Phase Separation Solutions

Case Study Report

Introduction

This case study report will explore the company Phase Separation Solutions (PS2) and identify the key problems and alternatives. An analysis and application of models will then be conducted. Specifically, the five models chosen consist of a PESTEL analysis, Porters Five Forces, a SWOT analysis, the VRIN model and the organisational configuration model. An evaluation of alternatives involving advantages and disadvantages for the alternatives are then investigated. Finally, a conclusion and recommendations are presented for PS2.

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 PS2 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 PS2 to internationalise. Declining economic markets and volatile industry propensity in Canada and North America display limited sustainable future revenues and weakening PCB-contaminated soil allocation. Regulatory issues prohibit PS2 from transporting soils from the US to Canada in addition to PCBs only providing PS2 with short term momentum as PCB treatment is a declining market in Canada. Currently, in the Canadian market there is a potential limit in regards to the amount of PCB-contaminated soil and unfavourable cost advantages which may require PS2 to look abroad in order to increase their business activities. These factors raise issues of constraints in PS2s existing markets (Canada and North America) which will cause assessment whether PS2 should internationalise into China.

The second problem deals with which of the two opportunities should PS2 pursue. PS2 needs to weigh up the two options. Option one is a joint venture (JV) with Nanjing Institute of Environmental Sciences (NIES) in the remediation POP-contaminated soil while option two is a JV with Zhoushan Nahai Solid Waste Central Disposal (Nahai) 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 financials and costs to determine the possibility of pursuing both options. In order to undertake both options, PS2 has to assess the cost and benefits. The third problem deals with whether PS2 possess 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 NIES and Nahai in China would do to impact the metrics of PS2 and the flow-on impact on corporate resources and the organisational structure.

The fourth problem deals with what ownership levels PS2 should assume for each option. Investigating both options and determining the percentage of ownership levels for both options (i.e. equal joint control, majority control or minority control) needs to be undertaken. Therefore contract negotiations with potential JV partners must suit PS2. Based on ownership levels, the fifth problem would be how PS2 would staff its Chinese operation(s) if they decide to pursue the opportunities in China. Organisational structures, systems, and staffing need to be considered when determining the JV 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 of research capabilities and techniques of treatment facilities even though the potential size of this market appears a decent size for small firms such as PS2. The seventh problem deals with competitors (i.e. BEV) who have been seeking opportunities for geographical diversification which could saturate the market and put pressure on PS2. Competitor analysis and determination of future potential industry outcomes are needed to determine a long-term plan for PS2 to internationalise 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 contracts. The eighth problem is that PS2 has no experience in international expansion of an equity-based manner which could present unforeseen issues PS2 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) PESTEL Model (macro analysis)

PS2 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 viability. 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 PS2 should enter the Chinese market and which option(s) to choose.

Political Factors: The Chinese government has realised and reached a consensus on the importance of prioritising environmental protection beyond a "basic policy" 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 (Peng & Beamish, 2012, p. 9). Furthermore, in 2010, the Chinese government claimed that $3 billion would be invested to oil investigation and oil remediation from 2011 to 2016 (Peng & Beamish, 2012, p. 10).

Economic Factors: In the past 30 years, economic development of China was rapid where the real GDP per capita rose from $220 in 1980 to $2,883 in 2010 and the annual growth rate was around 9% per annum (Peng & Beamish, 2012, 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 410,000 people die every year in China because of environmental pollution (Peng & Beamish, 2012, p. 9). Meanwhile,