Achieving growth in a competitive marketplace
A Powergen case study

Page 1: Introduction

In today’s competitive business climate no marketplace is completely static and some markets are more dynamic than others. One which has changed beyond recognition over the years, is that of electricity. Since the start of privatisation in 1989, the UK electricity industry has seen many strategic changes in structure, direction and activity. This represents a new challenge for electricity...
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Page 2: Market structure

Among the principal commercial features of the reorganised industry was the introduction of competition in two of these areas - generation and supply. This competition in electricity generation changed the nature and structure of PowerGen’s activities by putting pressure upon market share and the prices it could obtain in the market for its product.Upon privatisation, there were 10...
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Page 3: Core business

PowerGen first concentrated on becoming a low cost and flexible producer. The twin aims were to reduce fixed and variable costs. Fixed costs are those costs that do not increase as output increases. Fixed costs do not change over a range of output even though output within that range will vary. Variable costs are those that increase as output increases, because more of these factors need to be...
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Page 4: New business

While PowerGen’s strategy for the core business has been successful in helping it to manage the reduction in market share, it has not been sufficient on its own to deliver future growth for the company. For the longer-term PowerGen had to look for new ‘earning streams’ by expanding its activities into new areas which were still related to the company’s core areas of...
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Page 5: International power

Ten years ago the concept of an international power generation business did not exist. Electricity industries throughout the world were nationally based and monopolistic. Increasingly, in recent years, electricity markets have been opened up to foreign investment as governments have sought efficient and competitive alternatives to meeting demand for new power station capacity. PowerGen’s...
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Page 6: Conclusion

The power industry has gone through a period of unprecedented change over recent years. PowerGen has had to think through much confusion, uncertainty and resistance in order to make key decisions which reflected its own circumstances. From the beginning it set out to be a quality, low cost producer which could bench-mark itself alongside the best in the world. Its strategies have been based...
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