1. TOPCIMA
EGC
Strategic Analysis
Nick Best

2. Welcome to Nick Best’s TOPCIMA strategic analysis
In this presentation you’ll find my views on the latest TOPCIMA case study
For details of courses which I am taking at Reed Business School and to learn more about the exam and how to approach it,
please see

3. Well, what an unusual case!!!
ABOUT ECG
Well, what an unusual case!!!
I bet you weren’t happy when you heard about this one. Personally, I find this a nice change from all those medium sized quite successful businesses which seem to crop up case after case.
Nasty from a student’s perspective though!

4. Despite this, there’s still plenty to get our teeth into!
ABOUT ECG
The difficulty in doing a strategic analysis on this type of company is that many of our standard models don’t work well and are largely meaningless.
This is the first time I ever remember doing a Porter’s Five Forces analysis where all the forces are low.
Despite this, there’s still plenty to get our teeth into!

5. Electricity Generation 12 coal fired power stations
ABOUT ECG
Electricity Generation
12 coal fired power stations
Democratic Asian country
Sell Electricity to 10 electricity distribution companies, who sell on to consumers/businesses
Main goal = providing electricity to home country ‘at any cost’
Nationalised
Government influenced – direct strategy
Monopoly
Appears to be inefficient
Election
(1) Current government - Greater efficiency drive
(2) Opposition - Nationalise

6. On the following page you’ll find my SWOT analysis.
Remember that you MUST do a SWOT analysis as Appendix 1 in your answer.
You will score 1 mark in the technical section for this, and up to 3 further marks in the application section if done well
You must update this SWOT for unseen issues (underline or bold these in your exam script)
A recent student script review I read made it clear that 2-3 word points in the SWOT are NOT sufficient. Aim to write at least 7-8 words for each point in SWOT.
I’ve shown my points in priority order as I see it. You don’t need to do this in the exam!

7. SWOT STRENGTHS Monopoly – no threat to sales
Financial backing from government – assures future existence whatever their position
Continued (and rising) demand assures revenue streams
Low cost loans, which have no repayment date
Technically knowledgeable staff
WEAKNESSES
Power stations operating at maximum capacity, so little additional capacity available to meet future demands.
Old asset base (inefficient, not environmentally friendly, costly to maintain)
Poor governance (power of MD, lack of reporting, no long term planning, MDs attitude of complacency, informal decisions)
Too many staff (increases cost)
Poor cost control - culture where costs are not deemed important - few targets
Poor structure – lack of control for FD, long hierarchies = slow and inefficient
OPPORTUNITIES
New production methods – nuclear, gas, wind
Import/export energy
THREATS
Large increases in demand (with limited capacity)
Political change (privatisation, price increases limited, efficiency targets)
Change in home coal industry
Environmental concerns

8. Mission and objectives
On the following page you’ll find my PEST analysis.
The PEST analysis is always an optional appendix in this exam.
In this scenario, the PEST factors are more significant than most and I believe that including a PEST will be very useful
You MUST cross reference your PEST in your script however, and many students do not do this well. Aim for 2-3 cross references

9. Mission & Objectives Governance & Ethics
NO MISSION IS DEFINED, BUT THERE ARE SOME HINTS IN THE CASE
MD – To maintain electricity generation at any cost
Minister of Energy “Productivity, Return on assets, and good stewardship of public funds”
Objectives/
Performance Measurement
Non-profit making
Government aim – to cover operating costs through sales (not reinvestment)
Few apparent cost or performance targets
Governance
Managed by board directly accountable to government
MD reports to senior civil servants – formal annual meeting
Government want ‘good stewardship of public funds’
Other meetings are informal
Lack of broad business experience on board (all electrical engineers) – no non-exec roles on board
MD appears to have total power – e.g. Corp sec does what told
No clear recruitment process noted – e.g. nomination committee
No clear remuneration process noted - E.g. Remuneration committee
Ethics
Duty to the people to be efficient – not current attitude
All research funding by coal industry
Environmental issues

10. On the following page you’ll find my PEST analysis.
The PEST analysis is always an optional appendix in this exam.
In this scenario, the PEST factors are more significant than most and I believe that including a PEST will be very useful
You MUST cross reference your PEST in your script however, and many students do not do this well. Aim for 2-3 cross references

11. PEST Political/ Legal Economic Social Technological
Government controlled
Dependent on political policies e.g. environment
Government funded (threat of change of funding method)
Very important politically to ensure continued supply
Health and safety important in production methods
Political impact of having a nuclear ability
Economic
Increasing energy prices internationally – likely to have an impact on costs
Some countries have lost their coal industry and uneconomic – threat to ECG
Increasing inflation – links to economic uncertainty
Well developed capital markets
Social
Increasing demand (doubled over last 10 years), need for more capacity in future
Environmental concerns may drive new technology use
Technological
New technologies such as wind and solar power will develop over a number of years

12. On the following page you’ll find my resource audit.
Resource Audit – 5 M’s
On the following page you’ll find my resource audit.
This adds to the detail you’ll find in my SWOT analysis.

13. Strengths and Weaknesses Resource Audit - 5 M’s analysis
Men
Knowledge of company and markets
Loyal Corp sec – and his staff
Long hierarchy - bureaucratic – committees, forms//inefficient/MD sign off $5000
Lack of broad business experience on board (all electrical engineers)
Significant replication of duties between regions e.g. HR, finance
Very big staff increases – greater than demand increases - particularly managerial
Little external knowledge/experience
Informal decision making – not structured
Technical director – part time Phd – are they committed in such an important role?
FD little control over regional finance staff
MD view – Government = bottomless pit
Money
Government financial backing
Gov. loans have no set repayment dates
Low cost of debt (2% below base rates)
Staff costs and overheads rising by more than revenues (reg 4.1% head 5.1%)
No increase in prices despite inflation
Poor cost control
Poor financial information (inc o/h apportionment)

14. Strengths and Weaknesses 5 M’s analysis
Materials/
Supply
Coal available
Machines/ Assets
Times when not able to meet demand
All power stations over 15 years old
Large investment required just to maintain output levels
No apparent plan to increase capacity levels despite obvious need
Currently near maximum practical output levels
Markets
Monopoly provider in home country
Doubling of energy consumption
Lack of knowledge and expertise in nuclear and other forms of power
Low R&D spending

15. Porter’s 5 forces analysis
What a boring 5 forces analysis!!!! (see the next page)
This is not one I’d recommend for this exam since its rather strange, mostly due to the fact the company is a monopoly.
An analysis like this with all forces being low would normally suggest high profitability, but, of course, in this case it is largely meaningless since prices are agreed by the government.

16. Opportunities and Threats 5 forces analysis
Factors increasing Force
Factors lowering force
Buyer Power
Low
Prices fixed by government
Monopoly (10 buyers)
Supplier Power
Fewer coal suppliers internationally
Could higher prices generally encourage coal suppliers to sell overseas
(Could be higher power in future for new technology e.g. nuclear)
Use virtually all the home based coal – very big, powerful customer
Competi-tors
Monopoly
New Entrants low
Unlikely as nationalised
Subs
Few substitutes
e.g. oil/gas for heating – but these are increasing

17. Product life cycle/BCG matrix
The product life cycle/BCG matrix is largely meaningless here as they have one single product – electricity – which is mature in nature.
Production methods could have a life-cycle – but note that this is a ‘production method’ not product so take care in its use!
Coal and gas = Mature (Int)
Nuclear = Mature (internationally)
Wind = Growth
Oxyfuel/carbon capture – Growth

18. Why bother being a cost leader when you are a monopoly!
Generic strategies
It’s so strange to say this, but Porter’s generic strategie are largely pointless in this case study!
Why bother being a cost leader when you are a monopoly!
No need to differentiate when you are a monopoly!
Perhaps you could argue they are focused on Electricity generation and distribution, not sales, but that’s weak at best! MY SUGGESTION
IGNORE THIS MODEL IN THIS EXAM!

19. Ansoff’s Matrix Existing Market New Market Existing Product
Build new power stations
New production methods:
- Nuclear power – not favoured internally
- Wind power
- Gas powered
- Solar (technology not good enough yet)
- Oxyfuel
Better cost control and performance management
New structure
Redundancy programme
Long term strategic planning
Long term – could sell to other countries
New Product
Other forms of energy
e.g. gas distribution (like national grid)
Regional distribution and sales
e.g. Oil production/distribution

20. Mendelow’s Stakeholder Matrix
I like this for use in the exam! Remember to cross reference your Mendelow’s matrix throughout your script (people are so bad at doing this – why is that when its so important???????)
This case throws up a lot of stakeholders with high interest in the company which is unusual.
I really struggled to find a stakeholder in the keep satisfied box, but one of my students suggested the media were a good example. I agree.

21. Stakeholder Analysis Mendelow’s Matrix
Low Interest
High Interest
Low Power
High Power
Individual employees
End Users
Environmental groups
10 Dist
Companies
Finance Director
Corporation Sec
Opposition
Coal
producers
Technical D.
Regional D.
Media
Unions MD
Government

22. Methods of Growth Restructuring
Internal Development
New power stations
Restructuring
Acquisition
Possibly buy overseas power companies/stations
Buy gas distribution infrastructure/business
Joint Venture
Other countries/companies who have expertise e.g. nuclear power
Divest
Split in different ways:
- national grid vs production
- regionally

23. So given all that analysis – what should EGC do going forward?
Possible strategy
So given all that analysis – what should EGC do going forward?
The following slides show you my view.
WARNING!!!
Just remember that this MUST be seen alongside any new information given in the UNSEEN, and that new unseen information is far more important to deal with than any of the pre-seen issues.

24. Possible strategy
Plan for future capacity to meet future demands
Environmentally friendly e.g. oxyfuel/nuclear
Discuss and agree with political parties after election
Create a financial plan, including funding issues ( government/private sector funding)
Considering when current power stations need replacement
Review possibility to import electricity, and infrastructure
required to do so
Restructuring
Delayer - Lay off many staff
Remove regional structure and rationalise OR centralise the functions
Remove some bureaucracy

25. Possible strategy
Significant governance changes
Non-exec style personnel on board to bring independence
and scrutiny
Possible replacement of key personnel e.g. MD to help to
create cultural change
Clear, formal processes of decision making
More discussion with and accountability to government
Efficiency improvements
Management information and performance targets including
costing information
Benchmarking vs other countries
Continual cost improvement targets
Culture change programme (organisational development)