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Essay Paper on AES Case Study

AES entered the 21st century with operations in 32 nations. Its power generation capability last year was about 56,700 net megawatts. By comparison, during the same time local electricity provider Pepco at its peak generated just over 6,000 megawatts. Mr. Bakke and Roger Sant, the founders of the company, went into business in 1981, at a time when the United States began co-generating electricity and utilities throughout Europe were privatizing. These changes offered new market opportunities for companies like AES. In its early days AES was made up of six groups, based on geographic location. Each group acted independently of the other, making its own rules and decisions.

Since AES was started, the company’s founders have zealously disregarded corporate culture. As a result, during its 19 years AES has never developed departments or appointed heads to financing, purchasing, operations, public relations or even human resources. This highly independent environment creates situations where mechanical engineers and coal handlers make multimillion-dollar deals. What makes the company different from the other companies in the trade is that at the same time that the company had more business, the decision-making chain was very decentralized.

The company has never formed corporate departments or assigned officers to oversee finance, operations, purchasing, human resources, or public relations. Instead, such functions are handled at the plant level, where plant managers assign them to volunteer teams. The AES structure saves on the costs of management – the organization has only five levels – and it economizes on specialized staff. The company was able to make $3 billion acquisition of the Drax Power plant in England, with a team of several people who obtained many separate permit approvals and negotiated the complex financing through different lenders. Normally, projects of this size require hundreds of workers, each with small specific tasks to perform. The savings and increased speed and flexibility of the AES team-based approach are an important source of the firm’s competitive advantage.

The founders of AES have enjoyed the luxury of sitting back and watching their 53,000 workers build the company. Because it employs locals on all seven continents where it operates, AES’ work force is so ethnically mixed that English is the first language of only about 10 percent of its employees. And the company continues to expand.

Britain was the first overseas market AES entered in the late 1980s when the island country was deregulating electricity. At the time at home the opportunities were not abundant, and AES was struggling to win a part of the Texas market. Then the Iron Curtain fell in 1989 and opened dozens of small Eastern European nations in search of power companies that would buy and update their obsolete nuclear power plants. By 1996, AES had plants throughout Europe and Asia. Then it aggressively began buying facilities in South America and Africa…

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