Business Plan Assignment Evaluating Strategy of Lumo Energy

Question

Task: You are required to write a 2000-word business plan assignment in which you apply learnings from the capstone topics and apply them to the organisation by undertaking additional research.

Assuming the role of an organisational consultant, you are to write a report that clearly articulates the organisation's strategy and business model and outlines a detailed approach to Competition Strategy, how the chosen organisation’s performance is/can be measured against their strategies. You will also be required to prepare a Balanced Scorecard for their chosen organisation. Attention should be paid to the use of secondary research and insights

Answer

Executive Summary
This report on business plan assignment aims to assess Lumo Energy’s competitive strategy and positioning in the market and accordingly devise performance metrics. Lumo Energy located in Australia is an energy retailer who offers services in Victoria and South Australia predominantly. The company’s business model has been deconstructed to assess the nine major elements who support the business. The competitive positioning of the business is through its creative marketing campaigns that creates valuable content for the customers through social media handles. This has increased the customer engagement ratio and reduced the complaint levels. The performance metric tools that can be applied by Lumo energy ranges from tracking of client-wise consumption ratio, monitoring electricity downtime to Operating cash flow. The balance scorecard relies on four major factors for the business success like financial in terms of the value rendered to shareholders, customer related to their satisfaction and engagement levels, innovation and learning and internal process.

Based on this analysis, the following recommendations are provided:
• Creating disaster recovery plan
• Increase employee engagement
• Creating unique brand positioning

1. Introduction
The changing and complex business setting has forced the present companies to apply accurate knowledge of both internal and external aspects when making strategic choices, operational and premeditated decisions (Shujahatet al. 2017). Thus, such decisions can lead to competitive benefit based on information and knowledge sources. Strategic management provides a comprehensive framework by developing strategies and guidelines that is aimed in achieving the objectives and allocating resources to implement the strategies. The report aims to evaluate Luma energy’s strategy and business canvas model using the nine building blocks that will summarise its competitive tactic. Further, Porter’s five forces, SWOT, performance measurement and balance scorecard of the business will be defined to address the competitive ability of the business. This assessment will help to devise recommendations will be applied to enhance the future performance, productivity and become a stronger operating force in the competitive marketplace.

2. Company background and business model
Lumo Energy is an Australian energy retailer that operates from Victoria and South Australia. Lumo Energy is a wholly owned subsidiary by Snowy Hydro since 2014 and the company provides gas and electricity packages in Victoria and South Australia. The business as of 2017 had 500,000 customers and 500 employees. The company offers some of the best turnaround plans for commercial and household purpose and offers one of the best energy plans for its customers with award winning facilities. Lumo Energy's vision is to offer convenient to use energy solutions and delivering them in an exclusive and customer friendly manner.

2.1. Strategic approach
Lumo Energy boasts itself on its explicit positioning within the Australian energy retail market. Despite not being a major energy company in Australia, Lumo is immediately identified because of its creative application of tactics in its marketing campaigns which is unique and plays a major role in promoting the brand. The company initially failed to understand which was the most suitable channel to reach its existing customers and capture new prospects. However, the digital team inside Lumo was quick to develop differentiated, new and engaging digital marketing approach contingent on in-depth market and keyword search, seasonal happenings and current trends. Thus, the team executed useful and intriguing social media campaigns to engage existing customers and targeting potential prospects using Facebook and Google analytics (founddigital.com.au 2020). Hence, this brough in massive success for Lumo within two years from launch by addressing the inadequacy present in marketing practices by eradicating irrelevant channels. Moreover, the company was seeking simpler ways of process requests and increase employee cooperation (Nintex.com 2020). They implemented online application to streamline processes and increase discernibility in overlying areas.

2.2. Business canvas model
Business model techniques can be used in supporting sustainability through looking both within and outside the business(Joyce and Paquin 2016). The business model for Lumo is as follows:
• Key partners –Nintex software application provider, Electronic manufactures, Facebook ads and Google analytics, National electricity market (NEM) that helps in exchange between electricity providers and customers. The Salvation Army for supporting local communities.

• Key activities –Providing electricity and gas services, marketing campaigns to retain customers, optimising energy efficient network, installation of smart meters
• Value propositions –Offers customers affordable electricity and gas services. Distinguished plans for home and commercial users. Customisable personal account for each customer. Reward programs for customers to some of Australia’s major retailers like Coles, Myer, Woolworths and so on. Exclusive $bonus credit offered for selected plans.
• Key resources –Staff with relevant competence, digital content creating team, various electricity plans for household and commercial purposes.
• Customer relationships –Agreement with local provisioners for using district heating network, online round the clock customer services for resolving complaints and other queries.
• Customer segments – Individual households, commercial offices.

• Channels – Social media ads, local media, television and newspapers, energy bills company website and smart meters.
• Cost structure –Electricity and heat production costs, maintenance and staff expenses, operating expenses incurred for heat and electricity distribution network, software vendors costs and marketing expenses.
• Revenue streams –Profits from sale of energy and gas distribution.

3. Competition strategy
3.1. Porter’s five force analysis
Porter’s five forces helps to analyse the external factors opportunities and threats for the business (Öneren, Arar and Yurdakul 2017). Lumo’s porter’s five forces are as follows:

• Bargaining power of buyers (low) –This is low because customers’ although has an option to switch between different electricity and gas providers, however, Lumo offers the best rates to its customers and a lot of other services. The company offers different price slabs for house and commercial purpose and also rewards that can be redeemed in high-retail stores within Australia.

• Bargaining power of suppliers (high) –The suppliers have better negotiating power since there exists limited suppliers within Australia who can offer the requests for such energy-based business.

• The threat of new entrants (low) –This is invariably low because this is a capital-intensive sector and needs a lot of approval and installations that will take time and also the resources to support the operation. New entrants’ sustenance will be an issue.

• The threat of substitutes (low) –The substitutes are very limited in this segment where customers can opt for solar panelled energy. However, this depends on various other factors like weather and also installation and maintenance are an expensive job.

• Competitors (high) – There are various competitors in Australia both private like Diamond Energy, Powershop, AGL and so on along with local government offering electricity and gas needs in every Australian district.

3.2. SWOT analysis
The next strategic management process is internal and external evaluation known as SWOT that identifies the threats and opportunities in the competitive environment (Güreland Tat 2017).

3.3. Competitive positioning and benefits
Lumo Energy provides electricity and gas to more a lot of customers in Victoria and South Australia.Lumo provides a lesser than average price on GreenPower offsets and has reasonable solar offers for customers, nevertheless, the company is not carbon neutral. Moreover, 75% of customer service calls made to Lumo are answered within 30 seconds (choice.com.au 2020). Also, it offers $20 bonus credit to every customer to start their rewards programs and the rewards can be collectively redeemed by consumers at major retail outlets in Australia which is a unique selling proposition (USP) offered by Lumo energy. It also offers a dedicated account management team for business clients to offer quality service and installation of meter. Similarly, Lumo educates the customers regarding the energy bills, services and the pricing slabs to assist them to understand how the process works (Utilities.com.au. 2020). Compared to its competitors like Click Energy, Red Energy, Lumo energy provide its service at low cost. Finally, the company focuses on risk management to make sure growth is sustainable and customer complaints are reduced.

4. Performance measurements
• Monitor the downtime –Power outages or frequent cuts are inevitable and can be due to major repair works or maintenance schedule. Recognise the root cause of power cuts and the response time required by Lumo to comprehend when and where things faulter based on which they can offer better customer solutions that will bring down the complaint levels.

• Track the consumption client-wise –Tracking the consumption consumer-wise will help Lumo Energy to comprehend who are their key customers, for example, it can be either commercial outlets in Victoria and South Australia or household segment. This key performance indicator will provide vision to plan and prioritise the production levels as well as staffing requirement. Assess the consumption per sector over time, so as to recognise a trend of consumption and this will enable to forecast future requirements more precisely.

• Operating cash flow -The Operating Cash flow signifies the amount of cash Lumo energy generates on normal business operations, less taxation and interest paid. The financial energic metric will inform if a company is liable to generate adequate cash to sustain and grow their operations. This will provide a clear view for Lumo on the reality of the business operation. The key indicator is to monitor cash flow closely and make estimations frequently so keep the business out of trouble.

• Performance ratio-This is the most critical energy metrics in assessing the competence of to measure and enhance the effectiveness of the company assets like equipment, energy generation plant etc. Lumo can track the performance ratio over a period to monitor variations and compare with industry average to check if they are on track (datapine.com 2020).

5. Balance scorecard
The adoption of balance scorecard is beneficial for a business as a performance measure instrument (Hamdy 2018). The balance scorecard of Lumo Energy is indicated below:

Table 1: Balance scorecard of Lumo Energy

Source: (csus.edu 2020)

6. Recommendations
• Disaster management plan–Having an extensive disaster or contingency business plan is necessary for Lumo Energy. This will ensure they have adequate resources and information required to act immediately. Assessing potential risks for the business and ways to avoid them must be present in the plan. Preparing contingency plan will help Lumo to safeguard its assets, for example employees, databases, equipment and expensive machines can help the company eliminate from major risk

• Increase employee engagement –Employees need to be frequently trained on new process and technology with regard to energy sector. Having meetings with the team managers will help them to understand and resolve employees’ concerns (Winston, Favaloro and Healy 2017). Moreover, improving communication flow and empowering them to be part of decision-making process will make the employees feel valued. Thus, all these factors will increase workplace satisfaction among employees who will perform better and give better results.

• Creating unique brand positioning –Creation of unique brand positioning in terms of making the website interactive, changing the way the energy sector operates and frequent interaction with consumers are some of the explicit ways the company can capture more customers across Australia and growth the market share through this unique brand positioning(Webfx.com 2020).

7. Conclusion
Thus, from the above analysis of Lumo Energy who have been awarded the best customer centric business in Australia provides affordable electricity and gas services to both households and commercial outlets in Victoria and South Australia. The company offers reward points and creates intriguing marketing campaigns that acts as a strong competitive benefit for the business. The performance measure of the business can be measured using various business parameters like financial, customer score and so on. The balance scorecard details four major areas where the business needs to focus to stay strong like financial, customers, innovation and learning and internal process. Based on this analysis, recommendations have been offered for the business improvement and success.

References
choice.com.au 2020.Lumo energy review.Available at: https://www.choice.com.au/shopping/shopping-for-services/utilities/articles/lumo-energy csus.edu 2020.Electricity utiliy balance scorecard. Available at: https://www.csus.edu/indiv/h/hattonl/documents/ElectricUtilityBalancedScorecardExample.pdf

datapine.com 2020.KPIS examples for the energy industry.Available at: https://www.datapine.com/kpi-examples-and-templates/energy

founddigital.com.au 2020.Lumo Energy Omni-channel markting.Available at: https://www.founddigital.com.au/our-work/lumo-energy-omni-channel-marketing/

Gürel, E. and Tat, M., 2017. SWOT analysis: a theoretical review. Journal of International Social Research, 10(51), pp.994-1006.

Hamdy, A., 2018. Balance scorecard role in competitive advantage of Egyptian banking sector. The Business & Management Review, 9(3), pp.424-434.

Joyce, A. and Paquin, R.L., 2016. The triple layered business model canvas: A tool to design more sustainable business models. Journal of cleaner production, 135, pp.1474-1486.

lumoenergy.com.au 2020. About us. Available at: www.lumoenergy.com.au Nintex.com 2020.Lumo energy standardizes processes, reducing customer churn and increasing employee engagement. Business plan assignmentAvailable at: https://www.nintex.com/case-study/lumo-energy/

Öneren, M., Arar, T. and Yurdakul, G., 2017. Developing competitive strategies based on SWOT analysis in Porter’s five forces model by DANP. Journal Of Business Research-Turk, 9(2), pp.511-528.

Shujahat, M., Hussain, S., Javed, S., Malik, M.I., Thurasamy, R. and Ali, J., 2017.Strategic management model with lens of knowledge management and competitive intelligence. VINE Journal of Information and Knowledge Management Systems, 47(1), pp.55-93.

Utilities.com.au. 2020.Lumo energy.Available at: http://utilities.com.au/index.php?option=com_zoo&view=item&layout=item&Itemid=423 Webfx.com 2020.5 effective ways to increase market share online.

Available at: https://www.webfx.com/internet-marketing/how-to-increase-market-share-online.html Winston, A., Favaloro, G., and Healy, T., 2017.Energy Strategy for the C-Suite.Available at: https://hbr.org/2017/01/energy-strategy-for-the-c-suite ?