Industry Report Waste Management Term Paper

  • Length: 20 pages
  • Sources: 5
  • Subject: Transportation - Environmental Issues
  • Type: Term Paper
  • Paper: #18058164

Excerpt from Term Paper :

Waste & Environment Management

SPELT Analysis

Market Segmentation

Major Competitors & Market Share

Porter's 5 Forces

Financials

Strategic Recommendations

The waste management industry is segmented in terms of customer -- both the payer and the type of waste are means by which the industry is segmented. While the demand conditions are relatively stable, the political and social environments are both important because they are driving trends in waste treatment, in the sorting and separating of waste and in waste re-use.

The waste management industry is diffuse, with thousands of players, most of them small and regional. Municipalities still account for 23% of the industry, managing their own waste. This creates significant opportunity in privatization. There are otherwise two major players, WMI and Republic, and after than the companies are either small or niche market specialists (medical waste, for example). The industry is highly regulated so companies with specialized competency are somewhat insulated from competition by their knowledge and technology.

The companies that operate in waste management are financially healthy in general. The stable demand helps to ensure profitability. Some companies are more aggressive in their approach to growth, while others remain conservative. Going forward, however, the advantages of scale are going to be more prevalent in the industry than in the past, because of the importance of technology. As a consequence, it is expected that there will be consolidation in the industry going forward.

There are also opportunities overseas, as scale becomes more important, in addition to ongoing privatization. So waste management companies can grow if they want, and it is recommended that firms in the industry pursue multiple avenues for growth in the coming years in order to return value to shareholders.

The waste management industry is segmented in terms of the types of customer. The customer types are residential, commercial, industrial, and municipal. Businesses within the solid waste industry are collection, landfill, transfer and recycling (Waste Management Inc. 2013 Annual Report). Most companies in the industry work on multi-year contracts to handle one or more of these functions for their customers. Water supply and sewage treatment is a related industry, and air pollution control is another. In some jurisdictions, waste management is handled by a municipality, while in other areas this function is privatized, or run with a public-private partnership. Industry analysis from IBIS World estimates the value of the waste collection services market at $43 billion in the United States, and the Waste Treatment and Disposal business at a further $17 billion. Both of these business are diffuse, characterized by a large number of players, but there are some large companies that have national or regional strength in each business.

SPELT Analysis

The SPELT analysis takes a look at the industry through the social, political, economic, legal and technological lenses. The social trends driving waste management include greater sensitivity to the issue of waste. This has driven growth in recycling businesses in particular, and perhaps slowed the growth of landfills. That slowing is probably offset by increases in population and overall consumption. Consumers might think that they want to waste less, but in most places they still waste a lot. However, the recycling business is a major growth business within the industry, largely because of consumer demand for greater recycling. The other social issue is population growth, and the steady growth of the U.S. population has provided ample opportunity for growth in the waste industry since each person contributes a certain amount of waste per year, and every single person does it.

The political element is highly important for waste management. Many contracts are at the municipal level, and this includes residential and commercial contracts. For the most part, these contracts offer exclusivity for waste services in a municipality. This means that it is highly important for any company operating in this industry to be able to work closely with government. Meeting the needs of government is how contracts are acquired and maintained. In some cases, governments face the choice between maintaining municipal services that they run themselves or switching to a private contractor. The trend towards the use of private contractors is driven by efficiency and cost concerns -- in particular the high costs associated with union labor make cities nervous, and the threat of garbage strikes does as well. That said, government is also responsible for creating the regulations under which the waste management industry operates. The industry needs to work with government to ensure that regulation is aligned with the needs of all stakeholders and has been based on sound research and facts. Public sentiment -- the social dimension -- often drives the political environment as well, so the two can be closely connected.

In some ways, the waste management business is recession-proof, because most consumption (i.e. industry demand) is basically fixed (Steverman, 2008). While it is argued in the text that the industry is driven by gross U.S. economic output, it is best to remember that most that output is going to be there year over year -- a recession might reduce total output by 1-2% and not all of that output reduction is going to affect solid waste levels. Thus, there is a constant need for waste management capacity even during economic slowdowns. The state of the economy can affect, however, the price that customers are willing to pay. There is competition in most markets and as a result there might be bidding wars if customers need to drive down costs in order to balance their books. Public budgets in particular are affected by recession because they are affected by changes to the tax base. For waste management companies, economic slowdown increase the risks that municipal customers in particular are likely to bargain down on price.

The legal environment is closely related to the political, since the politicians make the laws. There are a number of regulatory bodies that can affect the legal environment in which waste management firms operate. The overarching federal body is the Environmental Protection Agency, which enforces many statutes with regards to waste handling and disposal. The regulations with respect to household and routine commercial waste are not especially tough, but medical and industrial waste handling come with very strict regulations in order to preserve the safe handling of the more dangerous forms of waste.

The EPA enforces the Resource Conservation and Recovery Act (RCRA), which governs the handling of solid waste material. The RCRA provides the legal framework for the handling of all manner of waste, from dead animals in agriculture to inorganic chemicals to medical waste and all manner of hazardous waste. For example, certain things must be disposed of in an incinerator, while other things can end up in the landfill. There are no strict rules regarding mandatory recycling but there are definitely some guidelines that companies can work with as to what should be recycled and how that recycling can be handled.

The final element of the SPELT analysis is technology. Technology is rapidly changing in some areas of waste management. These changes are being driven by the social and political dimensions, where it is becoming important to minimize the amount of waste, and to maximize the amount of "garbage" that is diverted back to productive purposes. Technologies are being developed to handle solid waste keeping these objectives in mind. Some technological advances that have transformed waste management include anaerobic digestion, which is one of the best ways to dispose of biological waste; conversion to energy, which not only disposes of waste but provides economic opportunity to waste management companies; zero waste technologies, which seek to repurpose all waste so that nothing is diverted to a landfill. Improvements to sorting technology have made it easier to sort out different types of waste for diversion as well (Capel, 2014).

Market Segmentation

The waste management industry is segmented in terms of the types of customer. The customer types are residential, commercial, industrial, and municipal. Businesses within the solid waste industry are collection, landfill, transfer and recycling (Waste Management Inc. 2013 Annual Report). Most companies in the industry work on multi-year contracts to handle one or more of these functions for their customers. Water supply and sewage treatment is a related industry, and air pollution control is another. In some jurisdictions, waste management is handled by a municipality, while in other areas this function is privatized, or run with a public-private partnership. Industry analysis from IBIS World estimates the value of the waste collection services market at $43 billion in the United States, and the Waste Treatment and Disposal business at a further $17 billion. Both of these business are diffuse, characterized by a large number of players, but there are some large companies that have national or regional strength in each business.

Markets are not segmented by demographics. The people who make the decisions come from a wide range of backgrounds, and waste is generated by everybody. The types of customers have already been identified above, and to these a number of niches can be added…

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