Identification of Key Problems and Alternatives Within the case study there are a set of key problems and alternatives presented. The first problem deals with whether ASS should enter the Chinese market. To investigate this further, economic problems, regulatory problems, and the problem of potential limited markets in Canada and North America may compel ASS to internationalist. Declining economic markets and volatile industry propensity in Canada and North America display limited sustainable future revenues and weakening PC-contaminated soil allocation.
Regulatory issues prohibit ASS from transporting soils from the US to Canada n addition to BPCS only providing ASS with short term momentum as PC treatment is a declining market in Canada. Currently, in the Canadian market there is a potential limit in regards to the amount of PC;contaminated soil and unfavorable cost advantages which may require ASS to look abroad in order to increase their business activities. These factors raise issues of constraints in Sass existing markets (Canada and North America) which will cause assessment whether ASS should internationalist into China.
The second problem deals with which of the two opportunities should ASS pursue. ASS needs to weigh up the two options. Option one is a joint venture (JP) with Nanjing Institute of Environmental Sciences (NINES) in the remediation POP-contaminated soil while option two is a JP with Shannon Nah Solid Waste Central Disposal (Nah) in oil recovery from oil sludge. Either none, option one, option two, or both need to assessed and then selected. Would it be feasible to pursue both?
Assessments of internal capabilities would need to be undertaken, focusing on financial and costs to determine the possibility of pursuing both options. In order to undertake both options, ASS has to assess the cost and benefits. The third problem deals with whether ASS assess the required resources and capabilities to pursue an equity-based entry. An internal assessment of resources and capabilities will need to be undertaken to determine current capacity and any future resources and capabilities needed to expand.
Additionally, determining the affect cooperative opportunities with NINES and Nah in China would do to impact the metrics of ASS and the flow-on impact on corporate resources and the organizational structure. The fourth problem deals with what ownership levels ASS should assume for each option. Investigating both options and determining the percentage of wineries levels for both options (I. E. Equal joint control, majority control or minority control) needs to be undertaken. Therefore contract negotiations with potential JP partners must suit ASS.
Based on ownership levels, the fifth problem would be how ASS would staff its Chinese operation(s) if they decide to pursue the opportunities in China. Organizational structures, systems, and staffing need to be considered when determining the JP and the collaboration of staff. The sixth problem could be that the Chinese market is still in an emerging stage which brings about issues of lagged development of industry in terms f research capabilities and techniques of treatment facilities even though the potential size of this market appears a decent size for small firms such as ASS.
The seventh problem deals with competitors (I. E. BEE) who have been seeking opportunities for geographical diversification which could saturate the market and put pressure on ASS. Competitor analysis and determination of future potential industry outcomes are needed to determine a long-term plan for ASS to internationalist into China. Lastly, the modes of international involvement have previously been on a non-equity basis, in the form Of equipment exporting, licensing and service interacts.
The eighth problem is that ASS has no experience in international expansion of an equity-based manner which could present unforeseen issues ASS has not previously faced. Therefore determination of company capabilities to set-up operation systems to effectively implement an equity- based entry will require copious assessments. Analysis and Application of Models 1) PESTLE Model (macro analysis) ASS is no stranger to international markets and is presented with the opportunity to enter the unfamiliar yet seemingly attractive Chinese market. An analysis of the Chinese market is necessary to determine the expansion ability.
PESTLE is a model which can provide comprehensive information about the macro-environment of the Chinese market and can help answer the problems of whether or not ASS should enter the Chinese market and which option(s) to choose. Political Factors: The Chinese government has realized and reached a consensus on the importance of proportioning environmental protection beyond a “basic polio/’ of country agenda from 2009. The Chinese State Environmental Protection Agency spent $162. 5 billion on environmental protection in 2009 and the Chinese government strongly committed to the
Stockholm Convention on Persistent Organic Pollutants, which meant the government needed to pay more attention and spend more money on environmental protection (Penn ; Beamers, 201 2, p. 9). Furthermore, in 2010, the Chinese government claimed that $3 billion would be invested to oil investigation and oil remediation from 201 1 to 201 6 (Penn ; Beamers, 2012, p. 10). Economic Factors: In the past 30 years, economic development of China was rapid where the real GAP per capita rose from $220 in 1 980 to $2,883 in 2010 and the annual growth rate Was around 9% per annum (Penn ; Beamers, 201 2, p. 8).
The huge economic development will provide many opportunities for companies to enter. The Chinese economic environmental is still at the early stage however it has great potential to grow. Social Factors: Environmental pollution has become a serious social issue facing the Chinese government due to its negative consequences on society’s health. Around 41 0,000 people die every year in China because of environmental pollution (Penn & Beamers, 2012, p. 9).
Meanwhile, the number of protests related to environmental pollution increased with an annual rate of 29% in recent years (Penn & Beamers, 2012, p. . Technological Factors: China’s technological capabilities are not as developed as other nations and causing lags in potential growth. DU technology is widely used in China’s POP market. Compared with T DC], Ass’s T AS technology has higher mobility. In China, the oil sludge industry is in its infancy so advanced technologies are needed to propel development. Environmental Factors: China is critically affected by environmental pollution with smog causing negative effects on worker attendance and productivity.
Environmental pollution has placed a burden on the country’s medical system causing pressure on the government to solve the problem. Dumping of untreated oil sludge into pits or the fact that they were incinerated is also bad for the environment Legal Factors: The government is on its way to addressing environmental pollution. On one hand, it takes measures to reduce pollution. On the other hand, regulations have been created in order to treat pollution properly such as the regulation to forbid the traditional way to deal with the oil sludge, which can be positive for ASS to compete in the market.
Overall, the PESTLE model analyses the macro-environment of China. Generally the environmental industry of China is attractive. On one hand, China has seen huge economic growth so that the country has the ability to spend money on environmental protection. On the other hand, the economic development was made at the cost of the environment and people in China have been negatively affected by the environmental pollution, which means it is necessary to take measures to protect the environment. Moreover, the technology of the environmental industry in China is not developed.
To sum up, the macro-environment of China is positive for companies to enter with advanced technologies. Both the POP industry and oil sludge industry are at the early stage with great potential, so the external factors are positive for ASS to pursue both options and enter into the Chinese market. 2) Porters Five Forces Model (micro analysis) The treatment of POP and Industrial Sludge micro-industry analysis within China addresses the aspects which directly influence ASS and its competitive behavior and responses.
Porter’s Five Forces interact and determine an industry attractiveness and profit potential. One problem ASS can review to gain a clear picture of whether they should enter the Chinese market in order o determine its viability and what forces offer potential attractiveness or barriers. Another problem ASS can review is the competitive nature of the Chinese industry with potential opportunities or obstructions as well as varying competitor market saturation levels. Industry analysis will enable an overall assessment of the desirability to enter, difficulty to enter, and potential of the industry.
Threat of New Entrants: Low threat of new entrants as there are high barriers to entry which would be difficult to overcome however regulatory changes are transforming industry operations. Both options would mean ASS would eave high start-up costs in conjunction with the JP as they would have high capital requirements for allocation of site locations and treatment facilities as well as high fixed costs with the latest technology and transportation. The industry capabilities are specialized and require knowledge built through years of immersion in the industry’.
Legal barriers make entry more difficult to comply with environmental and legal policies which can restrict operations. Threat of Substitutes: Low threat of substitutes as there are no direct substitutes to the raw materials used in operations, such as POP contaminated soil and oil sludge. As both soil and oil are natural resources, the likelihood of substitutes are low however government pressures for preservation of environmental reserves means there are various substitute processes towards conversation of soil and oil which would be dependent on technology and cost advantages.
The ability to switch between substitute processes is moderate however contracts with companies would limit the ability to switch as site locations grant permission to treatment of the resource. Bargaining Power of Buyers: Low bargaining power of buyers as they have limited capacity to acquire or produce natural resources, such as clean soil ND oil on their own. There are a multitude of buyers who would purchase large volumes of either soil or oil however they would lack the ability to influence the products as the technological processes are highly specialized and restricted to government policies.
Buyers do however have the ability to switch between similar operational organizations if switching costs and contract negotiations enable such business transactions. Bargaining Power of Suppliers: Moderate-to-high bargaining power of suppliers as they are reliant on natural reserves that determine the allocation f such resources (soil and oil) to organizations. Governments and private organizations would need to give permission for site allocation as well as importation of resources to potential buyers which can be a rigorous and costly task.
The specialist of the resource and finite nature makes the bargaining power strong within the Chinese market. There are also other suppliers, such as the companies that supply ASS with materials for their technology and devices. These suppliers have a high bargaining power as it is assumed that only specialized companies can provide ASS with the materials and equipment that they need. The Threat of Competitive Rivalry: Low- moderate threat of competitive rivalry as there are a few competitors in the market with various location sites, technological processes and operational capacity.
The industry growth is immensely high with regulations and environmental outlooks encouraging preservation of natural resources (soil and oil) encouraging organizations to compete. There would be limited differentiation between resources however production and technological processes would ensure some differentiation enabling ASS to apply such processes to deliver a competitive advantage in the Chinese market. Overall the POP and Industrial Sludge industry is moderately attractive as a majority Of forces pose limited threats.
The process systems between buyers and suppliers are complex however power distribution is fairly UN- proportionate. The high barriers could be concerning however once entered into the market, the threat of substitutes and competitive rivalry is limited. Addressing the problems, ASS has the ability to enter the market as it is attractive and can compete and differentiate with other competitors with the assistance of a JP.
ASS has TIPS technology which has the ability to provide the Chinese industry with a highly unique and differentiated competitive alternative especially as the market has the capability for such treatment processes. ) SOOT Analysis The SOOT analysis takes an overall approach to the strengths, weaknesses, opportunities and threats presented to ASS in the case. Specifically, the SOOT analysis can review the problem of whether or not ASS should enter the Chinese market, which of the two options they should select, the feasibility of pursuing both options, ownership levels, the problem of competitors wanting to enter the international arena, and the fact that the market was still at an merging stage.
Strengths: – ASS is no stranger to internationalization into other markets with technology deployed in 14 countries in the past 15 years. ASS possesses internationally proven technology (TIPS), the only one to be able to extract 90% of oil from industrial sludge (Penn & Beamers, 201 2, p. 3). It is recognized as being world class for performance, reliability, mobility and its lack of harmful air emissions. – TIPS technology can easily be deployed at fixed locations and has several advantages (stated in above point). – ASS is well suited to the Nah JP as they have global experience. Both owners have similar rationalities and stories.
A solid trust had already been developed and Nah had solid assets with a wide range of permits already obtained. The Government agency (NINES) has a degree of safety to it which reduces the risk of the project. They had extensive expertise and experience and had identified and inventoried 300+ sites in three provinces. This option also acted as a free advertising campaign for ASS. – Being an early entrant into the emerging market of remediation of POP-contaminated soil, ASS would most likely enjoy first mover advantages. Weaknesses: – The oil recovery from oil sludge market was fragmented and the industry as still in its infancy.
The cost of both CSV’s are expensive ($3 million each – For option one (POP-contaminated soils), the JP would need to option). Design, engineer, manufacture and market T AS units in China for use in various regions of China. – There is no guarantee that option one will work as the JP would need to design, plan, launch and bid for, operate and participate in projects in China. – Some competitors already have the rights to other regions of China which will make it harder for ASS to gain permissions to other areas in China and cause competitive intensity in the industry.
Opportunities: – The contaminated soil market has opened up significantly since regulations imposed by governments required more adequate processing of soil. – China was becoming more environmentally aware making protection a priority. Previously waste would be dumped, however now it can be treated with new regulations in some provinces. – More sludge would be generated from increased oil imports which equates to more business for ASS. – Nah was a leader in the area, possessed the only waste management processing permit in the area, and had an excellent infrastructure.
If option two goes ahead, it pens the doors up for other opportunities like consulting services and applying the technologies to other parts of China. The reads: – The main threat is the issue of the Jobs. Issues of control, management and staffing are present and could undermine Ass’s abilities. – Contaminated soil sites were widely dispersed across the country. The soils would therefore need to be transported; however this is not easy due to their bulk. New laws and regulations were expected to ban the importation of waste containing POPs from province to province.
Based on the SOOT analysis, it appears that the strengths and opportunities outweigh the weaknesses and threats. From the model, it looks certain that indeed ASS should enter the Chinese market, and pursue both options as it is feasible to pursue both options. Entering the market would beat any competitor in entering the Chinese market and may even deter them, hence eliminating the problem of competition. The problem that the market was at an emerging state helped ASS as it was in a growth Stage and this seems likely to continue.
Regarding ownership levels, there seems to be a good fit between the two groups who ASS would enter the JP with, so this should not be much of a problem. 4) FRI. Model In order to determine which option to pursue, or whether ASS should choose to pursue both, the strategic capabilities and resources as a basis of competitive advantage must be explored. The internal capabilities will be examined, alongside the required resources and capabilities to pursue an equity-based entry. Furthermore, company capabilities to set-up operation systems to effectively implement an equity-based entry will be determined.
Value: With the Chinese government understanding the current environmental concerns in their economy, a need for the protection of the environment was a priority for the government. Pollution was not only an issue, but posed a social issue to residents of the country. As a result, environmental protection became a “basic state policy” (Penn & Beamers, 201 2, p. 9). Contaminated sites were randomly dispersed across China, and the mobility of Ass’s TIPS technology provided them with a possible competitive advantage in this market. This ease of use across the various sites in China was not something offered by Ass’s competitors.
Also, due to application of Ass’s technology regardless of the pops to be treated, the opportunity in China could allow them to compete in a $725 million market (Penn ; Beamers, 201 2, p. L O). The technology ASS possesses offers value to the company and an entry into China could extract extra value for ASS based on favorable policy changes. Rarity: The history of the company, providing a management team with extensive knowledge of the industry, and the geographical experience possessed by these individuals provides ASS with a supremely talented and knowledgeable workforce.
With the president and CEO Paul Mantle’s 25 years of experience behind him, his abilities to pursue projects have contributed to his many awards. He was recognized for his success as an entrepreneur, suggesting similar qualities to that of Nazi’s owner. This similarity, alongside an ability to direct and manage, provides ASS with the advantage of identification with individuals and knowledgeable people to run such a project.
Moreover, ASS offered services on a “fee-for-service basis” creating a desirability surrounding their product and service Furthermore, their adoption of previous ways to raise capital, such as the Capital Pool Company program, and their insight into becoming a public company suggest that ASS has been a strategic player in their ambition to create funds. All this confirms that the resources and capabilities that ASS possesses are rare and hard to mind in other companies within the industry. Maintainability: The TIPS technology differed to that of its competitors.
It produced safe soil with an 85% decrease in volume that could be returned to the environment. The TIPS process not only enabled the recovery of oil and other hydrocarbons for reuse or resale, but also generated its own fuel source to fire the system. Compared with incineration and land filling, TIPS technology produced no harmful air emissions and no land and water pollutants. And finally, compared with incineration, the TIPS process produces significantly fewer greenhouse gas emissions. The environmental benefits resented by this technology dealt with the current environmental concerns facing the Chinese government (Penn ; Beamers, 2012, p. ).
This makes the TIPS technology hard to imitate by any other competitor as there is no other technology that can match its superiority. Non-substitutability: There are always risks of competitors entering the market, but not necessarily substituting Ass’s technology with the same. Rather, competitors may enter the market and look to potentially enhance Ass’s technology. The driving force behind Ass’s technology is the development of a technology that allows for the protection of the environment (p. ). This technology may only be substituted by the use of incineration or landfills, and if substituted, to the detriment of the environment (p. ).
These forms of substitution do not create the same outcome as that of Ass’s TIPS technology. The FRI. model explores the resources and capabilities currently possessed by ASS. Option one allows ASS to enter a somewhat new market in China, allowing NINES to act as an agent for Ass’s technology. Option one presents a lower level of risk for ASS, but in doing so, results in a lower level of return, contrary to option two. Option two allows a certain level of identification teens the management team of Nah, and Ass’s current management team.
This, alongside Nazi’s tangible resources, may present an attractive venture for ASS. Either option presents ASS as a new, and highly competitive, entrant in the Chinese market. Therefore, the FRI. model confirms that ASS may have a sustainable competitive advantage and should therefore enter the Chinese market. Both options look suitable. ASS currently has the required resources and capabilities to pursue an equity-based entry. 5) Organizational Configuration Model The organizational configuration model looks at six main elements in organizations and can be applied to ASS.
Specifically, this model can review the problem of whether or not ASS should enter the Chinese market, which of the two (if not both) options that they should select and whether ASS possess the required resources and capabilities to pursue an equity-based entry. Leadership: Paul Antler is the CEO of ASS and leads a team of employees who all possess skills and abilities around the TIPS technology. Nazi’s owner had a similar personality to Antler and was also an entrepreneur. They both identified with each other from the beginning, so there is definitely a match in Gerard to the leaders and their ways of thinking.
They had a solid trust based on this. The NINES had made the first call to ASS about their technology (based on the State Environmental Protection Agency of China) so it is accepted that the leaders somehow matched and got along well. Vision ; Strategy: Sass strategy wanted to involve international geographic diversification to propel it to not just a domestic player, but an international one. This would at the same time improve their growth potential. Since both these opportunities were international expansions, it suited the strategy of ASS and there was a match.
Their vision was to become an international player and expand in more areas on new terms (equity basis) and these options to enter into China allowed them to do just that. Formal structures: Antler as CEO leads his team of employees. Among these employees there are certain positions held such as marketing manager, operations manager and manager. ASS has a fairly rigid and hierarchical structure where certain people report to others above them. However, due to the small number of staff, there are quite frequently vertical hierarchical jumps and everyone interacts with each other.
Technology: The Thermal Phase Separation (T AS) technology that ASS possesses is an internationally proven technology which is the only one to be able to extract 90% of oil from industrial sludge (Penn ; Beamers, 201 2, p. 3). It is recognized as being world class for performance in regards to its reliability, mobility and its lack of harmful air emissions. It has been internationally proven and produces safe oil, enables the recovery of oil which can then be reused or resold. The technology produced no harmful air emissions, no land and water pollutants, and fewer green house gas missions.
This would be appreciated by the Chinese and their government in regards to recent policy changes and environmental protection developments. Processes: At ASS, there exist several processes that act in harmony to accomplish tasks and achieve goals effectively and efficiently. There are processes that deal with inputs and outputs such as information, people and materials. There are also processes formed around customer service and after sales service for existing customers, new product development, order fulfillment as well as things like decision making and resource allocation.