Hongkong Electric Holdings Limited Group members: (4A)Lee Hin Yeung(5) Tsoi Hin Nam(9) Chan Yuen Ying(15) Cheng Mei Kwan(18)
Background information Name: Hongkong Electric Holdings Limited Date of founded: 9th April 1976 Headquarter: Hongkong Electric Centre 44 Kennedy Road Net Profit (2007) : HK$7.448 billion
Form of Business Ownership 0001 0013 Stock Code 1038 0006 They are all public limited companies, as well as listed companies.
Company Structure Internal growth Provide Local Electricity Invest In Overseas Business Research and Training e.g. And they are lateral integration. Australia Thailand UK External growth
PROBLEMS OF RESOURCE ALLOCATION Electricity Secondary production Electrical Cooking appliances classes Tertiary production
Entrepreneur Labour Capital Land
Complex division of labour takes place.
Hong Kong citizens on Hong Kong Island and Lamma Island There are half a million customers!
Market Structure Natural monopoly Electricity generation involving huge amounts of capital Only sellers operating on a big business scale can afford Production of a large output Gain benefits from economies of scale Leaving no room for other sellers
Features Number of buyers Number of sellers Nature of goods Ease of entry Market Information Pricing Behaviour Many One Monopoly Homogeneous and heterogeneous Restricted Imperfect Price searcher Non-price competition Yes
StrengthWOT analysis 1. Wider source of capital It can issue shares and bonds to raise capital There is no upper limit on the number of shareholders 2. Regional monopoly Sole electricity supplier for Hong Kong Island and Lamma Island There is no competition from a second electricity supplier
3. Benefit from integration Hongkong Electric Holdings Ltd. overseas electric companies Lateral integration Managerial economies Combine duplicated departments Labour cost Marketing economies Purchase related materials More discount Financial economies Get bank credit easily and enjoy a lower interest rate Loss If a loss in one market Compensate by the profits made in another market Profit
SWeaknessOT analysis 1. Lack flexibility in decision making Scale of production has a more complex organizational structure Communication between departments slow down decision making process 2. Scheme of Control Agreements Existing permitted rate of return is 13% on the firm s net fixed assets It will decrease to 9.99% from January 09 It is also linked to emission caps Lower the revenue in local market
3. Increase risks to supply reliability human errors and natural disasters people may lose their confidence
SWOpportunityT analysis 1. The 2008-09 Budget HKSAR Government would allocate $4.3 billion to inject into each domestic electricity account a subsidy of $1,800 Demand for electricity increase Price ($) P 1 Electricity S 0 Q 1 Gain Q 2 D 1 D 2 Total revenue increase Quantity
2. Lamma Winds The first wind turbine in Hong Kong is set up on Lamma Island It is a milestone in the application of renewable power resources in Hong Kong 3. A Symphony of Lights It is the world's largest permanent light and sound show It is displayed every night with good weather It create a derived demand for electricity
SWOThreat analysis 1. Face competition Competition from other kinds of energy supply e.g. kerosene, liquefied petroleum gas Price ($) LPG P 1 P 2 0 Q 1 Q 2 D Price of LPG Quantity demanded Quantity Price ($) P 1 0 Electricity Loss Q 2 Q 1 D 2 D 1 Quantity Demand for electricity Quantity demanded Loss
2. Energy Crisis Coal is mainly used to generate electricity It will be used up one day and cannot be renewed in a short time There will be no production of electricity 3. Discontent of the public Burring coal for electricity generation causes environmental problems e.g. acid rain, smog More and more people become awareness of this problems Some organization protest against the use of fossil fuels
Suggestions to increase profit Develop a wider use of renewable energy Avoid over-reliance on coal Become more environmentally-friendly Spend money on advertisements Provide more information to customers and investors Build a better corporation image Provide more technical training to labour Avoid human errors in supply reliability Merge the companies of liquefied petroleum gas Turn competitors into partners