Eskom

TABLE OF CONTENTS

1. EXECUTIVE SUMMARY

2. INTRODUCTION

3. STRATEGIC MANAGEMENT PROCESS IN ESKOM

3.1 Methodology of Review

3.2 Management Process

3.2.1 Environmental Analysis

3.2.1.1 Comments

3.2.2 Vision Statement

3.2.2.1 Communication

3.2.2.2 Values

3.2.2.3 Comments

3.2.3 Objectives

3.2.3.1 Short Term Priorities

3.2.3.2 Medium and Long Term Priorities

3.2.3.3 Comments

3.2.4 Crafting of the Strategy

3.2.4.1 Comments

3.2.5 Implementation

3.2.5.1 Comments

3.2.6 Monitoring

3.2.6.1 Comments

4 RECENT CHANGES IN THE STRATEGY

4.1 Factors Which Led to Changes in the Strategy

4.2 Results and Expected Results

5. ESKOM INVESTMENT STRATEGY INTO THE FUTURE

6. RECOMMENDATIONS ON STRATEGIC ACTIONS AND CONTROLS NEEDED

8.1. Revenue Management

8.2. Benchmarking

8.3. Outsourcing

8.4. African Collaboration

7. REFERENCES

8. ANNEXURES

1. EXECUTIVE SUMMARY

The aim of the assignment is to:

* consider the strategic management of an organization of choice and comment on the process and evaluate its effectiveness;

* discuss the changes made over the last five years and how they took place, and the factors that led to the changes in strategy; and also the results of changes in the strategy;

* extrapolate into the next five years in order to identify the organization's abilities for attaining a competitive advantage through their strategy.

* recommend strategic actions required to be implemented, referring to necessary controls.

This product is a review of the strategic management process in Eskom Holdings, which is the organization that the group preferred. Eskom is an established company in South Africa with an illustrious history in the role it has played in growing the SA economy since its founding in 1923.

This paper has been confined to the changes introduced in the period after the year 2001 until today. The major objective of government with these changes government was targeting at cutting costs and bringing standardization in the tariff structure.

Eskom is to this day striving to implement the changes that were mooted back in the cabinet decision of 2000. As it will be explained this cabinet decision of 2000 set in motion the restructuring that brought about the establishment of Regional Electricity Distribution (RED's) stations.

Owing to lack of sufficient progress, the RED's were followed in 2003 by the establishment of the Electricity Distribution Industry Holdings (EDI Holdings).

With respect to the strategic management process we found that the practices in Eskom were in line with international standards. Finally, we ended with some recommendations.

2. INTRODUCTION

The company that we have chosen for this project is Eskom. Eskom is a public company with government as the sole shareholder. Eskom generates over half the electricity produced in the whole of Africa and aims to extend its transmission grid into neighbouring sub-Saharan countries. Currently, Eskom produces 90% of the South Africa's electricity generated for resale and is the monopoly domestic public power utility.

''When we talk about power and power outages, we tend often to focus on South Africa's (S.A.) growing shortage of electricity generation and capacity. But when the lights go out it's just as likely to be because of troubles in electricity distribution, whether the power is supplied by our local municipality or by ESKOM'' (The business Day Friday May 4 2007 - Opinion and Analysis - Electricity's crises page 14)

" Poor strategy is expensive, bad strategy can be lethal, while when the stakes include survival, very bad strategy is almost always fatal." Colin S. Gray, Modern Strategy, Oxford University Press, 1999.

It will be evident in the discussion that is to follow below, that while Eskom carries its operations as an independent entity, the government has a big influence in the policies that are shaping the operations at Eskom. Consequently, the vehicle with which the government executes its economic strategies has much to do with the success of parastatal organisation such as Eskom.

In one of government control mechanism, government determined that electricity was a central medium for achieving its objective of growing the economy. In the eyes of government, affordable electricity will promote stability in the economy, and it will also attract foreign direct investment. But to bring certainty in the equation, government adopted the National Electricity Regulator in 1994. The National Electricity Regulator was empowered to ensure the orderly, effective generation and distribution of electricity throughout South Africa. The existence of this structure means that Eskom may not unilaterally raise the price of electricity.

3. STRATEGIC MANAGEMENT PROCESS IN ESKOM

3.1 Methodology of Review of Strategic Management Process

We have begun our search for information by first approaching a Strategic Management Manager employed at Eskom. He has basically given us an overview of the entire strategic management process at Eskom as well as describes