon emissions. Furthermore, this international energy services and solutions company provides flexible services resulting in increasing the efficiency of the electric grids and also decreasing the requirements for power generation.

2. Changes in the Energy Company Obligation (ECO) Scheme to promote sustainable energy supply: The Energy Company Obligation scheme was introduced in 2013 for the provision of low-carbon and low-bill energy efficiency and heating measures by the obligated energy companies to the households in Britain. Over the years, modified versions of this scheme, namely ECO2t and ECO3 were initiated by the government for the poorer households. As of February 2020, around 2.67 million efficiency measures were installed in nearly 2 million households in Britain under this scheme. Abiding by ECO, Centrica also took many measures like quitting oil and gas production business line and adopting clean energy reforms into its policies.