Research Topics: Centrica

Strategic Plan for Centrica : Swot Analysis

Introduction             Centrica is a large multinational company, based in the UK but also with interests in North America and Europe             Centrica was demerged from the former British Gas in February 1997, established to continue to invest in a successful energy and related home services business in UK.             In Great Britain, Centrica is known and trusted by millions of consumers with their consumer’s brand, British Gas and Dyno, developing a range of products and services tailored to the specific needs of commercial customers. It remains the largest residential supplier of gas and electricity in UK. It is also the largest domestic central heating installation and maintenance company. In addition, non-customer brands, Centrica Energy and Centrica Storage, play a key role in supporting the customer brands. Centrica Energy sources the gas and electricity to supply customers through their upstream gas production and electricity generation facilities and wholesale and gas trading activities. Centrica Storage provides gas storage services for a wide range of customers including other businesses within the group. Centrica has made strong inroads into the North American market and exporting strategy into Europe with ventures in Belgium, the Netherlands and Spain.             Centrica serves millions of people across the United Kingdom, North America and Europe. They provide a wide range of products and services, from gas and electricity supplies to insurance and telephone services.   Strategic Plan             Strategic planning consists of the process of developing strategies to reach a defined objective. This process provides an overview of the entire organization to its leadership. It is also defined as a plan describing how a firm will adapt to take advantage of the opportunities in its constantly changing environment, in order to maintain a strategic fit between firms and goals and capabilities and these market opportunities (Dictionary of Business 2002).             Strategic Plan should serve as a framework for decisions or for securing support/approval. This should also provide a basis for more detailed planning. This explains the business to others in order to inform, motivate and involve. Moreover, this assist benchmarking and performance monitoring and stimulate change and become building block for the next plan.   SWOT Analysis SWOT analysis can provide a framework for identifying and analyzing strengths, weaknesses, opportunities, and threat. This can also provide an impetus to analyze a situation and develop suitable strategies and tactics, a basis for assessing core capabilities and competences. Moreover, this can provide the evidence for, and cultural key to change and a stimulus to participation in a group experience. Vision             Centrica will be either number one or two leading supplier of energy and related services both in UK and internationally that have the appropriate business and regulatory climate , in order to provide high returns to shareholders that shareholders expect to receive from the top 25 best performing companies in the FTSE 100.             In 3 to 5 years time, Centrica will recover the wholesale cost of gas and will acknowledge that the long-term strength of the Group is dependent on British Gas delivering a fair and reasonable profit. We will have more than 300 new fully qualified engineers and will complete the nationwide roll-out of the engineer deployment system to all central heating engineers. Operating profit will rise by 60%.             Mission             Centrica manage sales, marketing, and customer service activities to reduce the impact of competitor. Cost control remains a high priority of the company. Develops system and improve process to achieve efficiences to meet the objective to reduce cost. Continue to seek expansion of infrastructure that bring gas into UK to have downward pressure on prices.   Corporate Values             The corporate values of Centrica are based on fundamental values and beliefs which links their vision to their business principles. These includes passion for customers, pride, trust, challenge, and support.             Passion for customer is the central value to the way they work. They have an ethos to deliver outstanding customer service, anticipating customers’ needs and correct errors promptly. They give value to money, and deliver efficient and effective products and services.             Pride comes from the satisfaction of their customer and from  dlivering high quality products and services. Proud of the staff and their achievements and recognize and reward success. Trust is at the heart of their relationship to their customers, doing what they say, acting with integrity and respecting and empowering employees. Building trust helps develops strong future relationship with their stakeholders. Challenging themselves from constant striving for continual improvement, engaging constructively with advocates and critics from within and outside the company to maintain competitive edge nad deliver consistentlyoutstanding stareholders returns. Supporting employees seeking to meet and own challenges. They foster teamworking and knowledge sharing, and give their employees the tools and training they need to do their jobs well.   Objectives             The long term objectives of Centrica are summarized as: to expand the business agressively and offer above average returns to stakeholders and to be tnimber one or two leading supplier of gas and electricity in UK and internationally.   Goals              Centrica’s key targets will be achieved over the next 3-5 years are as follows: increase operating profit by 60%, operating and overhead costs reduction, achieve an expansion of efficient infrastructure, achieve a develop system and improved process, become the largest supplier of gas and electricity over Europe, and employ fully qualified employees and engineers.   Strategies             Centrica’s strategic priorities are the following: rigorous cost reduction across the Group to allow lower prices on the commodities, proactive marketing to strengthen customer loyalty and cope up again the large customer loss from this year, positive price management to sustain proﬁtability, building growth in our service and energy businesses at home and abroad, and absolute ﬁnancial discipline in acquisition and capital investment.   Marketing Mix             Product             Centrica provides a wide range of products and services, from gas and electricity supplies to insurance and telephone services.             British Residential Gas supply gas and electricity to residential customers throughout Great Britain. British Gas Services is the nation’s biggest residential gas and electricity supplier and also the largest domestic central heating and gas appliance and breakdown cover ptovided under the home care. British Gas Business is Britain’s leading supplier of energy to the business sector, and the only energy supplier dedicated to the needs of small to medium size customers through to industrial and commercial customers. The creation of a distinct business unit in 2002 enabled British Gas Business to focus on the specific needs of businesses, from core gas and electricity services to central heating care. Centrica Energy source the gas and electricity we need to supply our residential and industrial customers in Great Britain through a team of specialists working for Centrica Energy. Centrica Energy consists of our upstream gas production, electricity generation and renewable asset operations, wholesale and certain industrial gas sales activities, and our energy procurement optimisation and scheduling unit. Dyno-Rod, which is part of British Gas, is the UK’s market leading drain cleaning service. Its work includes clearing blockages, CCTV drain inspections surveys, drain repairs and pipework installations.It operates through a network of franchises covering all of the UK and Ireland. Price Price is one of the problem of Centrica today. Centrica have higher prices than the other competition in the industry.ause of high prices in their commodities, they loss millions of customer. To regain the loss, Centrica need to lower their prices. In order to lower their prices, they need to reduce their operational cost. Promotion Centrica had loss many customers. In order to regain them a intensified promotion should be done.  Additional services should be undertaken to sustain their still loyal customers and also to attract new customer.   Place of Distribution Centrica has a goal to penetrate the whole Europe. It would be a good idea  for the company to expand more to be able to get to supply the gas and electricity to the European countries. Additional rofit would entail the company if it will be achieved.   Credit:ivythesis.typepad.com

Strategic Plan for Centrica : Swot Analysis

Introduction Centrica is a large multinational company, based in the UK but also with interests in North America ...

Prospectus Feed back

I feel that you have a general focus on virtual teams as a CASS (Complex Adaptive Systems) phenomena. You should try quantitative research instead. Qualitative study in this case will be more complex. So now the focus needs to become more precise. You use the words research question and hypothesis in your document but you do not state these precisely enough for us to know what data you intend to collect. I then suggested that when your research question is more precise then the way you write the background literature can be organized toward introducing your specific research. I asked for examples of data you might collect so that I could get a better sense of the operationalisation of your variables. I again suggested to you that you look at related empirical studies to see how those researchers conducted their research. The literature that you reviewed in mostly practitioner or survey articles. You can recognize an empirical paper because it has methods and results sections. Maybe your next step is to look for more research articles about virtual teams and get more narrowly focus about your research question. I look forward to more progress with you.   Your assignment is: Rewrite the research question. Your Research question is not clear.   research question – How to observe this data?  Compare findings to Complex Adaptive Systems (CASS) theory. Your research question. Your question should address a principle or issue that can be generalized beyond the immediate research setting.   Measure – What is the measure of effective team performance?  “Individual performance” of individuals of a team.   are these variables? and if so what is the measurement of different values of the variables: individual development (define it), CASS (define it)   parallel relations; does this imply correlation of two variables? so scores on one variable are parallel to scores on other variable?   give example of one value of individual development and its relation to one value of CASS one value means a concrete, specific observed instance. Otherwise, choose another variable.   page 6 of the prospectus suggests that a variable is individual development (productivity score). Bell and Kozlowski give propositions about methods and factors related to performance. What are the methods and factors related to individual performance and CASS? focus on specific research idea=foreground. One idea, not mixed up.   then the background can be chosen that is meaningful to that foreground.   The articles used, as reference, should be Research articles. They need to have the following structure: Introduction Methods Results And Discussion.         The Research prospectus is a summary of the Research proposal. It should follow the same pattern: Your research method. Outline the research method you plan to use and present a brief justification for your choice. Briefly address each of these elements of the methodology: design, measures, controls, sample, procedures, and analysis   The Bell and Kozlowski  (2002) (Typology of Virtual Teams) you have used in your prospectus is a good example.   Another good example is the IBM Study reference: Flexible working practices and staff retention (These are good examples of variables).   This would be a good research prospectus:    Research carried out by the Chartered Institute of Personnel and Development (COPD) in the UK has found that 75 percent of employers say flexible working practices have a positive effect on staff retention, while 70 percent say that it has had a positive effect on staff motivation. The COPD research suggests that organizations who only half-heartedly introduce policies or fail to effectively implement good policies could lose out on the possible benefits associated with flexible working patterns. However, almost half of the line managers who took part in the research (including employees of Ernst & Young, Centrica, Telexes, The Scottish Legal Aid Board and St. Mango’s homelessness charity) reported difficulties with implementing flexible working practices. Factors that can affect the successful implementation of mobile working patterns include: • Management failure to: demonstrate fairness between employees, communicate effectively with their team and control workflow. • Monitoring and evaluation: only 25 percent of organizations who took part in the survey formally monitor and evaluate the effectiveness of flexible working practices. • Organizational culture: businesses need to improve awareness of flexible working arrangements and establish trust, fairness, consistency and cultural acceptability.   Credit:ivythesis.typepad.com

Prospectus Feed back

I feel that you have a general focus on virtual teams as a CASS (Complex Adaptive Systems) phenomena. You should try quantitative research...

ASSESSMENT PLAN: A Case Study of Centrica Energy’s Five Years Strategic Business Plan

ASSESSMENT PLAN: A Case Study of Centrica Energy’s Five Years Strategic Business Plan   Introduction Perhaps the space between the new organization design and implementing it into actuality is the whole coverage of organization change and development. People are adaptive to change. However, certain skills must be present from the initiators of change so as to successfully implement their project. Thus, managers need to have the necessary abilities not only in detecting what needs to be changed but also how to effectively introduce the change. But the reliance to the internal resources of the organization will not do if environmental considerations of the company are not likewise considered. These include the significant market characteristics that directly and indirectly influence and dictate the strategic business implementation and sound decision-making from the options available. The forecast of subsequent political, economic, and social implications that change will result to also needs to be identified and enumerated in order to ensure the success and development of the organization and the welfare of the public in general. This paper will present a case study of Centrica Energy evaluating its competitiveness in the UK energy industry. In this light, the paper provides a PESTEL analysis of the company’s e3xternal environment, the Porter’s Five Forces model, and the critical success factors of the energy industry along with the internal analysis of the business organization’s internal competencies and capabilities.  Relevant theories and business models were incorporated in the paper to strengthen the claims and arguments that were presented. The results of the analysis provide an illustration of a five-year strategic business plan of the company.      Company Profile Centrica was initiated in 1997 after a demerger from British Gas Plc currently assuming three consumer brands – British Gas, One.Tel, and Centrica Business Services. In 2004, the company sold the AA and required the integration of Managing Agent and TFM service provision characterizing the diverse portfolio of the company of over 200,000 properties which is composed of two pricipal headquarters, critical data centers, offices, call centers, and power stations. Centrica Energy and Centrica Storage are the company’s two non consumer-facing brands (). Centrica Energy is the leading energy provider in the UK, recently expanding its home and commercial services to North America and Continental Europe while employing business management strategies that will improve its overall customer service and operations. The company sources gas and electricity to residential units as well as industrial clients all over Great Britain. Its operations include gas production, electricity generation and renewable asset operations, wholesale and industrial gas sales activities, energy procurement optimization and scheduling unit.  Access appropriations to gas and power supplies make it possible for the organization to be successful in the energy retail business ( 2005). The company recognizes the fact that increase globalization trends calls for a more competitive as well as more stable business operations in order to meet the long-term and short-term obligations and object6ives of the organization. The impact of high international competition when it comes to energy production and energy services resulted to highly unpredictable and complex business environment in the international energy industry. Along with these market challenges includes the non-renewable characteristic of most energy sources limiting the life span of the entirety of the business existence. The inevitable environmental changes that confront all energy business entities present the need for Centrica Energy to cope and position itself competitively in the international energy production and services industry. In line with these economic considerations, Centrica Energy follows specific international management and operations strategies which includes (1) deeper customer commitment and relationships, (2) sustaining competitive supply cost, (3) operational efficiency through research, and (4) best practice ( 2005).         PESTEL Analysis One of the core characteristics of a successful organization is focus. Since the business environments are fast becoming more and more complex added to the fact that it changes rapidly and dynamically, businesses need to concentrate on a few key elements that are most important to their organizations survival. Thus, it is not surprising the critical success factors keep the organizations from straying too far with external issues not relevant to their company’s success. The success of the business organization entails detailed understanding and examination of political, economic, social, technological and legal factors that influence the growth and continuous operations of the company. Studying the important consideration relevant to the organization to serve the purpose and objectives of the company will determine its success. Consequently, decision-makers of the company should be sensitive of the general trends and changes that are taking place in their industry. This will include efforts to maximize the opportunities available while reducing the risks that confront the business organization. The political, economic, and social trends that characterize the operations of Centrica Energy are detailed in the discussions that follow. Political trends. The political situation and stand of the government contribute to the factors that energy companies should take into account to ensure success and competitive advantage in the industry. The government directly influences the energy industry in the political agreements and contracts that policy-makers sign in order to improve the economic and social conditions of the government. Distinction between government-owned power corporations as well as private electric companies should be considered in examining the viability and competitive advantage of the organization since these market players are constantly aware of the current trends in the business environment. Most importantly, energy companies should be able to determine the business relations and contract agreements between and among the competitors to make easier predictions of the changes that will occur in the industry so as to make necessary strategic business plans that will best serve the interests of the company in whatever situation it is confronted with.  Economic trends. Business administration and management characterizes the process of leading and directing the systems within an organization by exhausting available resources extensively so as to achieve the objectives of the business operation. It most of the time includes the conceptualization of business plans and monitoring its execution for assessment and evaluation of the efficiency and effectiveness of the business transactions. Strategic management should be able to identify and enumerate the aims of the organizations in order to come up with sound business policies and plans from which the profit of the business organization will be fully maximized. Proper allocation of funds and investments on business ventures is practiced in order to achieve the expected results of a specific business plan thus providing direction to the whole enterprise. Conceptualizing the business strategy should be always in sync with the available resources of the company, recognizing the circumstances of every business move which the company will be responsible in the future. Strategic advantages in the business environment, particularly in the energy industry, determine the success of the conjured business plan through a continued focus on controlling costs and increasing efficiency by putting the organization into a position that will make its mission a reality. Introducing competition within a small electricity system throws up two major issues in addition to those facing larger systems. First, small systems are generally built around a few large power stations that each slot into a specific place on the overall load shapes. Consequently, they do not naturally compete one with another. Second, a smaller customer base must carry the cost of introducing new generation capacity. As such, the size of the market is a significant factor in the need for vertical integration. Socio/cultural trends. The consumer population of the electricity and energy products which includes the residential as well as the commercial areas that greatly depend on power source to perform their daily activities comprises the focus of analyzing Centrica Energy’s economic positioning. Market determines the viability of a particular product or service as the consuming end of the supply and demand chain. Peppers (1993) elucidate on this when he noted that another advantage of having a strong customer base is that it is more inexpensive to maintain one than acquiring new customers. In order to maximize the procedure of identifying the company’s target market, consumer studies are conducted. Surveys or interviews for instance, can help in determining the needs, biases and preferences of the customers. Online surveys, constituent focus groups as well as direct mail surveys may also be used in order to gather pertinent information. Technological trends. The technology and exploration endeavors that power companies engage in likewise determine the success in the energy industry. This contributes to the strengthening of the organization’s market advantage in being able to offer products and services that the competitors lack.  In this light, increased competitive advantage is fully exhausted and maximized by the company. Investing on energy exploration ventures will sustain the long-term goals and objectives of the company through continuous service to the consumer population. A commitment to rigorous environmental management through community consultation, proactive planning, compliance, sustainable development and auditing for continuous development should be continuously initiated by the company.             Legal trends. The current arrangement in the fuel supply market largely determines the extent to which effective competition in generation can be achieved. Issues such as the lack of competition in gas and coal supply, the strategic importance of fuel diversity as well as existing contractual commitments need to be resolved since large gas resources are unlikely to be developed without a substantial foundation customer such as a liquefied natural gas export project. As such legalities of business transactions and effectiveness of contractual terms between companies arise to protect the interest of both parties. These companies are able to bring substantial commercial, legal and negotiating resources into any fuel-contracting situation. They gain further commercial strength from the lack of depth on the fuel market, their overall importance to the government and national economies and, in some cases, the cross ownership between resources. The presence of smaller producers in the market ensures there is competition for purchases of small trenches of fuel. Considering and current arrangement in the fuel supply market will largely determine the extent to which effective competition in generation can be achieved. In particular, issues such as the strategic importance of fuel diversity and Centrica Energy’s existing contractual commitments need to be resolved.   Porter’s Five Forces Model Understanding the dynamics of the competitors in the industry helps assess the potential opportunities of every business venture by differentiating the similar products or services offered by the company against other business organizations. According to David (2003), there are at least four types of resources which the company can use to achieve its objectives: financial, tangible, human and technological resources. As such, it is necessary to realistically assess potential levels of profitability, opportunity and risk based on five key factors within an industry so as to determine the long-term profitability of a market or market segment. Suppliers. An organization that offers products as well as services also depends on suppliers that deliver the company’s raw materials. This condition leads to the buyer-supplier relationships within different industries. Such relationship is directly influence by the changes in the supply and demand variables based on the existing needs of the consumer population. The influence of the supplier is defined by its ability to dictate price and influence availability of materials. Other strengths of the supplier include their ability to (a) increase prices without suffering from a decrease in volume, (b) reduce the quantity supplied, (c) organize in a formal or informal manner, (d) compete in an environment with relatively few substitutes, (e) provide a product/material that is a critical part of the end product or service, (f) impose switching costs on their customers when they depart, and (g) integrate downstream by purchasing or controlling the distribution channels. As such, every company that depends on the services and materials from key suppliers need to be sensitive on the variables that are highly important and considered by the suppliers. In the case of the energy industry, particularly in the current situation that confronts Centrica Energy, decision-makers of the company should have a clear understanding of the business dynamics in which suppliers are directly involved in. These include the suppliers’ concentration or their focus and core business interests, variety of products, design and services offered, and the alternative resources that are available. In this light, it is most appropriate to build win–win relationships with suppliers or arrange the use multiple suppliers in order to protect the interests of both ends. Buyers. The power of buyers describes the impact customers have on an industry. When buyer power is strong, the relationship to the producing industry becomes closer to market conditions wherein the buyer has the most influence in determining the price. As such the bargaining power of buyers increases when they have the ability to (a) make agreements with other companies providing similar products and services, (b) purchase a product that represents a significant fraction of the expenses incurred by the company, (c) purchase of a product that is undifferentiated, (d) incur low changes in costs when they change vendors, (e) be price sensitive by bearing in mind the options available, and (f) integration to purchase the goods of the suppliers. In the case of Centrica Energy, maintaining its integrated organizational structure wherein distinctions between the energy generation, transmission, and retail operations are part of one all-encompassing market player, buyer power will be high since it will be able to dictate the prices of its raw materials incurred from the suppliers. Another consideration is the large market size that the company caters to and the fact that the company enjoys the position of being the major key market competitor I terms of international energy production and services industry. New Entrants. The possibility of new companies entering the industry influences the pace of the competition. Thus, the key is to evaluate the methods of entry and exit for a new player to the industry. Although any company should be able to enter and exit the sector, each industry presents different levels of difficulty influenced by economics. These unique characteristics of the each industry are referred to as barriers to entry which may come from different aspects of the business ranging from supplies to technology. They seek to reduce the rate of entry of new entrants which leads to maintenance of a level of profits for the existing players. In the case of the energy industry, barriers to entry are high because of the limited energy deposits that can be harnessed by a new company. Besides, large corporations particularly Cebtrica Energy is a difficult electricity provider to compete. The expensive cost of venturing into the energy industry likewise contributes to the challenges that a new market player should overcome to emerge successful in the business. Substitutes. “Substitute products” as those that are available in other industries that meet an identical or similar need for the end user. As more substitutes become available and affordable, the demand becomes more elastic since customers have more alternatives. The treat of substitutes often impacts price-based competition since substitute products may limit the ability of firms within an industry to raise prices and improve margins. Other concerns in assessing the threat of substitutes include the presence of new technologies that can contribute to competition though more diverse and economical substitute products and services. A segment is unattractive when there are actual or potential substitutes for a product. In the case of the energy industry, there are several existing energy sources that are concerted to electricity which can serve as alternatives. Solar energy is captured through solar panels to produce electric power that will enable appliances and other electric machines and devices to function. Other sources of power energy which can be converted to electricity include wind energy, rivers, geothermal, tides, waves, and biomass (1996). However, these alternative energy resources are determined by the topography and distribution of natural resources in a particular location. With regards to Centrica Energy, the available energy sources which proved promising to the company have been fully explored and discovered which made it the major market player in the energy industry. As such, the viability of providing alternatives to the services and products offered by the organization will be difficult and could be almost impossible. But if new technologies will enable the availability of substitute products and services, there will be new opportunities to gain entrance in the industry. Industry Competitors. Firms strive to secure a competitive advantage over their rivals. The intensity of rivalry varies within each industry and these differences can be important in the development of strategy. Industries that are “concentrated,” versus “fragmented,” often display the highest level of rivalry. In pursuing an advantage over its rivals, a firm can choose from several competitive moves: (a) changing prices, (b) improving product differentiation, (c) creatively using channels of distribution, and (d) exploiting relationships with suppliers. Centrica Energy is confronted with several competitors in the UK energy market in terms of production, transmission, and distribution. This includes AA, Armeda, Atlantic Electric and Gas, Basic Power, Beacon, British Gas, Calortex, Cambridge Gas & Electricity, Countrywide Energy, Daily Telegraph, East Midlands electricity, Eastern electricity, Ecotricit, Elf at Home, Equigas, Equipower, Green Energy, Ideal, Independent Energy, London Energy, Lloyds IdeaL, meb, Midland Shires Farmers, Midlands Electricity, Midlands Gas, National Power, Norweb Energy, RSPB Energy, Sainsbury Energy, Scottish Gas, SEEBOARD Energy, Sterling Gas, Telecom plus, SWEBB Energy, Tesco Energy, TXU Energi, Unit [e]-, Virgin Home Energy, and York Gas. These companies serve as threat to the company in terms of market share, services, and products ( 2006).    Implementation & Action Plan The table contains the implementation plan for Centrica Energy for one year, three years and five years. Time Goals Activities One Year Finalize Centrica Energy strategic business plans 1.  Reveal results of the Feasibility Study 2.  Introduce to the people the new business organizations that will deliver their specific consumer needs. 3.  Increase community relations activities to further promote the plans with the local communities   Three Years Fully exhaust and maximize the opportunities that will surface among the different production and services divisions of the company. 1.  Maintain strong relationship with the fuel suppliers. 2.  Establish brand name and product visibility concerning the power generation, transmission, and distribution interests of the business. 3.  Improve marketing efforts by highlighting the intensified service plans for the benefit of the consumer population. Retain market leadership in terms of power generation operations and improve the transmission and distribution competitiveness of the organization. 4.  Initiate revolutionary business plans and strategies that will address the necessary approach to improve the transmission and distribution aspects of the company. 5.  Continue marketing efforts in all the power generation, power transmission, and power distribution interests of the business. Five Years Become the market leader in Great Britain and world energy industry in terms of power generation, power transmission, and power distribution. 1.      Increased exploration efforts for more resources of energy generation. 2.      Research and development for technological innovations in all the core business interests of the company.. 3.      Increase product visibility and brand strength over the competitors in the power generation, power transmission, and power distribution industry.         Credit:ivythesis.typepad.com

ASSESSMENT PLAN: A Case Study of Centrica Energy’s Five Years Strategic Business Plan

ASSESSMENT PLAN: A Case Study of Centrica Energy’s Five Years Strategic Business Plan Introduction Perhaps the space between the new ...

BUSINESS STRATEGY: CENTRICA COMPANY

Strategic Plan               Centrica is a large multinational company based in UK which is known and trusted by millions of consumers. It remains the largest residential supplier of gas and electricity in UK. It is also the largest domestic central heating installation and maintenance company.     Corporate Objectives             The long term objectives of Centrica are summarized as: to expand the business agressively and offer above average returns to stakeholders and to be tnimber one or two leading supplier of gas and electricity in UK and internationally.     Corporate Goals              Centrica’s key targets will be achieved over the next 3-5 years are as follows: increase operating profit by 60%, operating and overhead costs reduction, achieve an expansion of efficient infrastructure, achieve a develop system and improved process, become the largest supplier of gas and electricity over Europe, and employ fully qualified employees and engineers.     SWOT Analysis             From the objectives of the Centrica, SWOT Analysis is used to measure organization’s internal strengths and weaknesses and external opportunities and threats. This shows a representation of where the company is at point in time in relation to its environment. SWOT starts off with investigating the internal factors that support the company (strengths) and the internal factors that have a negative impact to the company. Then after that, investigating the external opportunities which the company may have and its external threats follows through.             SWOT is limited only to looking at the internal strengths, weaknesses and external opportunities and threats but it fails to consider the economical and social trends. The strengths of Centrica are its strong financial performance and its dedicated and professional employees. The weaknesses are high prices on commodity, lack of upstream gas assets, customer losses, undeveloped system and unimproved process, and high operational and overhead costs. The opportunities of Centrica is diversification, they can also go into vertical integration and even internationalization. The main threats are competitive marketplace, volatile market conditions, and the additional supplementary tax on gas production profit.       Key Strategies             Centrica’s strategic priorities are the following: rigorous cost reduction across the Group to allow lower prices on the commodities, proactive marketing to strengthen customer loyalty and cope up again the large customer loss from this year, positive price management to sustain proﬁtability, building growth in our service and energy businesses at home and abroad, and absolute ﬁnancial discipline in acquisition and capital investment.     Strategic Action Programs             The following strategic programs will be implemented:     A.     CEO: Prepare comprehensive business plan     B.     HR: Recruit Marketing Director and other key staff for marketing and sales     C.    HR: Train newly recruited staff     D.    Board: Expand BOD to include further independent financial, technical, and industrial expertise     E.     Director of Development: Prepare a development plan for power station infrastructure     F.     Director of Development: Present to CEO for approval     G.    Director of Development: Start the infrastructure building     H.    Group Managing Director: Seek out new markets in Europe for further expansion       GANTT Chart             Shown below is a Gantt Chart to show when the task should be completed. It is a useful tool for planning and scheduling projects. It assesses how long a project should take, determine the resources needed and lay out the order in which the task need to be carried out.     Table 1 : Gantt Chart of Centrica’s strategic action programs             In the Gantt Chart above, it shows that Program A which is preparing the business plan should be done by the CEO in 6 months time. In the Program B, the Human resource should recruit new marketing personnel in 4 months time and train them in just 2 months. Next is the Board should extent the Board of Directors in 2 years. Then to expand their infrastructure, the Director of Development should prepare a development plan for 10 months. After having the development plan it should go to the CEO for approval. After approval, the project should start up immediately and finish it in 4 years. And also the company should seek out new markets for further expansion and should start out looking out immediately after a business plan is completed and would end within 5 years and hopefully by the end of five years, Centrica has already new markets within Europe or in other countries or continents rather than Europe to start with the business expansion.             Gantt Chart are also useful when the project under way. It helps in monitoring its progress and immediately see what should have been achieve at a point in time, and can therefore take remedial actions to bring the project back on course.   References:         Credit:ivythesis.typepad.com

BUSINESS STRATEGY: CENTRICA COMPANY

Strategic Plan Centrica is a large multinational company based in UK which is known and trusted by millions of ...

Strategic Plan for Centrica

Business Strategies Strategic Plan for Centrica   Introduction             Centrica is a large multinational company, based in the UK but also with interests in North America and Europe             Centrica was demerged from the former British Gas in February 1997, established to continue to invest in a successful energy and related home services business in UK.             In Great Britain, Centrica is known and trusted by millions of consumers with their consumer’s brand, British Gas and Dyno, developing a range of products and services tailored to the specific needs of commercial customers. It remains the largest residential supplier of gas and electricity in UK. It is also the largest domestic central heating installation and maintenance company. In addition, non-customer brands, Centrica Energy and Centrica Storage, play a key role in supporting the customer brands. Centrica Energy sources the gas and electricity to supply customers through their upstream gas production and electricity generation facilities and wholesale and gas trading activities. Centrica Storage provides gas storage services for a wide range of customers including other businesses within the group. Centrica has made strong inroads into the North American market and exporting strategy into Europe with ventures in Belgium, the Netherlands and Spain.             Centrica serves millions of people across the United Kingdom, North America and Europe. They provide a wide range of products and services, from gas and electricity supplies to insurance and telephone services.   Strategic Plan             Strategic planning consists of the process of developing strategies to reach a defined objective. This process provides an overview of the entire organization to its leadership. It is also defined as a plan describing how a firm will adapt to take advantage of the opportunities in its constantly changing environment, in order to maintain a strategic fit between firms and goals and capabilities and these market opportunities ( 2002).             Strategic Plan should serve as a framework for decisions or for securing support/approval. This should also provide a basis for more detailed planning. This explains the business to others in order to inform, motivate and involve. Moreover, this assist benchmarking and performance monitoring and stimulate change and become building block for the next plan.   SWOT Analysis SWOT analysis can provide a framework for identifying and analyzing strengths, weaknesses, opportunities, and threat. This can also provide an impetus to analyze a situation and develop suitable strategies and tactics, a basis for assessing core capabilities and competences. Moreover, this can provide the evidence for, and cultural key to change and a stimulus to participation in a group experience.   Fig. 1 SWOT Analysis   Vision             Centrica will be either number one or two leading supplier of energy and related services both in UK and internationally that have the appropriate business and regulatory climate , in order to provide high returns to shareholders that shareholders expect to receive from the top 25 best performing companies in the FTSE 100.             In 3 to 5 years time, Centrica will recover the wholesale cost of gas and will acknowledge that the long-term strength of the Group is dependent on British Gas delivering a fair and reasonable profit. We will have more than 300 new fully qualified engineers and will complete the nationwide roll-out of the engineer deployment system to all central heating engineers. Operating profit will rise by 60%.             Mission             Centrica manage sales, marketing, and customer service activities to reduce the impact of competitor. Cost control remains a high priority of the company. Develops system and improve process to achieve efficiences to meet the objective to reduce cost. Continue to seek expansion of infrastructure that bring gas into UK to have downward pressure on prices.   Corporate Values             The corporate values of Centrica are based on fundamental values and beliefs which links their vision to their business principles. These includes passion for customers, pride, trust, challenge, and support.             Passion for customer is the central value to the way they work. They have an ethos to deliver outstanding customer service, anticipating customers’ needs and correct errors promptly. They give value to money, and deliver efficient and effective products and services.             Pride comes from the satisfaction of their customer and from  dlivering high quality products and services. Proud of the staff and their achievements and recognize and reward success. Trust is at the heart of their relationship to their customers, doing what they say, acting with integrity and respecting and empowering employees. Building trust helps develops strong future relationship with their stakeholders. Challenging themselves from constant striving for continual improvement, engaging constructively with advocates and critics from within and outside the company to maintain competitive edge and deliver consistently outstanding stareholders returns. Supporting employees seeking to meet and own challenges. They foster teamworking and knowledge sharing, and give their employees the tools and training they need to do their jobs well.   Objectives             The long term objectives of Centrica are summarized as: to expand the business aggressively and offer above average returns to stakeholders and to be number one or two leading supplier of gas and electricity in UK and internationally.   Goals              Centrica’s key targets will be achieved over the next 3-5 years are as follows: increase operating profit by 60%, operating and overhead costs reduction, achieve an expansion of efficient infrastructure, achieve a develop system and improved process, become the largest supplier of gas and electricity over Europe, and employ fully qualified employees and engineers.   Strategies             Centrica’s strategic priorities are the following: rigorous cost reduction across the Group to allow lower prices on the commodities, proactive marketing to strengthen customer loyalty and cope up again the large customer loss from this year, positive price management to sustain proﬁtability, building growth in our service and energy businesses at home and abroad, and absolute ﬁnancial discipline in acquisition and capital investment.   Marketing Mix             Product             Centrica provides a wide range of products and services, from gas and electricity supplies to insurance and telephone services.             British Residential Gas supply gas and electricity to residential customers throughout Great Britain. British Gas Services is the nation’s biggest residential gas and electricity supplier and also the largest domestic central heating and gas appliance and breakdown cover provided under the home care. British Gas Business is Britain’s leading supplier of energy to the business sector, and the only energy supplier dedicated to the needs of small to medium size customers through to industrial and commercial customers. The creation of a distinct business unit in 2002 enabled British Gas Business to focus on the specific needs of businesses, from core gas and electricity services to central heating care. Centrica Energy source the gas and electricity we need to supply our residential and industrial customers in Great Britain through a team of specialists working for Centrica Energy. Centrica Energy consists of our upstream gas production, electricity generation and renewable asset operations, wholesale and certain industrial gas sales activities, and our energy procurement optimization and scheduling unit. Dyno-Rod, which is part of British Gas, is the UK’s market leading drain cleaning service. Its work includes clearing blockages, CCTV drain inspections surveys, drain repairs and pipework installations.It operates through a network of franchises covering all of the UK and Ireland. Price Price is one of the problem of Centrica today. Centrica have higher prices than the other competition in the industry. use of high prices in their commodities, they loss millions of customer. To regain the loss, Centrica need to lower their prices. In order to lower their prices, they need to reduce their operational cost. Promotion Centrica had loss many customers. In order to regain them a intensified promotion should be done.  Additional services should be undertaken to sustain their still loyal customers and also to attract new customer.   Place of Distribution Centrica has a goal to penetrate the whole Europe. It would be a good idea  for the company to expand more to be able to get to supply the gas and electricity to the European countries. Additional profit would entail the company if it will be achieved.                                   Credit:ivythesis.typepad.com

Strategic Plan for Centrica

Business Strategies Strategic Plan for Centrica Introduction Centrica is a large multinational company, based in the ...

Tullow Oil Case Study

Tullow Oil Case Study   Introduction             (1985) states that “competitive advantage grows fundamentally out of the value a firm is able to create for its buyers that exceeds the firm’s cost of creating it. Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors for equivalent benefits or providing unique benefits that more than offset a higher price. There are two basic types of competitive advantage. These are cost leadership and differentiation.” A cost advantage exists when the firm is able to deliver the same benefits as competitors but at a lower cost. While differentiation advantage exist when the firm deliver benefits that exceed those of the competing products.             However, the Resource-based View ( 1984, 1987;  1986, 1991, 1989;1991) provides another perspective on competitive advantage. This is hailed as a possible paradigm capable of elucidating and integrating research in all areas of strategy (1993). The basic tenet of the resource-based view is that unique resources are the sources of sustained competitive advantage (1991). To generate such advantage, a resource must be rare, valuable, inimitable, non-tradable, and non-substitutable, as well as firm-specific ( 1986, 1991;  1989; 1991).             Tullow Oil is under the oil and gas industry. According to Grote (2001), stock market analysts see oil and gas exploration and production as an old economy. However, Grote argues that oil and gas industry is the cutting edge of innumerable technological breakthroughs, such as engineering and digital technology, chemical science and the dot.com world. He added that oil and gas industry will continue to dominate the global energy market despite growth in renewable energy resources.             Tullow Oil is founded by , the Group’s Chief Executive, in 1985. Tullow is quoted on the London and Irish Stock Exchanges and is one of the largest independent exploration and production companies in Europe with production exceeding 63,000 barrels of oil equivalent per day. The Group is engaged in oil and gas exploration and production with a primary focus on gas in the UK Southern North Sea and oil in Africa, with an ongoing appraisal and development programme in South Asia.             Particularly, this paper will be concentrating on how Tullow Oil gains the competitive advantage given its strategy of acquiring mature fields. It will be discussing on the strategies the company has implemented, the objectives of their strategy and how this will position the company to remain competitive. Current and projected finances will also be presented.                   An Overview of Tullow Oil             Tullow Oil was founded by Aidan Heavy, the Group’s Chief Executive, in 1985. Gas production and sales commenced in Senegal in which a license agreement had been signed in 1986. In 1989, Tullow Oil shares were listed on the London and Irish Stock Exchanges. In the same year, Tullow began its development initiatives with its first onshore UK licenses.             Tullow is quoted on the London and Irish Stock Exchanges and is one of the largest independent exploration and production companies in Europe with production exceeding 63,000 barrels of oil equivalent per day. The Group is engaged in oil and gas exploration and production with a primary focus on gas in the UK Southern North Sea and oil in Africa, with an ongoing appraisal and development programme in South Asia.             In 1990, Tullow signs its first license agreement in Pakistan, laying the foundations of Group’s South Asia core area. In the mid 1990’s Tullow discover the Sara gas field in Pakistan which was brought to stream in 1999. In addition, Tullow acquired Bangladesh and Côte d’Ivoire licenses in 1996. This included the Espoir oil and gas fields where first production was achieved in 2000.             The year 2000 is said to be the beginning of an accelerated pace of activity for Tullow. It started with the acquisition of a ₤200 million of the producing gas fields and related infrastructure in the UK Southern North sea from BP. By 2004, Tullow has acquired 0 million of Energy Africa. It was the remarkable year for the Group since it has transformed to a more balanced oil and gas exploration and production company together with the strong cash flow and upside potential through exploration opportunities and global resource pricing. In addition, by December of the same year, the Group announced a ₤200 million of UK Schooner and Ketch producing assets and surrounding acreage. In just four short years to 2004, Tullow has followed a coherent strategy with a logical progression that has enabled the Group build a leading production and acreage position in the CMS area.             In 2005, Tullow records a positive operating environment, delivering record profits, earnings and cash flow, with buoyant oil and gas prices. New fields are added and major increase in output and good progress in key development projects. Production increased by 44%. Current production is 69,000 boepd. Organic reserves replacement was 118% and total reserves increased by 53 mmboe to 358 mmboe. The Group has already two UK North sea gas discoveries which are in Gabon and Mauritania.             The Group is headquartered in London and employs over 200 people worldwide. Tullow is a dynamic industry player with a diverse portfolio of 90 licenses in three core areas spread across 15 countries in NW Europe, Africa and South Asia. Production is expected to grow to over 80,000 barrels of oil equivalent per day during 2007 and our reserves are over 358 million barrels of oil equivalent.             The Group’s primary listing is on the London Stock Exchange and Tullow’s shares are also listed on the Irish Stock Exchange. The Group is a constituent of the FTSE250 and our market capitalization is approximately £2.5 billion. Over 70% of the issued share capital is held by institutions, with a strong UK shareholder base and growing ownership in both Europe and the US.             Tullow is founded in Ireland in 1985. It has originated in Africa. By the year 1990 became active in South Asia and in the UK gas market in 2001. Over time they have developed a balanced portfolio, with a mixture of oil and gas assets in mature and developing markets and a balance between growing production output and longer-term exploration.             Tullow’s strategy is to build strong positions in core areas and to consolidate niche positions in developing regions. This is managed through production-led exploration and reserve enhancement, operational innovation and focused acquisitions and divestments. Tullow’s aim is to deliver superior returns to shareholders and Total Shareholder Return over the past five years was 325%.             Tullow has a genuine commitment to our environmental and social responsibilities and we look forward to sustaining and improving our high levels of performance in this area as the Group continues to grow. The Group sponsors a wide range of social and community projects in countries where we live and work.         Production             Tullow Oil‘s principal activities are exploring and producing oil and gas and providing technical services to its joint venture partners. Moreover, the Group has a diverse portfolio of 90 licenses in three core areas spread across 15 countries in Europe, Africa and South Asia.             Below are the tables presenting the production of the oil and gas in the three core area, Europe, Africa, and South Asia.   Table 1. Production and Commercial Reserve of gas and oil of Tullow Oil in the three core areas in 2003, 2004 and 2005       1. NW Europe       2005                          2005     2.Africa   2005         3. South Asia 2005                                             Source: 2004 & 2005               The table above presented the comparative production and commercial reserve of Tullow in the year 2003, 2004 and 2005 in the three core areas.   Table 2. Production and Commercial Reserve by Core Area in the year 2004 and 2005     Source: 2004 & 2005               From the tables, it is presented that in 2005, the weighted average working interest production is 58,450 boepd which is 44% higher than the average for 2004. NW Europe has a total production of 42% from the 51% in 2004, Africa has 57% from the 47% in the year 2004 and South Asia has 1% compared to the 2% in 2004. In addition, commercial reserve is also presented showing that NW Europe total reserve is 31% from 21% in 2004, Africa has 61% compared to 70% in 2004 and South Asia has 8% from the 9% in 2004. Group working interest production continues to increase, current production is over 56,000 boepd this year (2006).             In comparison with 2005 results of NW Europe operation, weighted average working interest production in 2004 was 40,600 boepd which is 62% ahead of 2003 levels, with a geographic balance between NW Europe (51%), Africa (47%) and Asia (2%) and a product balance between oil (56%) and gas (44%).             A press release (2006), Tullow Oil UK Business Update, states that Tullow’s NW Europe interests are primarily focused on gas in the Southern North Sea. Tullow has substantially extended and enhanced its position through exploration drilling, active development, participation in licensing rounds and a series of bolt-on acquisitions. Moreover, Tullow’s interest includes the CMC and Thames/Hewett areas. Natural gas production from Horne and Wren commence on June 9, 2005 and reached a stabilized flow rate of 60mmscfd. Tullow has also gone into a 50:50 joint venture with Centrica. The development project is comprised of two horizontal wells in which Tullow has 67% interest.               Moreover, Horne and Wren discoveries have resulted in Tullow operating development with 50% interest. Production from Horne and Wren wells brings the throughput of the Thames infrastructure to over 190 mmscfd, a four fold increase since early 2004. This increase further reduces the unit operating cost of this regional hub and extends the life of the Thames facility, thereby enhancing the value of Tullow’s other interests in the Thames Area fields.             In addition, the Opal exploration well has successfully encountered gas bearing reservoir in the Carboniferous section. Tullow has currently has a 46% interest in the discovery.             In Africa, Tullow has production in Gabon, Cote d’Ivoire, Congo (Brazzaville) and Equatorial Guinea. Tullow also has exploration programs in Morocco, Mauritania, Senegal, Cameroon, and Uganda (2005).             Finally, in South Asia, Tullow has production and exploration interests in Pakistan and exploration activities in India and Bangladesh. According to the report, in 2004 the Group had exploration success in Bangladesh, where the Bangora-1 exploration well tested gas at an aggregate rate of 120 mmscfd gross, and in Equatorial Guinea with the Akom North oil prospect, a satellite to the Okume complex (2005). The Group drilled 16 exploration wells, of which seven were discoveries. Currently South Asia accounts for 1% of Group production.             In an interview, Aidan Heavy states that after having acquired the Energy Africa, production has doubled to 54,000 barrels a day overnight. He admits that the deal was a gamble, however, he has a good track record of betting big and winning. The acquisition, which was completed in June, doubles group reserves to 174 million barrels (2004).             Currently, in the first half of 2006, Tullow has already drilled 18 development wells increasing the Group working interest production to 63,200 boepd which is 8 % higher than 2005 levels (2006). Financial Analysis Table 3. Five Year Financial Summary of Tullow Oil   IFRS   UK GAAP1 Group Profit and Loss Account 2005 £’000 2004 £’000 2004 £’000 2003 £’000 2002 £’000 2001 £’000 Sales Revenue 445,232 225,256 225,256 129,625 110,610 76,633 Cost of Sales (243,149) (141,228) (131,071) (82,249) (75,350) (46,480) Gross Profit 202,083 84,028 94,185 47,376 35,260 30,153 Administrative Expenses (13,793) (11,573) (11,017) (3,059) (3,925) (3,859) Profit/(Loss) on Disposal of Oil and Gas Assets 36,061 2,292 2,292 (952) 914 – Exploration Costs Written Off (25,783) (17,961) (17,961) (12,772) (4,169) (3,945) Operating Profit 198,568 56,786 67,499 30,593 28,080 22,349 Loss on Hedging Instruments (159) – – – – – Finance Revenue 4,367 3,458 3,458 2,016 1,409 1,371 Finance Costs (24,197) (13,449) (12,960) (8,730) (9,044) (7,708) Profit from Continuing Activities before Taxation 178,579 46,795 57,997 23,879 20,445 16,012 Taxation Charge on Profit on Ordinary Activities (65,443) (15,460) (25,048) (12,958) (7,649) (6,702) Profit for the Year from Continuing Activities 113,136 31,335 32,949 10,921 12,796 9,310 Dividends Paid (14,555) (6,995) (6,995) (3,782) – – Retained Profit for the Financial Year 98,581 24,340 25,954 7,139 12,796 9,310 Earnings per Share             Basic – Stg p 17.50 5.88 6.18 2.92 3.56 2.61 Diluted – Stg p 17.20 5.81 6.11 2.90 3.51 2.56 Group Balance Sheet Fixed Assets 897,602 649,967 599,728 193,263 195,886 207,659 Net Current (Liabilities)/Assets (71,273) 21,394 23,353 32,521 15,771 8,685 Total Assets less Current Liabilities 826,329 671,361 623,081 225,784 211,657 216,344 Long Term Liabilities (437,310) (295,894) (243,997) (109,863) (111,357) (124,344) Net Assets 389,019 375,467 379,084 115,921 100,300 92,000 Called Up Equity Share Capital 64,744 64,537 64,537 37,784 35,981 35,847 Share Premium Account 123,019 121,656 121,656 14,198 2,485 1,993 Other Reserves 60,589 148,591 148,591 45,593 69,213 69,213 Profit and Loss Account 140,667 40,683 44,300 18,346 (7,379) (15,053) Equity Shareholders’ Funds 389,019 375,467 379,084 115,921 100,300 92,000               Source:             As shown in the financial summary for the last five years, there have been fluctuation in the retained profits of the company but there have been a tremendous increase in profit in the year 2005. Generally, the five years time, sales revenue has continually increased. In addition, assets of the company have continually increased which is a good sign of good asset management. Table 4. Comparative Financial Results for the year 2004 and 2005   2005 2004 Change   £ millions £ millions   Sales Revenue 445.2 225.3 Up 98% Operating Profit 198.6 56.8 Up 250% Profit Before Tax 178.6 46.8 Up 282% Operating Cash Flow before Working Capital 288.1 139.5 Up 106%   Stg p Stg p   Basic Earnings per Share 17.50 5.88 Up 198% Final Dividend per Share 3.00 1.25 Up 140% Source:             The above table is the comparative financial results of the operating year 2004 and 2005. A horizontal analysis is used to analyze the financial status and performance of the company. Horizontal analysis is one type of financial ratios which is used to analyze the percentage change in sales over time and be able to know the necessary decision for the company.             As shown in the comparative financial results, the year 2005 is a year of progress. Sales revenue increased by 98% to pounds 445.2 million compared to 2004 which is up to pounds 225.3 million reflecting a full year contribution from the Energy Africa assets, nine months contribution from the Schooner and Ketch fields and oil and gas prices significantly higher than in 2004.             Operating profit increased 250% to pounds 198.6 million compared to 2004 which is up to pounds 56.8 million and profit before tax increased 282% to pounds 178.6 million compared to 2004 which is up to pounds 46.8 million including the profit of pounds 36.1 million on the disposal of non-core oil assets in the UK and offshore Congo and the sale of equity in the Horne & Wren development.             Basic earnings per share amounted to 17.50 pence, an increase of 198% compared to 5.88 pence in 2004. Operating cash flow before movements in working capital amounted to pounds 288.1 million, an increase of 106% over 2004, reflecting the quality of the Group’s producing asset base and allowing record levels of reinvestment in the business.             Moreover, the Group’s capital expenditure programs are comfortably funded from strong operating cash flow and profit on disposals. The refinancing initiatives undertaken during 2005 have significantly enhanced the Group’s financial flexibility over both the short and long-term. In line with the Group’s progressive dividend policy, and reflecting the cash generated by the business and the capital investment and acquisition opportunities available, the Board recommends a final dividend of 3.00 pence per share. This brings the total dividend for the year to 4.00 pence per share compared in 2004 which is 1.75 pence per share.               In addition to show the company’s operating efficiency and over all returns on asset and capital, a profitability analysis should be used. There are many profitability measures. In here we use net profit margin to measure the percentage of each sale peso remaining after all expenses. Net profit margin is computed by dividing net income by sales.             Net profit margin (2004) = net income / sales                                                       = 24,340,000 / 225,256,000             Net profit margin (2004) = 0.11   Net profit margin (2005) = net income / sales                                                       = 98,581,000 / 445,232,000             Net profit margin (2005) = 0.22               From the computation, the net margin of 2004 is 0.11 which has doubled by the year 2005. This means that in 2004, in every ₤1 invested there is a net profit of ₤0.11 while in 2005 for every ₤1 invested there is ₤ 0.22 net profit. The net profit margin of the company has increased which means that the company has been operating more efficiency in 2005 compare to 2004.     Company’s Objective           Tullow’s vision is to be a leading independent oil and gas Group, with a balanced portfolio of exploration and production assets. This vision is underpinned by a consistent growth strategy, the cornerstones of which are a focus on gas in the UK Southern North Sea and oil in West Africa, with an ongoing appraisal and development programme in South Asia. Tullow’s key objective is to maintain consistent growth over the long term.   Company’s Strategy             Tullow’s strategy is to build strong positions in core areas and to consolidate niche positions in developing regions. This is managed through production-led exploration and reserve enhancement, operational innovation and focused acquisitions and divestments. Tullow’s vision is to be the leading independent oil and gas Group with a balanced portfolio of exploration and production assets. Tullow has a consistent growth strategy. With this strategy, Tullow work hard to exploit and expand their current reserve base. They combine development and near infrastructure exploration with high impact, higher risk exploration. They make selective acquisitions to complement our existing asset base and we drive their performance with operational innovation and active portfolio management.             Tullow has seen a positive outlook on the performance and growth of the business in the next year of operation. The next year is seen to be a year of consolidation and delivery from Tullow’s enlarged portfolio of assets. The Group has an active programme of development and exploration that will continue to grow and develop the business. The exploration risk-reward profile will be enhanced by farm-outs of licenses where value has been added through geological and geophysical surveys.             At a global level, the market environment and oil and gas prices are expected to remain strong. In particular, the fine balance between gas supply and demand in the UK underpins the Group’s view that the current favorable gas pricing environment in the UK will continue over the coming years.             The 4 million realized from the disposal of non core assets, combined with a planned consolidation of Group banking facilities during 2005, leaves Tullow conservatively funded and well placed to continue to pursue its growth strategy.             Business Wire reported that Tullow continued to have a positive outlook of the future. Tullow has steadily developed a balanced portfolio of international exploration and production assets. The performance of these assets during 2005 and the organic growth expected in 2006 provide a solid base for further growth. Projects such as the development of the Kudu field in Namibia and the exploration programme in Uganda provide possibilities for significant changes in the Group’s scale, while the Group’s cash flow and modest gearing create the flexibility to accelerate programs and take advantage of development and acquisition opportunities as they arise.             Moreover, by the following year, Tullow will be able to have six UK exploration wells. In Namibia, 2006 will be an important year both for the gas sales negotiations for the gas-to-power. In Uganda, Tullow and its partners plan a minimum of four further onshore wells in 2006 and two additional wells in Lake Albert in 2007 as part of an extensive exploration and appraisal programme across its Albertine Basin acreage.             In Bangladesh, extensive 3D seismic, appraisal drilling and the initiation of production on a long-term test basis to help supply much needed gas to the Dhaka region. The introduction of Total as a partner in offshore Blocks 17&18 brought a renewal of activity with the recent commencement of an offshore seismic survey.             In Pakistan, work on the development of Chachar field continues, with first gas forecast for the final quarter of 2006. Drilling has commenced on the Shahpur Chakar well in the Nawabshah block. In India, joint venture is integrating information from significant regional discoveries to the South and the North, and the companies anticipate a multi-well drilling programme in 2007.             According to Aidan Heavey, “their production is growing strongly and is expected to reach 75,000 boepd by the end of the year. On the exploration front they plan to drill over 20 wells, including further wells in Uganda, where they have scheduled an extensive exploration and appraisal program to build on the recent M’Puta and Waraga discoveries.             The outlook for Tullow is very positive. Oil and gas prices are strong and forecast to remain so. Their existing assets and work programs are expected to deliver robust organic growth and our new ventures program and other development opportunities offer compelling upside potential.”             In 2005, according to the report, major investment in people and facilities has been made reflecting the material growth of the Group in recent years. Moreover, during 2005 the London team moved to a new office at Chiswick in which over 40 additional staff were recruited and dedicated teams were put in place for the important Schooner & Ketch and Kudu projects (PR Newswire, 2006).             Tullow Oil Competitive Advantage             Tullow is a leading independent oil and gas, exploration and production group. The Group has interests in over 90 production and exploration licenses in 16 countries and focuses on three core areas: NW Europe, West Africa and South Asia.                       In order for Tullow to survive, the company has to have some degree of competitive advantage. Competitive advantage, according to (1985), comes from the value that firms create for their customers that exceeds the cost of producing that value. The key concern for a business is to capture that value which is greater than its cost.             Additionally, he identified two types of competitive advantage, which were cost leadership and differentiation. The source of above-average performance of a firm in the long run is a result of sustainable competitive advantage, and the three generic strategies which he suggests leads to above-average performance are cost leadership, differentiation, and focus.             However, there has been another research which has illustrated by the work of  (1986, 1991), (1991), (1989), (1991),  (1992), and (1993) known as the resource-based view.             According to  (1996), the resource-based view focuses on heterogeneity among firms in the same industry. It views firms in terms of unique bundles of resources and capabilities that provide the basis upon which a competitive advantage can be pursued. Moreover, the normative implication of this view is that the firm should base its strategy on its own resources and capabilities. Irrespective of the markets or combination of markets served, firms should seek to leverage the resources best suited to those markets. This may even lead to a situation where the firm will choose to compete in inherently less structurally attractive markets if it possesses resources that are valuable in serving those markets (1991).             According to (1989), competitive advantage is not inherent in all resources but, rather, in only those that meet a rigorous set of conditions ( 1991,  1993).             The first condition is that the resource must be valuable. It must provide the opportunity to exploit some environmental opportunity or neutralize some threat. (1991) suggests that resources are considered valuable when they enable a firm to conceive of or implement strategies that improve the firm’s efficiency or effectiveness.             Second condition is that resources must have the characteristic of rareness. Firms should possess unique bundles of skills and resources that can attain a sustainable competitive advantage.             Third, there must be the condition of imperfect mobility of resources. Imperfectly mobile resources include those that are idiosyncratic to the firm ( 1979), those for which property rights arc not well defined ( 1989), or those that are co-specialized assets (1986).             Finally, resources must be imperfectly imitable (1991) or provide some ex-post limits to competition, that is, subsequent to a firm gaining a superior position and earning rents, forces must exist that limit competition for those rents (1993). For a firm to be in a position to exploit a valuable and rare resource, there must be a resource position barrier preventing imitation by other firms (1984).             From the information gathered and stated above about Tullow operation and finances, competitive advantage of the company can be identified. Here are some of the competitive advantages that the company is possessing.   Progressive Dividend Policy             The Group’s capital expenditure programs are comfortably funded from strong operating cash flow and profit on disposals. The refinancing initiatives undertaken during 2005 have significantly enhanced the Group’s financial flexibility over both the short and long-term. In line with the Group’s progressive dividend policy, and reflecting the cash generated by the business and the capital investment and acquisition opportunities available, the Board recommends a final dividend of 3.00 pence per share. This brings the total dividend for the year to 4.00 pence per share compared to 1.75 pence per share in 2004. Major investment in People and Facilities             A major investment in people and facilities has been made reflecting the material growth of the Group in recent years. During 2005 the London team moved to a new office at Chiswick, and recruited 40 more staff and dedicated teams were put in place for the important Schooner & Ketch and Kudu projects. Group’s cash flow and modest gearing create the flexibility to accelerate programs and take advantage of development and acquisition opportunities as they arise. Rigorous Operational Risk Management             Risk management is central to our business, particularly in light of the international spread of our activities and the dynamic nature of our industry. The Group gives regular consideration to the key risks facing the business, with particular reference to those concerning the overall safety of our operations, the geographical balance of our activities and the characteristics of our individual assets and joint ventures Record Operating Cash Flow and Strong Balance Sheet             The strong pricing environment, allied to increasing production and effective control of underlying operating costs, led to record operating cash flow before working capital movements of pounds 288.1 million, 106% ahead of 2004. This cash flow enabled the Group to maintain modest gearing of 36% at year end, to increase dividends to shareholders in respect of the period by 129% and to invest pounds 193.0 million in exploration and development activities in the year.             Over 80% of Group capital expenditure was associated with ongoing development and production enhancement projects in the UK, Gabon, Congo (Brazzaville), Equatorial Guinea and Cote d’Ivoire. The programs associated with this expenditure have allowed Tullow to achieve organic reserve replacement of 118% over the period. Tullow has approved total 2006 capital expenditure of pounds 280 million across all assets, driving group production to a target of over 75,000 boepd by year end.             Net assets at December 31, 2005 amounted to pounds 389.0 million (2004: pounds 375.5 million). Net assets were reduced by pounds 120.4 million in the year due to the recognition of a hedge reserve in accordance with IAS 39 (adopted January 1, 2005). An increase in net assets (foreign currency translation reserve) of pounds 32.4 million resulted from the strengthening of the US Dollar against Sterling from US.93 to US.72 in the year. Successful major Refinancing             Over the last five years Tullow has undertaken a range of acquisitions and field developments, all of which have been wholly or partly debt financed. During 2005 the Group completed a US0 million refinancing, the largest such facility ever negotiated by a UK independent oil company. This has allowed Tullow to consolidate existing borrowings into a single facility, to halve its collateralization obligations and to maintain financial flexibility for future growth. The Group currently has over US0 million of unutilized debt capacity in addition to its cash balances. Significant Operational Milestones             In the UK we completed our first operated offshore development and assumed operatorship of the Schooner and Ketch fields, helping to increase our net production to over 200 mmscfd, 60% of which we operate. In Africa, our focus was on development and infill programs, most notably in Gabon, where our proven and probable reserves increased by over 50% during the period. In Equatorial Guinea the Okume project remains on target for first oil during 2006 and in Congo (Brazzaville) the M’Boundi field continues to perform strongly. In Asia, during 2006, the Bangora long-term test will commence and the Chachar development will produce first gas. Organic reserves replacement for the year was 118% and total reserves increased by 53 mmboe to 358 mmboe.   Financial Strength and Progressive Dividend Policy             Tullow’s capital expenditure requirements are comfortably funded from Group resources. In 2005, operating cash flow before working capital movements amounted to £288.1 million (2004: £139.5 million) and profit on non-core disposals was £36.1 million as we rebalanced our asset portfolio.   Commitment to Corporate Social Responsibility             Much of the Group’s success has been based on building and fostering strong relationships with stakeholders, employees, industry partners, local communities and shareholders. Tullow conduct business to the best industry standards in a manner that is safe, environmentally acceptable and sensitive to the needs and concerns of local communities.   Valuable Assets and Further Opportunities             Tullow has steadily increased its acreage and developed its reputation as a technically innovative and commercially astute operator since its entry into the UK Southern North Sea in 2001. During this time, the UK has become a net importer of gas to satisfy indigenous demand. UK gas production was over 200 mmscfd for the first time in December and has since increased to 210 mmscfd. Tullow has over 40 licenses and a strategic position in terms of acreage and infrastructure. Tullow operate over 60% of UK production, allowing the Group material control and influence over its daily production, gas sales and the management of its assets.             There is an outstanding opportunity over the coming years to continue to build a truly Pan-African oil and gas business. In 2005, they invested over £139 million in our African operations with exceptional results. Current African oil production exceeds 34,000 beopd, with further increases anticipated during 2006 as new developments in Côte d’Ivoire and Equatorial Guinea come on stream. Africa is a region with high exploration potential and recent results in Uganda and Mauritania are very encouraging.             Tullow is establishing a presence in new countries where attractive prospects exist. In 2005, the Government of Madagascar approved Tullow’s participation in onshore Block 3109. Further exploration and development opportunities are in the final stages of negotiation and should include entry into at least one additional new country in 2006.              In Namibia, the Group is making steady progress, together with our joint development partners, in ensuring that the significant potential of the Kudu gas field is realized.             While Tullow’s production in South Asia has been modest, an extensive work programme in 2005, covering a number of important exploration and development projects has the potential to transform the Group’s business in the area.               In India, a 1,152 km 2D seismic programme recently commenced in Block CB-ON/1. The joint venture is integrating information from significant regional discoveries to the South and the North, and anticipating a multi-well drilling programme in 2007.   A Long-term Perspective             The Group has a consistent growth strategy and a long-term perspective. We invest in assets and markets where our skills and focus make a difference and seek developments where modern technology, attention to detail and a rigorous commercial approach adds significant value.   5.88 Conclusion             Based from the information gathered and stated in the paper, Tullow Oil has its competitive advantage. No company will survive without competitive advantage. Tullow has created significant value on service and products they offer to the customers. They also gain competitive advantage through their commitment to their social responsibility having them closer to the community they serve contributing to the success of the business         Credit:ivythesis.typepad.com

Tullow Oil Case Study

Tullow Oil Case Study Introduction (1985) states that “competitive advantage grows fundamentally out o...