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STRATEGIC MANAGEMENT
Course instructor: Ekhlaque Ahmed
Submitted by: Mehwish Aqeel (8403)


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Foreword

This report is dedicated to Sir Ekhlaque Ahmed; whose guidance makes me able to complete
this project.
Thank you Sir


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BUSINESS SCOPE
K electric is a service based business.
Since there is no other electricity provider in Karachi therefore it got Monopoly.
As per terms and conditions; High penalty if anyone want to introduce any
alternative
Now K electric is private company because Abraaj Group holds 72.58% of its
share and Govt. holds 27.42% shares.
WANT TO BE IN
To focus on consistent electricity with low cost and customer solutions.
THE BUSINESS WE ARE
Provides electricity throughout the Karachi but still not cost effective (since 1913;
1952)
The new identity, that entails 3 feathers that represent their primary function &
ESG (Environmental, Social Governance) values, creates a perception of a strong
organization dedicated to serve Karachi
The customer relies upon us to do the right thing because we are responsible to the
people and for protecting the environment.
REGIONS
The corporation provides electricity throughout Karachi and in the nearby towns
of Dhabeji and Gharo in Sindh and Hub, Uthal, Vindar and Bela in Balochistan.
The coverage of electricity is maximum, that is in every area but its exposure is
minimum or instability due to theft incidents.
FUNCTION WHAT NEED
To provide low cost electricity
Security : proper wiring to avoid mishaps/ accidents
Better quality service, quick response Quality of service monitoring
Representatives at maintenance centers
Deliver uninterrupted electricity
Proper allocation (Scheduled Load Shedding Policy)
Back up planning esp. for summers
Reward program for those who pay their bills prior to due date
Infrastructure upgrades and process development
CONSUMERS AND USERS
Residential
Commercial
Industrial

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NEEDS
Since K-Electrics have monopoly but they can build customer trust by:
Reliability
Convenience
Focus on safe electricity
Accurate customer solutions
To provide low cost electricity
Security : proper wiring to avoid mishaps/ accidents
Better quality service, quick response Quality of service monitoring
Representatives at maintenance centers
Deliver uninterrupted electricity
Proper allocation (Scheduled Load Shedding Policy)
Back up planning esp. for summer season
Reward program to those who pay bills on time
Infrastructure upgrades and process development
CUSTOMERS & USERS - WHOSE NEEDS
What important for you, does not mean important for your customers. Those companies who
understand this philosophy will be able to breakthrough in the market. Company needs to
answer the critical question; what do our customers want? What are the most important
aspects? Do we really know that? If not then it is an assignments for further knowledge
improvement. How do we Score? Who are our competitors, current as well as potential, their
key strengths and weaknesses?
Analysis
It is dissimilar in the case of K electric; they have changed their brand name but still
doing the same mistakes as they have done earlier.
Also, community welfare program is not important because K electrics is not an
NGO.
How k electric create customer
K electric creates customer by adapting these measaures:
Core Values:
Professional Integrity
Customer Satisfaction
Brand values:
Innovative
Trustworthy

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COMPANY ANALYSIS
After conducting interview of GM of K electric it is analyzed that:
There is lack of integration between departments
Financial issues; billing and tariff
Lack of innovation, company still following backward measures
Poor utilization and allocation of resources; high loss of electricity due to poor
infrastructure
Re- engineering need.
Need for Employer branding so that employees get motivated towards works
Incompetent and lazy HR
Lack of motivation
Lay off so that new candidates can break through in the system
AZM Internal Newsletter, for internal matters between employees and
employers
Umeed External Newsletter, for external matters between corporation and its
stakeholders
CSR:
K-Electric to provide free electricity to Childrens Village Karachi
KE successfully completes 2nd phase of Low-Cost meter installation
K-Electric and UNICEF unite against childhood preventable diseases in Pakistan
KE to successfully install 500 Low-Cost meters
ADDED VALUE
e-billing (online)
Mobile payments (Omni, easy paisa etc )
Duplicate bills
Energy conservation
Reporting of safety issues
Sukuk
BUSINESS WE ARE NOT IN
K Electrics solely provides electricity.
ORGANIZATIONAL AND MANAGERIAL RESPONSIBILITY (AUTHORITY
AREAS)
7 authority areas:
Generation Department
Grid Stations & Transmission Lines Department

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Distribution Department
Consumer Department
Human Resource Department
Supply Chain Department
Finance & Account Department
Marketing Department
COMPETITORS BUSINESS SCOPE
Since K electric got monopoly but these are the rival firms if we take whole cities of Pakistan
into consideration. In which WAPDA regulates all electricity supplier and PEPCO regulates
KE only.









MARKET STRUCTURE VERTICAL INTEGRATION









Cables/ wires

PEPCO
Grid station

Monopoly
Electricity (Purely
intangible)

Generation- Plants

Transmission
Distribution: End
user/ Applications
Products

60% own
production and 40%
imports

35% loss during
transmission

WAPDA:
Faisalabad Electric Supply Company
Gujranwala Electric Power Company
Hub Power Company
Hyderabad Electric Supply Company
Islamabad Electric Supply Company
Kot Addu Power Company
Lahore Electric Supply Company
Multan Electric Power Company
Peshawar Electric Power Company
Quetta Electric Supply Company
Tribal Electric Supply Company
PEPCO:
K electric


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Other than loss of electricity by company, the electricity is theft by hook system and by
tempering of meters.
These are the areas in which theft incidents take place:
A Ar re ea a E Es st ti im ma at te ed d
l lo os ss se es s
A Ar re ea a E Es st ti im ma at te ed d
l lo os ss se es s
O Or ra an ng gi i 5 59 9. .4 48 8% % S Sh ha ah h F Fa ai is sa al l 3 34 4. .7 75 5% %
K Ko or ra an ng gi i 5 56 6. .5 56 6% % F F. . B B. . A Ar re ea a 3 33 3. .9 99 9% %
L La an nd dh hi i 5 54 4. .8 83 3% % G Ga ar rd de en n 3 31 1. .1 18 8% %
B Ba al ld di ia a 5 53 3. .9 94 4% % J Jo oh ha ar r 2 28 8. .4 41 1% %

L Li ia aq qa at ta ab ba ad d

5 53 3. .6 69 9% %

B Ba ah ha ad du ur ra ab ba ad d
2 27 7. .5 59 9% %
M Ma al li ir r

5 50 0. .6 60 0% %
G Gu ul ls sh ha an n
I Iq qb ba al l
2 26 6. .4 44 4% %

N Na az zi im ma ab ba ad d

5 50 0. .3 33 3% % T Ti ip pu u S Su ul lt ta an n 2 23 3. .6 68 8% %
N N K Ka ar ra ac ch hi i 4 49 9% % C Cl li if ft to on n 2 23 3. .1 14 4% %
S Su ur rj ja an ni i 4 46 6% % S Sa ad dd da ar r 1 18 8. .2 21 1% %
N N K Ka ar ra ac ch hi i 4 49 9. .4 46 6% % U Ut th ha al l 1 17 7. .5 54 4% %
G Ga ad da ap p 4 48 8. .7 77 7% % D De ef fe en nc ce e 1 17 7. .4 47 7% %
L Ly ya ar ri i 4 43 3. .3 32 2% % B Bi in n Q Qa as si im m 9 9. .7 74 4% %
N N. .
N Na az zi im ma ab ba ad d

3 35 5. .3 31 1% % S SI IT TE E 6 6. .2 29 9% %

MARKET SIZE & GROWTH PAST YEARS
Generation (in %)
2008 2009 2010 2011 2012 2013
30.4% 31.5% 33.5% 33.6% 35.64% 37.7%

Transmission wastage of electricity (in %)
2008 2009 2010 2011 2012 2013
3.15% 1.87% 1.85% 1.45% 1.39% 1.03%

Distribution losses (in %)
2008 2009 2010 2011 2012 2013
36% 35.9% 34.9% 32.2% 29.7% 27.8%

Overall Value chain (in Billion Rupees)
PKR bn FY09 FY10 FY11 FY12 FY13
EBITDA (6.9) (3.8) 3.5 17.4 26.7
Net Profit(Loss) (15.5) (14.6) (9.4) 2.6 6.7


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MARKET SIZE & GROWTH FUTURE YEARS
Generation (in %)
2014 2015 2016 2017 2018 2019
38.4% 39.5% 40.5% 41.6% 42.64% 43.7%

Transmission wastage of electricity (in %)
2014 2015 2016 2017 2018 2019
1.02% 1% 0.85% 0.45% 0.39% 0.03%

Distribution losses (in %)
2014 2015 2016 2017 2018 2019
25.9% 23.9% 22.8% 21.8% 19.8% 16.9%

Overall Value chain (in Billion Rupees)
PKR bn FY09 FY10 FY11 FY12 FY13
EBITDA 27.8 29.2 30.5 32.4 35.7
Net Profit(Loss) 7.8 9.2 10.5 12.6 14.7

Changes and effects:
The demand of electricity is higher than the supply due to several factors such as theft, high
tariff, government regulations etc. This has been deemed a gap.
BUSINESS EXPOSURE
Since KE is the sole electricity provider in Karachi, therefore its customers are:
Residential 77% residential customers
Commercial 22% commercial
Industrial 1 % industrial customers
Total 2.1 million customers
MARKET SIZE OVERALL
The total power generation capacity of Pakistan is 21,143 MW and the electricity demand is
14,500 MW and PEPCO is merely generating 10,000 MW. K electrics productions are:
Bin Qasim Power Station 1 (Capacity: 1260 MW)
Bin Qasim Power Station 2 (Capacity: 560 MW)

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22%
1%
77%
By customer Type
Commercial Industrial Residential
18%
50%
32%
By Revenue
Commercial Industrial Residential
Korangi Thermal Power Station (Capacity: 125 MW)
Korangi Combined Cycle Power Plant (Capacity: 220 MW)
SITE Gas Turbine Power Station (Capacity: 88 MW)
Korangi Gas Turbine Power Station (Capacity: 88 MW)
Electricity production
Electricity production: 88.42 TWh
Electricity production by source
o fossil fuel: 65% of total
o hydro: 31% of total
o nuclear: 4% of total
Electricity consumption
Electricity consumption: 74.62 TWh
Electricity exports: 0%
Electricity Consumption per Capita = 430.183 kWh/capita










PLC
Since the product of KE is pure electricity therefore its availability is shown by PLC is:
Product Segments INTRODUCTION GROWTH MATURITY DECLINE
Residential

+

Commercial

+

Industrial +



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COMPETITION / SEGMENT MATRIX
Competition Segments Overall
No competition 1 2 3
Residential Commercial Industrial 100%
Historical Growth 77% 22% 1% 100%
Projected Growth 80% 30% 10% 100% + 20%
Company
Profitability
32% 18% 50% 100%

Total share of K electrics = 2,121 MW / 21,143 MW
Therefore, 19,022 MW others








Findings and Reasons
Business worth increase by PKR 49.606 billion
o New businesses
o 72.58% Pvt.
o 25.66 % Govt.
High cost of electricity
o Tampering of Meters
o Industrial clients who are billed according to a sanctioned load use bigger
grips to get more power
o People use kundas (hooks) on distribution lines
o Theft and technical faults
o Loss during transmission up to 30%
Gaps - Load shedding
o Demand and supply gap
o Fuel supply constraints (natural gas from SSGC and furnace oil from PSO)
Historical lack of investment and master planning (haphazard growth)
9%
91%
K Eelctrics

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Load shedding
o Demand and supply gap
o Transmission & Distribution Bottlenecks
o Fuel constraints
o Liquidity /Cash flow constraints
Load imbalance
o Actual load greater than sanctioned load in most instances (tripping and
voltage fluctuation)
o Rights of Way issues with municipal authorities leading to delay in
execution of projects underground wiring

DISTRIBUTION STRUCTURE 2009 - 2013
% of Rs
Residential
2009 - 2013
Commercial
2009 - 2013
Industrial
2009 - 2013
Generation
30.40% 33.70% 30.40% 33.70% 30.40% 33.70%
Transmission
43.1% 44.4% 53.6% 48.3% 68.6% 63.5%
Distribution
26.5% 28.9% 16% 18% 1% 2.8%
100% 100% 100% 100% 100% 100%

DRIVING FORCES
Low cost electricity
Fast customer services
Try to take steps for cost cutting by reducing wastage of electricity
Since K electrics got size advantage therefore more focused on providing
sufficient electricity so that new business established in Karachi and take
incentives with government
Launch new grid stations and transmission lines
Lure industrial buyers High returns
Taking
advantage
Trend Potential impact K electrics
Planning Consistent electricity No
New grid stations Govt. incentives Yes
Price decrease New business - FDI No
Industrial selling High return No


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External
analysis

Internal
analysis

Opportunities

Threats

Strengths Weaknesses
Cater industries

Poor
regulation,
wastage of
energy

Tariffs

High return after catering

PORTER FIVE FORCES MODEL
Threat of New Entrants: Low due to capital cost
Threat of Substitutes: Low
Bargaining Power of Buyers: Low
Bargaining Power of Suppliers: High
Current Rivalry: Nil
SWOT ANALYSIS
S Coverage (size) advantage, Unique product,
Monopoly in Karachi
W Poor performance, Customer service, Wastage
of resources
O Re engineering, Cater industries
T Govt. regulation, High cost of gas and fuel,
Tariff











Competitive Advantage: Monopoly in Karachi
Constraints: High cost of fuels and tariff


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PEST ANALYSIS
P Political intervention, High tariff
E Lack of resources for new plants, Cost
S High consumption of electricity
T Technological boom, electricity is essential

THE CUSTOMER: BASIS OF OUR BUSINESS










RELATIVE IMPORTANCE OF FACTORS
Factor Absolutely
Critical
5
Very
Important
4
Quite
Important
3
Nice to
Have
2
Not
significant
1
Dont
Want it
0
Consistent
electricity
**
Secure
wiring
**
Low cost *
CSR *
Monopoly = Strength
Tariff = Weakness
Customer wants low cost
consistent electricity


Low cost and consistent
electricity
Company knows this
Assignments for further
knowledge improvement

No rivals
Reduce cost

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Worse
Least
Most
Question
its Cost

Keep it
UP


Improve
fast


Do Not
Sweat


10%

20%

RATING AGAINST CUSTOMERS BUYING CRITERIA
Quality & Price K electric
Non-Price attributes
Affecting Customer Choice
%
Weight
%
Weight
Product Related
1. Consistent electricity .25 .1
2.Free maintenance .25 .2
Service - Related
1.Customer care .25 .01
2.Secure wiring .25 .1
Total 100% 41%


CUSTOMERS CRITERIA







New
Generation
plant
Consistent
electricity

CSR Wiring
Better
Same
Relative
Performance
Rating
Attributes important to
customers

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IMPACT OF ISSUES ON STRATEGIC PROFILE
Issue Number Issue 1
Cost
Issue 2
I nconsistency
Issue 3
CSR
Issue 4
Secure
wiring
Issue 5
Gap
(demand
supply)
I ssue Name
Customers
++ ++

Regions
++
Money
++


Needs/wants/applications
++
Products (prices)/services
++ ++

Strategic Management

++
Product Creation Process
+

Sales Acquisition Process

++
Operations
(Production/Logistics)
++
Customer base Management

++

Technology
+ +

Plant & Equipment
++
Distribution Channels
++
+

VISION, MISSION & OBJECTIVES
Strategic I ntent: To provide low cost electricity, and truly made Karachi City of light.
Competitive I nnovation: Recover wastage; fill gaps produce low cost energy for every
sector.
Mission: Brightening the lives of the people of Karachi by building the capacity to deliver
uninterrupted, safe and affordable power.
Meanings: Cost of electricity is very high; therefore company is working to cover cost so
they can easily provide consistent and affordable electricity.
Vision: To restore and maintain pride in K-Electric, in Karachi and in Pakistan.

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Meanings: Since the name of KESC or K electrics got ill reputed; therefore company is
working to regain its image in the eyes of customers and all of its stake holders.
Objective: Cover loophole with strategic fit.
Therefore the competence of K electric is defined as:
Competence = (Technological improvement + Customer care + Learning from past and
new advancement)
After strategically analysis of K Electric, the action plan for every segment is concluded as:
ACTION PLAN # 01
What How Who When
Focus on residential segment
Value added
services
Through rebates and
check and balance
CEO and customer care
(HR)
In 2014

ACTION PLAN # 02
What How Who When
Focus on commercial segment
Low cost
electricity
Through innovation &
cost cutting strategy
CEO In 2014

ACTION PLAN # 03
What How Who When
Focus on industrial segment
Consistent
electricity
Through proper check
and balance of voltage
and load
CEO and Technicians
(Engineers)
In 2014 2015



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APPENDICES