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Aggeko Value Chain Essay

2951 words - 12 pages

1. Introduction
Aggreko plc is engaged in the rental of power generation and temperature control equipment. It has gained several successes in its business to become the global leader in the power service industry over 49 years. To find out what factors have created the Aggreko’s successes and in what extent this company can achieve the competitive advantages in its business strategy, value chain analysis might be a suitable tool to offer evaluations about the activities through which Aggreko develops a competitive advantage and creates shareholder value. This report will first present the overview about value chain model, then applying this model in case of Aggreko to analyze some major ...view middle of the document...

In the International Power Projects business, as a power producer, Aggreko installs and operates power plants through providing the generating capacity as well as producing the electricity for customers. Specifically, Aggreko provide range solutions, from the simple to very complex, such as:
* Generating power for entire countries in times of severe power shortfall
* Multi-million pound projects to help increase production in petrochemical plants by providing additional power and liquid cooling.
* The design and operation of the temporary power infrastructure for major public events such as the Olympic Games and the FIFA World Cup.
* Providing temperature control in an office after the air-conditioning has broken down.
* Installing chillers to provide the cooling for temporary ice-rinks; renting a generator for a few days to a power utility while it carries out improvements to transmission lines.
(Aggreko website, 2011)
Presently, Aggreko headquarter is in Glasgow, Scotland – UK. Its capitalization is approximately 5,452.30 million pounds. In 2010 company revenue was 1,230 million pounds, profit before tax was 304 million pounds, growing by 20% and 25% respectively. Aggreko issues 274.54 million shares with the value 1,986 pounds per share (valid on the 7/7/2011) in the London stock exchange. (Morningstar website, 2011)
2. Overview Value chain:
Michael Porter is an Economics doctorate of Harvard University. In his 1985 book Competitive Advantage, Michael Porter introduced a generic value chain model that includes a sequence of activities found to be common to a wide range of firms. Value chain analysis helps managers to better understand the activities through that a firm develops competitive advantages and creates shareholder value. Porter (2008) identified the value chain includes two components such as primary and support activities as shown in the following diagram:

According to Porter (2008), the goal of these activities is to offer the customer a level of value that exceeds the cost of the activities, thereby resulting in a profit margin.

The primary value chain activities are:
Inbound Logistics | the receiving and warehousing of raw materials, and their distribution to manufacturing as they are required |
Operations | the processes of transforming inputs into finished products and services. |
Outbound Logistics | the warehousing and distribution of finished goods. |
Marketing & Sales | the identification of customer needs and the generation of sales. |
Service | the support of customers after the products and services are sold to them. |

These primary activities are supported by:
Firm infrastructure | organizational structure, control systems, company culture, etc. |
Human resource management | employee recruiting, hiring, training, development, and compensation |
Technology development |...

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