Strategy of the company The general company strategy of Looting is Cost Leadership. Looting produces electricity, the product characteristic of which is generic/mass production. The price of the product is settled by the market (government), so the company Is by large a price taker. In the electricity supply market, there are more than 60 electricity- generating units in Huber Province, Including the famous Three Gorges dam project.
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Given the market competition, If Looting Increased price, Hubble Provincial Power Company (HIPS), the only purchaser would better turn to other suppliers for electricity. Thus the product Is highly price elastic at least for Looting. Furthermore, Looting tried very hard to cut the cost of production as It striver to cut fuel price, Increase plant availability and Improve fuel economy, Indicating the cost leadership strategy. Other Characteristics of Lou Tang taking a cost Leadership strategy can be summarized in table.
Key factors of success D Fuel price management Fuel price management is crucial to power plants. According to the contract with Paintings, Looting paid a fixed price per tone of low sulfur bituminous coal delivered. Looting was somewhat protected from the effects of increases in fuel rises since the power purchase contract contains provisions to adjust electricity price. Thus, the gross profit could be increased. Increase sales and production Plant availability and fuel economy were improved over the year, which increases production.
Furthermore, Looting was successful at biding to sell electricity above the amount in contract to HIPS. It was also able to negotiate Excess Energy sales in the previous years, thus increasing the revenue. 0 Economic growth China has seen robust economic growth In the past two decades. In recent years, Chinese government prioritize the development of middle and east china Including Hubble province. In 2012, Hubbell GAP growth was 11. 3%. Lou Tang City economy has been booming too, resulting In the Increasing demand of electricity.
Mall problem: Despite the improved plant availability, fuel economy and electricity purchase obligations being met, revenue was shrinking. The company wasn’t performing well for the financial result. BY Jigging 12 of the product is settled by the market (government), so the company is by large a generating units in Huber Province, including the famous Three Gorges dam project. Given the market competition, if Looting increased price, Huber Provincial Power electricity. Thus the product is highly price elastic at least for Looting.See More on Economics