Abstract
This entire analysis reveals the fact and effectiveness of the Energy market and its regulations. The entire analysis is revealing that regulations are important for the companies operating in a certain market for their core effectiveness. Liberalization, which is one of the dominating factors found in the market, will affect the economies particularly. It is also evaluated and confirmed through this entire analysis that competition is increasing in all over the world, and in different industries of the world, and among them the name of Energy market is one of them. European Union (EU) is trying to empowering the Energy Market of the Europe with new laws and regulations and among them; the name of Liberalization is one of them. The analysis is intending to utilize the behavior of different market players, however considering the problem of the big players of market and giving them confidence can overcome on their problems and insecurity that will ultimately enhances the market competition and effectiveness.
Introduction
Compliance is an important need for an entity, as without effective and timely compliance, no organization can have the effectiveness in the market (Checchi, Behrens & Egenhofer, 2009). The compliance behavior is important in almost every part of the world, and entities are obliged to comply with all the escalating factors to get the things in the right manner (Clout, Blacksell, King & Pinder, 2014). Some of the highly demanding and compliance based industries are banking, Financial Institutions, Food Industry, Arms and Ammunition as well as Energy Industry. In the developed countries of the world, the application of compliance are important for their future, and they will be taken into consideration for the long run economic benefits of the companies and industries as a whole Dorsman, Simpson & Westerman, 2013).
Among numerous industries that are creating effectiveness in the market in the European market, the name of Energy market of Europe is one of them. The European Energy market is the largest Energy Market of the World in terms of financial aspect as well as having some of the largest organizations in it. The energy market of the European Union (EU) has around 27 members in it which have a single continent-wide market for the electricity and gas Dorsman, Simpson & Westerman, 2013). EU Energy Market is the largest regional bloc of the world. The main theme of this assignment relates to the EU Energy market in particular by answering some of the questions related to the case. There is a small case associated with the assignment that needed to be completed.
Basic Industry Information
Government intervention is an important aspect from the viewpoint of an organization as well as industry that will affect the financial and strategic position of an industry in a best possible and organized manner. The companies or industries which have the highest amount of influence and intervention from the government sometime get an upper hand and eminence (Dorsman, Westerman, Karan & Arslan, 2011). Government can intervene in an industry or company through different decisions and pin point factors, however the effectiveness of the companies depends specifically only with those facts which are more towards the complying behavior. Among numerous compliance behavior, there is a name of Liberalization is one of them (Fusaro & Wilcox, 2000).
Liberalization is a general term that refers specifically with the relaxation of the previous government restrictions and regulations usually supported in those areas which are social, political and economic. In other word, it is an abortion of previous laws and regulations applied on an industry particularly (Fusaro & Wilcox, 2000). Due to some of the major reasons this particular aspect of Liberalization is not at all allowed in different parts of the world which will not create something potential for the different economies of the world (Geradin & Kerf, 2003). The EU Energy market is also under pressure of the effects of Liberalization.
The European Union Energy Market is one of the largest energy based markets of the world in terms of size and financial consequences. It is an important organization that provides electricity and gas facility in all of the Europe (Geradin & Luff, 2004). The market has 27 members state, and every state has number of companies operating in it. France and Germany are known as the largest contributor in the market, who has the largest share in the market. Many countries and industries of the world are pointing out to decrease the level of Liberalization from the market, and make the things in the favor of the market accordingly.
Answer-1
What do you think are the economic benefits of liberalizing the EU energy market? Who stands to gain the most from l Liberalization?
- As per the quotation of Adam Smith, (The Father of Economics), “Economics is the name of earning and consuming the money at a best place and in a perfect manner” and it is an important aspect from the viewpoint of an organization (Geradin, Muñoz & Petit, 2005).
- The field of economics is very broad but still it manages number of aspects accordingly in it and among them, there is a need of Liberalization in it as well. Alfred Marshall (One of the famous economists) was in the fact of providing benefits to the EU Energy industry particularly (Glachant & Finon, 2003).
- According to the case study, European Union which is the largest trading bloc in the world in terms of Energy and Gas is trying to dissolve all the 27 members of the state (Glachant, Finon & De Hauteclocque, 2011)
- EU is trying to make a single continent-wide market for the electricity and gas industry in the Europe to make a firm influence over the companies operating in the market (Hoerber, 2013).
- As per the wordings of Alfred Marshall “Economies should only transform those industries and companies which are providing the highest level of benefits to them”
- The foremost economic benefits that can be applied with the act of Liberalization on the EU Energy market is that it will completely eradicate the monopoly of some of the major markets of the industry
- Liberalization will certainly remove the level of ineffectiveness in the market due to not having a regulating body
- Liberalization of the EU Energy market certainly makes the market effective and organized, and will provide further economic integration to those companies which are new in the market
- According to the case, it is observed that most of the companies operating in the industry are producers, and more and more companies are entering in the same business unit by ignoring the other units completely which is actually creating a tough time for the consumers
- These particular fierce competitions in single business units are weakening the position of the market ineffectively. However, the stance of Liberalization can certainly plays a vital role to overcome on this issues completely by placing the things accordingly in different markets, like different blockings for producing, distributing and selling the energy (Hoerber, 2013)
- Liberalization of the EU market that will eradicate the entire level of monopoly from the market will also serve their consumers in a best possible manner by providing quality based services to them in lower amount of money.
- Eradicating the monopoly will increase the competition in the market that will compel each and every company of the market to play its role towards the effectiveness of the market in an organized manner
- Liberalization will empower a single authority in the market, and will assist the industry to grow substantially and effectively in the market with a positive attitude and mind to keep the momentum of the industry in an organized and perfect manner
- The best part of liberalizing the EU Energy market is that it will empower the low scale players to emerge effectively on the screen that will increase the level of competition and trade in the market which will be economically effective and sound for the economies found in the state
- It will increase the level of cross order and domestic mergers and integration of business with each other, which will certainly provide effectiveness to the companies operating in the market
- The direct quotation of Alfred Marshal can be achieved accordingly through the implementation of EU Energy market specification and industry wide analysis
Answer-4
"Why do you think progress toward liberalization of the EU energy market has been fairly slow so far?
- The existence of markets and market behaviors are extremely important in the field of economics (Perović, Orttung & Wenger, 2009)
- According to the direct quotation of John Maynard Keynes (JMK) “An economy should have a monopolistic competition rather than of Monopoly in the market for their better growth and effectiveness” (Wenger, Orttung & Perović, 2006)
- The wordings of JMK were wonderful and will certainly pick up the pace of the market in an effective and organized manner (Wenger, Orttung & Perović, 2009)
- As mentioned above, the move towards Liberalizing the EU Energy Market will strengthen the entire economic functions and activities of the Energy market of the European Region, however there are some countries which are totally against with this fact
- In the light of the EU, the effects of Liberalization can be motley, and it will certainly provide high competition in the market and will empower the companies to move the things in the favor of the market (Kuzemko, 2012).
- According to the case, there are two major players France and Germany who are opposing the Liberalization because they know that there competition will increase, and there monopoly will be no over effective for the industry (Kuzemko, 2012)
- This is the main reason why the level of progress towards the Liberalization of the EU Energy market is really slow and ineffective, and it is not producing the market accordingly
- France and Germany are not in the favor of Cross Border Integrations and mergers; however they are more interested to merge with some of the largest players of the market by leaving the other ones completely intact (Lewiner, 2010)
- This particular thing is totally against with the trading and operating laws in which a country is not at all allowed to derail the stance of trading in the market through any mean or reason, and they should provide betterment in the services of the industry just to enhance the productivity of the market accordingly
- The company of France has a 87% share in the overall energy market in the EU, and the company is completely opposing the stance of Liberalization from the market. Apart from that the reluctance of the Germany to initiate cross border mergers and integration are also diminishes the market ineffectively due to which the level of innovation and development is very slow up till now in this particular market
Conclusion & Recommendation
The field of economics can be applied on almost every single walk of life, and there will be nothing that can deny the facts of economics accordingly (Lewiner, 2012). The field of economic can benefited its users through two different angles known as Micro angle and macro angles. Micro angles that usually referred as Microeconomics is a part of economics associated with the economics of individual capacity as a whole, while in terms of macroeconomics, the stance of economics will be on the economy as a whole. The beauty of economics lies in the fact that it has number of companies which are collectively trying to improve the entire market structure and increases the effectiveness in the market with a positive attitude.
Regulations are some of the important aspects that related with the field of Economics, and entities are required to comply with all of these regulations for their future benefits and creation of momentum. Regulations have been posted and build by the regulators, and entities are required to comply it in such a manner that they will not derail the effectiveness of the market and the regulations. Liberalization is a name of relaxing the market and develops new rules and regulations in the market for the companies already existed in the market. From the case study of the EU Energy market, it is computed that the level of competition is increasing heavily in the EU Energy market, and with the help of this aspect many companies have problems. The analysis also revealed that there are two big players in the market which are completely opposing the act of EU of Liberalization to not to attain effectiveness in the market. Liberalization will increase the level of competition in the market, and will also increase the regulatory stance of the companies which will be a perfect choice for the companies. Some of the major recommendations that can be taken into account are as follows
Recommendations
- The EU should intervene in between to settle down the issue have by France and Germany
- Educate them that their strategic value will not affect or hurt adversely with any of the action of Liberalization from the government
- Should information them that the competition will not affect the financial position of some economies, but it will increases the economic consequences for every player of the market.
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