MBA FPX 5006 Assessment 3

Strategic Framework

PG&E aims to ensure long-term success and sustain competitive advantage through clear strategic vision and mission. The vision of the company is to provide clean, safe, reliable, and affordable energy, while the mission is to locate, develop, and put in place new infrastructure. The overall objective is to achieve clean and renewable energy sources by 2030. PG&E has designed a plan for the implementation of a Continuous Energy Improvement Plan, as per state and federal regulations, as part of its strategy. The strategies of the company are based on the implementation of the Green Energy Business Plan (Pacific Gas and Electric Energy Efficiency Business Plan, 2020).

MBA FPX 5006 Assessment 3:AFI Framework

PG&E’s strategic analysis displays excellent leadership and ethics, as depicted through the AFI Framework. Strategy analysis incorporates an external analysis from the PESTLE and Five Forces models, which represents the company’s competitive force. Within, PG&E has qualities that are valuable, rare, and inimitable, which put the company on the way to long-term competitive success. The strategy development encompasses a business strategy to develop energy efficiency as an economic grid asset, a corporate strategy to provide clean, safe, affordable, and reliable energy, and a global strategy to make PG&E a climate change leader. Implementation of strategy is through a well-designed organizational framework, governance by a 14-member Board of Directors, and business ethics through aligning corporate activities with ethical standards (PG&E, Our Approach, 2020).

SWOT Matrix

PG&E uses strategic thinking techniques to address business problems through the SWOT matrix. Its strengths include over 100 years of experience in the utility industry, 23,000 trained employees, and diversity in power sources. Weaknesses include recent bankruptcy, wildfire risk, and government regulation. Opportunities are derived from renewable sources such as wind, sun, and nuclear. The threats are rising cost of production, rapidly changing energy markets, and green laws. 

Internal Environmental Analysis – VRIO

The VRIO model captures PG&E’s internal resources and capabilities. In terms of value, the firm has 16 million customers, has great customer service, and has rural and urban operations with a highly capable workforce. Rarity is the presence of high-technology equipment, over a century of experience in utility, and vertical integration. Imitability is difficult for the company due to strong customer ties and market dominance, while its organization has a diversified workforce, strong management, and good government relations. 

External Environmental Analysis – PESTLE

The political environment indicates that PG&E’s rates and profits are governed by the California Public Utility Commission and are subject to state laws governing business operations. The economic factors include higher costs related to volatile gas and electricity prices, unionized labor employee salaries, and inflation. Social forces are determined by the skill of the workforce and public attitude towards utilities. Technology advances such as improvements in weather observation and utility infrastructure are critical. Legal needs include employment, antitrust, and consumer protection law. Environmental influences, including climate change and pollution law, influence PG&E as well. 

External Environmental Analysis – Five Forces

Within the Five Forces Analysis, the possibility of new entry into the energy market represents a threat through lower energy prices, which PG&E offsets through new energy programs. The bargaining power of the suppliers affects profits, but PG&E balances this by leveraging its purchasing power and using dedicated suppliers. The buyer bargaining power is a problem, with cities seeking cheaper energy through community aggregation. PG&E balances this by charging other providers to use its grid. The threat of substitute products like solar and wind power remains high, and PG&E defuses this through investment in such technologies and good customer service. Lastly, rivalry among the competitors is fierce but is alleviated by PG&E’s market leadership, which allows it to invest in large renewable energy projects (PG&E Company Profile, 2020).

Strategic Concepts and Models

To ensure effective strategic planning, PG&E management should develop a strategic vision, mission, and strategy. The strategic vision states the company’s general purpose and existence, while the mission explains how to achieve the vision. The strategy implements these goals through measurable targets. PG&E leadership also needs to incorporate ethical values by developing a code of ethics, spending on ethics training, providing situational guidance, and establishing a confidential reporting system. Integrating ethics into the company’s business strategy is key to its future success (PG&E Continuous Improvement Plan, 2020).

Recommended Strategic Actions for PG&E

PG&E can also increase initiatives to make energy management and energy savings more attainable to customers and ramp up energy-savings programs. It should also assist the company in meeting zero-net-energy goals, improve infrastructure reliability, and ensure public safety. Increased safety inspections, improving vegetation management, and installing high-definition cameras throughout the service area are some of the other key recommendations (PG&E, Our Approach, 2020).