This study on Ceylon electricity board here on referred to as CEB will analyze the current down falls that it is confronting and the grounds for it will be discussed in the debut. Briefly explicating the statues of CEB and the history of it the study will travel to the strategic facet of CEB.
For the intent of this study rational be aftering theoretical account is being used to hold a more structured attack to choosing and measuring the strategic options that will originate to CEB.
The mission and vision of CEB is identified and the stakeholders that will hold involvement in the operations of the direction of CEB will be assessed to make a rounded scheme that will take into history the return holder groups. Mendelow ‘s matrix will be used as a tool for measuring stakeholder power and involvement in CEB. Corporate hierarchy theory will be explained in the context of the company and what sort of signifiers of schemes will each degree of hierarchy demand.
Corporate assessment will be carried out to measure the internal and external factors that will be an influence in the creative activity of schemes of the Company. SWOT analysis will be used to place the nucleus internal values of CEB and PEST analysis will be used to place the External factors that will hold consequence on CEB.
When choosing appropriate schemes porter ‘s generic schemes will be assessed and Ansoff matrix will be farther looked into. Divestment schemes will besides be looked at bettering the inefficient construction of the province owned corperation.the issues of divestment will besides be analyzed.
Treasury will besides be looked at and ways that CEB could cut down their load on them will be reported in this assignment. Finally the recommendations and decision for CEB will be provided in this study to the board of managers of CEB.
Contentss
Recognition
This study could non hold been successfully completed without Mr. Trevor Mendis `s aid, who Pushed and helped me through the academic plan. He ne’er accepted less than my best attempts. Thank you.
What are collected in this study are stuffs that I found in our press releases, the cognition given by our lector, books and the personal research done through cyberspace. I make no claim to be comprehensive.
A particular thanks to our lector once more. This study would hold taken old ages off my life, without you. I would wish to admit and widen our heartfelt gratitude to Mr. Trevor Mendis our Director in IIHE for actuating me in this topic to transport on farther. At last non least I would besides wish to thank my CIMA lectors who bought me to this degree and made this assignment easier and helped me to finish it faster.
Thank you!
1. Introduction
Ceylon Electricity Board ( CEB ) has a long standing history in this state, for operating since 1968. CEB is presently basking monopoly statues in the energy market in Sri Lanka having about 100 % market portion. The lone rival that CEB faces in Sri Lanka is from lanka electricity company, which CEB has a major shareholding of 55.2 % ( 2010, one-year study ) . It has a high grade of perpendicular integrating holding power coevals, distribution, transmittal, retailing giving it the monopoly statues in Sri Lanka.CEB uses different signifiers of bring forthing energy from fossil fuel to renewable energy beginning such as hydroelectricity. Establishing its presence around the island in the most scenic environments.CEB presently has a registered histories of about 4.4 million occupants in Sri Lanka ( 2010, CEB one-year study ) .
1.1 Case brief
CEB is in a crisis state of affairs due to many internal and external factors that can non be avoided by the board of CEB.The losingss have staked up to Rs.40 Bn which has a strain on the authorities every bit good as the economic system. This is chiefly due to the exchange rate volatility of Sri Lankan rupee and that thermic energy, which requires Diesel to bring forth energy which is imported, therefore exchange volatility.
This study is to the board of CEB on the Strategic analysis, strategic Choice and strategic execution to turn CEB from a loss doing company to a coveted state of affairs for all stakeholders. While researching alternate beginnings that would assist increase the productiveness and efficiency to foster aid CEB ‘s unfavourable situation.decieding on a planning technique to guarantee that operations would be uninterrupted and would cut down the force per unit area on the authorities as this organisation is a province owned operation.
2. Rational planning tool for strategic preparation
“ Strategic planning is a systematic, formalistic attack to scheme preparation ” [ Grant2003 ]
Rational planning method will be used to guild the strategic preparation for CEB in order to run into the undermentioned objectives-
Overcome the inauspicious fiscal state of affairs of losingss.
Explore other renewable beginnings of energy to prolong a better hereafter.
Avoid future proficient interruption downs to a mere minimal per centum.
Increase productiveness and cut down load on the Sri Lankan exchequer.
Position Audited account
Mission and aim
Corporate assessment
Implication and reexamine
Strategic rating
Strategic options
Environmental audit
2.1 Mission and Objective
What is a scheme?
‘This is the procedure of explicating a class of actions & A ; way that a house should be in a long term position ‘
“ Scheme is theA directionA andA scopeA of an organisation over theA long-run: A which achievesA advantage for the organisation through its constellation ofA resourcesA within a challengingA environment, to run into the demands ofA marketsA and to fulfilA stakeholderA outlooks ” hypertext transfer protocol: //tutor2u.net/business/strategy/what_is_strategy.htmA
For CEB to win in the chase of acquiring the company in a better place by altering its schemes they must first clearly defined Vision and mission statements to guarantee that the direction has a general way that it could take for in a span of 5-10 twelvemonth or more.
Vision
‘Enrich Life through Power ‘ ( CEB one-year study, 2010 )
Mission
‘To develop and keep an efficient, coordinated and economical system of electricity supply to the whole of Sri Lanka, while adhering to our nucleus values ‘ ( CEB one-year study, 2010 )
Schemes are formulated based on first looking at the Mission and Vision of the company, this would Give a Specific Direction that CEB indented to be in the long term position ( 5-10 old ages ) .CEB intended to Maintain efficient economical systems while supplying a quality service to its clients, which its falling short of due to many proficient lacks and external hardship. The new scheme should straight reflect what the mission statement intended to offer to its stakeholders.
2.1.1 Measuring Stakeholder powers of CEB
“ Stakeholders are parties that have vested involvement on the concern activities. They span from employees to clients ”
CEB must measure what are their chief groups of stakeholders in order to maintain them satisfied so that the company can execute their operations without breaks.
Stakeholder groups in CEB –
Stakeholders
Power
Interest
Description
Customers
5
7
These persons are the 1s who buy the services of CEB. Buy devouring the electricity that CEB generates and pay them for the units consumed. As CEB is the monopoly power provider in Sri lanka this group of Stake holders will non hold much power
Suppliers
8
4
This stakeholder refers to the providers of stuff required for CEB to bring forth the electricity that is purposes to provide. Suppliers have a higher bargaining power compared to the power of CEB As crude oil is a panics resource
Government
8
8
CEB is presently Owned by the authorities so they are likely to hold high power and involvement in the operations of CEB
Local community
4
4
These stakeholders are like to hold non much power or involvement in the activities of CEB because they may non be straight involved as client or stockholders
Trade brotherhood & A ; Pressure groups
6
8
This group of stakeholders are with high involvement of CEB ‘s activates cause it may hold a direct impact on the occupations or environment.
This is on the Scale of 1-10 one being weak and 10 being strong
Mendelow ‘s matrix
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( mendelow ‘s matrix )
A class – The local community falls under this class, harmonizing to the the theory CEB should non direct its strategic resources to this quarter-circle as it non traveling to Affect CEB and its operations.
B class – the clients fall in to this class as CEB is the monopoly energy provider to Sri Lanka. However they are interested in the pricing of the Electricity as they will hold to pay for their ingestions. So CEB should maintain its clients informed if there is any major alterations that would impact them like pricing or Power failures.
C class – this stakeholder group has high power but does n’t hold much involvement in the activities of CEB as it may be undistinguished. Suppliers to CEB autumn into this catogoy.where they have a better bargaining power as coal is non extracted from within Sri Lanka and has to be imported from Middle East or Latin America.
D class – Government falls into this class because CEB is a authorities tally organisation, Government makes the determination and has the power to command schemes. Harmonizing to mendelow they should be kept the chief stakeholders that the Company should be looking to fulfill.
CEBs should implement schemes that will increase the authorities ‘s wealth
2.1.2 The corporate hierarchy theory
This theoretical account provides an overview to CEB of each Slab that will necessitate appropriate schemes in order to map as an efficient and dynamic house.
Cooperate schemes – the overview of the whole organisation and moving as an Index to the stakeholders where the house should be. Corporate schemes must be deiced by the board of managers of CEB as to ‘which Business should CEB be in? ‘ CEB holding many SBU under its parent company umbrella they should measure if the company as a whole is synchronized to one way in the strategic position. Schemes must be formulated in this degree for the hereafter of CEB, if they find future chances in other concern so that they could diversify.
Business schemes – All the CEB ‘s SBUs schemes aggregated into one long term program to guarantee the success of the concern from fall ining all the hydro power works schemes to thermic works schemes, IPP Thermal workss and little power manufacturers etc…
Functional schemes – include selling schemes, new merchandise development schemes, human resource schemes, fiscal schemes, legal schemes, supply-chain schemes, and information engineering direction schemes. The accent is on short and average term programs and is limited to the sphere of each section ‘s functional duty. Each functional section efforts to make its portion in run intoing overall corporate aims, and hence to some extent their schemes are derived from broader corporate schemes that CEB would hold in topographic point.
After a thorough apprehension of all the degrees of schemes that CEB should be see, a strategic program should be put in topographic point to accomplish a successful scheme.
CEB presently operates in a market with monopoly statues. This provides the direction with the chance of utilizing a long term strategic be aftering tool instead than emergent planning.
2.2 Critical analysis of Cooperate assessment
Cooperate assessment connects the vision and the aims environmental audit and place audit to understand the procedure connexions better in the organisation. There are twosome of tools that can be used to transport out this assessment such as SWOT Analysis, Value concatenation, GAP analysis, Benchmarking.
When explicating schemes the Internal environment and the external environment of CEB should be critically evaluated in order to do the schemes more value adding and to do it suited to the context and state of affairs the company is presently traveling through. Position audit will be used to see the current place of the governmental organisation and the Environmental analysis will critically measure the factor of the environment that might impact the organisation.
2.2.1 Position Audit
SWOT Analysis of CEB
‘A critical appraisal of the strengths and failings, chances and dainties ( SWOT analysis ) in relation to the internal and environmental factors impacting an entity in order to set up its status prior to the readying of the long term program ‘ ( Neil Botten, 2009 )
SWOT is a really powerful tool to analyze the current nucleus competences of CEB and do certain they can follow schemes to better on its strength and hold on the chances while minimising its dainties and cut downing its failing. Presently the SWOT for CEB is as follows:
Presently CEB is a governmental organisation with monopoly power and being a regulative organic structure has limitless power in the current market.CEB besides possess alone integrating island broad from administering to bring forthing and retailing, this is a huge strength that CEB possess.
As CEB is a governmental organisation it is indebted to make occupations and this has become a major ground for concern in stakeholder satisfaction, as the powerful trade brotherhood have made strategic determinations hard to implement and transport out without a major work stoppage or revenge by the employees.
Sri Lankan is a developing state and there is a great addition in demand for power during the old ages. Giving it an unsaturated market that can bring forth major income in the hereafter.
As the CEB is submerging in organisational and internal issues the dainty such as power larceny from people who delay payments to people who use unethical agencies to avoid paying for the service they used is turning. Besides as CEB generates a batch of power utilizing fuel that has to be imported they face a hazard of exchange rate fluctuations and dealing hazard. This besides is due to the high volatility in the Srilankan Rupee compared to the US dollar which the Oil barrels are purchased in.
2.2.2 Environmental analysis
Plague Analysis for CEB
Component
Description
Political
PUCSL has been already set up under the commissariats of the Public Utilities Commission of Sri Lanka Act No. 35 of 2002 to modulate the physical substructure sectors, it will be empowered to put to death ordinance merely when the single industry statute laws are enacted and made effectual. The province polies have made it clear that energy should be provided at the lowest possible degree to the client of the industry. ( national energy polies and schemes for sri Lankan, 2006 )
Economic
GDP existent growing rate is 8 %
GDP per capital – $ 5300
8.307 million ( 2011 est. ) – labour force by business
industry: 24.2 % ( affect CEB )
Unemployment rate
4.9 % ( 2010 EST. )
Budget excess ( + ) or shortage ( – )
-7.3 % of GDP ( 2011 EST. )
Exchange rates: Sri Lankan rupees ( LKR ) per US dollar –
112 ( 2011 est. )
113.06 ( 2010 est. )
114.95 ( 2009 )
108.33 ( 2008 )
110.78 ( 2007 )
( Sri Lanka Economy Profile 2012. 2013 )
Social
Presently due to the Growth in the state and the high instruction degrees of the citizens, they are demanding a more renewable energy beginning without consuming the natural resource of the universe
Technological
Technological development has advanced and increased the demand for electricity and other energy beginnings. Such as hydro and turbine green power etc.
The PEST analysis is a utile tool for understanding market growing or diminution, and as such the place, possible and way for a concern. A PEST analysis is a concern measuring tool. PEST is an acronym for Political, Economic, Social and Technological factors, which are used to measure the market for a concern or organisational unit.
All this information is on or before 2010***
Once the corporate assessment is to the full evaluated the strategic options must be considered in order to run into the aims of the Company in the best signifier possible.
2.3 Strategic option coevals and critical rating
There are many theoretical accounts that can be used to bring forth schemes to get the better of several of CEB jobs like heavy losingss and high trade brotherhood powers. For this study intent we will be bring forthing schemes from –
Porters generic competitory strategic theoretical account
Product – market schemes
Divestment schemes
2.3.1 Poters Generic schemes
Harmonizing to Michel porter ( 1980 ) , ‘there are three possible successful generic strategic attacks to surpassing other houses in an industry ‘ .
Elementss
Description
Overall cost leading
Lowest cost manufacturers compared to the completion. Where due to the houses core competences they enjoy a decrease in cost or due to the graduated table and size of operation they enjoy economic systems of graduated table
Differentiation
Making a Differentiated merchandise that the industry broad clients are willing to pay a premium monetary value to bask the merchandise or service
Focus
Serves a narrow strategic mark more efficaciously than challengers who are viing more loosely
Evaluation of the schemes
Presently CEB is holding many proficient issues due to its undependable power workss around sir Lankan. Overall cost leading scheme, where it gives an uninterrupted flow of service with the lowest possible monetary value. As CEB is a monopoly, there is small to no competition, to be in line with the mission statement of ‘Enrich Life through Power ‘ ( CEB one-year study, 2010 ) CEB must supply the service to all the people in the state and do it low-cost to all consumers. However for CEB to go a cost leader in the Power industry they must hold a sound and stable organisational construction, and should non be in an unfavourable state of affairs devising losingss.
Differentiation schemes for CEB would be making new beginning of power than what it already uses. Presently they use –
Fossil fuel: 51.7 %
hydro: 48.3 %
atomic: 0 %
other: 0 %
( www.indexmundi.com )
By CEB making alternate beginnings and distinguishing its merchandise by traveling into renewable energy such as air current and solar power, Biomass or even atomic might be able to bear down a premium from the consumers who concerned about conserving the environment.Sri Lankan being a state which needs touristry to hold an influx of foreign modesty demands to conserve its scenic beauty which many other states lack. Thermal, Diesel and crude oil energy pollutes the environment doing server environmental jobs, hence Investing in Nuclear power which is clean beginning of energy will assist continue the beauty and the economic system therefore assisting CEB in the Future.
CEB has many options to take and distinguish its merchandise and service being in an island with abundant of resources.
Focus schemes are non the most suitable for CEB as it is a monopoly and has to bring forth, conveyance and retail all the energy demand of the state. This scheme will accommodate a smaller private electricity manufacturer.
2.3.2 Product – market schemes
Ansoff matrix – Ansoff demonstrates the strategic way unfastened to the house in the signifier of a Matrix. ( Adopted from Ansoff, 1965 )
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Elementss
Description
Market incursion
Firm addition its gross revenues in the present line of concern
Merchandise development
Widening the merchandise scope available to the houses bing market
Market development
Here the house develops through another group of purchasers for its merchandise
Diversification
Here the steadfast gets involved in a wholly new industry
CEB presently has a registry client base of around 4.1 million users has possible to derive more in comparing to Sri Lankan pollution of 21 million ( Approximately ) . ( www.indexmundi.com )
So by doing the power more low-cost CEB would be able to increase its Customer base. By deriving Economies of graduated table through the figure of new clients CEB will be able to better the pricing of power. Sri Lankan is a fast developing state with possible and the energy market is non saturated. CEB must do distribution channel to farther metropoliss and town in the rural countries. Constructing towers to transport the electricity will be a good deserving investing as the clients and market has high demand.
The other directional scheme that would be looked at is the Product development. CEB would put in new beginning of energy or do the current beginning of energy more efficient. The other energy beginning as stated above under Poters generic schemes could be adopted to get the better of the current state of affairs of loss devising and inefficiencies in the dodo fuel production of energy.
2.3.3 Divestment schemes
CEB being a State owned establishment has to follow with the governmental ordinance and orders, Thus CEB is doing tremendous losingss and is inefficient. Divestment schemes will assist CEB taken over by a private direction with stockholders therefore holding a better control and involvement over the concern. Divestment could be selling of the direction to a private proprietor or selling assets that being in negative NPV to CEB such as the loss doing power workss Norochcholai and Lakvijaya which would better its loss devising procedures and better the efficiency by holding a more concentrated unit to pull off.
2.4 Issues in divestment that CEB faced
CEB being a house that has a big pool of labours has really powerful labour brotherhoods which is forestalling Divestment or any other action that will assist better the CEB lose doing state of affairs.
CEB could better the Losingss that it ‘s facing by depriving the loss doing power workss such as Norochcholai which give CEB monolithic losingss of 6.5 billion rupees. ( The Sunday leader, 2012 ) nevertheless it ‘s non possible due to the labour brotherhood and the power they hold as stakeholders.
CEB could decide many of its jobs by divestment, nevertheless the trade brotherhoods must foremost be dealt with. Some schemes to cover with the labour brotherhoods are-
Pass statute laws – As CEB being a province owned organisation they could go through a statute law to censor illegal work stoppages and break of work and have the the trade and labour brotherhoods pay for the losingss. This would discourage the idea of traveling against the direction determinations. However this could impact the authorities ‘s relationship with the ballot base.
Educated and pass on – portion the vision of the determination of the direction. Make the employees understand the demand for the alteration. This scheme is clip devouring and there ‘s no warrant it would work
Compensate and council – because CEB will be cut downing its labour force they will revenge against the determination, by supplying them a compensation bundle they will be able to understand the determination and assist CEB travel through with the strategic determinations.
3. Reduce load on exchequer
Presently CEB imports the FUEL needs therefore the Countries shortage is besides increasing in size.
Fossil fuel: 51.7 %
hydro: 48.3 %
atomic: 0 %
other: 0 %
( www.indexmundi.com )
Where the hydroelectricity is generated in Sri Lankan but 51.7 % is foreign exchange cut downing in the modesty of the state. Besides Sri Lankan non exporting adequate merchandises means the depletion of modesty are greater than the satiety. The exchange rate fluctuation besides is a ground for the load to increase on the exchequer and the loss of net income to increase in CEB.
CEB should follow a Growth scheme mentioned above and do its sustainable by cut downing the demand for fuel which is imported in $ . This would assist cut down the load on the authorities and the revenue enhancement policies.
CEB should better an farther invest in R & A ; D to place sustainable green energy that will a cheaper beginning of natural stuff that besides could be found within the island of sri Lankan.
4. Decision and Recommendation
In decision CEB is running at a major loss every twelvemonth due to its direction inefficiencies and the external factors such as Fuel and Exchange rate fluctuations. The most appropriate schemes to get the better of the losingss and the inefficiencies must be to deprive the major loss devising workss that CEB presently operates. This would assist CEB concentrate more on the workss that are running expeditiously and better them. CEB would besides be able to put in a more suited beginning of power like Wind, and Hydro as Sri Lankan is an island and has this resource in copiousness. This type of power beginning will assist CEB go a more sustainable manufacturer with a CSR facet.
Trade brotherhoods power demands to be diluted in order to take CEB from a loss devising house to a more favourable sitatuion.this can be achieved if they educated and counterbalance the work force therefore cut downing the opportunity of the labour force acquiring demotivated and going unproductive.
Having merely a base of about 4.1 million registry users CEB must better its distribution and affordability to clients around the island by decrease the cost and bettering the service. Cost can be reduced through Economies of graduated table by increased figure of users, CEB being the monopoly house in the electricity market they could so derive Economies of graduated table.
Besides harmonizing to Ansoff theory CEB must develop a wider scope of merchandises that will give the consumers a better choice.CEB must develop a more efficient and cost effectual signifier of energy that will be more attractive to its consumers.
Finally this study would be concluded by stating the heavy losingss and high power trade brotherhoods would be stopped one time the inefficiencies and loss devising division are divested by CEB. By utilizing Rational planning procedure to guild the company in choosing and measuring the most appropriate schemes.
