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Posted on April 2nd, 2012, by

The close relation of these two meanings in examination the PowerGen case make us to signify what is corporate planning and what is strategy in general understanding.

Strategy is traditionally referred to as the plan of a certain activity, created to reach particular goal ()

Corporate planning is referred to as the process of drawing up detailed action plans to achieve an organization’s goals and objectives, taking into account the resources of the organization and the environment within which it operates  (CBS Interactive Inc, 2010).

We see how close these two meanings are. The PowerGen corporate planning and strategy are also closely connected: The centralised approach to planning associated with the CEGB began to loose relevance with the opening of the market for electricity, the wholesale Electricity Pool (April 1990). The operation of the Pool became the focus of PowerGen’s strategy, requiring the development of both a strong commercial orientation and increased operational flexibility (Jennings, 2001). It goes without saying that close connection of corporate planning and strategy makes the contrasting not an easy task. Hence the corporate planning was seriously influenced by CEGB: The planning process was lead and managed by the Commercial Division within which a large group of planners assisted the development of corporate strategy and the Company’s diversification through the New Business Development unit.

The planning process retained a high degree of centralization. Staff in the Business Planning and Development Department constructed a number of scenarios concerning market share, Pool prices and competitor analysis for the core business (the Generation Division). The decisions that could be made by each unit (power station) were essentially those that had been available to them within the CEGB, with planning focused upon developing the resource implications of a centrally determined strategy. The plans from the business units were aggregated to provide divisional plans. Financial projections from these exercises were consolidated by the Finance Division (Jennings, 2001). But the strategy required strong commercial orientation and increasing of the operational flexibility. As it usually happens the confrontation of the corporate planning and the strategy caused negative results and needed reorganization: The Company’s strategy anticipated that PowerGen would suffer an inevitable reduction in market share together with pressures for price reduction. Consequently the Company recognised that growth in the medium and longer term would require the establishment of new income streams in other energy-related areas where it’s core competencies could create value (Jennings, 2001).

 

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