Industrial Services of America, Inc. and Its Strategies - Essay Example

?Industrial Services of America, Inc. and Its Strategies Industrial Services of America Inc. An industrial Service ofAmerica Inc. is an American company that deals with recycling of recyclable materials including stainless steel, ferrous as well as non-ferrous. In addition, the company provides services regarding the management of solid waste. Primarily, Industrial Services of America, Inc. started as a firm dealing in production of electrical products. In 1979, the company liquidated its operations and sold a good part of its tangible assets. On liquidation, Harry Kletter purchased majority of the shares and on the eve of 1980s, he started a new company concerned with the selling of equipments associated with handling and disposal of solid waste. The new company operated with a new trade name known as Waste Equipment Sales and Services Company (WESSCO). WESSCO finally joined with CWS (Computer Waste Systems), a company that had specialized in giving consultations in relation to solid waste management to a number of businesses operating in diverse industries. The merging of these two firms led to the establishment of business operations headquarters at Louisville in Kentucky. Since then the company has acquired a number of recycling units in several regions. Besides purchasing of business units, the company has also seen itself enter into merger with other companies. Currently, the company is resorting to contracting third parties’ services in collecting and disposing solid waste. This will see ISA increase its coverage area in regards to offering its services leading to amplified profits. Although the company has its operation in two sectors, that is, recycling and waste management, ISA is considering about concentrating in recycling activities. The reason behind this decision might be due to its efficiency in the recycling operations (Consonni, Giugliano & Grosso, 2005). External environment Industrial Competition The recycling business especially in the metal sector is very competitive in the US market. ISA faces stiff competition from those firms that have access to metal source. It is alleged that some companies have access to cheap scraps giving them a chance to sell the finished products at relatively low prices. The tough competition is further enhanced by existence of rivals that have adequate financial capacity, physical resources such as trucks and efficient marketing strategies among other factors such as large market share. ISA also fears that its competitiveness might adversely be affected by weak economy and unfavorable market conditions (Consonni, Giugliano & Grosso, 2005). Risk Associated With Depending Upon One Customer ISA is exposed to great risk by depending on one customer that contributes over 60% to its profit. ISA majorly depends on North American Stainless pertaining to sale of its recycled metals. Environmental Regulations and the Government Policies The government and the environmental organizations frequently monitors the operations of all company’s that deals in recycling of materials in addition to management of wastes to ensure their practices are in line with laws and regulations governing the environment as well as company’s operations. Such policies entail environmental, health and safety issues such as Occupational Safety and Health Administration. Failure to comply with these laws ISA might find itself in the trouble of paying fines and thus affecting their profitability (Cointreau, 2001). Internal organization Management team ISA brags of having experienced and qualified management team including the president and chief operating officer, Mr. Brian Donaghy as well as the vice president of the ISA Recycling, Mr. James Wiseman. The team management is cooperative and competitive and work closely with its employees to achieve the organizations’ goals. Employees At the end of 2010, ISA had about one hundred and eighty five employees who were employed on a full time basis. Ninety-eight of the employees are employed in recycling; seven are working with the management services while four are dealing with the sales and leasing of both recycled metals and equipments used in handling the solid waste. In addition, ISA managed to employ twenty-two in the maintenance department, seventeen as drivers and thirty-seven at the administration level. The company enjoys to have experienced employees regarding the recycling of metals and management of waste. Processes/Production/Manufacturing Activities ISA is well endowed with advanced and more efficient recycling processes that ensure quality is maintained while keeping the cost of productions as low as possible. The scrap processing activities include: Sorting: At this point, the scrap material is inspected with an objective of determining how it should be processed to optimize profit. The sorting process also entails classifying the scraps according to size, composition and quality. Shearing and cutting: here, large pieces of scrap materials are cut into small pieces that will enable eventual processing procedures easy and smooth. Shredding: large pieces of metal scraps are shredded into smaller pieces. The smaller pieces are further separated from stones, rubber and dirt using magnetic separators. Baling: at this point, pieces of scraps collected from various industries and factories are balled into large uniform blocks that are saleable to a number of end-users such as brokers and steel mills. Strategic goals pursued by ISA Differentiation strategy The laws governing recycling and management of wastes are becoming strict making such operations reasonably expensive. Most firms are encouraged to have their own department handling the recycling and management of waste materials. Furthermore, landfills are decreasing discouraging disposal of waste products. This makes businesses dealing with waste disposal a bit expensive. However, due to lack of specialized tools in handling recycling and waste management, many firms have resorted to contract these services to third parties. This perhaps gives chance the recycling and waste management firms a chance to offer the services. In realization of the increasing levels of operational costs related to recycling and waste management services as well as the increased competition, ISA realized pursuing cost leadership strategy would result to minimal benefits. In this regard, ISA decided to pursue differentiation strategy. This can be evident in ISA’s effort to ensure the third party provides timely services to its customers by collecting solid waste on time in addition to offering quality-recycling services. It is also evident that ISA is redesigning and reconditioning the equipments associated with handling both solid waste and recycling activities to match or fit the requirements of the customer. Noticeably, reconditioning the equipments is an attempt towards customizing the equipments that intend to serve its customer. The company’s management once suggested that customers’ need is its focus (Graves & Moran, 1995). Firm Expansion through Mergers and Acquisition ISA has for so long increased its size by purchasing new business units or entering into partnership with other similar or related businesses. For instance, on January 2009 ISA entered into contract with Venture Metals in an agreement to allow ISA to use properties situated at Louisville within a period of two years. The acquisitions and mergers ensure that ISA is able to access more areas that require waste management and recycling services. Consequently, this leads to increase in IAS’s market share enabling ISA to stand in a better chance of earning superior profits in its operations. The decision of expanding rapidly into new areas came as a result of the recognition of large share market dominated by rivals. The expansion approach will most likely help ISA to compete effectively with the big players in the current market (Haines, 1995). Conclusion It is evident that diverse companies offer waste and recycling management services on competitive grounds in the U.S. market. This forces most firms to offer superior services that will remain attractive in the eyes of customers. On the other hand, it is noticeable that government is enhancing more restrictions concerning laws governing waste disposal as well as recycling of waste materials including metals. This has led to the decrease in the number of landfills hampering company’s from the previous smooth operations. Specifically, restrictions arising from environmental policies and regulations lead to high costs of operating recycling and waste management activities. This subsequently forces firms to pursue other strategies in the market other than cost leadership strategy. In conclusion, it will be prudent for ISA to expand and capture a wide market for its activities. This will be made possible through partnerships and purchase of related business units in different parts of the U.S. and Canada. The company will as well gain competitive advantage by pursuing differentiation strategy. This denotes that the company should provide unique services that focus needs as well as taste of consumers. Being in a position to offer superior services will assist the company to remain competitive in this market with a lot of regulations and unfavorable market conditions in addition to stiff competition. References Consonni, S., Giugliano, M. & Grosso, M. (2005). Alternative strategies for energy recovery from municipal solid waste, Part B: emission and cost estimates. Waste Management, 25, 137-148. Cointreau, S. (2001) Declaration of principles for sustainable and integrated solid waste management, World Bank. Retrieved on 12 November 2011 from: http://siteresources.worldbank.org/INTUSWM/Resources/siswm.pdf Haines, G. (1995) Successful strategic planning. California, CA: Crisp Publications Inc. Graves, S. & Moran, J. (1995). Developing an organization’s strategic intent and operational plan. The Quality Management Forum, 21(1), 1-4. Read More