Promethus and Hayward: a Comparison - Essay Example

 A comparison of Promethus and Hayward The Prometheus Energy company is involved in the business of development of alternative fuels to the traditional diesel, propane and gasoline and is therefore, primarily involved in the production, sale and distribution of liquefied petroleum gas. The Hayward company provides building materials and services to professional builders and homeowners. Hence, the Promethus company is involved in the fuel industry and deals with energy, while Hayward is in the construction industry and deals with lumber. The similarity between the two companies is that both are based in California and both are focused upon the development of environmentally friendly solutions; however there are also certain differences in their approach, which are detailed further in this report. Both of these companies have been able to achieve an optimum level of extraction of resources and demonstrate an adherence to the guidelines set out by Tietenberg(2006) as follows: “Practically speaking, solving these equations to find the optimal solution is not a trivial matter, but neither is it very difficult… As an exercise, those interested in computer programming might construct a program to reproduce these results’ (Tietenberg, 2006: 147). The Prometheus company was founded in 2003 and its headquarters is based in Redmund, Washington. While it originally started off primarily to deal in liquefied petroleum gas, the company has moved into the development of environmentally friendly solutions that can be derived through the use of LPG (Business Wire, 2008). The primary source of the LPG produced by the Company is methane, which it captures from stranded sources which also include landfills, sewage plants and waste water treatment facilities, agricultural operations as well as coal beds. In carrying out this process, the Company began to question how resources could be extracted to an optimum level, based upon the question: “Instead of burning off the methane gas created in landfills, why not capture it and convert it into fuel that can replace diesel and propane?” (www. Prometheus-energy.com). As a result, during the process of production of methane, by choosing not to burn it off from the landfills, but rather to ensure that this resource is extracted and bottled, so that it can be distributed and marketed, the Company is also producing an impact that is environmentally friendly, i.e, drawing out the methane gas from sources that could be potential polluters of the environment, such as sewage plants and landfills. As a result, its operations have a side effect of producing benefits to the environment. In view of the current political and public focus on the preservation of the environment, the side effects mentioned above have led the Company into focusing actively upon its environmental policies. For example, the Company recently built and designed a production facility that converts Landfill Gas to Liquefied Petroleum Gas located at the Frank R Bowerman Landfill at Irvine, California and after operation was commenced, the Company was able to announce that the plant had met and exceeded the design capacity targets, i.e, it was currently running at 70% of its full capacity of 5000 gallons per day.(Business Wire, 2008). The move towards capitalizing on the potential environmentally friendly aspects of production of LPG arises from the non damaging safety aspects of methane, which was also recognized by the Company. The safety record of LPG plants is high, because the gas methane when liquefied (a) does not smell (b) does not create particle emissions and (c) has a low noise output (Ricker, 2010). While the risk of fire always exists with any gas that is used, liquid methane has the best safety record. The Prometheus Company was able to incline its corporate policy towards a green, environmentally friendly policy by diverting waste materials from pollutants like sewage and landfills into the production of methane gas that could be used for fuel. In order to insulate the possibility of risks arising from potential fires and such, similar companies have generally tended to house their production facilities in large areas that are well isolated from highly populated areas where damages could result from any untoward incident. This does contributed to improved efficiency but the economies of scale which are achieved are offset by the dramatic increase in the costs associated with the transportation of the fuel, since it needs to be stored in double insulated containers and protected all the while. The Prometheus Energy Company was able to overcome this deficiency and gain an edge over its competitors by using proprietary technology in order to produce LPG on a small, distributed scale rather than a large centralized one, by using untapped resources which are spread out all over the planet.(www.prometheus-energy.com). This has provided it with a significant cost advantage over its competitors. The Hayward Lumber Company started off as a family owned business, primarily selling lumber, which was used to supplement building services. It is a Company that came into being in 1919 and is almost a century old and has been primarily a family business, but in 2003, announced its intention to become the leading supplier of environmentally friendly building materials in California (Delmas et al, 2007). As Bill Hayward, the CEO of Hayward Lumber puts it, during a 16 year period since the Company was founded, it has “grown from a company selling mostly lumber to a company selling lumber, doors, windows, cabinets, trusses, engineered wood, foundation, and green building materials.” The trend towards the Company developing an environmentally friendly posture began in 2003, when Bill Hayward noted that there was a small category of builders who were moving against the norm and offering building materials that conformed to strict environmental standards. Hayward also noted that these builders were increasingly being favoured by home builders because they supplied materials that were less damaging to the environment. The growing pressure on the development of environmentally friendly initiatives led the Company to seek initiatives to supply a niche in the market which was focused upon the use of environmentally friendly measures. For example, traditionally, wood was treated with arsenic in order to preserve it, but the Environmental Protection Agency announced that the use of arsenic treated wood would not be permitted due to its adverse health consequences to construction workers and potential home residents.(Delmar et al, 2007: 7). As a part of this initiative, the Company began selling Forest Stewardship Council certified lumber , which could be slotted under the category of “green” building materials, much in demand in the region of California’s central coast market.(Delmas et al, 2007). The distinctive aspect about FSC wood was that it was environmentally sustainable. Wood products were generated from a sustainable forest management policy, i.e., the protection of fragile eco systems, ensuring that forest resources would be preserved in the long term, ensuring that the indigenous people who lived in the forests were not deprived of the opportunity to benefit from those forests and in effect, ensuring that the maximum economic value could be extracted from the forests while simultaneously ensuring that the environmental and social goals outlined above were also preserved. (Delmar et al, 2007). The production of FSC wood allowed the Company to gain a foothold in a niche market, but this led them to expand horizontally into the production of other kinds of “green” building materials which also provided them with the facility of earning higher revenues because such products were also more expensive. As compared to its competitors, the Company did not initially benefit from its choice to focus upon the environmentally friendly range of building materials, because (a) the clientele for such products was restricted to custom homebuilders who did not balk at the high process of such products (b) FSC mills were not always adequate to produce wood that met the necessary standards for accuracy and prime finish, which also led to delays, waste and customers who were dissatisfied (c) since obtaining FSC certified wood required a lead time of at least three months, the Company was forced to stock inventories of at least three months in order to ensure a continuous supply of the product and therefore had to ensure adequate storage facilities and preservation of the wood. The only advantage the Company had was the determination of environmentally conscious customers to use green products. At the outset therefore, Hayward’s competitors definitely had the advantage in terms of time of delivery, quantities of materials available for supply and the logistics of preparation and supply of the material. In order to tackle its new policy and adhere to its Green Manifesto, the Company decided on a policy that was based upon a three part environmental strategy.(Delmar et al, 2007). Firstly, the Company aimed to provide arrange of green building materials, such as non toxic adhesives, no and low-VOC paints and similar products in a relatively short lead time. With the new requirements for environmentally friendly building products such as use of wood not treated with arsenic, laid out by the Environmental protection Agency, the Company gained an advantage by providing a comprehensive range of such building products all in one place. Builders increasingly subjected to pressures to locate such materials in a tight time span appreciated the value of obtaining the materials from one place. The second measure initiated by the Hayward company was to expand its market by educating more customers about the need to use environmentally safe building materials. It conducted seminars for various building professionals on green building, developed an extensive web catalogue of green building materials. Furthermore, by donating such materials to charitable construction projects that were also endorsed by celebrities, the Company also gained media attention, all of which helped it to build its client base and gain more customers. Thirdly, the Company introduced a change in the Company culture, by making environmental ideals and values an intrinsic part of its corporate culture. In doing so, the Company was able to attain an accord with its customers who also favoured such idealistic goals and develop a common base of shared values. It introduced an internal recycling and waste diversion plan, initiated the use of green products internally within the Company as well and made a corporate commitment to ensure that all its construction projects adhered to the LEEd standards (Delmar et al, 2007). The Company’s competitors were slow to enter into the area of green building materials, but even where those who had entered into the field earlier were concerned, the comprehensive corporate package that the Hayward Company was able to put together by aggregating the supply of green building materials and also attracting medic attention to its products provided it a clear advantage. In conclusion it may thus be noted that the solutions derived by both the companies is based upon efficient resource extraction and optimal grouping, so that it ensures that the best possible outcome is produced. Tietenberg (2006) has provided mathematical formulae to ensure that the optimal solutions that are derived are based upon the efficient extraction path of a finite resource, such as for example the methane by Prometheus Energy which is using it rather than burning it and the development of environmentally friendly building materials by the Hayward Company. Tietenberg’s formulae are also calculated to ensure that the time path and the user costs are also factored into the equation in order to ensure that the most efficient solution is obtained, and both of these companies have been able to thrive from the respective policies they have developed, which not only cater to the demands of the market but also ensure that these demands are met in a cost efficient manner in an optimal time frame. References: Business Wire, 2008. “Prometheus Energy announces Bowerman LNG plant achieves production targets”, Business Wire, January 3, 2008, Retrieved July 2, 2010 from: http://www.encyclopedia.com/doc/1G1-172988029.html Delmas,Magali, Plambeck, Erica and Porter, Monifa, 2007. “Environmental Product Differentiation by the Hayward Lumber Company”, Stanford Graduate School of Business, retrieved July 2, 2010 from: http://www2.bren.ucsb.edu/~gsd/HLC-04-01-04.pdf Ricker, Nok-Noi, 2010. “Brewer residents question operators of proposed liquid methane plant”, Bangor Daily News, January 14, 2010, retrieved July 2, 2010 from: http://www.allbusiness.com/energy-utilities/oil-gas-industry-oil-processing-products/13728560-1.html Read More