Introduction
Southern Company is an energy generating company that creates and distributes electricity in Southeastern region of US. It possesses all the common stocks of Alabama Power Company, Georgia Power Company, Gulf Power Company among others. Southern Company mainly functions in Alabama, Georgia and Southeastern Mississippi in the United States.
The company’s headquarters are in Atlanta. It employs around 26,000 people. It supplies its electricity to a 120,000 square mile distance. It has various generation fleets which assist in distribution of electricity to its customers (Datamonitor, 2011).
Company’s mission, vision, and primary stakeholders
Southern Company’s mission is to provide reliable, superior and affordable electricity services to its customers. These objectives are realized when the company completes every task safely and when it achieves Southern Style. Southern Style involves complete commitment, exemplary performance and absolute trust in Southern Company’s business operations (Southern Company, 2010).
Vision statement states the future or long term goals and objectives of an organization. Southern Company’s vision is to be the world’s greatest energy generating company (Southern Company, 2010).
Primary stakeholders: Stakeholders are the people that are affected or who could be affected by the company’s activities. Southern Company’s main stakeholders are the personnel, consumers, financiers, the public, suppliers, NGOs and regulators (Southern Company, 2010).
Five (5) forces of competition and how it impacts the company
Rivalry: This involves competition from firms offering similar products (Porter, 2010, par. 1). For instance, Southern Company is facing competition due to change in federal laws. This has increased the presence of old electricity suppliers and wholesalers. Therefore, Southern Company’s net income is being affected by these changes in supply and demand.
Threat of Substitutes: Substitutes are products which are already being offered by other producers, therefore, affecting price and demand (Porter, 2010, par. 7). There are other companies offering electricity products such as North America utility companies. This has reduced the demand for Southern Company’s electricity and subsequent market share.
Buyer Power: This is the effect that consumers have on a company (Porter, 2010, par. 10). Southern Company’s buyers are powerful because they are large corporations who buy in large quantities. The company’s subsidiaries are able to supply to municipalities and millions of customers.
Supplier Power: This involves the influence that suppliers have on the production company (Porter, 2010, par. 11). If suppliers are powerful, they can sell at high prices. Otherwise, they are weak. Southern Company’s suppliers are weak because the company mainly sells on retail to its consumers. Therefore, it avoids manipulation by the wholesalers and consequently, the performance is maintained.
New entrants’ threats and barriers: These are new competitors entering the industry (Porter, 2010, par. 11). As a result of changes in federal laws, barriers to enter electricity market are less. This has seen many companies emerge together with contracts futures. As a result, Southern Company’s performance is at a threat.
SWOT analysis for the company identifying the major strengths, weakness, opportunities, and threats
Southern Company’s strengths are
Wide range of generation fleet: Southern Company has a varied generation fleet that is shared among the old operating companies and Southern Power. The old operating companies are controlled utility branches of Southern Company. They include Georgia, Alabama, Gulf and Mississippi Power companies.
SEGCO is also a company that has its own electric generating facilities. Alabama and Georgia Power are both eligible to half of SEGCO’s energy capability. Southern Company’s varied generation fleet helps in taking care of its consumer’s power needs (Datamonitor, 2011)
Wide customer base: Southern Company serves a wide variety of customers. For instance, it serves residents, industries among others. Its utilities reach around 4.4 million consumers. Georgia Power is supplied on retail to over 600 communities within Georgia and on wholesale to corporations.
On the other hand, Alabama Power supplies its electricity on retail to over 650 communities such as Anniston, Gadsden among others. It also supplies on wholesaler to 15 electricity distribution networks that are owned by the municipal council. Alabama Power also liaises with suppliers in order to support sale of electric devices.
Gulf Power supplies its electricity on retail to 71 communities such as Panama City and Pensacola. Additionally it supplies on wholesale to municipalities. Mississippi Power on the other hand supplies on retail to 123 communities and rural residents. It also supplies on wholesale to one municipal council, six rural associations and one transmitting cooperative. This varied customer base shields the company’s general performance from economic downturns (Datamonitor, 2011).
Southern Company’s weaknesses are
Reliance on branches to pay dividends: Since Southern Company has subsidiaries. it does not have its own operations. Therefore, in order for Southern Company to be able to pay dividends and other expenses, it depends on the income and cash flows of its subsidiaries and their capacity to pay upstream dividends.
Since these subsidiaries are separate legal bodies, they have no responsibility to fund Southern Company’s needs. Over reliance on the subsidiaries to pay its obligations can affect the confidence of Southern Company’s shareholders (Datamonitor, 2011).
Inadequate presence: Some electricity supply companies in North America supply electricity and gas. They therefore take advantage of this wide range of their products. However, Southern Company is dedicated to supply electricity to the US markets. This increases the risk related with electricity market performance. Therefore, the company is exposed to changing product prices because it takes part in significant energy trading. Eventually, this can affect the Southern Company’s performance (Datamonitor, 2011).
Southern Company’s opportunities
Partnership with Turner Renewable Energy: This partnership has been formed in order to undertake renewable energy developments in the US. The first aim is to create large-scale solar projects in the places that have efficient solar resources.
Consequently, Southern Company in conjunction with Turner Renewable Energy have absorbed Solar Photovoltaic Power Project. The project will be in a position to support around 9,000 homes. The emphasis on renewable energy will allow Southern Company to lessen its reliance on non-renewable energy provisions (Datamonitor, 2011).
Alternative power generation: Southern Company has other sources of energy. For instance, it has biomass and landfill methane gas products. It is also promoting geothermal energy. This project is expected to serve the Austin city for 20 years.
Additionally, the company is testing solar energy and is studying the possibility of wind energy in the Southeast. These diverse energy sources allow Southern company to obtain stable revenues and market share (Datamonitor, 2011).
Southern Company’s threats
Competition: There is expanding competition at the wholesale level. This is because of the changes in federal and regulatory policies, increased participation by old electricity providers, brokers and free power suppliers. The levels of wholesale supply and demand affect Southern Company because it has no control over them. Consequently, this can have a negative impact on the company (Datamonitor, 2011).
Regulatory requirements: Southern Company faces several federal and state environmental obligations related to pollution and waste management. Abiding by these laws is costly since it has to pay for pollution control equipment and emission fess. This could affect the cash flow and income in the future (Datamonitor, 2011).
Natural disasters: Old electric supply companies have retained funds to cater for damage costs as a result of storm on distribution lines. There are also hurricanes which cause rise in costs. For instance the storms cause damage to Southern Company’s transmission and distribution lines. These calamities can also delay completion of projects that are underway (Datamonitor, 2011).
Recommendations based on SWOT
Southern company may take advantage of its strength by increasing the working capability of its generation fleets. For instance, it can increase the holding capacity that Alabama and Georgia Power have on SEGCO. This capacity can be increased to three quarters. As a result, supply will increase as well as performance.
Southern Company can also increase its hydroelectric generating stations. By the end of financial year ended December 31, 2010, there were 82 power stations generating around 42, 963 MW. If the stations are increased to 85 of them, then the capacity could rise to a minimum of 43, 963 MW (Datamonitor, 2011).
Southern Company can also put more effort in producing biomass energy. Since this project was expected to start in 2012, it is time that the company commences it in time. This is because the benefits expected (100 MW) are huge and can benefit Austin city for many years. Additionally, it should speed up its tests and studies on solar and wind energy. Given that these are potential ecofriendly energy sources, they can be less costly and more profitable to the company (Datamonitor, 2011).
The company should aim at minimizing its weaknesses by venturing in to other energy sources such as gas and nuclear instead of concentrating on electricity generation. This way it can beat competition from the other utility companies and increase its sales revenue.
Additionally, by venturing in to renewable energy, the costs associated with waste management such as hazardous waste can be reduced. It can also insure its energy production facilities against natural disasters and calamities. This way, it can pass over this responsibility to insurance firms therefore making it cheaper (Datamonitor, 2011).
Various levels and types of strategies the firm may use to maximize its competitiveness and profitability
Business level strategy is an organized set of plans and actions that a firm uses to achieve a competitive advantage by developing its main capabilities in particular product markets (Business-Level Strategy, 2011).
Cost leadership strategy: This involves a combination of actions in order to produce or supply quality and cost effective products to its consumers. For instance, Southern Company can standardize its electricity in order to ensure it is at its best position to meet consumer needs with no delay or hitches. Delivery should be prompt while the cost should be affordable for both retail and wholesale consumers. This can increase sales and profits (Business-Level Strategy, 2011).
Differentiation strategy: This is a combination of actions created by an organization to create and supply affordable products that are acceptable to customers.
Acceptability entails the value that customers receive from a firm’s products such as quality and status. Southern Company can create differentiation by building up new systems and procedures which improve the quality of electricity. For instance, venturing in to more renewable energy generation. Additionally, it can improve the quality of its products by motivating its employees (Business-Level Strategy, 2011).
Identification of market niches: This involves analyzing and identifying unsatisfied consumer needs. For instance, Southern Company can conduct market survey in order to know the areas that are lacking electricity facilities or modify the quality of the available electricity.
Recent corporate governance issues that are currently affecting the company’s decisions
Corporate governance is a means by which organizations are directed and controlled. It also involves relationships among management, the shareholders and the stakeholders. One issue being faced by Southern Company is its relationship with its subsidiaries which affects dividend payments. It relies on its subsidiaries to cater for its obligations. Since these subsidiaries are not obligated to pay for Southern Company expenses, it becomes difficult to pay shareholders’ dividends. Additionally, its relationship with its consumers is being affected since it sells to wholesalers who later sell to retailers then to consumers. This can lead to increased costs of electricity. Its relationship with the community is also at stake because of the environmental pollution from its operations.
Conclusion
Southern Company is a company that concentrates on production and supply of electricity. Although it has various strengths and opportunities, it faces threats and weaknesses both internally and externally. This has made it to come up with various strategies to cater for these issues. It is also faced with forces of competition and corporate governance issues which affect its operations. However, the company has continued to thrive in the presence of these challenges and remained at the top of the industry.
References
Business-Level Strategy. (2011). Web.
Datamonitor. (2011). The Southern Company: Company Profile. Farringdon Road, London.
Porter, M. (2010). Strategic Management: Porter’s Five Forces.Web.
Southern Company: Corporate Responsibility. (2010). Web.