Week 5_2 Env_ Policy and Firm Strategy

7/21/2019 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)



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=> Opportunities and threats

External analysis requires an assessment of:

External analysis


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



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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



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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



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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



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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?

Week 5_2 Env_ Policy and Firm Strategy

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