Waste Management, Inc. Analysis and Recommendations

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Company Analysis

Waste Management Inc offers comprehensive waste management services. The company has a long history in the waste management business since 1894 with its offices located in Downtown Houston, Texas. The company has an extensive association of collection and management of waste operations with over 431 collection operations, 381 transfer locations, 286 disposal sites, 17 waste to energy plants and 134 recycling plants, 119 landfill gas projects and 6 autonomous power production projects.

Performance

The revenue of the company has been steady for the past five years with an average growth of 3.2 per cent. The company has demonstrated a remarkable increase of dividend per share over the past five years with an average dividend growth rate of 9.6 per cent. The company has established a strong distribution network and existing market share of about 30 per cent bringing a level of stability in its revenue, operating margin and profitability in the past five years can be found on the Graph below.

Five-year profitability comparison

The company’s margins are higher than the industry’s margins indicating cost efficiency of company.

The company is a service company dealing with collection and management of waste. The waste collected is recycled and used in the generation of power. By 2003, the company was already returning profits in free cash to its shareholders in form of dividends.

The company had expressed interest in acquiring its competitor Republic Services, Inc in July 2008 placing a bid of $34 per share, however, this offer was rejected and the company made another attempt in August the same year raising the offer to $37 per share. Unfortunately, this bid was also rejected and Waste Management, Inc finally withdrew the bid in October, 2008 citing that it was in a financial turmoil.

YEAR	2010	2011
Price per share(In dollars)	31.14	31.18
Outstanding share number	2,818,609	2,961,433
Market cap	87,771,484.26	92,337,480.94

Market cap= Price per share* Outstanding share number

The above shows Waste management Inc, stock price in comparison to the market cap index and how price per share affect the market capital directly.

Competition analysis

Competition in the waste management industry is moderate. Price war in 1990’s created by mergers and acquisitions consolidated the industry resulting in a few players in the industry. Waste management Inc largest competitors are Allied Waste management, Inc, Republic Services, Inc and Waste Connections, Inc. all three are very competitive companies.

Although Waste Management, Inc is the largest environmental services company in the US, Allied Waste Management Industries presents formidable competition. The company has 310 collection companies serving 10 million customers drawn from the residential, industrial and commercial sectors. In addition, it operates 166 transfer stations, owns 169 active landfills coupled with 57 recycling states extending these services to 37 states.

Republic Services, Inc is ranked as the third environmental services company which also is a competitor in the waste management industry. However, its operations are not as extensive and far reaching as those of WM and Allied Waste Industries since Republic Services, Inc ‘s operations are mainly in Sunbelt boasting of 140 collection companies, 60 active landfills, 90 transfer locations and 35 recycling stations.

The company offers solid waste management services to more than 1 million customers comprised of residential, industrial and commercial clients from over 20 states mainly drawn from western US. Waste Connections, Inc engages small markets mainly in the solid waste sector operating 105 collection functions, 35 active sites and 25 recycling facilities.

SWOT analysis

The waste management Inc. has its internal strengths and weaknesses plus external strengths and weaknesses.

External

Internal

Opportunity

Threats

Strengths

Strengths are areas where the organization excels over its competitors. Opportunities are the external factors that are present in the company. How well does the company use its leverage to take advantage of opportunities

Threats are the factors that hinder the industry as a whole and the organization has no control over it. How does the company use its strengths to minimize threats

Weakness

Weaknesses are areas where competitors have outweighed the company. How is this weakness controlled not to bur opportunities

The only option available is repositioning to adapt to the external environment. How to fix weakness that can have a real impact on threats.

Corporate mission

Waste Management, Inc mission is “To develop and deliver meaningful business results”. This well developed mission statement is a clear demonstration that it intends to deliver positive results for its customers, suppliers and shareholders. The company intends to accomplish its mission by building partnerships, involving a competent supplier base, developing best processes and finally by aligning the organization through the help of highly skilled professionals with a business orientation.

Products and services

The company has tailored its services to efficiently meet the needs of each customer group. It offers collection, disposal, transfer, autonomous power production plants and waste recycling services.

Leadership

The company has had successful leadership owing to exceptional management of the leadership team. The company has Corporate Governance Guidelines which provides outlining the company’s primary objectives. It was named by Ethisphere, a business magazine as one of the most ethical companies in the world in June 2008.

However, the company has not had it all rosy. The company faced lawsuits and fraud investigations following the alteration of the company’s books of accounts to meet predetermined earnings between 1992 and 1997. This act of unprofessionalism was aimed at eliminating and deferring the financial year’s expenses. In mid 1997 a new CEO ordered a review of the company’s accounting practices consequently discovering the fraud. The company was forced to restate its earnings for the period by $1.7 billion.

Resources

The company possesses strong organizational resources by employing economies of scale provided by its ability to rely on its large physical network of plants and landfill. The company also has a program called Service Machine that tracks and measures customer service performance.

Human resources are strong due to the company’s long history of waste management coupled with extensive portfolio of acquisitions and mergers. The company values the human aspect and puts efforts to manage human resources, through using a job analysis system.

Innovation is another strong point for the company since the company demonstrates remarkable ability to reinvent itself. Innovative restructuring has assisted the company overhaul customer service, goods and services purchasing, vehicle and equipment maintenance by reorganization of operation units in market areas and creation of market specific business strategies.

Furthermore Waste Management Inc enjoys significant reputation contributed by its long standing association with many communities and local councils in North America. It brand

Waste management Inc, enjoys remarkable awareness in its diversified customer base. However, this reputation was dented badly when Chicago waste collectors went on strike, notably most of the workers on strike from Waste Management Inc owing to the company’s large size.

Core competencies and advantages

Owing to its large size, the company has the capability to neutralize threats from smaller but strategically placed companies by absorbing them where their territories overlap. Secondly, the company has a strong base in North America where many landfills approved by the government are situated hence the company has an advantage over its competitors.

The company offers a wide range of services throughout North America. These services entail collection, disposal, transfer and recycling. Moreover, the firm has waste to waste technology that other competitor companies do not possess. This advantage is serves the company well in the wake of worldwide energy concern.

The company has over time through mergers and buy-outs consolidated its command in the industry making its competitors hard to imitate. However, the company is at risk of competitor companies merging to defeat the company’s advantage of size and location.

Conclusion and recommendations

There is remarkable driving force which is significantly changing in the socio/political arena. The company has abundant environmental opportunities and significant internal strengths. However, some recommendations may be made on the fuel conversion and waste to energy capital expansion. This is achievable by adjusting fleet operations that will be helpful in mitigating risk posed by the ever increasing oil prices.

Waste Management Inc can also take advantage of the worldwide energy shortage by expanding and diversifying its operations in the waste to energy sector. The company is operating in an emerging industry which holds a great future for the company. Therefore, the company must ensure that it remains relevant by relentless advertisement and dedicated customer service while avoiding fraudulent undertakings that may badly taint the image of the company.

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