Pre-Masters Skills for
Value chain analysis of Aggreko
Tutor: David Dick
Value chain analysis of Aggreko
Currently, along with the increasingly development of globalization, every walks of life has to confront with the fierce competition. Even electric power market is no exception as well. Furthermore, more and more companies have not satisfied with the domestic market, they have focused on expanding the international market, such as Aggreko. As leader of the world's temporary power industry Aggreko has achieved a serious of success in recent years, even they need to face to intense competition from domestic and international market. This essay will through analyze the operation process and the creating of competitive advantage of Aggreko, in order to find out the reasons of Aggreko’s success. Therefore, this essay will be divided into four parts: the first part will introduce Aggreko Company briefly. Secondly, it will explain the value chain theory. And then the third part will use the value chain theory to analyze the competitive advantage of Aggreko. Finally, this essay will conclude Aggreko’s operation and its competitive advantage. 2. About Aggreko
Aggreko is currently recognized as the world's largest specialist energy company, which provides specialist temporary energy rental solutions, such as Power Generation, Temperature Control, Oil-Free Air (North America only), Risk Management, Aggreko Cooling Tower Services, Aggreko Event Services, Aggreko Process Services. The company was created in Netherlands in 1962 and established in Scotland in 1973. For the goal of delivering attractive and growing return to shareholders, the excellence service for customers by becoming the world leading temporary power provider and temperature controllers, Aggreko takes fleet investment and geographic expansion as their strategy to operate their business (Aggreko annual report, 2010). Specifically, at the end of 2010, it had a fleet of 13,500 generators ranging in size from 10KW to 2MW which, in aggregate, amount to over 6,600MW of generating capacity, the equivalent of about 10% of peak power demand on the UK national grid. In terms of marketing performance, in 2010, the Local business had revenues of £696 million which is 60% of Aggreko’s total revenue excluding pass-through fuel. On the other hand, in 2010, the International Power Projects business generated revenues of £460 million, or 40% of Aggreko’s total revenue excluding pass-through fuel revenue (Aggreko annual report, 2010). And The International Power Projects business also sells power and delivers using power plants built, which owned and operated by company selves. In spite of this, for expanding economic scale, acquisition policy also is the indispensable part of Aggreko’s operation strategy. Specifically, on 3 December 2010 Aggreko completed the acquisition of Northland Power Service, a leading provider of power solutions for the oil and gas exploration and production market in the Rocky Mountain region of North America, for £16.7 million. In addition, to invest continuingly in their business is necessary for Aggreko’s sustainable development. Accordingly, in 2010 the capital fleet expenditure increased from £105 million to £254 million as 1.7 times depreciation (Ibid). Over the last nearly 50 years development, Aggreko has a huge progress, it has 144 service centers in 34 countries, more than 3,800 employees and customers around over 100 countries throughout the world (Aggreko official website). In 1997, Aggreko is listed on the London Stock Exchange and also a company of FTSE 100. And now, Aggreko company share price has achieved 1880.00 GBP (Burns, 2010). 3. The overview of the value chain theory
Value chain is a model, which introduced by Michael Porter in 1985 in his book named Competitive Advantage. This model is useful to separate the business...