CASE STUDY

Case Study



Case Study-Power Gen

Introduction

Strategic planning enables an organization to effectively allocate its resources and maximize its output. Changes in the market structures create a significant pressure on the organizations to effectively manage its position. PowerGen, since its formation, has effectively tackled the changes by modifying its planning process. This provided the company opportunity to achieve its objectives effectively. This paper analyzes the strategic planning decisions of the PowerGen and possible alternatives in the context of Porter's five forces model.

Strategic Planning Process

Strategic planning process enables the organization to allocate its resources in an efficient manner to enhance its strategic and financial performance. A typical strategic planning process is broken down into four processes. These define the overall viability of the decision taken by the organization. Strategic planning process begins with defining the objectives and developing strategic intelligence. This is followed by strategy formulation and evaluation of the strategic alternatives. Once strategic alternatives are identified, best evaluated decisions are implemented and controlled in the third step. At last, performance is monitored and controlled. Any deviation from the predetermined objectives is aligned by making necessary adjustments in the strategies taken.

Similar process was observed in the case of PowerGen Co. Formerly, company had functional organizational structure. Due to industry pressure, company devolved its planning structure to robust the quick decision-making. For multinational organizations, it is necessary to limit the degree of flexible strategies. (Rumelt, 1991, pp. 167-185)

PowerGen changed its strategic planning structure from functional division to decentralized structure. This was mainly done to enhance the performance of the organization, while effectively managing the timely responses to competitors' strategies. Strategic role of the management layer employees was increased to foster the quick decision making. Autonomy of divisions was increased that enabled them to develop their strategies that fulfil the objectives of the company. In dynamic business environment, success of an organization is dependent on how quickly organization responds to changes in the market structure. PowerGen reduced its planning cycle duration including the level of detail required to develop a business plan.

For PowerGen, an initially centralised approach to planning not only reflected their prevailing corporate management style and experience of planning but was also consistent with the company's need for centralised initiatives, and the 'top-down' setting of goals to initiate diversification into new business areas. A centralised approach to planning was also consistent with the organisation initially having a narrow range of businesses (Carbasho, 2010, Pp. 120-132).

Porter Five Forces Model

Strategic planning of an organization is driven by the external forces. These forces shape the approach an organization adopt to achieve its objectives. Corporate objective is not the only factor that defines the strategic planning of the organization in contemporary business environment. As highlighted in the case, main external factor that shaped the strategic planning of the PowerGen include the increasing competition in the UK electricity industry due to free entry of private entities in the sector. This reduced the bargaining power of PowerGen to vitalize huge profits from the ...