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Conducted by Global Intelligence Alliance, the 2009 Global Market Intelligence survey consolidated the responses of 45 senior Market Intelligence executives at some of the world’s largest global or regional energy companies, and provided some interesting insights.
New entrants from Asia, price erosion and overcapacity change the competitive Energy landscape
Many threats are perceived in the next two years. Some energy companies expect a continuation of the economic slump, along with overcapacity and increasing import pressure. It is also interesting to see how European and American companies feel threatened by the fast-growing energy industry in Asia. Western companies are losing market share to Chinese companies.
A good example is the wind energy sector. The Chinese government regards the development of clean technology and wind energy as a key priority. In order to meet the demands of the growing market, Chinese production of wind turbines and components is stepping up. With this accelerated development of manufacturing, China is gearing up to meet both the domestic demands as well as preparing to supply components to the international market.
On a global level, energy companies feel that competitors are getting more aggressive and more informative, which also increases the need for advanced Market Intelligence.
Government continues to play an important role, posing both opportunities and threats to the energy industry
The strengthening role of governments is a potential threat to energy companies. In some energy market segments, companies usually deal with the governments of countries rather than with the private sector.
In a downturn, the government spending could get restricted and may negatively affect energy projects. The regulative environment, higher taxation and changes in the external environment such as emission norms are perceived as important threats in the energy industry over the next two years.
On the other hand governmental stimulus is helping many energy companies to overcome the economic downturn. Public spending projects e.g. related to energy efficiency, renewable energy and new technologies are major opportunities for the energy industry. Changing consumer behavior, environmental consciousness and government policies with regard to the climate change have a natural impact on the energy industry.
Market Intelligence operations are in place, but only at a basic level
Nearly 70% of the surveyed energy companies have an existing market intelligence operation, which is rather high compared to other industries. However, the level of sophistication of the intelligence operations is not very high.
The World Class Market Intelligence Framework, developed by Global Intelligence Alliance, divides companies into five levels of maturity, where the levels range from “Firefighters” (Level 1, the beginners), to “Futurists” (Level 5, the most advanced organizations with regards to the level and maturity of their intelligence activity).
The global survey revealed that most companies in the energy industry are ranking themselves on the Basic Level 2.
This is also evident when energy companies are asked about their decision-making processes. 6% of the surveyed energy companies never utilize market intelligence in key decisions. And none of the surveyed energy companies made use of Market Intelligence for all vital business decisions. It is justified to say that it’s small wonder if decision-making within the surveyed energy companies suffers from inefficiencies!
Budgets for Market Intelligence will increase over 2010/2011
Energy companies have average annual Market Intelligence budgets of less than USD 350 thousand on average. Comparing exact figures in conjunction with this graph would be artificial because of varying company sizes, but the overall differences between industries become evident. Companies in the energy sector are clearly lagging behind the global averages.
Size of annual Market Intelligence budget (on average)
N=724 Market Intelligence executives
Source: Global Intelligence Alliance, Global Market Intelligence survey 2009
Considering the relatively lower budget levels, it is interesting to report that energy companies are anticipating more Market Intelligence investments over the next two years. 53% of surveyed energy companies are going to increase their market intelligence investments, and 16% of the companies even see significant investments in Market Intelligence. 37% say that the Market Intelligence investments will remain on the same level.
Recession impacts Market Intelligence activities of energy companies
The recession has had a large impact on Market Intelligence in 70% of surveyed energy companies, meaning that the importance of intelligence has increased moderately (43%) to significantly (27%). Now that the global economy is showing its first signs of recovery, 76% of energy companies expect their intelligence needs will increase. 21% expect an equal level of intelligence activities during the upturn.
Market Intelligence will be most likely be used on conducting strategic analyses and M&A screening and evaluation
Respondents in the global survey have identified opportunities in the field of M&A, and expect that their companies will be developing new markets geographically and product-wise. Market Intelligence departments in energy companies will increasingly identify, evaluate and recommend potential acquisition targets. Overall, energy companies plan to place ‘somewhat more emphasis’ on Market Intelligence across all geographic regions as they look for opportunities and greater efficiencies.
* Market Intelligence or MI is the discipline where organizations systematically gather, process and analyze information from their operating environment to facilitate decision-making
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Global Intelligence Alliance (GIA) is a strategic market intelligence and advisory group. GIA was formed in 1995 when a team of market intelligence specialists, management consultants, industry analysts and technology experts came together to build a powerful suite of customized solutions ranging from outsourced market monitoring services and software, to strategic analysis and advisory.
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