How Waste Management, Inc. Has Succeeded Where Others Have Failed

External Analysis

General Environmental Analysis

Demographic Segment

Economic Segment

Political/Legal Segment

Socio-Cultural Segment

Technological Segment

Global Segment

Summary of General Environment Analysis

Driving Forces

Industry Analysis

Description of the Industry

Industry Dominant Economic Features

Market Size

Market Growth Rate

Industry Trends

Five Forces Analysis

Threat of New Entrants

Power of Suppliers

Power of Buyers

Power of Suppliers

Intensity of rivalry

Industry Competitors

Rivals Anticipated Strategic Moves

Summary of Five Forces Analysis

Industry Key Success Factors

Internal Analysis

Organizational Analysis

Corporate Mission

Products and Services

Leadership

Organizational Culture

Structure

Strategy

Summary of Organizational Analysis

Analysis of Firm Resources

Tangible Resources

Intangible Resources

Summary of Firm's Resources

4.3. Capabilities

Value Chain Analysis

4.3.2. Core Competencies and Sustainable Advantages

4.3.3. Summary of Firm's capabilities

4.4. Financial Analysis

4.4.1. Valuation Analysis

4.4.2. Growth Analysis

4.4.3. Profitability Analysis

4.4.4. Financial Strength Analysis

4.4.5 Management Efficiency Analysis

4.4.6. Summary of Financial Analysis

5.0. Strategic Issues Analysis

5.1. Critical Challenges...

5.2. Resources and Capabilities...

5.3. Strengths or Weaknesses Analysis...

5.4. Opportunities or Threats Analysis

6.0 Current Strategic Issues Facing Waste Management, Inc.

7.0 Two Major Challenges Facing Waste Management, Inc. And Corresponding Internal Capabilities

WASTE Management, INC. FIRM SITUATION ANALYSES AND RECOMMENDATIONS

1.0.

Executive Summary

Houston-based Waste Management, Inc. is the largest waste management service in the United States with an estimated $12.3 billion-a-year in revenues.

2.0.

Company History

Founded in 1968 and incorporated in 1987, Waste Management, Inc. (hereinafter alternatively "Waste Management" or "the company") is currently the largest municipal waste disposal service in North America (Business summary, 2014). The company provides disposal services to more than 20 million customers in its North American market as well as Puerto Rico (Business summary, 2014). The company currently has around 42,700 full-time employees (Business summary, 2014). As part of the company's long-term strategy for growth, it states that it is "committed to developing new waste solutions that can help communities and organizations achieve their green goals, including zero waste" (Company profile, 2014, para. 2).

In addition, the company also provides renewable energy and currently produces more than twice the amount of renewable electricity than the entire solar-powered industry in the United States (Company profile, 2014). According to the company's profile, "One of the ways we do this is by recovering the naturally occurring gas inside landfills to generate electricity, called landfill-gas-to-energy. By the end of 2012, we operated over 138 beneficial-use landfill-gas projects, producing enough energy to power nearly 500,000 homes" (Company profile, 2014, para. 3).

At present, Waste Management projects an increase in capacity to process more than 20 million tons of waste annually by 2020, a significant increase from the current 12 million tons-plus processed in 2012 (Company profile, 2014). In this regard, the company reports that, "Part of that will come from expanding on proven technology to make recycling easier for consumers. Another part will be investing in future technologies, like converting organic waste from the materials stream to make high-end compost for local growers" (Company profile, 2014, para. 3).

2.1.

Background

Waste Management, Inc. provides waste management services to residential, commercial, certain industrial, and municipal customers in North America and Puerto Rico (Business summary, 2014). The company also provides waste collection, transfer, recycling and resource recovery, and disposal services (Business summary, 2014). In addition, Waste Management owns, develops, and operates waste-to-energy and landfill gas-to-energy facilities in the United States (Business summary, 2014). According to the company's business summary, Waste Management's "collection services include picking up and transporting waste and recyclable materials from generated area to a transfer station, material recovery facility, or disposal site; and recycling operations comprise materials processing, plastics materials recycling, and commodities recycling services" (Business summary, 2014, para. 4).

Furthermore, Waste Management also offers recycling brokerage services comprised of:

1. Managing the marketing of recyclable materials for third parties;

2. Electronic recycling services (e.g., collection, sorting, and disassembling of discarded computers, communications equipment, and other electronic equipment); and,

3. Sustainability services to businesses and organizations (including in-plant services that provide full-service waste management solutions and consulting services at customers' facilities) (Business summary, 2014, para. 5).

In addition, Waste Management is actively involved in the following activities:

1. The development, operation, and promotion of landfill gas projects;

2. Rental portable restroom facilities to municipalities and commercial customers under the Port-o-Let name;

3. The provision of street and parking lot sweeping services; and,

4. The acquisition and development of oil and gas producing properties (Business summary, 2014, para. 5).

The company also offers (a) medical waste disposal services; (b) portable self-storage services; and (c) fluorescent lamp recycling services (Business summary, 2014, para. 5). Formerly known as USA Waste Services, Inc., the company changed its name to Waste Management, Inc. In 1998 and is headquartered in Houston (Business summary, 2014).

2.2.

Purpose of this study

The purpose of this study was to examine the internal strengths and weaknesses of the company as well as the external operating environment of Waste Management, Inc. And its competitors.

3.0.

External Analysis

The external environment in which the company competes is characterized by increasing amounts of e-waste as well as efforts to divert as much recyclable material from the municipal waste stream as possible. In addition, disposable income for the municipal solid waste industry relates to the type of disposal methods that are employed. Municipal solid waste is either landfilled or recycled, including processes generate energy from these resources (Highfill & Mcasey, 2004). Recycling is regarded as a backstop waste disposal technology that costs more per unit than landfilling (Highfill & Mcasey, 2004). According to Highfill and Mcasey (2004), "Demand for waste disposal is linear and the measure of welfare is consumer surplus (less costs)" (p. 124).

Municipalities or regional cooperatives of municipalities and/or communities that enjoy sufficiently large landfill capacity can accept imports of waste without the need for recycling or other diversions efficiently (Highfill & Mcasey, 2004). In this regard, Highfill and Mcasey emphasize that, "A municipality with a sufficiently large landfill to accommodate both its own demand for landfill space and the demand for landfill space from the exporter would not exhaust in autarky, and has space that would have been unused if it had not been used to dispose of the exporter's waste" (p. 124).

Conversely, municipalities or regional cooperatives that lack sufficient landfilling space are faced with the need to divert a percentage of waste, thereby increasing costs (Highfill & Mcasey, 2004). Therefore, there is a definite potential for a growing preference for recycling among many American households in the future which could have a dramatic impact on the amount of municipal solid waste that enters the waste stream in the first place. In this regard, Folz reports that, "While the actual potential for diversion depends upon the composition of a locality's waste stream and the market for various materials, one estimate suggests that over 80% of the typical municipal solid waste stream technically can be recycled or composted" (2008, p. 301).

3.1. General Environmental Analysis

3.1.1. Demographic Segment. Currently, Waste Management, Inc. provides residential, industrial, commercial and municipal waste management services. The company also partners with various municipalities to improve their recycling regimens and lengthen the useful lifespan of landfills (Bloom, 2004).

3.1.2. Economic Segment. Demand for waste management services is resistant to downturns in the national economy (Alter, 2009).

3.1.3. Political/Legal Segment. Beginning the early 1990s, the federal government began implementing more stringent regulatory guidance concerning conventional solid waste disposal methods that increased the costs of doing business between five- and ten-fold (Tiller & Jakus, 2005). Furthermore, beginning in the early 1990s, a majority of the states had enacted various recycling laws, recycling or diversion regimens, or goals for waste reduction; in addition, a growing number of states implemented comprehensive waste management legislation that mandated long-term planning initiatives (Tiller & Jakus, 2005).

As municipal solid waste management has become more complex and costly, increasing numbers of communities across the country have implemented new strategies to satisfy growing demand, including regional cooperative efforts that extend to multiple counties or communities (Tiller & Jakus, 2005). According to Tiller and Jakus, "Cooperation is a process whereby neighboring cities, counties, or other governmental entities pool resources to address local challenges, taking advantage of the potential economies of scale associated with many aspects of municipal solid waste management" (2005, p. 223). In addition, a number of states have created solid waste regions that include incentives as part of a comprehensive municipal solid waste management system (Tiller & Jakus, 2005).

In addition, the disposal of municipal solid waste on an interstate basis has become an increasingly popular alternative for many American communities in satisfying the growing demand for municipal solid waste disposal capacity (Podolsky & Spiegel, 1999). According to Podolsky and Spiegel, "In general, the courts have supported a national market in municipal solid waste disposal by declaring unconstitutional legislative or regulatory approaches that inhibit interstate disposal" (1999, p. 250). Likewise, Highfill and Mcasey (2004) also report that, "While municipalities frequently resist imports, the interpretations of the Interstate Commerce Clause require that landfills accept waste regardless of its origin" (p. 123). Currently, approximately 10% of municipal solid waste is transferred between states nationwide (Highfill & Mcasey, 2004).

3.1.4. Socio-Cultural Segment. There is a growing movement among American consumers to recycle their municipal solid waste (Herndon, 2012).

3.1.5. Technological Segment. Waste Management's investments are aimed primarily at acquiring new technology and production capacity (Herndon, 2012).

3.1.6. Global Segment. The company competes in the North American market only.

3.1.7. Summary of General Environment Analysis. There is a growing trend for municipal waste disposal services to extract as much value as possible from the wastes they handle, including energy generation schemes that are intended to divert as much solid wastes from landfills as possible (Herndon, 2012).

3.1.8. Driving Forces. Increasingly onerous environmental regulations are forcing many municipalities to reevaluate their waste disposal regimens to include recycling and compositing alternatives (Herndon, 2012).

3.2. Industry Analysis

3.2.1. Description of the Industry. The term "municipal solid waste" is used to describe a specific segment of the waste stream that is generated by commercial, residential, institutional, and certain industrial sources, comprised of mostly solid wastes (Tiller & Jakus, 2005). According to Tiller and Jakus, "Traditionally, municipal solid waste management has been the responsibility of local governments, with landfilling the most common method of disposal" (p. 220). Local governments, though, may elect to outsource services such as municipal waste management. In this regard, McDavid (2000) notes that, "Local governments, organized on behalf of their residents, can make decisions to provide services to their residents or choose to let residents provide those services for themselves" (p. 157). Most local governments, though, have retained this aspect of waste management. For example, Villanueva (2008) reports that, "The management of these wastes is the responsibility of local governments in accordance with a hierarchical system developed by the U.S. Environmental Protection Agency and adopted by most states" (p. 205).

The municipal solid waste industry is faced with a wide range of materials for disposal, as depicted graphically in Figure 1 below.

Figure 1. Total municipal solid waste by material in the United States: 2012

Source: EPA (2014)

Each of these groups of materials has its on unique disposal requirements and/or the opportunity for recycling or energy generation (Herndon, 2012). According to the U.S. Environmental Protection Agency (EPA), approximately 251 million tons of trash was generated in the United States in 2012; of this amount, about 87 million tons of this material was recycled or composted, representing a 34.5% rate of recycling rate (Municipal solid waste, 2014).

3.2.2. Industry Dominant Economic Features. The company's market is comprised on a wide range of customers, including private consumers, certain industries as well as commercial enterprises. Depending on the type of wastes that are involved, they can be recycled, composted or transformed into energy (Herndon, 2012).

3.2.3. Market Size. The U.S. Environmental Protection Agency reports that approximately 251 million tons of trash was generated in the United States in 2012; of this amount, about 87 million tons was recycled or composted, representing a 34.5% rate of recycling rate (Municipal solid waste, 2014).

3.2.4. Market Growth Rate. The municipal solid waste industry has experienced sustained growth in recent years (Herndon, 2012). During the last several decades, though, the market growth rate for the solid waste management industry has changed. According to the EPA, "Solid waste generation per person per day peaked in 2000 while the 4.38 pounds per person per day is the lowest since the 1980s" (Municipal solid waste generation, recycling, and disposal in the United States: Facts and figures for 2012, 2014).

By contrast, the rate of recycling has increased from less than 10% of municipal solid wastes generated in 1980 to more than 34% by 2012 (Municipal solid waste generation, recycling, and disposal in the United States: Facts and figures for 2012, 2014). In addition, the disposal of municipal solid wastes to landfills has decreased from 89% of the amount generated in 1980 to less than 54% in 2012 (Municipal solid waste generation, recycling, and disposal in the United States: Facts and figures for 2012, 2014).

3.2.5. Industry Trends. There is a growing trend among waste management providers to extract as much value as possible from the materials they process, including trash-to-energy regimens (Tiller & Jakus, 2005). In response to the growing problems associated with municipal waste management, the United Kingdom produced and published the Government's Sustainable Development Strategy which outlined the country's environmental policies and guidance for improve waste management practices that are reflective of current trends in the industry (Edgar, 2005). For instance, according to Edgar, "The report introduced the principle that the 'polluter pays' and is associated with the precautionary principle that 'prevention is better than cure'. The Government viewed this as an important means of influencing potential polluters" (p. 15). The operational strategy for improving solid waste management practices included the following three main objectives:

1. To reduce the amount of waste that society produces;

2. To make best use of the waste that is produced; and,

3. To choose waste management practices that minimize the risks of immediate and future environmental pollution and harm to human health (Edgar, 2005, p. 16).

In addition, the strategy developed by the UK also addressed a so-called "waste hierarchy" for reduction, re-use and recovery of solid municipal wastes that serves as the basis for its sustainable waste management policies (Edgar, 2005). These trends are consistent with the efforts being made in the United States where recycling has become an increasingly popular alternative strategy for dealing with the growing solid waste disposal needs of many U.S. municipalities (Folz, 2008). According to the EPA, "Recycling and composting prevented 86.6 million tons of material away from being disposed in 2012, up from 15 million tons in 1980" (Municipal solid waste, 2014, para. 2).

The diversion of this amount of municipal solid waste reduced the release of approximately 168 million metric tons of carbon dioxide equivalent into the atmosphere in 2012 (Municipal solid waste, 2014, para. 3). These trends are due in large part to the increasing costs of landfilling as a result of a more stringent regulatory environment. In this regard, Folz reports that, "Whether faced with dwindling landfill capacity, rising charges for waste disposal or tougher federal, state, and county solid waste management policies, the appeal of recycling lies in its potential to be a primary method, along with source reduction and composting for managing the municipal solid waste stream" (p. 300). By diverting municipal solid wastes to prevent them from entering the waste stream, it is possible to reduce the costs associated with landfilling. As Folz points out, "Recycling can help to control the sky-rocketing costs of landfill disposal and incineration by diverting a significant proportion of the solid waste produced locally" (2008, p. 300).

3.2.6. Five Forces Analysis. An application of Porter's five forces is provided below.

3.2.6.1

Power of Buyers: Municipalities currently have few viable alternatives available for their waste disposal needs. The provision of waste management services by municipalities rather than outsourcing these services may become more prevalent in the future as technological innovations and increased value from waste are realized.

3.2.6.2

Power of Suppliers. Larger waste management companies such as Waste Management enjoy a competitive advantage through economies of scale.

This competitive advantage can be eroded by cut-throat pricing from lower-priced competitors that have leaner operations.

3.2.6.3 Threat of Substitution. Recycling may remove significant portions of municipal solid wastes from the waste stream. Waste Management is currently searching for new ways to extract value from municipal wastes.

3.2.6.4

Threat of Entry. As traditional methods of municipal solid waste management have become increasingly expensive as a result of increased regulation, a growing number of municipalities across the country are considering cooperation as a viable waste management strategy (Tiller & Jakus, 2005).

The threat of this new entrant into the waste management field will vary, though, depending on the unique circumstances of the municipality. In this regard, Tiller and Jakus point out that, "While economies of scale may be a factor in the consolidation decision, similarities and differences between counties in current individual provision levels of solid waste services, ability to pay for services, and expectations for future solid waste service demands are statistically more important" (2005, p. 221).Despite its competitive advantage by virtue of its larger size, the barriers to entry in this industry are relatively low. One of the company's main competitors, Casella Waste Systems, Inc., started business with just one truck.

3.2.6.5

Internal Rivalry. None identified.

Kermally (2003) advises that Porter's five forces framework can provide an improved understanding of the competition in a given industry. In this regard, Kermally notes that, "In order to construct a competitive strategy, an organization needs to know what is likely to happen in the markets in which the organization delivers its products and services. It also has to know who its competitors are in a particular industry structure" (2003, p. 58). To this end, a summary of Porter's five forces applied to Waste Management, Inc. is provided in Table 1 below.

Table 1

Porter's Five-Force Industry Analysis of Waste Management, Inc.

Force

Overall Assessment

Analyses and Comments

Power of Buyers

Municipalities currently have few viable alternatives available for their waste disposal needs.

The provision of waste management services by municipalities rather than outsourcing these services may become more prevalent in the future as technological innovations and increased value from waste are realized.

Power of Suppliers

Larger waste management companies such as Waste Management enjoy a competitive advantage through economies of scale.

This competitive advantage can be eroded by cut-throat pricing from lower-priced competitors that have leaner operations.

Threat of Substitution

Recycling may remove significant portions of municipal solid wastes from the waste stream.

Waste Management is currently searching for new ways to extract value from municipal wastes.

Threat of Entry

Despite its competitive advantage by virtue of its larger size, the barriers to entry in this industry are relatively low.

For instance, one of the company's main competitors, Casella Waste Systems, Inc., started with just one truck

Internal Rivalry

None identified.

3.2.6. 5.1. Industry Competitors. Currently, Waste Management, Inc.'s primary competitors are Casella Waste Systems, Inc. And Republic Services, Inc.

3.2.6. 5.2. Rivals' Anticipated Strategic Moves. Waste Management, Inc.'s primary competitors' anticipated moves include (a) expanding their operations to additional municipalities and (b) increasing the amount of waste that is recycled. In addition, Republic Services has increased the amount of materials disposed on in landfills it owns and operates in recent years (RSG Form 10-Q, 2013). With 31,000 full-time employees and an established business, Republic Services possesses the resources and expertise to achieve its long-term objectives. By contrast, with just 1,100 employees, Casella Waste Systems Inc. possesses far less capability to achieve its objectives. In addition, Casella Waste Systems Inc. intends to divest itself of certain corporate holdings that the company feels are inconsistent with its core competencies. By contrast, Republic Services intends to continue its corporate strategy of gaining additional municipal customers.

3.2.6. 6. Summary of Five Forces Analysis. Waste Management, Inc. currently enjoys a strong leadership position in the national waste management industry, but smaller Casella Waste Systems Inc. continues to outperform it with respect to stock price. A comparison of Waste Management's stock price with its two major competitors is provided in Figure 2 below.

Figure 1. Waste Management, Inc. Stock Performance vs. Competitors: Past 5 Years to Date

Source: http://finance.yahoo.com/q/bc?t=5y&s=WM&l=on&z=l&q=l&c=cwst%2C+rsg&ql=1

Note:

CWST

Casella Waste Systems Inc.

RSG

Republic Services, Inc.

3.3.7.

Industry Key Success Factors. One of the main key success factors identified in the research was the ability of waste management companies to remain nimble in the face of a changing marketplace. Exemplifying this type of nimbleness is Waste Management's decision to extract as much value as possible from the waste it processes.

4.0.

Internal Analysis

Based on empirical observations and analyses of the company's management systems, most authorities agree that Waste Management, Inc. has a strong vertically integrated operation that will drive the company's success in the years to come. In fact, the company continues to make investments in technologies and resources that will help it remain flexible in the face of changing industry standards and consumer preferences for waste disposal services. For example, Waste Management recently implemented a program known as "Workout" that was developed by Chicago-based Leap Technologies (Minter, 2008).

The Workout initiative employs fast-cycle change principles applied to small teams comprised of five or six employees that has helped the company remain focused on corporate goals and worker safety (Minter, 2008). In this regard, Minter reports that, "Workout teams use a simple but highly structured approach to conduct short team meetings - typically one hour a week. Management provided teams with assignments, a strategy that helped make sure activities would focus on business needs and that the company's decentralized management would support the process" (2008, p. 6). More significantly, perhaps, the company's empowers the Workout teams to determine the best course of action and make the decisions necessary to implement them -- typically within 2 months or less (Minter, 2008).

One especially noteworthy initiative that emerged from one of the hundreds of such regularly conducted Workout meetings included a suggestion from a route driver to improve the physical conditioning of drivers to help them endure the rigors of their routes (Minter, 2008). According to Minter, "Waste Management brought in a physical therapist to design the exercise program and train employees in proper lifting techniques. The physical therapist returns periodically to provide refresher training and to assess the fitness progress of the company's truck drivers" (2008, p. 16).

Besides this initiative, the company has also acted on other Workout team recommendations to help retain qualified drivers and improve the efficiency of operations, including: (a) changing its hiring and orientation process to create a pool of qualified applicants and to make sure they had a realistic understanding of what the job entailed; (b) implementing a 10-day driver training program, approximately half of which involves classroom work, that includes safety and environmental training in addition to truck operation and other matters; (c) instituted a designated driver program, in which a senior driver acts as a mentor to new drivers (Minter, 2008, p. 16).

4.1.

Organizational Analysis

4.1.1.

Corporate Mission. The company states that its mission is "to maximize resource value, while minimizing environmental impact, so that both our economy and our environment can thrive" (Waste Management Form 10-K, 2014, p. 1).

4.1.2.

Products and Services. The company states that it helps "industries, communities and individuals reduce, reuse and remove waste better through sound sustainability strategies" (Waste Management Form 10-K, 2014, p. 2). In of these services, the company states that is has "a precise day-to-day focus on collecting and handling our customers' waste efficiently and responsibly" (Waste Management Form 10-K, 2014, p. 2).

4.1.3.

Leadership. The names, compensation rates and stock option exercises of the company's key executive leadership team are provided in Table 2 below.

Table 2

Waste Management, Inc. Key Executives

Name/Age

Pay

Exercised

Mr. David P. Steiner, 54

Chief Exec. Officer, Pres and Director

1.36M

Mr. James C. Fish Jr., 51

Chief Financial Officer and Exec. VP

0.00

Mr. James E. Trevathan, 61

Chief Operating Officer and Exec. VP

Mr. Rick L. Wittenbraker, 66

Chief Compliance Officer, Sr. VP and Gen. Counsel

0.00

Mr. Jeff M. Harris, 59

Sr. VP of Field Operations

0.00

Note: Amounts are as of Dec 31, 2012 and compensation values are for the last fiscal year ending on that date. Pay is salary, bonuses, etc. Exercised is the value of options exercised during the fiscal year.

Currency in USD.

Source: http://finance.yahoo.com/q/pr?s=WM+Profile

4.1.4. Organizational Culture. The organizational culture at Waste Management, Inc. places a high value on the company's 42,700 full-time employees. For instance, according to Minter (2008), "Waste Management, Inc. wants to engage the minds and hearts not just of its managers, but of all its employees" (p. 6). In addition, the company reports that its "employees are committed to delivering environmental performance" (Waste Management Form 10-K, 2014, p. 2).

The organizational culture at Waste Management is also characterized by high levels of trust wherein all employees and others performing work on behalf of the company are "expected to abide by the laws and regulations that apply to their work activities and demonstrate ethical behavior on their decisions and interactions" (Demir et al., 2005, p. 49). Some of the company's recent ethics and diversity initiatives in this area include the following:

1. Ensuring each and every employee is in possession of a current and relevant Code of Conduct entitled "Focus on Integrity and Inclusion";

2. An operation of an integrity help line (1- [HIDDEN] ) to assist employees that have questions about a business issue or wish to report a suspected violation;

3. Promoting diversity representation of the board of directors, senior leadership team, management, and professional employees;

4. Proactive compliance with all EEO and OFCCP regulations; (e) developing and delivering diversity and inclusion training to all employees with people management responsibilities;

5. Regularly communicating Waste Management's commitment to ethics, diversity, and inclusion commitment;

6. Focusing strategic partnerships with community organizations that share their diversity and inclusion commitments; and,

7. Increasing the company's procurement spending with minority and women-owned business (Demir et al., 2005, p. 45).

4.1.5. Structure. Waste Management, Inc. is a regional recycling and resource management services company that is vertically integrated as shown in the organizational chart in Figure 2 below.

Figure 2. Waste Management, Inc. Organizational Chart

4.1.6. Strategy. The company's most recent annual report (February 18, 2014) identifies three primary strategies:

1. Pursue revenue growth through customer-focused segmentation, pricing discipline and strategic acquisitions;

2. Continually emphasize cost control and investment in technology and systems that enhance the efficiency of our operations; and,

3. Invest in emerging technologies that offer alternatives to traditional disposal and generate additional value from the waste, recycling and other streams we manage (Waste Management Form 10-K, 2014, p. 2).

4.1.7. Summary of Organizational Analysis. Waste Management, Inc. was shown to be a progressive company that places a high value on the safety and welfare of its 43,000-plus full-time employees.

4.2. Analysis of Firm Resources

4.2.1. Tangible Resources. Waste Management, Inc. has a large physical network of plants, disposal facilities, transfer stations and hundreds of landfills in North America (Demir et al., 2005). The company also operates more than 18,000 waste disposal trucks (Minter, 2008).

4.2.2 Intangible Resources. The company's intangible resources include more than 40,000 full-time employees, and a cadre of talented executives (Demir et al., 2005).

4.2.3. Summary of Firm's Resources. Besides the foregoing tangible and intangible resources, Waste Management also owns 11% of Enerkem Inc. (NKM) and 12.3% of Fulcrum BioEnergy Inc. (FLCM), which are developing systems to process waste into ethanol. It also has 25% of Agilyx Corp., which converts waste plastic into a synthetic crude oil. It owns 6.9% of Genomatica Inc. (GENO), which is developing genetically modified microorganisms that convert gasified garbage into chemicals. Waste Management is backing four other ventures developing processes to produce transportation fuels, heat or electricity from waste: Terrabon Inc., Harvest Power Inc., Agnion Energy Inc. And InEnTec Inc. (Herndon, 2012).

4.3. Capabilities

4.3.1. Value Chain Analysis. According to the editors of Management Services, "The purpose of a lean supply chain is to address the 'five rights', namely the inventory that is: the right product, in the right quantity, in the condition, at the right place, at the right time" (Lean in the supply chain: Friend or foe?, 2010, p. 16). For Waste Management, Inc., it is important for the company to "move beyond regulatory compliance and create a culture of environmental activism in the entire value chain of the business" (Globe fights climate change through 'green' campaign, 2011, p. 37). To this end, the company has stated that it is important for Waste Management, Inc. To "move beyond regulatory compliance and create a culture of environmental activism in the entire value chain of the business" (Globe fights climate change through 'green' campaign, 2011, p. 37).

4.3.2. Core Competencies and Sustainable Advantages. The company's primary core competencies relate to Waste Management's demonstrated ability to respond to changes in its operating environment and the application of technology-based solutions whenever possible (Herndon, 2012). In addition, Demir et al. (2005) reports that, "Programs that have been successfully implemented demonstrated that the firm's disciplines are built around the relentless pursuit of improvement, as they focus on continuously examining processes and programs, deployment of resources and investment of capital" (p. 48).

4.3.3. Summary of Firm's capabilities.

4.4

Financial analysis. Waste Management, headquartered in Houston, is financially healthy as the largest waste disposal company in North America (Roberts, 2009).

4.4.1

Valuation analysis. The company earns approximately $12.3 billion per year from the waste it processes (Herndon, 2012).

4.4.2

Growth analysis. The company has experienced modest (2.4%) growth year-to-year from 2012 to 2013 (Waste Management Form 10-K, 2014).

4.4.3

Profitability analysis. The company's most recent annual report (February 18, 2014) reports revenues of $14.0 billion in 2013; these revenues compared with $13.6 billion in 2012, representing an increase of $334 million, or 2.4% (Waste Management Form 10-K, 2014).

4.4.4.

Financial strength analysis.

Among the notable accomplishments was that the company reduced costs in 2002 by $108 million through the procurement process (Roberts, 2009). On February 25, 2014, Waste Management, Inc. announced the declaration of a quarterly cash dividend of $0.375 per share which was payable on March 21, 2014 to stockholders of record as of March 10, 2014 (Waste Management Announces Cash Dividend, 2014). In addition, the company reports that in 2013, $683 million and $239 million were paid to shareholders through dividends and share repurchases, respectively versus $658 million through dividends in 2012 (Waste Management Form 10-K, 2014).

4.4.5. Management efficiency analysis. For the past several years, Waste Management, Inc. has experienced sustained growth and profitability (Roberts, 2009).

5.0. Strategic Issues Analysis

5.1. Critical Challenges. The company has experienced a great deal of negative publicity in recent years due to the siting of their landfills and waste disposal operations that are considered environmentally harmful. For instance, according to Chan (2003), "Waste Management, Inc. is the most vilified waste hauler in history. People of color and people in poverty suffer a disproportionate exposure to environmental hazard" (p. 3).

5.2. Resources and Capabilities. Currently, Waste Management, Inc. enjoys "the largest network of recycling facilities, transfer stations and landfills in the industry" (Company profile, 2014, para. 2). More importantly, the company emphasizes that its "entire business can adapt to meet the needs of every distinct customer group. In 2012, we worked with over 100 Fortune 500 companies and helped over 150 different communities become greener" (Company profile, 2014).

5.3. Strengths or Weaknesses Analysis. The purpose of a SWOT analysis is to identify key issues that will allow an informed strategic approach (Cravens, 2000). The SWOT analysis seeks to identify the respective strengths, weaknesses, opportunities, and threats related to an enterprise's operating environment. Strengths and weaknesses are internal aspects and opportunities and threats are external to the enterprise. The strengths and weaknesses components of the SWOT analysis are applied to Waste Management, Inc. In Table 3 below.

Table 3

Strengths and Weaknesses of Waste Management, Inc.

SWOT Component

Description

Strengths

1. Mature nationwide waste management infrastructure in place. Waste Management, Inc. has "the largest network of recycling facilities, transfer stations and landfills in the industry, our entire business can adapt to meet the needs of every distinct customer group. In 2012, we worked with over 100 Fortune 500 companies and helped over 150 different communities become greener" (Company profile, 2014).

2. Established brand with widespread brand recognition. For instance, Demir et al. (2005) report that, "Waste Management Inc. is a longstanding firm with ties to many communities and local governing bodies across North America. As the number one largest residential waste management and collection company in the U.S., WMI enjoys considerable brand awareness among customers" (p. 48).

3. Experienced executive leadership team.

4. Strong commitment to diversity. According to the company, "Waste Management is strongly committed to promoting diversity and inclusion. Our focus is to support minority and women's organizations that strive to improve opportunities for professional development and advancement" (Company profile, 2014, para. 3). Waste Management, Inc. was named one of the top 100 employers in the United States for minorities (Major, 2010).

Weaknesses

Bloated supply chain.

5.4. Opportunities or Threats Analysis. Respective opportunities and threats for Waste Management, Inc. are set forth in Table 4 below.

Table 4

Waste Management, Inc. Opportunities and Threats

SWOT Component

Description

Opportunities

1. Recycling municipal solid wastes to extract value and energy: "The company is developing and implementing new ways to handle and extract value from waste" (Waste Management Form 10-K, 2014, p. 1). The company estimates that the municipal waste it currently landfills may be worth more than $40 billion a year in energy. According to Herndon (2012), "That is the value of fuel and chemicals the Houston-based company estimates could be extracted from the 112 million tons of trash it collected [in 2012] if the entire waste stream was diverted from landfills" (para. 1).

2. Developing single- or dual-source supply chain partners.

Threats

1. A downturn in the national economy could drive customers to lower-priced competitors.

2. Growing awareness of the need to recycle could reduce the amount of municipal waste processed by the company. In this regard, the company states that "customers [are] increasingly seek[ing] non-traditional solutions" (Waste Management Form 10-K, 2014 p. 2).

3. E-waste: The increasing amount of e-waste processed by the company represents an environmental threat.

6.0

Current Strategic Issues Facing Waste Management, Inc.

This case assessment of Waste Management, Inc. summarizes the strategic issues facing the company from the general environment and waste management industry. The strategic issues for each of these segments are ranked according to their significance to Waste Management. In addition, two major challenges facing the company are identified and matched with corresponding internal capabilities of Waste Management.

6.1

General environment

Strategic Issue No. 1: Bloated supply chain. The most significant strategic issue currently faced by Waste Management is the need to pare down the number of supply chain partners that company uses for procurement. In this regard, Waste Management's vice president and chief procurement officer, Bradley Holcomb, emphasizes that, "One of the biggest challenges we face, in addition to the usual difficulties of having poor data and developing new information systems, is that we have had far too many suppliers in our company by virtue of the way it was formed" (cited in Roberts, 2009, p. 2). The need for effective supply chain management processes is well documented. For instance, according to Elmuti (2009), "Supply chain management has become a very prominent concern for both large and small companies as they strive for better quality and higher customer satisfaction" (p. 37).

Properly developed and administered, an efficient supply chain can help improve firm performance and profitability. In this regard, Elmuti adds that, "Supply chain management works to bring the supplier, the distributor, and the customer into one cohesive process" (2009, p. 37). The strategic partnerships that now characterize efficient supply chains mean that supply chain partners operate collectively in their mutual best interests rather than solely from self-interest (Elmuti, 2009).

The process, though, is not especially inexpensive, simple or straightforward, but rather requires ongoing evaluation of supply chain partners to ensure that these relationships are the most effective at a given point in time. For instance, Elmuti notes that, "Effective management must take into account coordinating all the different pieces of this chain as quickly as possible without losing any of the quality or customer satisfaction, while still keeping costs down" (2009, p. 37).

At present, Waste Management, Inc. continues to rely on an excessive number of supply chain partners that have been acquired over a period of several years (Roberts, 2009). This strategic issue is cited by Waste Management's vice president and chief procurement officer who emphasizes, "We're a broadly dispersed company having up to 1,400 different sites across North America, so our big challenge is reducing the supply base and aligning our dispersed organization with the suppliers that we 'pick on purpose' -- an expression that we often use at Waste Management" (cited by Roberts, 2009, p. 3).

To date, Waste Management has succeeded in reducing the number of supply chain partners the company uses, but it is clear that they still have a significant amount of work to do in this area. In this regard, Holcomb reports that the company "started out with 500,000 suppliers two years ago, and now we're down to less than 100,000. We will have less than 10,000 in a few years when we're done" (cited in Roberts, 2009, p. 3).

Making a supply chain more efficient is consistent with industry analysts that cite the need for supply chains to become as efficient as possible in providing the procurement needs of a company. For example, Elmuti emphasizes that, "To be successful, companies will not seek to achieve cost reductions or profit improvement at the expense of their supply chain partners, but rather seek to make the supply chain as a whole more competitive" (2009, p. 38). In many cases, this means that companies will need to rely on just a single source or dual sources for their procurement needs. Paring the supply chain at Waste Management, Inc. is highly congruent with the guidance provided by Young and Nie (1995) who report, "Procurement must take a stance on whether they intend to source materials from a selected few vendors or offer the business to many sources" (p. 26). Although every business situation is unique in some fashion, some of the more salient advantages of single sourcing include:

1. Reduction in paperwork,

2. Fewer trucks to receive products from;

3. The possibility of developing long-term relationships and partnerships; and,

4. Lower prices (Young & Nie, 1995, p. 26).

In sum, the supply chain managers at Waste Management, Inc. are faced with the need to develop optimal sourcing solutions for their supply chain needs and strategic partnerships. In this regard, Young (1996) reports that, "Procurement must take a stance on whether they intend to source materials from a selected few vendors or offer the business to many sources" (p. 26). Although every business situation is unique in some fashion, some of the advantages of reducing the number of supply chain partners include:

5. A reduction in paperwork,

6. Fewer trucks to receive products from;

7. The possibility of developing long-term relationships and partnerships; and,

8. Lower prices (Young, 1996, p. 26).

A growing number of companies of all sizes and types have found that reducing the number of supply chain partners to the maximum extent possible improves their efficiency and profitability (Mudambi & Ricketts, 1998). There are some strategies available that can help Waste Management, Inc. achieve its goal of paring down its supply chain to more reasonable numbers of supply chain partners, including those set forth in Table 5 below.