Download - Week 5_2 Env_ Policy and Firm Strategy
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Miriam Fischlein
ESPM/MGMT 3604-5604
Formulating and selecting abusiness environmental strategy
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Agenda
Strategy formulation
Orsatos typology of environmental
strategies
Downy case study
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Strategy formulation
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The Five Steps of the Strategy MakingProcess
Define mission& goals
Analyze theexternalenvironment
=> threats andopportunities
Analyze theinternalenvironment
=> weaknessesand strengths
Selectappropriatestrategies
Implement thestrategies
1
2 3 4 5
Adapted from: Hill, 2008. Copyright: Houghton Mifflin Company
Define Analyze Select Implement
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Environmental mission statement at 3M
3M's commitment is to actively contribute tosustainable development through
environmental protection, social responsibilityand economic progress. To us, that meansmeeting the needs of society today, whilerespecting the ability of future generations tomeet their needs.
=> The mission statement provides a rationale forwhat the company intends to do and a frameworkwithin which strategy is formulated (Hill, 2008).
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Environmental objectives at 3M
Key objectives: Meeting society's and 3M'sexpectations for environmental improvement:
Reducing our environmental footprint.
Assuring our products are safe for their intendeduse through their entire life cycle.
Assuring the appropriate management of any 3Mhealth and safety issues that may touchcustomers, neighbors and the public.
Maintaining a safe and healthy workplace. [...]
=> Objectives define a measurable desiredfuture state that a company attempts torealize (Hill, 2008)
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Environmental strategies at 3M
Meeting society's and 3M's expectations forenvironmental improvement:
Utilizing 3M's Environmental, Health and SafetyManagement System to help 3M and our business units
identify key issues and long-term solutions. Utilizing Life Cycle Management to continuously improve
the environmental, health and safety impact of ourproducts and processes.
Making pollution prevention pay through development ofnew technologies and products.
Setting aggressive environmental goals and meeting them.
=> Strategies are a plan of action and the means toachieve a desired end.
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SWOT analysis
SWOT analysis is a decision-making tool
It helps to identify strategiesthat align a companysresources & capabilities to itsenvironment in order to create& sustain a competitiveadvantage. (Hill, 2008)
Adapted from: Hill, 2008. Copyright: Houghton Mifflin Company
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=> Opportunities and threats
External analysis requires an assessment of:
External analysis
Adapted from: Hill, 2008. Copyright: Houghton Mifflin Company
The industry
environment
in which
company
operates
The country or
national
environments in
which company
competes
The widersocioeconomicenvironmentthat may affectthe companyand its
industry
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=> Strengths and weaknesses of acompany
Internal analysis includes anassessment of:
Quantity and quality of a companysresources & capabilities
Method of building unique skills andcompany-specific or distinctive competencies
Internal analysis
Adapted from: Hill, 2008. Copyright: Houghton Mifflin Company
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Levels of strategy-making
Functional Level Strategy
Business Level Strategy
Corporate
Level Strategy
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Types of environmentalstrategies
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Orsatos types of environmental strategy
Source: Orsato 2006
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Strategy I: Eco-efficiency
Operations and price strategy:
Focus on resource efficiency to reduce both costs
and environmental impact of operations. Ultimate
target: Closed-loop system May implement formal EMS, if not too expensive.
External communication is of little importance
Best for:
Industrial suppliers
Waste-intensive industries
Process-intensive industries
Adapted from: Orsato 2006
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Examples for eco-efficiencystrategies
Tray-free dining
Use waste
heat to pre-
dry coal
shrank the size of its cerealsboxes [] and re-engineered thenoodles in its Betty CrockerHamburger Helper meals to make
them fit into a smaller carton.(Int. Herald Tribune, June 4, 2008)
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Strategy II: Beyond complianceleadership
Organizational differentiation strategy:
Strive for above-average environmental quality,
document and report environmental efforts.
Unprofitable environmental investments can bemade, if they provide image gains.
Implement formal EMS, participate in PPPs and
voluntary initiatives
Best for: End-consumer industries
Large, highly visible companies
Adapted from: Orsato 2006
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Strategy III: Eco-Branding
Product differentiation strategy
Differentiate products based on environmental
characteristics.
Document and communicate reliable environmental
product information.
Best for:
Industrial markets
if product lowers prices, as well as environmental impact
if product helps comply with environmental regulations.
Environmentalized end consumer markets
Adapted from: Orsato 2006
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Preconditions for successfulenvironmental product differentiation
Willingness to pay for environmental quality
Credible information about environmentalproduct characteristics
Innovation not easily imitated by competitors
Source: Reinhardt 1998
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Uses organic cotton, recycled PET fibers
Prices exceed those of other outdoor clothing sellers by
50%
=> Vertical differentiation: Make product more
attractive to SOME
Switched to dolphin-safe tuna in 1990, adding a pricepremium
=> Horizontal differentiation: Make product more
attractive to ALL
Examples for eco-branding
Source: Reinhardt 1998
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Strategy IV: Environmental costleadership
Product and price oriented strategy:
Focus on radical product innovation (material
substitution and dematerialization) and substantial
redesign to reduce prices. Develop a product service system: Sell a function, not
a product.
Best for:
Anybody with a good idea and the ability to put it intoaction
Adapted from: Orsato 2006
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Example of a product servicesystem: Pay per wash
Vattenfall
(electric utility)
Electrolux
Customer
Installs, services,
replaces after
1000 cycles
1 per wash
cycle (electric bill)
45 for
installation
=> Function delivered: Washing laundry
Installs smart meter
uses
Transfer
payment
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Cost leadership strategy atSams Club
Solution, or Mess? A
Milk Jug for a GreenEarth
http://www.nytimes.com/interactive/2008/06/29/business/milk-jug3/index.html
http://www.nytimes.com/interactive/2008/06/29/business/milk-jug3/index.htmlhttp://www.nytimes.com/interactive/2008/06/29/business/milk-jug3/index.html -
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Copyright: New York Times, 2008
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Recap: How to decide amongstrategic pathways?
Competitive analysis:How do Porters 5forces play out?
Risk-benefit analysis:What are theadvantages anddisadvantages of eachstrategy?
Orsato 2006Source: Hill 2008
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Case study: Down Enviro-Pak
Should Procter & Gamble launch
the EnviroPak in Canada?
What strategies is Procter &
Gamble considering in marketing
the Downy EnviroPak?
What are potential risks and
benefits of these strategies?
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Pricing of the EnviroPak -Contribution analysis
$ 0.161
weighted: 30% deal,
70% normal price
- $ 0.034- $ 0.386IncrementalContribution
$ 0.44$ 1.59$ 0.59$ 1.01$ 0.30$ 1.38Contribution
$ 4.15$ 4.15$ 4.15$ 4.15$ 4.61$ 4.61Variable Cost
$ 4.59$ 5.74$ 4.74$ 5.16$ 4.91$ 5.99Wholesale
$ 5.60$ 7.00$ 6.29$ 6.29$ 5.99$ 7.30Retail
DealNormal25%
margin
18%
margin
DealNormal
Enviropak:Discount strategy
Enviropak: Every-day low price
Current (3 literjug)
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Case study: Down Enviro-Pak
How does the threat of regulation
affect Procter & Gambles decision?
How do public opinion and consumerattitudes affect its decisions?
How can it maintain its first mover
advantage?