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, the number of protests related to environmental pollution increased with an annual rate of 29% in recent years (Peng & Beamish, 2012, p.
9). Technological Factors: China’s technological capabilities are not as developed as other nations and causing lags in potential growth.TDU technology is widely used in China’s POP market. Compared with TDU, PS2’s TPS 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 PS2 to compete in the market. Overall, the PESTEL 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 echnologies. Both the POP industry and oil sludge industry are at the early stage with great potential, so the external factors are positive for PS2 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 PS2 and its competitive behaviour and responses. Porter’s Five Forces interact and determine an industry’s attractiveness and profit potential.One problem PS2 can review to gain a clear picture of whether they should enter the Chinese market in order to determine its viability and what forces offer potential attractiveness or barriers.
Another problem PS2 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 PS2 would have high start-up costs in conjunction with the JV 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 specialised 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 and 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 specialised and restricted to government policies.
Buyers do however have the ability to switch between similar operational organisations 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 of such resources (soil and oil) to organisations. Governments and private organisations 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 speciality 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 PS2 with materials for their technology and devices.
These suppliers have a high bargaining power as it is assumed that only specialised companies can provide PS2 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 organisations to compete. There would be limited differentiation between resources however production and technological processes would ensure some differentiation enabling PS2 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 nd 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, PS2 has the ability to enter the market as it is attractive and can compete and differentiate with other competitors with the assistance of a JV. PS2 has TPS 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.
) SWOT Analysis The SWOT analysis takes an overall approach to the strengths, weaknesses, opportunities and threats presented to PS2 in the case. Specifically, the SWOT analysis can review the problem of whether or not PS2 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 emerging stage. Strengths: PS2 is no stranger to internationalisation into other markets with technology deployed in 14 countries in the past 15 years. -PS2 possesses internationally proven technology (TPS), the only one to be able to extract 90% of oil from industrial sludge (Peng & Beamish, 2012, p. 3). It is recognised as being world class for performance, reliability, mobility and its lack of harmful air emissions. -TPS technology can easily be deployed at fixed locations and has several advantages (stated in above point). -PS2 is well suited to the Nahai JV as they have global experience.
Both owners have similar personalities and stories. A solid trust had already been developed and Nahai had solid assets with a wide range of permits already obtained. -The Government agency (NIES) 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 PS2. -Being an early entrant into the emerging market of remediation of POP-contaminated soil,PS2 would most likely enjoy first mover advantages. Weaknesses: -The oil recovery from oil sludge market was fragmented and the industry was still in its infancy.
-The cost of both JV’s are expensive ($3 million each option). -For option one (POP-contaminated soils), the JV would need to design, engineer, manufacture and market TPS units in China for use in various regions of China. -There is no guarantee that option one will work as the JV 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 PS2 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 PS2. -Nahai 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 opens the doors up for other opportunities like consulting services and applying the technologies to other parts of China. Threats: -The main threat is the issue of the JV’s. Issues of control, management and staffing are present and could undermine PS2’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 SWOT analysis, it appears that the strengths and opportunities outweigh the weaknesses and threats. From the model, it looks certain that indeed PS2 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 PS2 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 PS2 would enter the JV with, so this should not be much of a problem. 4) VRIN Model In order to determine which option to pursue, or whether PS2 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” (Peng & Beamish, 2012, p. 9). Contaminated sites were randomly dispersed across China, and the mobility of PS2’s TPS 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 PS2’s competitors. Also, due to application of PS2’s technology regardless of the POPs to be treated, the opportunity in China could allow them to compete in a $725 million market (Peng & Beamish, 2012, p.
0). The technology PS2 possesses offers value to the company and an entry into China could extract extra value for PS2 based on favourable 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 PS2 with a supremely talented and knowledgeable workforce. With the president and CEO Paul Antle’s 25 years of experience behind him, his abilities to pursue projects have contributed to his many awards.He was recognised for his success as an entrepreneur, suggesting similar qualities to that of Nahai’s owner. This similarity, alongside an ability to direct and manage, provides PS2 with the advantage of identification with individuals and knowledgeable people to run such a project. Moreover, PS2 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 PS2 has been a strategic player in their ambition to create funds.
All this confirms that the resources and capabilities that PS2 possesses are rare and hard to find in other companies within the industry. Inimitability: The TPS 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 TPS 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, TPS technology produced no harmful air emissions and no land and water pollutants.And finally, compared with incineration, the TPS process produces significantly fewer greenhouse gas emissions. The environmental benefits presented by this technology dealt with the current environmental concerns facing the Chinese government (Peng & Beamish, 2012, p.
3). This makes the TPS 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 PS2’s technology with the same. Rather, competitors may enter the market and look to potentially enhance PS2’s technology.The driving force behind PS2’s technology is the development of a technology that allows for the protection of the environment (p.
6). This technology may only be substituted by the use of incineration or landfills, and if substituted, to the detriment of the environment (p. 6). These forms of substitution do not create the same outcome as that of PS2’s TPS technology. The VRIN model explores the resources and capabilities currently possessed by PS2. Option one allows PS2 to enter a somewhat new market in China, allowing NIES to act as an agent for PS2’s technology.Option one presents a lower level of risk for PS2, but in doing so, results in a lower level of return, contrary to option two. Option two allows a certain level of identification between the management team of Nahai, and PS2’s current management team.
This, alongside Nahai’s tangible resources, may present an attractive venture for PS2. Either option presents PS2 as a new, and highly competitive, entrant in the Chinese market. Therefore, the VRIN model confirms that PS2 may have a sustainable competitive advantage and should therefore enter the Chinese market.
Both options look suitable. PS2 currently has the required resources and capabilities to pursue an equity-based entry. 5) Organisational Configuration Model The organisational configuration model looks at six main elements in organisations and can be applied to PS2. Specifically, this model can review the problem of whether or not PS2 should enter the Chinese market, which of the two (if not both) options that they should select and whether PS2 possess the required resources and capabilities to pursue an equity-based entry.Leadership: Paul Antle is the CEO of PS2 and leads a team of employees who all possess skills and abilities around the TPS technology.
Nahai’s owner had a similar personality to Antle and was also an entrepreneur. They both identified with each other from the beginning, so there is definitely a match in regards to the leaders and their ways of thinking. They had a solid trust based on this. The NIES had made the first call to PS2 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: PS2s 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 PS2 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: Antle as CEO leads his team of employees.Among these employees there are certain positions held such as marketing manager, operations manager and R&D manager. PS2 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 (TPS) technology that PS2 possesses is an internationally proven technology which is the only one to be able to extract 90% of oil from industrial sludge (Peng & Beamish, 2012, p. 3).
It is recognised 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 emissions. This would be appreciated by the Chinese and their government in regards to recent policy changes and environmental protection developments. Processes: At PS2, 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 fulfilment as well as things like decision making and resource allocation. These could all be successfully employed in China. Informal structures: As mentioned above, although the hierarchical structure exists and is respected by all employees, informal structures are present. These informal structures don’t cause conflict as primarily it is the formal structure that employees follow.However, the CEO and management understand that sometimes it is easier to work with informal structures and that friendship groups work better with one another. For this reason, these structures exist and are granted by management to continue operating. This also leads to a higher motivated workforce.
Based on the organisational configuration model that looks at six main elements of PS2, it appears that PS2 should enter the Chinese market as the leaders have good fit, the vision and strategy align with moving into global markets, and the technology is sufficient in regards to China’s new environmental standards.Both options look suitable to be pursued. From the model, it appears that PS2 possess the required resources and capabilities to pursue an equity-based entry and therefore should enter the market. Evaluation of Alternatives Option 1: Remediation of POP-Contaminated Soil Some advantages of option 1 include: -The total amount of high-density PCB waste was about 50,000 tons, a decent proportion of the low-density waste which was calculated to be 500,000 tons – this was three times the amount of the Canadian PCB market (Peng & Beamish, 2012, p. 9). If the government improved its measures to protect the environment, the number of POPs in China would rise (currently a $470 million and the potential to be a $725 million market) (Peng & Beamish, 2012, p. 10). -The TPS technology differed to that of its competitors – the TPS process was able to produce safe soil with an 85% decrease in volume which could be returned to the environment (Peng & Beamish, 2012, p.
3). The TPS process not only enabled the recovery of oil and other hydrocarbons for reuse or resale, but also generated its own fuel generated its own fuel source to fire the system. Compared with incineration, the TPS process would produce less greenhouse gas emissions. -Compared with the TDU unit (the current technology from a competitor), PS2’s TPS technological unit had higher mobility, which would be attractive to the Chinese market because there were numerous small contaminated sites in China. -PS2 would cooperate with NIES. NIES was a government agency so the risk of this project would be reduced significantly.
NIES had extensive expertise and experience and had identified more than 300 sites in three provinces. This also acted as a free advertising campaign for PS2. Being an early entrant into the emerging market of remediation of POP-contaminated soil, PS2 would most likely enjoy the first move advantages. -PS2 was involved in conducting market research with the Chinese government over the past one-and-a-half years, which meant PS2 had already gained experience cooperating with the Chinese government.
The experience would be helpful if PS2 entered the Chinese market. Some disadvantages of option 1 include: -The JV would need to design, engineer, manufacture and market the TPS units in China for use in various parts of China.There is no guarantee that this option will work as the JV would need to design, plan, launch and bid for, operate and participate in projects in China. -The JV would need an investment of about $3,000,000, which is a large investment for a company the size of PS2. Option 1 is attractive because the positive factors outweigh the negative factors for PS2. The Chinese market is huge and has great potential.
Furthermore, PS2 has a competitive advantage to compete in the industry of remediation of POP-contaminated soils.However, there are some risks that PS2 needs to take into account such as the big initial investment. Option 2: Oil Recovery from Oil Sludge Some advantages of option 2 include: -Chinese oil sludge industry is large with treatment of 6.
1 million tons with Zhoushan’s facilities located close to costal oil terminals such as Aoshan Oil Terminal which is China’s largest oil transhipment base (Peng & Beamish, 2012, p. 13). -New regulations in Chinese market is encouraging organisations not to dump but rather enforcing proper treatment to respond to environmental issues. Cooperation with Zhoushan Nahai Solid Waste Central Disposal Co. Ltd. (Nahai) in Zhejiang means PS2 would be in partnership with the largest and only permitted solid waste management system in the area of Zhoushan.
-Nahai had become a “leader in the management of hazardous waste and oil sludge in the Zhoushan area” (Peng & Beamish, 2012, p. 13) therefore providing more tangible resources such as an oil storage facility, a waste oil recovery facility, bilge water treatment process and a solid waste destruction facility. The JV would expose PS2 to a greater window of opportunity through the capability of processing from 10,000 to up to 100,000 tonnes of oily sludge per year (Peng & Beamish, 2012, p. 13). -The ability to leverage off PS2’s international management teams experience through development opportunities of processing oil sludge recovery into other regions of China. -The internationally recognised TPS technology provided by PS2 addresses the environmental concerns of the Chinese government, and thus, partnering with Nahai will present this JV as the preferred vendor for oil sludge recovery systems.
PS2 is well suited to Nahai as they have global experience, similar personalities, he is an experienced entrepreneur and they identify with each other. Some disadvantages of option 2 include: -The permit for waste management held by Nahai is only limited to the Zhoushan area. While this area may contain a large potential of oil sludge remediation, gaining rights in other areas of China may pose an issue. -Some competitors already have the rights to other regions of China, thus gaining these permissions to other areas in China may be a drawback and saturate the industry. As Nahai is a privately owned company, and PS2 is a public company, the provisions between the two are not definite.
This JV, as with any JV between a public and private company may present a lack of accountability and blur the distinctions with regards to risk, performance and funding. -The Chinese oil sludge industry is still in its infancy and is very fragmented due to various oil sludge generation locations making it difficult to expand operations into other regions. -The JV would need an investment of about $3,000,000, which a large investment for a company the size of PS2.When determining whether PS2 should enter into a JV with Nahai it is important to explore both the advantages and disadvantages that exist. While there may be some disadvantages present, there are also advantages for PS2 to enter into a JVwith Nahai that will allow for the international growth and expansion of PS2. While it may not allow for the exploration of other suitable industries, such as research into rural environments, it does provide PS2 with substantial financial gain should they consider entering into this JV with Nahai.Recommendations and Conclusions Based on the above evaluation of alternatives, it appears that for both option one and option two, the advantages clearly outweigh the disadvantages. However, taking a closer look at both options, it appears option one has the same amount of advantages as option two but at the same time option one has far less disadvantages than option two.
From this, it could be concluded that option one is perhaps better than option two in regards to which option PS2 should choose.Therefore option one is the better opportunity on face value however this is not to say that option two is not viable as the analysis illustrates both provide high potential future prosperous outcomes for PS2. It is therefore recommended that PS2 enter both option one and option two, but at different times and stages.
It is recommended that PS2 pursue and enter option one, the remediation of POP-contaminated soil first and foremost. The only negatives for pursuing this option is firstly the cost, which is a price of doing business and will need to be undertaken no matter how or where PS2 expands internationally.The next negative is that there is no guarantee that the JV will work, as PS2 has to do extra work such as bidding, planning, launching, operating and participating. Therefore an element of risk does exist, but the advantages and potential return outweigh this risk. The advantages consist of large amounts of PCB waste present, the fact that the TPS technology was different to any other company including its use (such as a higher mobility) and the environmental protection is enforced.
Nevertheless, this does not mean that PS2 should not pursue the second option of oil recovery from oil sludge.Some of the major disadvantages deal with limited permits and areas where PS2 can use its technology, the fact that other competitors have the right to other regions of China, and possibly the problem of conflictions between the JV agreements as PS2 and Nahai are private and public respectively. There are though, more advantages than disadvantages, and stronger ones as well.
For example, PS2 would be exposed to a greater opportunity, Nahai has a strong reputation and possesses the only permits in the area in question, the large oil sludge industry and the fact that both PS2 and Nahai had similar founders with similar personalities.From the evaluation of alternatives, option one is preferred, but option two still appears viable. Therefore, it is recommended the corporate level strategy is to enter into option one and be monitored based on the above conclusions. Entering both options at the same time is unrealistic and would bear financial strain on PS2. It seems a more strategic move would be to pursue option one and monitor it in terms of its financial performance – return on equity and return on investment as well as its success.
If it is successful and some of the expenses are recuperated, this could be used for potential enter into option two.Therefore, it is recommended that an entry into option two is followed by the entry of option one at a later stage (based on the assessment outcomes of option one). If however option one is a failure and there is no return on the $3 million, option two will not be pursued. Further, it is also recommended that PS2 embark on a new operational level strategy of hiring additional employees and expanding resources required to increase the probability of any entrance into China ending in a successful move for PS2.It is expected that any move into China will require a collaboration of resources with the JV and further employees to cope with the increase in activities and make sure the entry runs smoothly. The increase and hiring of new staff should specifically involve potential employees who have some cross-cultural experience and perhaps even some business experience within China.
Reference Peng, G. Z. , 2012, ‘Phase Separation Solutions (PS2): The China Question’, Richard Ivey School of Business, The University of Western Ontario, p. 1-18