Assessment and Consultation

Introduction

The business unit that I have focused on is external environmental analysis, and the consultant’s task at hand is to develop feasible strategies for an updated efficiency model which in turn will impact other critical areas of Waste Management inc, including key marketing strategies, human resources, and revenue projections. The consultant should be prepared to assess the existing corporate structure, and make specific recommendations—both technical and structural—as to the scale, and operational detail of the company, and endeavor to isolate and detail critical lag areas in both internal and external performance. Both client and consultant should ideally formulate a time-frame for full implementation of key changes based upon an adequate timeline as well as other key preparations. Crucial to an effective client/consultant relationship are shared details and the essential structure of the undertaking and a demonstrable co-efficiency in approach. The consultant should be prepared to make exact cost-estimations and projections based upon an assessment of the present functionality of the company and the enhanced revenue model it predicts.

The consultant is entrusted by the client to outline a detailed planning model, and offer substantive recommendations throughout the process of transition. Here the client/consultant relationship is critical to a successful outcome, and should be characterized by a shared vision for company productivity and competitive viability. Consulting at this level of business demands a particular skill-set ideally fitted to structural applications and appraisal that involve all important aspects of operations. Should the consultant commit an error anywhere in the planning or recommendation stage, the entire project could be compromised, and the cost absorbed by the client. Pivotal consulting can assess and correct a unit problem, or—in the event of poor communication—exacerbate the problem (Block, 1999).

A: A General Environmental Analysis

The waste management industry has evolved and expanded in recent years, in accord with urban concentration brought on by globalization and the influx of international business sectors into major cities around the world. Where the manufacturing base in America has been in decline due to years of aggressive outsourcing, the technology sectors invariably based in large cities have steadily expanded the urban demographic, which in turn drives the expansion of the waste management industry. In nearly every global consideration the driving force in waste management expansion and competition is urbanization and the growth rate of the international corporate sectors. Educated urban elites comprise the single most dynamic demographic consideration impacting waste the management industry and the increasing competitive response within investment sectors. In recent years the consideration of waste-to-energy technology is drawing more attention within the industry, and generating a number of profitable investment opportunities.

Currently in the United States the waste management business generates in excess of $55 billion dollars annually, a revenue share that makes the industry enormously competitive, particularly in urban center where contracts and markets are fiercely established. The waste stream is divided into segments. By far the single largest segment of the waste stream is municipal solid waste (MSW), which accounts for 429 million tons annually just in the U.S. markets. Construction and industrial waste are considerably lower in mass, generating respectively just under 200 million tons annually (Honkio, 2009 ). SMW signifies the segmentation of the urban demographic, as well as the expanding capacities and pricing policies within the industry. These indices are generally reliable on global scale, with common variables.

Although there are vicissitudes in volume among select municipalities, pricing is generally stable. When growth is stagnant waste firms have even extracted modest percentages of increase for services. Landfill pricing per ton of MSW has steadily increased even amid periods of stasis or slight decline in revenue projections. Price variation is generally affected by such considerations as region, population density, demand, disposal capacity and overall volume. Environmental regulation is another area that potentially affects performance and revenue. Segmentation is critical to understanding the various forces at work in the industry and what factors specifically drive these forces. Breaking down the various segment of the industry isolates the most productive revenue areas both regionally and nationally. The single largest segment of the industry is waste collection, typically generating more revenue in dense urban areas as opposed to the suburban sectors, even though urban areas are apter to harvesting organic waste. This one segment of waste management accounts for fully 61 percent of all revenue, generating an estimated 34 billion annually. Additionally transporting and recycling, waste-to-energy processing, and landfill disposal round out the other 39% (Honkio, 2013).

A notable trend in the industry over the last twenty years is the degree to which waste management companies have been steadily privatized. In 1992 35% of waste management revenues were generated by municipalities. Today that percentage has fallen to 22%. The drift toward privatization demonstrates the profitability of the industry as well as revenue projections for the immediate future. The industry Privatization has resulted in concentration of ownership, which will ultimately erode competitive pricing. The larger companies are merging to offset the uncertainty of labor costs, and other critical economic factors that pose a threat. The established markets will incrementally expand, one of the leading predictors that drives industry concentration and integration.

B: Competitive Analysis of the Industry

Two companies have emerged with a considerable dominance of the industry, one of them is Waste Management Inc, and the other is Republic Services. Together these two firms account for an estimated 39% of the industry revenues. Private sector control of the industry is currently almost 80%, an astonishing change in a relatively short period. Profitability and investment attractiveness have been the driving forces for privatizing waste management entities (see Tidekleen Waste Management) that even thirty years ago were the province of municipalities. The competitive features of the industry are less dramatic than the trend in mergers and vertical integration as a form of economic insulation from an uncertain economy. Industry insiders simply recognized the viability of concentrated ownership as a means of gaining both market proliferation and protection. Industry consolidation limits or abolishes otherwise risky competitive features and allows steady prices increases in conjunction with market expansion (Pichtel, 2005).

Operations costs are a prime concern, price of fuel and fleet maintenance offset revenues to the extent that they are volatile areas of the industry, especially in time of economic uncertainty. Even with the trend in consolidation these factors come into play with particular regard to revenue projections and also expanding market projections. An alternative to rising fuel costs as well as landfill fees are the emerging sectors for energy conversion. An increasing number of conversion technologies are under investment speculation for long-term viability application. Among these conversion alternatives are Gasification and Hydrolysis. Gasification uses a set of chemical reactions to convert carbon-containing feedstock into synthetic gas. Hydrolysis is a process of chemical stratification using water as the separation agent. As landfill reliance diminishes with the introduction of solid conversion technologies the industry could potentially be transformed, with enhanced profitability (Lombardi, 2012).

In evaluating industry competitiveness at an extremely low rate due to progressive consolidation, the visible trend appears to be conversion technology and mandatory recycling at a level previously not seen. To the extent that waste-to-energy conversion is now competing with traditional landfill and disposal options the industry will veer to toward conversion technologies and attractive investment options (Lechter & Vallaro, 2011). Growth projections for waste management are calculated by the both the technology sectors that impact urbanization and the expanding U.S. housing market. Waste management investment is attractive for two primary reasons, low risk and industry consolidation, both of which translate to a positive cash-flow for investors. An additional investment consideration is that the Environmental Protection Agency is actively taking steps to reduce the prevalence of landfill options due to the generation of harmful methane gas, and encourage companies to explore waste-to-energy conversion.

Cost-reducing initiatives coupled with acquisition of new markets suggest industry growth projections over a short-term period. Because of the potential revenues derived from cutting-edge waste-to-energy conversion, and the as yet unpredictable transition within the waste management industry, there are uncertainties merged with the otherwise stable cash-flow tables common to the leading firms presently. Given the flexibility of stable earnings, Waste Management acquired a 40% equity investment in Shanghai Environmental Group, while also purchasing a waste-to-energy conversion plant in Virginia. Because the company dominates its industry does not guarantee that it is immune from reductive market forces or a significant change in the commercial environment. Currently the calculated steps the company is taking have the potential of paying substantial future dividends. By heeding the emerging trends in waste management and waste conversion the company is setting itself up as a major beneficiary of the new era (Nathanson, 2007).

Given the substantial market share of Waste Management Inc, although competition is negligible, local municipalities that handle their own collections and disposal posit a round of new markets that could add to the company’s revenue portfolio. The process for acquiring resistant municipal markets depends upon securing contracts that are able to undercut the existing costs to local authorities. Because pricing entails a host of factors and variables tied to such considerations as labor, waste volume, fuel, equipment maintenance and other relevant costs, securing municipal markets becomes a science of exact projections and cost overrides. The one area of Waste Management where competition is significant is solid waste disposal, because pricing and volume are subject to regional economic factors. By maintaining the focus on renewable energy and environmentally friendly methods of waste disposal the company is poised to take advantage of emerging trends.

The company has the capital to make a series of calculated investments in emerging green technologies that are destined to replace outdated and environmentally harmful waste storage and disposal practices. The timing for this investment could not be more fortuitous given the prestige of green alternatives and renewable energy. Recycling is the wave of the future, both from an economic and political standpoint. In spite of the necessary expenditures related to federal regulations for waste management, environmental protection emphasis, and obtaining critical permits and licensing, the markets are expanding and the cost output is compensated by enhanced revenue projections. Growth catalysts are the exceptional degree to which major players can align themselves with current trends in environmentally conscious alternatives to management and disposal of solid wastes, and the potential for transitioning into greater market shares of waste-to-energy conversion as a dominant indicator. Flexibility rather than a strict focus of current profit margins will determine the future industry leaders.

Politically popular green alternatives are creating a widening number of regulations and restrictions for an industry whose operational environment has not been subject to significant changes in decades. Charting the economic impact of the expanding regulatory culture becomes part of the active strategy of competition and corporate security. Although these new regulations pose an obstacle and added costs for the company, there are critical compensators for compliance in securing new and lucrative markets tied to the wave of green consciousness. Anticipating and adapting to these changes is a winning strategy that may entail short-term losses, but insure long-term gains (Honkio, 2013). The innovative approaches to waste management on the horizon will eventually transform the industry in terms of efficiency, cost and environmental considerations. The corporate capacity to not only chart these transformative changes, but to keep pace with them in terms of capital investment and technology applications will determine which companies secure the lion’s share of the industry.

Making a critical investment in the proverbial future is simply good business sense for an industry leader like Waste Management Inc. Because of the unique international scale of investment opportunities and emerging markets, as well as the trend toward privatization the business environment is literally seeded with gold. Market entry objectives that may initially entail substantial investment can also promise windfall revenues. Presently the investment positives outweigh the negative forces of a faltering economy. The cash-flows are stable in both MSW and transfer business, there is considerable growth in market share through relatively low-risk acquisitions, and the potential for waste-to energy conversion is promising. Emphasis on cost-reduction and technology-based efficiency is ongoing (Guyer, 1998). The industry is insulated to a remarkable degree from the economic threats that are ravaging other once dynamic sectors of the domestic economy.

C: Five Forces Analysis and Key Success Factors

(Table omitted for preview. Available via download)

In terms of the five forces model, the waste management industry enjoys a unique set of protections given the degree of the economic downturn and the impact that it is having on many other dynamic sectors of the domestic and international economy. In each category of the five forces model there is no substantial threat to the industry, and the revenue projections for emerging waste-to-energy conversion are attractive for investors.

Key success factors in the waste management industry are continually expanding markets, the trend toward privatization and revenue-driven efficiency models whose approach to the environment entails both internal and external benefits. The irreducible emphasis on green technologies and emerging waste-conversion transition has created an exciting edge for an industry in the process of transformation. Because the positive forces so completely dominate the negative force the consultant’s position is not necessarily to offset loss as much as chart the most productive channels for expansion, and make informed recommendations for capital expenditures that guarantee the most lucrative returns. Projections indicate that Waste Management’s revenue will increase by 2.75% over a ten year period, and that capital investment in conversion technologies shows no sign of diminishing. Growth projections are based upon current revenues and the inherent stability of the markets for these services. Urbanization and proximity housing markets insure industry expansion over a relatively stable period of investment.

Segmented revenues, including landfill and transfer servicing are expected to decline with the gradual expansion of traditional collection, MSW, and emerging conversion alternatives with considerable public appeal. Green politics is driving the conversion trend to a degree that is becoming more attractive to investors simply due to its popularity. By exploiting the drift toward environmentally friendly waste alternative the industry leaders are in unique position to play the odds in their favor. Waste removal is immune to economic recession, it is one of the few areas of the corporate economy that doesn’t fall into flux at the slightest ripple in the economic forecast. This is not only an enormous benefit in the revenue model, but one that permits a degree of reflection and calculated planning that is not common to other industries, whose fortune turn on the state of the domestic economy (Nathanson, 2007).

Waste Management Inc is in a position to purchase smaller companies that handle segmented areas of waste removal. Although current trends in first world nations are not necessarily reflected in other less developed nations, or subject to common lag-effects that follow in ten to twenty year patterns of adaption, the investment strategy can still produce substantial revenues. Consulting recommendations should ideally emphasize the long-term as opposed to short-term benefit for the client. Simply outlining the most obvious risk factors against the more stable aspects of the industry is not sufficient. The consultant is expected to detail each area of risk and formulate a set of solid recommendations for diffusing or avoiding them altogether. In the North American market the company competes with both governmental forces and the spate of municipalities that handle their own collection and waste disposal. Where it becomes economically feasible for these municipalities to retain external service contracts the company can make important market penetrations (Lechter & Vallaro, 2011).

There are specific economic and structural differences in emerging markets, as opposed to existing expanded markets which are positively impacted by such considerations as urbanization, incremental maintenance increases and fuel and labor costs. Cost reduction is a primary factor in revenue projection in both short term and long-term considerations. Because there are inherent variables in maintenance costs due to a host of specific economic factors companies should endeavor to compensate for unforeseen fluctuation in operations expenses. Growth cycles are often difficult to chart however by focusing resources on customer segmentation and strategic acquisitions, while controlling operating costs within an acceptable set of margins there is the likelihood of incremental growth. Expansion into recyclables and waste-to-energy conversion is presently the most dynamic growth sector in the industry, and offers a number of exciting new markets.

Having analyzed and outlined key external factors that can either inhibit or enhance growth projections for the short term I can make a set of general and more specific recommendations. Preserving customer loyalty and satisfaction plays a significant role in expanding present markets and acquiring new markets based upon client inquiries and other relevant comparisons. Using capital resources to fully explore the emerging options in green technologies and the markets they entail is a primary consideration for revenue projections and growth potential. Identifying and compensating for key risk factors in operations and market expansion is another vital area of concern as the industry embarks upon a segmented transition from traditional waste removal to more refined technologies involving not only collection and disposal, but conversion as well. Targeted price increases to offset operations costs in fuel, labor and equipment maintenance are also recommended.

Municipal competition is one factor that blocks expansion at the local or regional level of the industry. Municipalities have certain advantages in as much as tax-revenues are available to them to cover unforeseen operational costs and limited structural adjustments (Pichtel, 2005). Part of the strategy to compete with established municipal waste removal is focusing on operational streamlining and enhanced efficiency, demonstrating that the difference in resource management and collection pacing can amount to a number of clear advantages for the client. Simply offering a superior service is a basic sales strategy and one that invariably secures success. Because the industry is unevenly balanced between an encroaching private sector, and a number of guarded municipalities there are tactical advantages in understanding how to exploit capital values and the resources with which to compete with seemingly immunized municipal strongholds that entail a set of local political relationships and labor contracts. Waste Management Inc is posed to break into these markets.

Exciting waste-to-energy technologies are opening up in European countries, and Waste Management Inc is in a unique position to explore and invest in these technologies. One vital area of these emerging technologies is the potential for transferring the mass of MSW to a conversion system in which nothing is excluded. Traditionally MSW has been consigned to landfills, which pose a number of serious environmental issues. One of the research questions now being explored is how to affect a 100% transfer from landfill policy to energy conversion for the bulk of MSW. The possibility of affecting a total conversion of solid waste is one of the most ambitious efforts within the industry, and has the potential to establish a system in which waste-to-energy conversion can offset commercial and residential energy expenses at a significant level (Honkio, 2013). These are emerging trends that the company can exploit and invest in simply due the formidable capital reserves it commands.

Consultation at this level of the industry involves more than impersonal spreadsheets and calculated earnings projections, more than required accounting and cost offset facilitators. There is a much wider spectrum that takes into consideration all relevant areas of the company and actively searches for more efficient ways to manage resources, recommend innovative operational adjustments and streamline customer service. The consultant treats the entire range of the company as an investigate design offering hidden avenues and alleys that may be subject to limited improvements and refinements. Cost projections are only one of the areas taken into consideration (Block, 1999). The consultant must envision a much larger picture, one of intersecting and overlapping considerations and questions. Once the assessment is comprehensive and nothing is left to question, a set of external and internal recommendations can be outlined for management approval. To the extent that nothing escapes the analysis of the consultant, he or she has accomplished their stated task.

References

Block, P. (1999). Flawless consulting: A guide to getting your expertise used (2nd ed.). Hoboken, NJ: John Wiley & Sons.

Guyer, H. ( 1998 ) Industrial process and waste stream management, (1st ed.). Wiley & Sons Publishing.

Honkio, K. ( 2013 ) The future of waste collection. Waste Management. Retrieved from www.waste-management-world.com

Lechter, T., & Vallaro, D. ( 2011 ) Waste: A handbook for management (1st ed.). Academic Press.

Lombardi, C. (2012) Business consultants: Professionals that have numerous years of industry practical knowledge. Triple Consulting. Retrieved from http:// www.tripleconsulting.com

Nathanson, J. (2007). Basic environmental technology: Water supply, management and pollution control technology (5th ed.). Prentice Hall.

Pichtel, J. (2005). Waste management practices: Municipal, hazardous and industrial, (1st ed.). CRC Press.