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Rock Street, San Francisco

Context

Background

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In 2014, about 258 million tons of
municipal solid waste (MSW) was generated in the United States. Over 89 million
tons of MSW were recycled and composted, equivalent to a 34.6 percent recycling
rate. In addition, over 33 million tons of MSW were combusted with energy
recovery and 136 million tons were landfilled. (epa.gov)

The growing need for manufactures
to please shoppers and shareholders has given rise to the increased use of
recycled materials in manufacturing. This has in turn created the demand for
recyclable materials by large scale manufacturers globally. My chosen company,
“The Recycling Company”, is a privately-run waste management company. Its purpose
is to separate, categorize and process recyclable materials efficiently to
minimize total landfill materials and resell suitable recycled materials for
profit. The recycling company is
not only the largest privately-run recycling and waste management company
within city limits, it is also one of the fastest growing players in the
recycling industries within the state. The company earns revenue from its
contracts with the city and third-party recycling programs with manufacturers
and businesses. In addition, its high-quality service and on-time customer
service in turn translate to a consistent clientele portfolio for specialized
waste pickup like medical, hazardous waste, and bulk/construction. The
recycling company’s corporate mission is to provide waste management services,
protect the environment, and promote recycling in order to ensure a safe and
healthy community for current and future generations.

For privately-run waste management
companies such as mine selling these materials open numerous revenue streams
through the following ways; material processing, recycling commodities and third-party
recycling management.

Product/Service
Defining Features

The recycling company (TRC) will be
exploring the new growing market of used waste cooking oil recycling and
filtration. TRC will be setting up collection points for this new
product/service at local restaurants, hospital and hotels around the city to
collect waste oils, fat and grease. As well as drafting contracts stipulating
pre-negotiated terms with these businesses where necessary. For the acquisition
of raw materials (waste oils, fat and grease), the marketing and sales teams,
will focus on finding the appropriate relevant clients with suitable raw
materials by combing through our existent contact list and searching the city
for more customers. Next, the process development and research teams will
design a suitable process for the safe and effective collection, storage and transportation
of materials. The use of promotional emails as well as mail-in ads will be used
to target residential customers as well to maximize amount of materials
collected.

Fit

            The current products/services offered by TRC include
recycling programs as well as waste management within the city. The exploration
of new entrepreneurial opportunities such as tire and tin recycling open up new
possibilities for TRC. Having this in mind coupled with the corporate strategy
of continuous diversification to open up new income streams TRC is trying out
new waters by undertaking cooking oil filtration and recycling and adding it to
its lineup of products/services. The addition of this new division with our
current products/services will help the company by reduced cost through
economies of scale.

Effectiveness

With respect to TRC’s branding and
marketing efforts, the company has had minimal competition due to high barriers
of entry within its industry as well as good reputation.

To remain relevant within this
industry in the future TRC is focused on solidifying its footing by building on
already positive customer perceptions implemented by community programs in high
schools teaching kids about the importance of recycling. 

Developing
new product/services in a growing field creates the opportunity for innovation
and potentially owning proprietary processes in that field furthermore
solidifying TRC’s footing giving the company more resources to focus on its
strategy while creating a plan and vision for long-term growth.

Need

Target Market Basic
Demographics

            According to Lux research, global biofuels capacity will
grow to 61 billion gallons per year (BGY) in 2018, up from 55.1 BGY in 2014.
Ethanol and biodiesel will continue to dominate with 96 percent of the capacity
in 2018. To TRC, that means that demand for recycled waste oils will be at an
all-time high.

This
provides TRC with potential opportunities in two targeted industry markets
within the restaurant (hospitality industry) and biodiesel industries which are
continuously growing industries. With the restaurant industry reaching annual
sales of $799 Billion in 2017 and poised to continuously grow at a steady rate
and the income generated from biodiesel at a high $11.42 Billion and projected
to reach $54.8 Billion in 2025.

TRC
will take advantage of its already created and pre-negotiated contracts with client
restaurants while expanding its restaurant clientele portfolio to acquire raw
materials necessary for processing (filtration and recycling) and resale to the
biodiesel market. Keeping in mind the product offered by TRC at the low steady
rate charges associated with services earning customers will not be a
foreseeable problem.

Target Market Behavioral
or Psychographics

            Target market is made up of “planet conscious people”. Customers
in this market are targeted for their tendency to want to choose more
environmentally friendly fueling options in their everyday life. These
customers worry about the toxicity, biodegradability, safety and recycling of
already existent fuels, when compared to biodiesel, which “… has been proven to
be much less toxic than diesel fuel, and is readily biodegradable. These
attributes make it less likely to harm the environment if an accidental spill
occurred, and far less costly to repair damage and clean up. (biodiesel.com)”
Combined with being relatively easy to use, and ready to work in existing
diesel engines with almost no modifications necessary more people are beginning
to turn to biodiesel. With the “U.S. Biodiesel production facilities operating
at 68% capacity in 2016. (css.umich.edu)” The growth in this market benefits
TRC.

Want or Need and Why

            There is a significant disparity in knowledge of the
uses, benefits and possible applications of biodiesel. And while the use and
application of this product/service is not a one that fits every customer need,
for example, residential customers who drive conventional fuel engines have
less incentive to recycle used oils for use in biodiesel. While that may be the
case, TRC will focus strategic planning in raising the awareness of this
product/service.

            Restaurant customers need our
service to improve on their current practices of dumping used oils, fat and
grease into sewer lines causing severe blockages due to accumulation overtime,
in which case they have to spend more money to get taken care of. Our service
comes to them as a welcome relief, accompanied with a neat, safe collection and
pickup setup.

            Biodiesel industry customers need
our products (filtered and recycled oil) to decrease on high spending costs
associated with possibly owning, running and maintaining a feedstock farm. As
reported by the biofuel association, “…the biodiesel industry around the world
since 2007 has been under pressure from higher priced feedstocks.”  

Pricing

Obtaining the raw material (waste
oils) has usually been characterized by restaurant pickups in line with the
pre-negotiated third-party contracts in which the restaurants had to pay. With
the observable growth within the industry collection companies such as mine are
now been charged by restaurants to collect their waste oils for use. “Fryer oil
is now considered a commodity, as of June 2nd, 2008 worth $0.34/lb. previously
restaurants had to pay to have fryer oil removed from their premises.
(epa.gov)” The Company’s competitive advantage includes, elimination of
disposal issues; cities now have a waste that takes up landfill space. Our
service recycles the waste which saves valuable landfill space. Other companies
that purchase and use recycled products want to be characterized as a “caring
company” and are more appealing to the customer’s changing attitude toward
the environment. Cost; the price of our service is much lesser than others
within the industry. The company will market the resale of its oil materials to
future customers emphasizing high value, high quality products and services, while
building a business oriented relationship.

 

 

 

Costs

TRC’s
operation in the recycling industry as well as the new division into the filtration
and recycling of used oils, fat and waste means that there are a lot of
associated costs with respect to both fixed and variables.

Variable Costs

Variable costs are a company’s
expense that fluctuates in amount with total production output. These costs
rise or fall depending solely on a company’s production volume; they rise increase
as production increases and decrease as production decreases. For TRC these
costs include the cost of materials, cost of machinery and tools and cost of
processing and production.

For
our collection and pickup programs with restaurant clients TRC charges $0.25
per liter of waste oils collected. According to Utah biodiesel supply “waste
vegetable oil, commonly referred to as “Yellow Grease” in the industry, is
worth $0.44 per pound. WVO weighs about 7.5 pounds per gallon which puts the
price of WVO right at $3.30 per gallon.” With an average of 6,750 gallons
collected bi-weekly that amounts to $22,275, totaling $44,550 monthly.

            In addition, the cost associated
with filtering and recycling collected oils is $1.72 per gallon amounting to
$23,220 in monthly processing and production expenses. The cost associated with
media and advertising in the local paper will be about $100.

Fixed Costs

            Fixed cost are a company’s expenses
that do not fluctuate or change with a rise or fall in the amount of goods or
services produced or sold. These costs are expenses that have to be paid by a
company, irrespective of any business activity. For TRC these costs include
process development and research costs, costs of machinery, transport vehicles,
storage materials and operations building. Cooking oil filtration and recycling
process development and research costs will be estimated to be about $7,250
from cursory research. Cost of filtration and recycling machinery will be set
at $3,000; a 12-foot flatbed truck and a lift are necessary to moving raw materials,
cost of truck and lift are $14,000; customer storage drums will be purchased in
bulk of about 50 seventy-five gallon drums costing $20 per drum totaling $1000.
Operation building costs will be much higher as the available area in TRC will
have to be fitted to ensure safety for employee and eliminate equipment damage.
For the purpose of this project building costs will be set at $9,500.  

Pay
and Preferences

            Our individual residential customers
are willing to pay for our service because of the easy opportunity it affords
them to gather these materials and have them collected at little extra cost
rather than deal with disposing of the materials by their selves or dumping it
in the drains.

Our restaurant customers are
willing and ready to pay for our services because of the convenient opportunity
it presents them with. TRC sets up a waste collection system and all the
customers do is gather these materials without worry about employee or
environmental safety. They also have the added bonus of avoiding costly
plumbing issues and potentially inevitable fixes by working with us.

            Our biodiesel industry clients are
willing and ready to pay for our products because it is cost effective and efficient
in that they do not have to concern themselves with the rigorous process of
collecting and processing these materials as they can obtain high quality
materials by working with us.

            A deep look into this market shows
that the number of major players within the cooking oil filtration and
recycling industry is relatively low this helps ensure that customers need and
depend on TRC’s product/service creating a steady and consistent pay stream. TRC’s
pricing structure for this product/service is already competitively priced even
in the absence of competition. The company’s continued sustenance, growth,
availability and reliability show customers that they will always have TRC to
count on to meet demands regarding this product/service. If TRC asked its
customers for more I fear it would adversely affect sales and company
reputation, exceeding the current collection market price of $0.44 per pound
will decrease the amount of oils, fat and grease the restaurants collect and
therefore affecting our end processed product. It is unjustifiable to price at
a premium the new product/service.

Strategy

In this growing market TRC’s
marketing team will apply the penetration pricing strategy.

With
the future growth of this market projected to see major growth, offering our
product/service at a low price will help to attract a lot of customers and
generate good revenue in the process as well.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

BIODIESEL
BENEFITS – WHY USE BIODIESEL? Retrieved on January 15, 2018 from

           

BIOFUELS
FACTSHEET.  Retrieved on January 15, 2018
from

Biodiesel
Market Size worth $54.8 Billion by 2025 | Growth Rate: 7.3%. Retrieved on
December

14, 2017 from

Biodiesel
use around the world. Retrieved on January 15, 2018 from

Urban
Biofuels Initiative Final Report: A Guide for Coordinating a Fryer to Fuel
Collection

Program in Combined Urban/Suburban
Areas. Retrieved on December 14, 2017 from

Waste
Vegetable Oil Pricing & Biodiesel. Retrieved on January 15, 2018 from

 

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