Luotang Power company analysis
Macro Analysis
The following case analysis discusses the macro and micro elements that influence Luotang Power. When viewed as a company among dozens of others in the same firm, Luotang does not have a great impact to the industry in China. Although Luotang Power has been claimed to be successful and grew rapidly when it was first opened for business, the 20-year Build Operate Transfer (“BOT”) contract with the government is due very soon; the plant will be given to the Hubei Provincial Government after 2 centuries of operation at no cost to the government. Ever since the power plant has begun operating, there were already political restrictions put into use and some even before the plant opened. In addition to Luotang Power ultimately becoming the property of the Hubei Provincial Government, this plant is strictly foreign owned and the conditions were that only Chinese manufactured equipment will be used within and around the plant. This shows how political factors have already taken a great toll on Luotang plant before anything has happened; this also sets a limit of 20 years for the current rightful owner to try to make as much profit as possible before the contract ends (the microanalysis will elaborate on how this can harm the company). Economically, Luotang was one of many power plants that were in operation in China but only one of the few around the provincial area. Around the time Luotang Power began operations, this opened up opportunities for many other small businesses to form around the plant. The case provided information about how Luotang experienced rapid growth when it had first opened; many other power plants around the country were also growing quickly (refer to Appendix A for more information about the companies) and many power plants at the time were growing rapidly due to smaller businesses that formed around the electrical power industry. More recently, the parent company China Hua Tong Company (“HT”) has been considering the idea of a
The following case analysis discusses the macro and micro elements that influence Luotang Power. When viewed as a company among dozens of others in the same firm, Luotang does not have a great impact to the industry in China. Although Luotang Power has been claimed to be successful and grew rapidly when it was first opened for business, the 20-year Build Operate Transfer (“BOT”) contract with the government is due very soon; the plant will be given to the Hubei Provincial Government after 2 centuries of operation at no cost to the government. Ever since the power plant has begun operating, there were already political restrictions put into use and some even before the plant opened. In addition to Luotang Power ultimately becoming the property of the Hubei Provincial Government, this plant is strictly foreign owned and the conditions were that only Chinese manufactured equipment will be used within and around the plant. This shows how political factors have already taken a great toll on Luotang plant before anything has happened; this also sets a limit of 20 years for the current rightful owner to try to make as much profit as possible before the contract ends (the microanalysis will elaborate on how this can harm the company). Economically, Luotang was one of many power plants that were in operation in China but only one of the few around the provincial area. Around the time Luotang Power began operations, this opened up opportunities for many other small businesses to form around the plant. The case provided information about how Luotang experienced rapid growth when it had first opened; many other power plants around the country were also growing quickly (refer to Appendix A for more information about the companies) and many power plants at the time were growing rapidly due to smaller businesses that formed around the electrical power industry. More recently, the parent company China Hua Tong Company (“HT”) has been considering the idea of a