ENGIE: strategic transformation of an energy conglomerate

In 2016, the €75 billion French multinational energy conglomerate ENGIE was massively transforming its strategic and operational imperatives toward renewable energy. The 200-year old company owned Europe’s biggest natural gas pipeline and was a major global producer and supplier of natural gas and other energy sources. ENGIE had announced the transformation in 2014—following a sharp drop in global fossil fuel prices—viewing it as the beginning of a new era in energy. ENGIE set goals to double renewable power capacity for Europe over the next decade, rapidly expand its renewable footprint in high growth regions such as India and China, slash its lines of businesses based on commodities, and reduce exploration of oil and gas. CEO Isabelle Kocher’s vision followed her belief that “the name of the game was to take the lead in the new energy world.” The case is set in mid-2015, when top management, convinced that ENGIE needed to build a strong global portfolio quickly, acquired nine-year old French energy company Solairedirect for €200 million. The acquisition made ENGIE the number one solar company in France and gave it an international presence and product pipeline. Solairedirect had a profitable business model—different from ENGIE’s—that enabled it to rapidly build utility scale solar photovoltaic installations at competitive prices. ENGIE believed that buying the smaller company would bring an entrepreneurial spirit and new way of thinking to the company. However, ENGIE had just reorganized along mostly geographical business units, and Solairedirect did not fit into that organizational structure. Also, when ENGIE acquired Solairedirect, the solar company had just experienced an unsuccessful IPO attempt. The questions arose as to whether a company in that situation was a good acquisition target; whether ENGIE paid the right price for it; and how, and to what extent, Solairedirect could or should be integrated into the larger organization. Learning Objective The objective is for students to learn about the changes in the global energy landscape and the strategic decisions that need to be made to reflect the 2016 reality–low fossil fuel prices and a shift toward renewables. Students will also evaluate different business models in the same industry; examine the appropriateness of a purchase price paid in an acquisition; and explore how to integrate small, entrepreneurial companies into larger, established companies

ENGIE: strategic transformation of an energy conglomerate

In 2016, the €75 billion French multinational energy conglomerate ENGIE was massively transforming its strategic and operational imperatives toward renewable energy. The 200-year old company owned Europe’s biggest natural gas pipeline and was a major global producer and supplier of natural gas and other energy sources. ENGIE had announced the transformation in 2014—following a sharp drop in global fossil fuel prices—viewing it as the beginning of a new era in energy. ENGIE set goals to double renewable power capacity for Europe over the next decade, rapidly expand its renewable footprint in high growth regions such as India and China, slash its lines of businesses based on commodities, and reduce exploration of oil and gas. CEO Isabelle Kocher’s vision followed her belief that “the name of the game was to take the lead in the new energy world.” The case is set in mid-2015, when top management, convinced that ENGIE needed to build a strong global portfolio quickly, acquired nine-year old French energy company Solairedirect for €200 million. The acquisition made ENGIE the number one solar company in France and gave it an international presence and product pipeline. Solairedirect had a profitable business model—different from ENGIE’s—that enabled it to rapidly build utility scale solar photovoltaic installations at competitive prices. ENGIE believed that buying the smaller company would bring an entrepreneurial spirit and new way of thinking to the company. However, ENGIE had just reorganized along mostly geographical business units, and Solairedirect did not fit into that organizational structure. Also, when ENGIE acquired Solairedirect, the solar company had just experienced an unsuccessful IPO attempt. The questions arose as to whether a company in that situation was a good acquisition target; whether ENGIE paid the right price for it; and how, and to what extent, Solairedirect could or should be integrated into the larger organization. Learning Objective The objective is for students to learn about the changes in the global energy landscape and the strategic decisions that need to be made to reflect the 2016 reality–low fossil fuel prices and a shift toward renewables. Students will also evaluate different business models in the same industry; examine the appropriateness of a purchase price paid in an acquisition; and explore how to integrate small, entrepreneurial companies into larger, established companies

U.S. Dependence on Oil in 2008: Facts, Figures and Context

In 2007 and 2008, the price of oil skyrocketed, hitting historic highs. The corresponding increase in gas price was felt sharply in the United States by ordinary people, industries, the military and the government. Citizens were spending more and more of their paychecks to fill their gas tanks, airlines grounded planes to avoid the high cost of fuel, and the military saw its daily price tag for the wars in Afghanistan and Iraq increase due to fuel costs. The U.S. military depended almost exclusively on oil to power its weapons and vehicles. Economists the world over debated whether this sudden price jump was caused by supply and demand dynamics, market "speculation," or the weak dollar. In addition, debate intensified over whether the world was hitting "peak oil,"--a time when global oil production capacity would plateau. If strategy is about gaining and maintaining control of destiny through managing the balance between influence and dependence, the U.S. faced an increasingly dangerous strategic situation in 2008. Although the U.S. had traditionally been strongly influential in the oil industry, by 2008 it seemed that this influence had waned. U.S. oil production had been decreasing steadily since the mid 1980s, and the U.S. was losing clout as a customer as developing nations like China and India began buying increasing amounts of oil. As a result, the U.S. was potentially facing a situation of strategic subordination. The strategic imperatives facing the U.S. in 2008 were therefore first, to gain more control of the forces driving the United States' increased dependency on oil, especially foreign oil, and second, to take decisive action to significantly reduce its dependency on oil as a major source of energy within the shortest possible time. To develop a greater understanding of the strategic challenges facing the U.S. in 2008, this paper provides the key facts and figures, as well as key contextual factors, to describe global and U.S. energy and oil consumption, the history and evolution of the oil industry, the global oil marketplace in 2008, and the relationship between U.S. oil consumption and national security. This greater understanding, we believe, will facilitate taking the decisive strategic actions that the situation calls for.