Eléctricité De France Essay ⋆ Business Essay Examples ⋆ EssayEmpire

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:

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

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