Corporate strategy(powergen case study) Essay Example | Topics and Well Written Essays - 2500 words

Corporate strategy(powergen case study) - Essay Example Power generation is a crucial component of a countrys economy as it affects industry and businesses to a very large extent and greatly contributes to its economic progress. In past years, electricity demand showed little growth (only 0.6% a year) during the period 1990 to 1997 in the UK and there was excess generating capacity of 11,000 MW in 1990-1991 (based on projected demand of 50,000 MW vs. 61,000 MW capacity) in the country at the time. However, electricity demand grew by healthy percentages such as the USA (projected at 30% for next 2 decades), big developing countries like India (10%), China (9%) and poorer nations possibly more. On average, global electricity generation will grow at 2.6% annually until 2030 (Economy Watch, 2010:1). Changing conditions due to the technology innovations used in generating electricity brought about industry consolidation and vertical integration of most big players. PowerGen was not so well prepared for the industry shakeup despite its size and lost market share due to its failure to acquire a regional electricity company (REC) which is a crucial component for industry players because it deals with the retailing of electricity. The electricity industry is very important to a nations growth and progress. This has a profound impact on a country by providing its citizens with the conveniences of modern life. Many nations in the poorer regions of the world such as Africa and Latin America where a big majority (4/5 of the worlds entire population) live (Hofstede, 1993:11), the tendency of most governments is to somehow price their electricity artificially low. This social pricing structure does not reflect actual or true cost. The industry was recently liberalised to allow big players to make the necessary big investments to make electricity cheaper and also improve service to consumers through healthy competition. Many external factors affect industry players like environmental