Powergen Headquarters Is At Coventry In England Commerce Essay

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PowerGen energy company is public company which is a company of e.on founded in 1990 (as Powergen). Powergen headquarters is at Coventry in England, United Kingdom. It's key people is Paul Golby, CEO. Generally it produce Power and Gas and it's employee is about 2200.

Company Overview

Powergen prior to acquisition by E.ON was formed in 1990 as Public Limited Company which was wholly owned by the UK government and acquired about 50% of the Central Electricity Generating Board generating capacity. 60% of Powergen was sold to private investors in 1991, followed by the remaining 40% in March 1995. It expanded considerably by acquiring the regional electricity company East Midlands Electricity in 1998 and the supply business of TXU Energy in 2002. Powergen was eventually taken over itself by E.ON, an acquisition which was completed in January 2002.

It then bought the Distribution Network Operator Midlands Electricity in 2004. This was merged with the distribution business of East Midlands Electricity and rebranded as Central Networks. The Industrial & Commercial Retail business was rebranded as E.ON UK on 5 July 2004. The creation of the Central Networks business in April 2004 included "a company of E.ON" as part of its logotype. In October 2005 it was also added to the Powergen logotype.

In June 2007, a major advertising campaign entitled "The wind of change", containing advertisements using the E.ON logo, was launched. The campaign featured the Robin Rigg offshore wind farm in the Solway Firth, currently in development. In the consumer market, this was complemented by a replacement of the mostly blue Powergen identity to the red identity of E.ON, and the launch of a new product, Go Green, using electricity from renewable sources and carbon offset gas.

On the 22 October 2007, the company announced that the E.ON Energy and Powergen brands would change to E.ON as of the 1 November and 3 December 2007 respectively.

In January 2008, E.ON acquired West Midlands-based CHN Group, a provider of heating services to builders, local authorities and housing associations across the region and in August 2008 completed the purchase of a portfolio of highway lighting projects from ABB.

In 2008 and 2009 a number of protests took place at E.ON UK's power station including a Climate Camp at their Kingsnorth power station in August 2008 and at their Ratcliffe-on-Soar Power Station in October 2009.

On January 20th 2010, E.ON UK announced the closure of their Rayleigh Customer Service Centre and the loss of 600 jobs. The company only informed its employees after the information was leaked to a local newspaper. Despite the fact that the company prides itself on values of "Trust, mutual respect and openness", and despite the fact that it was already advertising for new positions at its Nottingham site. This has been criticised as a money saving exercise by an organisation which has seen an increase in profits of 18% in 2009 and news that E.on UK have made £80million in profits so far in the financial year 2009/10. 

Functional Organisational Structure

After privatisation in 1991 PowerGen had 21 power stations and was producing around 30% of the electricity supplied to England and Wales.

Between 1989 and 1992 PowerGen had a 'functional' organisational structure with few layers of management. For instance, their core business functions such as electricity generation and commercial energy sales formed divisions i.e. 'Generation division' and 'Commercial division', which were then subdivided into business units: business planning, marketing, or the power stations themselves.

According to some sources companies that are functionally organised have less need of a formal process of strategy formation. This is due to the fewer number of managers involved than in larger more diverse corporations for example. More emphasis is placed on the formation and reformation of action programs to implement the strategy.

Therefore the implications of PowerGen's organisational structure for its strategy and planning were that its high-level strategy to "become a low-cost producer on a world class basis" was translated into key business objectives and action plans in a simple and more streamlined way. The company went on to develop gas-fired stations, which proved cheaper to build and maintain and were more productive generators of electricity than the coal and dual-fire (coal and oil) power stations it had originally.

To better understand and appreciate a corporation's strategic development, the external environment or context within which the developments take place should be considered. The national grid forecasted only a slow growth in electricity demand throughout the early to mid-1990s of only 0.6% annually. PowerGen then decided to close some power stations and invest in the growing international market. It could be argued that it was PowerGen's simple and efficient organisational structure (relative to a diversified and complex structure) that enabled it to adapt to this change in circumstance in time to avert too many negative effects from the stagnating domestic market.

Control of the National Grid

The Central Electricity Generating Board (CEGB) was the cornerstone of the British electricity industry for almost 40 years; from 1957, to privatisation in the 1990s. At the centre of the CEGB's infrastructure was the National Control Room of the National Grid located in London, which was part of the control hierarchy for the system at that time. There were also both Area and District Grid Control Rooms, which were originally located at Newcastle upon Tyne, Leeds, Manchester, Nottingham, Birmingham, St Albans, East Grinstead and Bristol. The shift Control Engineers who worked in these control rooms would cost, schedule and load dispatch an economic commitment of generation to the main interconnected system (the 400/275/132kV network) at an adequate level of security.

They also had information about the running costs and availability of every power producing plant in England and Wales. It was, at these control centres that they would constantly anticipate demand, monitor and instruct the power stations to either produce or reduce electricity production, or stop producing electricity altogether. They used what was known as the "merit order" which established a system of ranking each generator in the power stations based upon how much they cost to produce electricity. The objective was to ensure that electricity production was always achieved at the lowest possible cost.

Research and development

The CEGB had an extensive R&D section with its three principal laboratories at: Leatherhead (Central Electricity Research Laboratory, CERL); Marchwood Engineering Laboratory (MEL); and, Berkeley Nuclear Laboratories (BNL). There were also at one time, five regional facilities. These Scientific Service Departments had a base in each Region. A major SSD role was solving engineering problems with the several designs of 500MW units. These were a significant increase in unit size and had many teething problems, most of which were solved to result in reliable service and gave good experience towards the design of the 660MW units.

Devolved Management and Decision Making

It goes without saying that top management plays a key role in the strategic plan development process. Their role in the process can be summarised as

"…reviewing both policy and information related to internal factors and the external environment and then, through rational decision making, to translate the mission into more specific objectives and establish major plans of action to reach those objectives."

In 1992 PowerGen underwent a major reorganisation from a functional structure into three main divisions: New Ventures, UK Electricity and Engineering & Business Services. The strategic role of top management was devolved to staff within the divisions together with more decision-making power with the effect that each division became a more autonomous system that could follow the planning development process in its own way.

However, a couple of years later there was a problem with the planning process in that the financial department was not integrated properly with the result that corporate financial requirements were not realised. This problem was directly attributable to the new form of divisional organisation introduced in 1992. Devolved strategic decision making - whilst empowering individual divisions - made planning implementation more fragmented from a corporate point of view. An example of this is the failure by top-level management to cascade 'scenario information' effectively enough to its divisions so that when 'capping' occurred (presumably capping of profits) the divisional business plans were not equipped to deal with the new situation.

Strategic and Planning Tools

In 1996, PowerGen underwent another reorganisation to accommodate the development and diversification of the New Venture. The reorganisation introduced new clusters of business units beneath the Chief Executive Officer and Managing Director (MD) such as 'UK Production', 'Gas', and 'Sales & Marketing'. Each cluster had its own MD and finance manager and both were involved in the planning process. The main advantages of this new structure were that it obviated the past problem of lack of financial input into the strategic plan and that it brought improved focus to each business unit on the circumstances specific to its role, for example, the Sales & Marketing cluster could concentrate on achieving their sales targets and enhancing the company's edge in the increasingly competitive market.

It has been said that companies have the scope of their business level strategic content prescribed for them by external driver and that the main thrust of strategic development is largely determined by these environmental factors rather than a corporate-set strategic mission. In the case of PowerGen these external factors were the increasing UK competition, geographical diversification - expanding PowerGen's interests overseas - and the changing influence of the government.

Therefore the new organisational structure had to be flexible and responsive enough and the strategic planning had to be robust enough to deal with the challenges posed by increasing environmental uncertainty. PowerGen responded by continually assessing strategic options by developing a number of 'scenarios' (for instance, changing energy prices and the effect this would have on the industry) and - where previously this had been a more centralised procedure - this was now a devolved process involving one or more business units and the corporate strategist.

The corporate planning process now integrated the gas and electricity business to reflect the need for consistent strategies and objectives and there was greater collaboration internationally to coordinate human resource management and the transfer of skills. The corporate planning cycle developed in 1998 formalised this combined effort with inbuilt scope for flexibility.

Conclusion

Since 1989 PowerGen has transformed from a UK based electricity provider to a diversified international corporation. It has undergone many organisational and strategic changes in this time. Its relatively simple structure from 1989 enabled it to incorporate plans for a possible downturn in domestic market share and to compete internationally in growing overseas markets in, for example, Australia, India and Thailand.

Its reorganisation in 1992 into a divisional structure had certain negative implications for its performance due to a lack of integration of corporate and divisional strategic planning.

Industry diversification and fierce competition meant that by 1999 there were 20 major power producers (MPPs), the two largest were National Power (23.6%) and PowerGen (21.3%), which represents a significant reduction in PowerGen's market share since 1990 when it was nearer 30%.

PowerGen responded to these changing circumstances by reorganising again but combining the benefits of devolved decision making and autonomy with an integrated structure. Strategy formulation is a reiterative process and as a company changes and its environment changes so must its strategy although it may not be necessary to 'revolutionise' the strategy or corporate objectives but only to adjust or reformulate certain objectives or elements. The Long Range Planning journal article discusses the ability of PowerGen's planning processes to balance "autonomy and adaptation by the business units" with greater intra-company coordination and fulfilment of corporate financial objectives.

Currently PowerGen is a part of E.ON, the world's largest energy company; it is a leading supplier of electricity and gas worldwide and is still diversifying with significant developments in renewable sources of energy, namely wind energy and hydropower.

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