Accelerating Pace And Scope For Business Commerce Essay Example

the role of culture, and how these strategic decisions impact the PowerGen utility industry then and now.

Section 1 of the study will focus on defining scheme and corporate planning and comparing them. It will also analyze the impact of strategic changes and highlight the significance of enhancing PowerGen's organizational structure from 1990-1998, based on the PowerGen's case study. Moreover, this section will provide an overview of the planning process.

Section 2 will delve into relevant literature, comparing the core competencies and dynamic capabilities of two major players in the industry: EDF and E-ON. It will examine how PowerGen's own core competencies and capabilities contributed to its market share and pre-tax profit in England and Wales during the period of 1991-1998.

Section 3 will analyze the impact of denationalization and deregulation in the UK Electricity Industry in the mid-1990s on the merger between PowerGen and Midland Electricity Plc. It will also discuss how a centralized planning approach, as represented by the Central Electricity Generating Board (CEGB), aligns with Geert Hofstede's (1993) concept of cultural constraints in management theories. The role and significance of culture in the strategy development process will be examined.

What is Strategy? In response to market regulations and advancements in technology, new industry structures are emerging in the energy and utility sector. It is important for organizations to effectively execute their strategies and corporate planning in order to enhance their existing capabilities and, when necessary, establish new ones through a flexible and continuous strategy. The term "strategy" has been widely used for various purposes without a universal definition.

In summary, strategic planning in an organization is the action taken to gain a competitive advantage and develop

a better approach for achieving success and sustainability. It involves looking towards the future, taking a long-term perspective, and finding ways for the organization to make a difference and remain viable. The strategy focuses on what the administration does, while corporate planning focuses on how it is executed. This involves creating new ideas to attract customers, implementing innovative workflows, and requiring effective management to engage team members in the process of reinventing. Whittington (2001) suggests that this approach saves time by avoiding a return to basic principles at each stage, offering shortcuts to action. Johnson et al (2005) argue that effective communication of strategy to teams and clear understanding among staff are essential for achieving better performance.

According to other books on scheme, scheme must be holistic, involving the entire organization to achieve the goal, and the building blocks of Powergen's corporate strategy, apart from its internal and external resources, are the alignment of their business processes. Mintzberg (1994) believes that successful strategy requires strategic thinking, the ability to detect change when it occurs, identify discontinuities, and recognize opportunities. PowerGen's strategy and planning period should search for new opportunities to expand their range of functions and maximize the availability of resources they have. Strategies may require significant resource changes for an organization, such as PowerGen's acquisition of East Midlands Electricity (EME) to sell electricity and gas to household consumers. This will be discussed further in the third part of the report. PowerGen's merger and strategies aim to reduce fixed and variable costs and offer low costs on a global scale, allowing them to have a wider range of expertise for overseas contracts and generate higher profits

(Wallis, 1995).

The PowerGen scheme is crucial in reducing the risk of not enduring through challenging stages. This involves significantly reducing fixed costs, downsizing staff, and cutting operating costs to improve technical performance.

Corporate Planning

Corporate Planning is vital for strategizing in a structured manner. It involves aligning the internal and external resources available to an organization and establishing a system that helps achieve its long-term objectives. Corporate planning supports the implementation of an organization's corporate strategy.

General Electric Company sets out their approach to corporate planning as follows: they outline their actions, express interest in new products, and keep an eye on the competition (Byrne, 1997). Corporate planning is essential in preparing for future challenges and opportunities. Strategy and corporate planning work hand in hand to achieve effective decision-making outcomes. Whittington (2001) notes that General Electric has been at the forefront of corporate planning, aiming to manage and diversify the organization. This approach has been widely adopted by various organizations with different terminologies but the same concept. Planning in a complex environment allows for greater flexibility, and considering external factors adds value to the planning process.

Grinyer et Al ( 1986 ) , discussed the importance of planning in enabling organizations to effectively respond to environmental changes, protect core technologies, address uncertainty, facilitate integration, and serve as a basis for divisional and business control.

However, there is still a need for a balanced approach between adaptation and implementation. In the context of PowerGen's corporate planning, Jennings ( 2000 ) identifies its critical role in identifying new concepts and ideas, identifying new growth areas, and evaluating the corporate portfolios.

To assess the effectiveness of the planning process, there is a need for

reconfiguring the planning system to reflect contextual changes. This involves establishing overall corporate financial goals and using them as the basis for goal setting in various functional areas of business. It also involves transforming the configuration of the planning process.

In PowerGen's case study, it is evident that creating a strategy helps stakeholders respond to new policy developments in a structured and coordinated manner.

In order to expand its involvement in natural gas, PowerGen has included it as part of their long-term plan. This expansion not only benefits the organization itself, but also aids policy-makers in comprehending the complexity and interconnectedness of issues faced by regulators and consumers. According to a case study conducted by PowerGen, the key to their success lies in developing a corporate strategy that highlights robust analysis, transparency, good communication, and cooperation among staff members. It is also crucial for them to maintain positive collaborations with the government, other utility stakeholders, and various companies. Mintzberg (1994) emphasized the significance of understanding the distinction between planning and strategic thinking when implementing an appropriate strategy-making process. Furthermore, it is essential to organize the organization's objectives into actionable steps and validate those steps in order to accomplish goals.

The Evolution of PowerGen's 'Corporate Planning Process'

The improvement of organization construction and the effective implementation of work procedures will allow the organization to operate and develop its capabilities to the fullest. Before Privatization, Mc Kinsey consulting company was hired to assist in developing PowerGen's strategy and organizational structure (De Wit and Meyer, 2004). Focusing on PowerGen's 'Corporate Planning Process' between 1990 and 1998 in the case study, there was a change in the organization

structure. In 1990, there was a large central planning team, which was replaced by planning staff within the division in 1992. This introduced a smaller functional organizational structure to create more action plans for both corporate strategy and corporate planning. The devolved planning process in 1992 represents a shift towards a more adaptive approach.

PowerGen's main focus during the period of 1990-1998 was on establishing an organizational structure that would adapt to new market conditions and meet the demands of the developing organization. The reorganization in 1992 had a significant impact on the corporate planning process, as it addressed the need to bridge skills gaps between existing and new staff in departments such as Finance (Wallis, 1995). The development of PowerGen's corporate planning process during this time also influenced how the different business units adapted to the changes. This period saw staff reductions, power plant closures, redundancies, and cost-cutting measures. Despite facing these challenges, the company's profitability remained strong, even though sales were negative.

The reorganization in 1996 improved the focus of unit directors on their specific concerns and enabled corporate staff involved in planning to develop goals that address the role and potential talents of individual businesses, particularly in decision making (Jennings, 2000). Therefore, the planning system encouraged initiatives by business units within a corporate context and addressed the need for coordination among multiple business units and the development of overseas operations. In this case, there should be a harmonious flow of circulating information in the overall strategic and financial direction and human resource planning and allocation of PowerGen. Additionally, the involvement of the finance division has been emphasized to anticipate and solve past problems and

to have a financial direction to support strategic plans. According to Johnson and Scholes' model of strategic management and implementation, resource planning, organizational structure, people, and systems play an important role.

The text explains that successful strategic execution requires intermixing a new scheme with versions to PowerGen's staff, construction, system, and managing the necessary acquisition and deployment of resources. This involves dealing with resource requirements, organizational structure changes, and determining the best way to coordinate the business to carry out the strategy, as well as meeting system and workforce needs. In the PowerGen case study, one key factor for success in the corporate planning process from 1996-1998 was a skills transfer that involved integrating human resource planning and superior project execution skills to retain and coordinate business units and introduce them to the new section of the organization. This required a willingness to find practical, standardized, and consistent solutions that would make it possible to execute with great reliability. According to Prahalad and Hamel (1994), strategy is the result of an analytical process, and execution is an organizational process that cannot be separated or made consecutive in a structure-conduct-performance framework. As cited in De Wit and Meyer (2004) in the PowerGen case study, business unit strategy was established before developing detailed planning guidelines due to the need for coordination.However, there was room for flexibility. Issues that affected business unit strategies often arose and needed to be addressed during the next stages of the corporate planning process before obtaining approval from the board.

According to Bozon et Al (2007), it is argued that the ability to attract, retain, and cultivate highly skilled project managers who can balance the

complexities of internal and external factors, such as technical, financial, commercial, and political factors, is crucial for future success. Consequently, talent acquisition and human resource development will remain a significant priority in the power generation industry over the next decade. The planning process at PowerGen has undergone changes, as shown in Table 1. This process has become more decentralized, emphasizing market demand and strategic involvement. The organization has moved from a large planning unit to a smaller corporate planning staff and shifted its focus from technical and resource-based approaches to a more financial and strategic orientation.

Jennings ( 2000 ) stated that concern units participate in cross-organization scenario planning to address challenging eventualities. This planning process is now completed in a shorter timeframe, ranging from twelve to six months, reflecting the increased complexity and uncertainty in PowerGen's business environment. Reviewing existing literature, Prahalad and Hamel ( 1990 ) proposed that organizations in the 1990s face the crucial task of evaluating their core competencies. These competencies are vital for maintaining competitiveness and require significant resource allocation. They are considered the organization's key strengths and essential products.

Core competences refer to the skills and abilities that enable a company to achieve a large market share in its core products. In the case of Powergen, these competencies are used to connect its activities and create advantages over competitors. If the strategy is to perform activities differently than competitors, core competencies allow for the choice of diversity. Core competencies involve management and technical expertise, a wide range of technology and resources, and the production of high-quality products and services. This adds value to the organization.

These are addendums and they hold significant

value for the growth and longevity of the company. They indicate that PowerGen's net income prior to revenue enhancement increased every year from 1991-1996, demonstrating the company's ability to adapt and learn. This ability allows them to sustain profitability by reorganizing their assets and skills to address market challenges in the PowerGen industry, supporting the traditional focus on core competencies (see Figure 3) and gaining market share. The company has the capability to align their strengths in order to seize opportunities, such as the PowerGen Power station.

ON is a Germany-based public public-service corporation company that is involved in generating, transmitting, and distributing electricity, as well as transmitting, storing, and selling natural gas. The company primarily operates in Europe and the US (Datamonitor, 2008). E.ON has seven market units for its core energy business: Central Europe, Pan-European gas, UK, Nordic, US Midwest, energy trading, and new markets. PowerGen is a UK-based subsidiary of E.ON.

According to a study by Datamonitor (2009), E.ON is involved in the generation and distribution of electricity, as well as the transit, supply, selling, and trading of gas. In the fiscal year ended December 2008, E.ON generated a gross of $130,061 million, which was a 25.6% increase compared to the previous year. This increase can be attributed to acquisitions in Russia, Italy, Spain, and France; positive price effects; higher pass-through effects pursuant to Germany's Renewable Energy Law in Central Europe; and production expansion and energy price movements in the Pan-European Gas market unit. However, in financial 2008, E.ON's net income decreased by 79.2% to $2,347.1 million due to intense competition. As mentioned earlier in this paper, the company aims to focus solely on

its core energy service business and pursue growth through acquisitions to maintain its leading position in Europe and establish a strong global presence. EDF Energy, on the other hand, is the UK arm of state-owned Electricite De France and is one of the largest gas and electricity distributors and suppliers in the UK.

The company, EDF Energy, is based in London, UK and has a workforce of 20,000 people. It supplies gas and electricity to 8 million customers in the UK (www.edfenergy.com). In terms of competition, it is important for the company to maintain a competitive advantage in order to survive. The competition has become stronger, making it necessary for the organization to have a solid defensive strategy. It is crucial to be aware of the strategies adopted by rival companies, as some may not have the resources for direct confrontations.

Each organization possesses unique resources, which are the basis for its strategy, through its core competencies and capabilities. According to Ed Wallis, PowerGen's CEO, the company is primarily focused on power generation and aims to sustain and integrate generation with supply while reshaping its electricity business. Grant (1991) argues that a firm's resources and competencies provide the foundation for its strategy and are also the main source of profit for the firm. In Table 6, E.ON and EDF analyze their resources, strengths, weaknesses, and opportunities compared to their competitors. By doing so, they can identify areas for improvement. A "core product" represents the tangible manifestation of a core competency.

According to Prahalad and Hamel (1990), the diversified company can be compared to a tree, with its core competencies serving as the roots that provide nourishment, support, and

stability. E-ON is an energy company that follows this concept, relying on its core competencies and capabilities as the foundation for building a sustainable future. The capability perspective is crucial for E-ON to sustain success in today's rapidly advancing technology and global business environment. These companies are able to perform activities at a lower cost in order to create greater value for customers and gain a competitive advantage. Porter refers to these factors as "drivers" that determine the execution of competitive strategies.

Strategic capableness refers to the ability of an organization to not only survive but also thrive, based on its resources, competency, and its ability to adapt its business strategy to changing circumstances and innovate new developments. Capability upgrading, also known as dynamic acquisition, is crucial for sustainable advantages and creating new sets of resources. Nuclear new build is a task assigned to bring in the next generation of nuclear plants in alignment with EDF's global plan of generating safe, affordable, reliable, and low-carbon electricity production in the UK. In 2009, the merger of EDF Energy and British Energy formed one of the largest energy companies in the UK. Together, they hold the largest share in electricity production in the UK.

Threshold resources

refer to the resources required to meet the minimum demands of customers and ensure continuous operations. The company also focuses on maintaining the pace of innovation in their technology and industry structure.

Reliable energy networks and multiple energy resources, ensuring a secure energy supply. Power-gas Convergence: Power and gas are closely connected at different stages of the energy chain - upstream, midstream, downstream. Additional investments in overseas projects and ventures. EDF operates power stations and

wind farms, buying and selling electricity to meet future generation and customer demands, engaging with all energy clients. Essential capabilities: Activities and processes necessary to satisfy customers' minimum requirements while maintaining a strong presence throughout the entire value chain - including power and gas production, importation, wholesale, distribution, and end-customer sales.

E-ON utilizes its Market cognition to operate efficiently and create value throughout the entire value chain. EDF operates eight nuclear power Stations in the UK, totaling approximately 9,000 megawatts of electricity which plays a crucial role in the UK economy. E-ON possesses unique resources that provide a competitive advantage and are difficult for rivals to replicate, thanks to its superior internal and external collaboration capabilities. Their core competencies are the activities that support their competitive advantage and are challenging to imitate. E-ON has a long history of producing and supplying electricity, dating back to the 1920s, which contributes to their strong market presence and is a part of their growth strategy. They take a proactive approach to M&A and have a talented and highly skilled staff who are involved in some of the most important projects and developments in the UK.

EDF company, founded in 1946 and made public in 2004, possesses a formidable market position. It has the financial strength of a major European group and strong procurement capabilities. Additionally, it has pan-European trades for prominent clients, international expertise, and access to significant R&D resources. The company's strategy aims to become a leading global energy service provider by concentrating resources on integration and growth initiatives. This will allow the company to focus exclusively on core energy service business and expand through acquisitions, consolidating its leading

position in Europe while forming a strong global foundation. It will divest non-utility and non-profitable activities, continuously reduce costs, and restructure the group. EDF's competitive advantage is centered around developing an international power generation business and facilitating foreign investment in electricity markets.

By utilizing its expertise and experience in the energy industry, E-ON has been able to establish a competitive advantage and expand its operations over time. This advantage is characterized by a capability that is not easily replicated, but also not so complex that it cannot be effectively controlled (Schoemaker and Amit, 1997). In order to operate in the power generation sector, E-ON must have the ability to manufacture or supply various energy sources, as well as a deep understanding of how these sources work and how to produce power from them. These knowledge and reputation are considered core competencies for E-ON. By diversifying its operations, E-ON can gain more control over the value system or supply chain within its industry, which in turn increases its market power. Additionally, E-ON's ownership of a costly input like fuel not only reduces production costs through economies of scale, but also serves as a potential barrier to entry. Scholars in strategic management literature argue that dynamic capabilities enable organizations to adapt to changing environments.

Dynamic capabilities refer to a company's ability to build, integrate, and reconfigure internal and external competences in response to rapid environmental changes. These capabilities include specific processes such as product development, alliances, and strategic decision making. E-ON possesses the capability to optimize their operations across markets and leverage synergies within the broad European market. To address the rapidly changing environment, E-ON focuses on

enhancing the efficiency of their generation fleet, reducing carbon emissions, and promoting climate-friendly energy for the future. In order to strengthen their identifiable processes in product development and position their brand in the European gas supply industry, E-ON acquired Yuzhno Russkoye, one of the world's largest gas fields located in Siberia, and Skarv-Idun in the North Sea of Norway to increase their production. Through these actions, they are reconfiguring their assets to establish a sustainable energy and gas supply system for the future.

As a public-service corporation sector, these agencies aim to confront the challenges and changes of the global industry by strengthening administration and regulatory compliance. The barriers for new entrants can vary depending on regulatory and legal constraints within their industry. If EDF and E-On can achieve economies of scale, they will have an advantage in matching each other and other competitors in lowering production costs. EDF is focused on innovation, investing in new technologies such as carbon capture and storage to make fossil fuel burning cleaner in terms of emissions (www.edfenergy.com). On the other hand, E-ON is investing in LNG (Liquefied Natural Gas) and natural gas as a low-carbon alternative to oil and coal, ensuring a secure supply.

E-ON is focusing on constructing more efficient fossil-fueled power workss and expanding renewable energy sources to make up one third of their total generation capacity. They are also working on making carbon capture and storage commercially feasible (E-ON Company Report, 2009).

E-ON has a strong brand and geographical coverage, with diversification across different markets. They have capabilities in power distribution in Germany, Central Europe, and the UK, giving them an advantage in energy and gas production globally.

E-ON is also adding value for consumers by promoting energy-saving and launching initiatives like 'Smart Saver' to help customers reduce their energy consumption. These efforts increase consumer awareness and may lead to greater adoption of E-ON's energy-saving concept.

However, there are threats from alternative sources such as gas and self-generation through solar panels.

E-ON has defended this challenge by creating a one-stop-shop for gas and electricity. However, this approach could become a threat in the future if consumers are not aware of how self-generation is done. This has led to a high level of competition between E-ON and Electricite de France (EDF), the two largest players in the European utilities market. EDF's entry into the market has increased competition as they benefit from economies of scale and can compete more aggressively on price. In response to this, E-ON emphasizes their continued focus on providing value to customers rather than just competing with existing rivals.

The competition in the market is being boosted by the two Powerhouses, .ON and Electricite de France (EDF), as they benefit from economies of scale and can compete more fiercely on price. Robert Hammond, an energy expert from Consumer Focus, stated that E.ON customers will welcome any price cut, as even a small reduction is better than none at all. However, a pattern is emerging where energy companies are once again adopting a group mentality, similar to the pricing strategy used by E.ON's competitors.

'It is clear that providers are operating in a low-risk market where there is insufficient competition to reduce prices' (see Appendix D: Estimated GB Average Energy Prices). In order to gain an advantage over rival companies, E-ON and EDF can benefit

from lowering their prices as part of their strategy or combining power services with other utilities to differentiate themselves in the market. E-ON, as an energy company, can also adjust the structure of their obligations to meet the needs of their major energy consumers.

Denationalization and de-regulation are now widely accepted policies in many states, offering unprecedented opportunities for foreign investments in the electricity sector. According to Jennings (2000), denationalization brings about changes in ownership and competition, leading to alterations in the internal processes of privatized organizations. Privatization involves a massive restructuring of the industry, with the aim of promoting competition and regulating prices in natural monopolies. In essence, denationalization results in significant changes in the electricity sector.