Eléctricité De France Essay

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Eléctricité  de  France  (EDF) is an  energy  operator involved in the  generation,  distribution,  and  transmission  of electrical  energy. It operates  globally to provide energy and services to 38.5 million customers. EDF mainly operates power plants (hydro, thermal, nuclear, and other  renewable) and distribution systems. For the fiscal year ended December 2007 the company recorded revenues of $81,702.7 million. The company controls  about 84 percent  of France’s electricity market. Top direct competitors of EDF include E.ON, RWE, and Enel.

EDF was established in 1946 and nationalized  by the French government.  As a public undertaking  of an industrial  and commercial  nature,  EDF replaced more than 1,000 private companies that up until then had  been  responsible  for generating,  transmitting, and  distributing  electricity. By 1950, the  rationing of electricity had stopped and distribution  networks had been completed or rehabilitated.  EDF remained a national company focusing only on the French market  until 1992. In 1992, EDF created  the holding company Eléctricité de France International and expanded  into  many global markets,  gaining presence in Africa, Asia, North America, and the Middle East. Further  strategic  developments  included  the acquisition  of London  Electricity by EDF’s United Kingdom subsidiary.

Since the creation  of EDF International, EDF has increased  their presence  in the global energy arena. In 2003, through a French-Japanese consortium,  EDF began construction of a power plant in Vietnam. In the same year, EDF was involved in the first gas pipeline constructed in Mexico, providing experience  in gas transport. Simultaneously, through  increased investment in research and development (R&D), EDF inaugurated a farm of eight wind generators in France. EDF continued  their rapid global expansion through joint ventures, alliances, and acquisitions of local providers of electricity and energy. In 2005 they acquired 100 percent  stake of the generation  company Laibin Electric Power in China. EDF expanded in Europe as well, acquiring organizations in Poland, Italy, Greece, and Switzerland.

EDF demonstrates capacity for innovation,  offering customers  services through  energy savings, renovation advice, and decentralized  renewable energy generation  solutions.  One  of the  main  strengths  of EDF is their R&D capabilities. The group’s R&D aims at developing tools and methods  to improve operations and optimize  the life span of facilities without compromising safety. The dedication of EDF to product and system innovation is reinforced by the strong portfolio of patented  products, which consists of 375 patented inventions.

Another  strength  of EDF is their  strong  financial position.  Through  expansion  in  the  global  energy arena, EDF has managed to accumulate strong financial growth.  There  has  been  a steady  increased  in profits since the establishment  of EDF International. The company’s margins are also higher than its main competitors’ in 2007. The operating profit margin of EDF was 17 percent  as opposed  to 15.2 percent  of E.ON, 13.7 percent  of RWE, and 16 percent  of Enel. This increase in margin reflects the efficient cost structure  of the company. It also shows the success of EDF’s management  in controlling costs despite fierce competition  and pricing pressures in the energy sector. This cost control is also associated with the heavy investment  in R&D that  lies at  the  heart  of EDF’s organizational culture.

Moreover, EDF is a vertically integrated  company with  a diversified presence.  This diversity  of businesses offers a competitive  advantage  for EDF as it provides cross-selling opportunities to the company and enables it to spread its revenue base.

However, EDF has experienced problems in recent years. The company was charged with involvement in market manipulation in 2007. The European Commission charged that its long-term supply contracts with industrial users have blocked other electricity providers from offering their  services. EDF has also been criticized about the condition  of their hydroelectric dams. In 2006, 450 dams showed signs of decay and posed a risk to the environment. EDF announced that they will invest $685 million in improving the conditions of the hydroelectric dams.

Overall, EDF has shown a steady increase in their profits, continuous  improvement of their operations, and efficient management  of their dynamic capabilities. EDF has managed to establish themselves as key players in the global energy industry through  extensive organic growth as well as strategic  acquisitions and alliances.

Bibliography: 

  1. Business Insights and  Samantha  Massey, Green Energy Strategies in European Utilities  Renewable Growth, Green Tariffs and R&D in New Technologies (Business Insights, 2007);
  2. EDF Group, www.edf.com (cited March 2009);
  3. Keerthi, “EDF: The  French  Electricity Giant’s Privatisation  Woes,” ICFAI Business School Case Study  Number  205-088-1  (2005);
  4. Strauss Khan  and D. Traca,  “Deregulating  Electricity Markets: The French Case,”  INSEAD Case  Study  Number  204-068-1  (2004);
  5. “Special Report: A Very Big French Turn-Off—Eléctricité de France,” Economist (v.372/8382, July 3, 2004).

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