You are on page 1of 33

Running Head: INDUSTRY ANALYIS

Industry Analysis: Waste Management

Group 10

Amanda Bowling, Bhavik Shah, Jaimin Chokshi.

Curtis Anderson, Michael Stewart, Aesha Desai

University of North Alabama

Management Policy
Table of Contents

1. Executive Summary 6

2. Industry Profile 8

3. Trends and Driving Forces 10

4. Industry Segment Data 11

5. Solid Waste Segment 14

A. Table 1 Profitability 16

6. Comparative Company Analysis 16

7. Strategies 17

A. Waste Management 17

B. Allied 17

C. Republic Services 19

8. Core Competencies 20
A. Waste Management 21

B. Allied 21

C. Republic Services 21

9. Products and Services 21

A. Waste Management 21

For Residents 22

For Businesses 22

Transfer Stations 22

Recycling 22

Landfills 23

Waste-to-Energy 23

B. Allied 24

Collection 24

Transfer Stations 24

Recycling 24

Landfills 25

C. Republic Services 25

Collection 25

Transfer Stations 25

Landfills 26

10. Management 26

A. Waste Management 26

B. Allied 27

C. Republic Services 27
11. Marketing 28

A. Waste Management 28

B. Allied 29

C. Republic Services 29

12. Technology and R&D 29

13. Strategic Groups 30

14. Financial Analysis 31

A. General Income Data 31

1. Table 2 Revenue 31-32

2. Table 3 Net Income 32

B. Profitability Ratios 32

1. Gross Profit Margin Table 4 32-33

2. Operating Profit Margin Table 5 33

3. Net Profit Margin Table 6 33-34

4. Return on Assets and Equity Table 7 & 8 34

C. Liquidity Ratios 35

1. Current & Quick Ratio Table 9 & 10 35

D. Leverage Ratios 35

1. Leverage & Return on Equity Table 11 & 12 36

E. Interest Coverage Table 13 36

1. ST Debt Ratio Table 14 36-37

F. Turnover Ratios 37

1. Receivable Turnover Table 15 37

2. Fixed Asset Turnover Table 16 37-38


3. Total Asset Turnover Table 17 38

G. Solvency Ratios 38

1. Solvency Ratio Table 18 39

2. Operating Cash Flow Table 19 39

15. BCG Matrix (Figure 1) & Table 20 41

16. Global Segment 43

17. Competition 44

18. Demographic Forces 46

19. Population Demographics 46

A. Figure 2 48

20. Ethnic Mix 48

21. Socio-cultural Forces 49

21. Existing Trends 50

22. Size of Industry 51

23. Sales and Marketing 51

24. Technological Forces 53

25. Role of Research and Development 55

26. Porter’s Five Forces 57

27. Intensity of Rivalry 57

28. Threat of New Entrants 57

29. Threat of Substitute Products 58

30. Supplier Power 59

31. Buyer Power 60

32. Collective Application of Five Forces Figure 3 60


33. Mergers and Acquisitions 63

A. Table 22 & Table 23 63-64

34. Worksheet on Industry Structure 67

A. Tables 24-29 67-74

35. Complementors 74

36. Government Regulation 75

37. Conclusion 76

38. Opportunities and Threats 76

39. Industry Attractiveness 77

40. Key Success Factors 78

41. References 80

HTTP://PAKISTANMBA.JIMDO.COM

FOR DOWNLOADING THIS REPORT AND FOR

MORE PROJECTS, ASSIGNMENTS, REPORTS ON

MARKETING,

MANAGEMENT,

ECONOMICS
MARKETING MANAGEMENT,

ACCOUNTING,

HUMAN RESOURCE,

ORGANIZATIONAL BEHAVIOR,

FINANCIAL MANAGEMENT

COST ACCOUNTING

VISIT

HTTP://PAKISTANMBA.JIMDO.COM

Industry Analysis: Waste Management

Executive Summary
The waste management industry services individuals,

companies, and governments. The industry itself is segmented

into the following: water treatment, pollution control,

remediation and consulting services, and solid waste management.

The trends in this industry are moving toward being more

environmentally focused. Services in the solid waste segment

include: recycling, collection, transfer, disposal, and waste-

to-energy services. However, only one firm holds the advantage

of waste-to-energy technology, Waste Management. The industry is

highly regulated being subject to such government acts such as,

the Clean Air Act, Clean Water Act, and Solid Waste Disposal

Act, to name a few.

Overall the waste management industry is profitable, but

due to increases in fuel prices and decreases in volume,

companies are currently focusing on cost efficiency and price

increases to generate most of their profit. Current strategies

in the industry focus on cost saving initiatives in order to

minimize the amount of cost passed on to the customers.

The top three contenders within the solid waste segment are

Waste Management Incorporated with 28.5% market share, Allied

Waste with 13% market share, and Republic Services with 6.6%

market share. However, competition within the solid waste

segment is highly fragmented. The industry itself is most likely

in the mature stage of its lifecycle, with competition competing


mainly on price. The management of these companies varies from a

centralized structure in Waste Management, to a decentralized in

Republic and Allied Waste.

The financial analysis of this industry includes the

liquidity, profitability, leverage, solvency and general income

data for the three top competitors. These figures will help you

to evaluate the differences in the companies’ structures and

returns. A BCG matrix is also provided that visually shows the

market share and business growth rate of the firms.

Forces such as globalization, demographics, socio-cultural,

and technological forces are discussed in regard to industry

impact. Porter’s Five Forces is used to discuss industry

conditions. In the industry buyer power, supplier power, threat

of new entrants, and the threat of substitutes is low. However,

there are many competitors in the industry. Complementors

include just about anything that has disposable parts. Recent

changes in the industry include the possible merger of Allied

Waste and Republic Services. This would combine their assets to

make them a formidable opponent of Waste Management.

Overall the industry displays slow growth potential and

would be extremely expensive for new start-up companies.

Established companies, such as Waste Management already have the

resources and permits required to operate. It would be extremely

expensive and difficult for new firms to find landfill space. We


would not recommend a new market entry. For those already

established in the industry, although growth is slow, the firms

will still be able to make profits, as long as they pursue cost

saving initiatives. The major concern for the industry is

staying abreast of regulatory changes.

Industry Profile

The waste management industry is made up of a wide variety

of services, including solid waste and hazardous material

pickup, water treatment and supply, and pollution products

(Scharf, 2008). The private portion of the waste management

industry in the United States has over 10,000 companies and

annual revenue of $50 billion (Hoover’s, 2008). The other

portion of the market is made up by government owned operations.

During 2007 the waste and remediation industry employed 351,300

workers (U.S. Department of Labor, 2007). The average worker

wages, over all occupations within the industry, is $39,900 a

year (U.S. Department of Labor, 2007). This results in a total

economic impact of $14 billion in individual earnings and $50

billion in company sales. Gross domestic output during 2006 was

$648 billion (U.S. Department of Commerce, 2008).

Services in this industry include: collection, treatment

and disposal, remediation, recycling, and waste-to-energy

plants. Waste collection makes up 55% of industry revenue,

treatment and disposal accounts for 20%, and remediation makes


up 15% (Hoover’s, 2008). Over the course of a year over 200

million tons of waste is generated (Hoover’s, 2008). Overall the

waste management industry is profitable, but due to increases in

fuel prices and decreases in volume companies are currently

focusing on cost efficiency and price increases to generate most

of their profit.

Government regulations impact the waste management segments

on varied levels. The larger customers in this industry are

generally municipalities, corporations, and individuals

(Hoovers, 2008). The industry itself is resistant to recession

and has held a steady growth rate of 3% to 4% (Scharf, 2008).

Trends and Driving Forces

The current developments and trends throughout the waste

management industry are varied among the segments. However, some

trends echo throughout the different segments. Cost savings,

efficiency, and environmental friendliness seem to be the common

elements that link all of the segments. Increases in the

regulatory environment are a major determining factor of the

industry participants’ strategic goals. The segments that are

considered part of the waste management industry include: solid

waste management, water treatment, air pollution control, and

environmental consulting and remediation services.


Current industry trends in the solid waste disposal segment

are focused on the increasing costs of landfills, landfill life

extension, how to improve rates and cut costs, regulations

affecting intrastate dumping, regulations affecting

international dumping, and the continued increase of recycling.

Within the water segment, the trend is on increasing the

investment in water supply and treatment facilities within the

United States. New water treatment plants and the replacement of

the existing support structure are needed. Privatization within

the water segment is also slowing, but industry trends point to

growth within this segment over the next ten years (Scharf,

2008).

The air pollution segment is currently seeing an impact

from increased regulations on the emission of vehicle pollution,

particularly for diesel vehicles. The Clean Air Interstate Rule

is in affect for twenty-eight states, and will likely increase

the need for emission control equipment (Scharf, 2008).

In the remediation segment, government spending has been

reduced, and private customers are determining demand. The

industry is trending toward a weaker market in some sectors with

the loss of government spending (Scharf, 2008).

Industry Segment Data

The individual segments, within the waste management

industry, each face unique structures and problems. The water


segment of waste management is dominated mainly by a monopoly of

municipally owned firms. Major companies within the water supply

segment include: American Water Works, Aqua America, American

States Water, California Water Services Group, and United Water

Resources (Scharf, 2008). The water segment in particular, has

to meet certain health regulations. Since the government

operates most of the water treatment and supply companies, they

set the fees. The water segment’s demand is driven by

population, industrial development, and weather. However, U.S.

population growth is the main driver. Given this, the growth

rate of this segment is projected be .9% annually by the U.S.

Census Bureau (Hoovers, 2008). Most of the growth in the water

segment comes in the form of price hikes.

The segment focusing on air pollution control is mainly

focused on the reduction of vehicle and industrial emissions.

Some of the major firms include Allied Signal, Corning Inc.,

Englehard, Johnson Matthey, Comfort Systems, Hamon Research-

Cottrell, and Clean Harbors (Scharf, 2008). This segment is also

regulated by the EPA, and is subject to the federal regulations

of the Clean Air Act (Scharf, 2008). Many firms focus on

providing products to assist firms and individuals in the

reduction of air pollution. The two biggest markets within the

air pollution segment are vehicle and industrial pollution

control. The main driver of demand in market for air pollution


control is government regulations and the automotive industry

demand. Gross domestic product is an indicator of economic

activity. It is estimated that GDP will grow at a rate of 1.1%

in 2008.

In the consulting and remedial arena, demand is driven by

government regulations. This segment is concerned with the

clean-up and maintenance of primarily industrial customers. The

growth rate in this segment is primarily based economic output

and government spending. The major companies in this segment

include: IT Group, Fluor Corp., Tetra Tech, CH2M Hill, CET

Environmental Services, Sevenson Environmental Services, Roy

Western, Bechtel Corp., URS Corp., and Earth Tech (Scharf, 2008).

The solid waste disposal sector, of waste management, is

broken down into five lines by Standard and Poor’s. These lines

are waste collection, landfill operation, transfer stations,

recycling, and waste-to-energy incineration. Of course the

biggest of these being, waste collection. Waste collection can

further be broken down into hazardous and non-hazardous

collection and recycling (Gale, 2008). The demand for solid

waste disposal is driven by economic output and population

growth (Scharf, 2008). The determinants of growth would be

influenced by GDP, which is expected to grow at a rate of 1.1%,

and population growth, which is expected to grow at a rate of

.9% (Hoovers, 2008). This will lead the segment growth rate to
be somewhere around these two indicators. However, recent trends

affecting the solid waste disposal sector, is the decline of

solid waste relating to construction. This can affect waste

volumes by as much as 15% to 30%. Trends in this segment are

pointing to a continued focus on recycling and waste-to-energy

efforts. Fuel efficiency is also a growing concern for this

segment, because of the distance to transport the waste to

landfills. This segment continues to pass cost onto customers,

but is focused on cutting costs to minimize this and reduce the

possibility of losing customers. This segment of the waste

industry will be the focus of this paper.

Solid Waste Segment

The three biggest players, that are publicly traded, in

this segment are Waste Management Inc., Allied Waste, and

Republic Services. All three combined, make up over 90 % of the

public company revenues in this segment (Hampton, 2008). They

also control over 40% of the market and service approximately

36.5 million customers (Scharf, 2008). As for market share,

Waste Management Inc. holds the biggest share with a 28.5%

share, Allied Waste controls around 13% of the market, and

Republic Services has 6.6% of the market share (Scharf, 2008).

Past the point of these three competitors, there is a highly

fragmented market with many competitors (Hoover’s, 2008).


Each firm has similar strategies, but different financial

data based on their share of the market, price structure, and

cost savings initiatives. Revenue growth rates over the prior

year are as follows: Waste Management experienced an increase of

.5%, Allied Waste had a .8% increase, and Republic Services a

2.9% growth increase (Hoovers, 2008). Revenues for each firm

reflect their varying market shares. Waste Management Inc. had

revenues of $13.31 billion (Waste Management Incorporated,

2007). Allied Waste had revenues totaling $6.1 billion (Allied

Waste, 2007). Republic Services had $3.2 billion in revenue

(Republic Services, 2007). Operating income for Waste Management

is $2.2 billion, Allied Waste $1.1 billion, and Republic

Services $519.5 million.

Table one, below, was obtained from Hoovers.com and depicts

the profitability percentages of the top three companies,

compared against the industry median. The industry median gives

the industry average for these measurements. You can see from

the table that return is moderate for Waste Management and

Republic Services. Allied is behind the other two competitors in

every category except gross profit margin. Allied and Republic

are at or better than the industry average in gross profit

margin and pre-tax profit margin. Allied ranks lower than the

industry median in net profit margin, return on equity, return


on assets, and return on invested capital. Waste Management is

above the median in all measures, except for gross profit margin.

Industr
y
Profitability WMI Allied Republic Median
Gross profit margin 36.80% 37.60% 37.70% 37.60%
Pre-Tax Profit
Margin 13.10% 9.60% 15.60% 9.30%
Net Profit Margin 8.80% 5.00% 9.80% 6.60%
Return on Equity 20.80% 8.00% 23.40% 11.40%
Return on Assets 5.90% 2.20% 7.00% 3.10%
Return on invested
Capital 6.60% 2.50% 8.00% 3.80%

Table 1

The solid waste segment is in the middle or mature age of

the business life cycle (Scharf, 2008). A major concern for

these firms it to now pay down debt that they surmounted during

the start-up and growth phases. The strategies, competencies,

and other financial indicators will be discussed in detail, in

the next section.

Comparative Company Analysis

In this section the three primary competitors will be

compared in strategies, management, products and services,

technology, and financial situation. During this analysis all of

the companies will be profiled so that their strengths and

weaknesses will be shown. In the waste industry competition is


intense, and given recent merger discussion between Allied Waste

and Republic Services, the industry is constantly.

Strategies

Waste Management

Waste Management’s corporate strategy has remained

unchanged in three years. They have focused on revenue growth

through pricing, the lowering of operating and selling expenses,

lowering general and administrative costs through process

standardization and productivity improvements, improving their

business units through their “fix or seek exit” strategy, and

generating strong and consistent cash flows from operations, to

return to shareholders. Waste Management will continue to divest

underperforming operations. Three major divestures in 2007

amounted to $230M in revenue with a total of $278M (Waste

Management Incorporated Annual Report, 2007).

Allied Waste

The corporate strategy of Allied Waste has 5 components.

The first component of strategy focuses on operating a

vertically integrated non-hazardous solid waste service

business. The fundamental objective of this model is to control

the waste stream from collection point through disposal with

optimization of the economies of the waste cycle.


The second component focuses on best practices, within

the company. Their goal is to continue, to identify and

implement those practices across all operations. The goal is

to improve overall operating and financial values.

The third component is the increased focus on customer

service excellence, through better hiring practices and

continual development of existing employees. Their goal is to

retain talented employees, by implementing best practices and

investing in a quality asset base.

The fourth component is to deliver sustainable long-term

profitable growth, while efficiently operating our assets to

generate acceptable rates of return. This is done by

increasing collection and disposal volumes; allocating capital

to businesses, markets, and development projects; developing

previously non-permitted, non-contiguous landfill sites;

acquisitions of operating assets, such as landfills and

transfer stations; evaluating existing operating asset

deployment, to optimize their position and investment of

capital; and seek opportunities to divest assets.

The fifth component is to maintain financial capacity and

infrastructure for future growth through sufficient

operational cash flows, a revolving line of credit, and letter

of credit needs (Allied Waste Annual Report, 2007).

Republic Services
The financial strategy of Republic includes the generation

of free cash flow, and the sustainment or improvement of return

on invested capital. This is accomplished through incentive

programs and monthly field operating reviews that underscores

the importance of increasing free cash flow and returns on

capital. Free cash flow is managed through operational oversight

to make sure capital investment and asset levels are appropriate

for the existing business and growth opportunities. They also

closely focus on reviewing working capital, which consists of

accounts receivable and accounts payable, to help realize growth

strategies.

The operating goal of Republic is to leverage existing

assets and revenue growth, to increase operating margins and

enhance shareholder value. This includes an operating strategy

to include: the utilization of their extensive industry

knowledge and experience, their decentralized management

structure, and their integrated waste operations. The plan is to

improve operating margins through economies of scale, create

cost efficiencies and asset utilization, achieve high levels of

customer satisfaction, and to utilize business information

systems to improve consistency in financial and operational

performance.

The growth strategy is broken down between internal and

external growth. The internal growth strategy is focused on


retaining existing customers and obtaining commercial,

municipal, and industrial customers through sales and marketing.

Their growth strategy also includes the following: price

increases across all lines of business, to offset increased

costs and to improve operating margins; secure long-term

contracts for collecting waste in high-growth markets; add

business through existing and prospective commercial,

industrial, municipal, and residential customers; identify

opportunities to increase their position through development

activities.

External growth is tailored toward an acquisition strategy

that includes acquiring well-managed businesses that position

RSG for growth in existing and new markets; and acquiring

facilities from municipalities that are privatizing, and

publicly owned companies that are divesting of assets (Republic

Services Annual Report, 2007).

Core Competencies

Waste Management

Waste Management’s core competencies are experience,

knowledge, and resources. With its experience, human resources,

and financial resources in the waste industry, WMI is

unmistakably the leader in solid waste management.

Allied Waste
Allied Waste’s core competencies include its knowledge of

the industry and its management leadership. Currently Allied

Waste is in talks with Republic Services about merging.

Republic Services

Republic Services’ core competencies are its business

leadership skills and its strategy. Republic Services is a very

patient company with stable finances and a responsible

management team.

Products and Services

Waste Management

Waste Management provides collection, transfer, recycling,

disposal, and waste-to-energy services. WMI customers include

residential, commercial, industrial and municipalities, other

waste management companies, electric utilities and governmental

entities.

Solid Waste Collection Services

For Residents

WMI offers services including residential recycling, bulky

item disposal, yard waste collection, and many other services.

Collection issues are handled effectively and efficiently

through WMI customer service centers.


For Business

WMI provides waste collection services to more than 2 million

commercial businesses in North America. In some locations WMI

has the capability to offer same-day emergency services to deal

with unexpected volumes.

Transfer Stations

WMI owns and operates 341 transfer stations that serve as

efficient way stations between collection points and landfill

disposal. At these stations waste is consolidated and compacted

for eventual transport to landfills.

Recycling

WMI processes more recyclables than any other company in

North America. Through it subsidiary, WM Recycle America, WMI

partners with the local community to process more than 5.5

million tons of recyclable materials each year through its 109

material recovery facilities. For commercial accounts, WMI

offers easy and cost-effective recycling through its single-

stream recycling, eCycling or shredding, to regional and

national bale routes.

Landfills

WMI owns and operates the largest network of landfills in

the industry. As of December 31, 2007, WMI owned or operated 271

solid waste and six hazardous waste landfills. In addition, it

managed 187 closed landfills. WMI utilizes Next Generation


Technology that accelerates the decomposition of waste in

landfills so that decomposition time is reduced from decades to

years.

Waste to Energy

WMI through its Wheelabrator division has been delivering

waste-to-energy projects since the 1970s. The steam that is

produced is either sold or used to generate electricity. WMI

owns or operates 16 waste-to-energy plants and 5 independent

power production plants.

Other

As of December 31, 2007, WMI was producing commercial

quantities of methane gas at 108 of it solid waste landfills,

where it is either sold to electricity utilities or to natural

gas suppliers. In addition the company through Port-0-Let rents

and services outdoor portable restroom facilities, and provides

street and parking lot sweeping services to municipalities and

commercial customers (WMI Annual Report, 2007).

Allied Waste

Allied Waste Industries, Inc. provides solid waste

collection, transfer, recycling and disposal services for more

than 8 million customers.

Collection

Allied Waste provides collection services under four

service lines: commercial, residential, roll-off and recycling


collection. Residential revenue accounted for 28.4% of its

collection revenue, while commercial revenue represented 36.2%

of its collection revenue. Roll-off collection services

represented 30.4% of collection revenue. Recycling accounted for

approximately 5% of total collection revenue for 2007.

Transfer Stations

Allied serves its customers through its use of transfer

stations to effectively consolidate solid waste before transport

to landfill facilities. On December 31, 2007 Allied Waste owned

or operated 161 transfer stations.

Recycling

Allied Waste operates 53 recycling facilities. Cardboard

and paper products represented 73% of its processed recyclable

product volume in 2007.

Landfills

To service its customers Allied Waste owns or operates

landfills for its solid waste collection. At the end of 2007,

the company had a network of 161 active landfills (AW Annual

Report, 2007).

Republic Services, Inc.

Republic Services operations include the collection, transfer,

and disposal of solid waste.

Collection
Republic Services provides non-hazardous solid waste

collection services for commercial, industrial, municipal and

residential customers through 136 collection companies located

in 21 states. In 2007 76% of its revenue was from collection

services. Revenue within the collection services were as

follows: municipal and residential customers, 33.2%; commercial

customers, 39.2%; industrial and others, 27.6%.

Transfer Stations

As of December 31, 2007, Republic Services owned or

operated 94 transfer stations. Waste at these facilities is

compacted and transferred to trailers for transport to landfills

or recycling facilities.

Landfills

Republic Services operates 58 landfills, some of which

accept non-hazardous special waste, including utility ash,

asbestos and contaminated soil. In addition, Republic Services

has 33 recycling facilities and other recycling operations.

Recycled materials are salvaged and sold to third parties (RSG

Annual Report, 2007).

Management

Waste Management
Waste Management has a centralized structure. Under

corporate management, there are six operating groups, of which

four are organized by geographic area and two are organized by

function. The geographic groups are Eastern, Midwest, Southern,

and Western. The two functional groups are: Wheelabrator and WM

Recycle America (WMRA). Management at WMI has extensive

experience in the waste industry, and has through acquisitions

expanded their market to become the largest in the business. We

believe that management has done a good job in securing WMI’s

current position, and taking the necessary steps to strengthen

shareholder value through reducing debt and its share buy-back

program (WMI Annual Report, 2007).

Allied Waste

Allied Waste corporate organization is formed by three

areas; corporate, regional, and district. Corporate management

defines long-term business plans, outlines business and

financial goals, establishes policies and procedures, and

monitors performance against goals and standards. Regional

management develops and initiates business growth at the

regional level and monitors compliance with corporate goals and

procedures. District management is responsible for service, and


maintaining vital community relationships. Business unit

management is responsible for sales growth and customer service.

Allied Waste’s management is in a poor position for growth.

It has in the past several years begun addressing the debt

problem within its structure, and this has helped. However, the

current loan situation does not allow for dividends, so

shareholder value can only come through stock appreciation, and

eventually shareholder needs have to be addressed. We are not

surprised to see AW and Republic Services agreeing to a merger

(AW Annual Report, 2007).

Republic Services, Inc.

Republic Services management structure is decentralized.

RSG relies on its decentralized management structure to minimize

administrative overhead costs and to manage its day-to-day

operations. There are five regional management teams that

include a vice president, controller, sales manager, maintenance

manager and an operations manager. The management teams have

extensive authority, responsibility and autonomy within their

region.

Republic Services’ management has been patient in choosing

acquisitions that only return sizable profits. Republic’s

management has agreed to buy Allied Waste. In doing so, it will

increase its territory and customer base to revenues of over 9


billion. This is a bold move for Republic as it hopes to instill

its own fiscal discipline into Allied Waste. If the appropriate

long-term financing can be secured, and corporate management

team assembled, then this will be a good move for both companies

(RSG Annual Report, 2007).

Marketing

All of the companies in this analysis employ marketing

representatives who seek to expand business with existing

customers, as well as attract new customers. The following key

marketing concepts were taken from each company’s 2007 annual

report.

Waste Management

WMI National Accounts Sales and Service team provides

services for national and regional multi-location companies.

This was developed in response to needs from customers in

various industries.

Allied Waste

AW has both commercial and municipal representatives who

serve their customers as well as develop a base of prospective

customers within each market.

Republic Services

RSG currently has approximately 500 sales and marketing

employees in the field who are compensated by a commission


structure that is focused on attracting high levels of quality

revenue.

Technology, Research and Development

The use of technology in the waste industries is constantly

in a state of evolving. Most companies use technology to manage

their solid waste streams in a more efficient and cost effective

manner. Development in the industry is generally related to

building transfer stations and landfill. Development projects in

the waste industry require extensive governmental permitting;

therefore most companies generally look for acquisitions to

expand their disposal sites.

Waste Management

WMI has used innovative technologies to reduce

environmental emissions, provide a safer work environment,

stream-line operational processes and waste-to-energy projects.

Key projects include: conversion of more than 425 trucks from

diesel to natural gas; on-board truck computing systems for

reducing the need for paper tickets; a highly technical call

center who improved and more efficient customer service; Next

Generation Technology which accelerates the decomposition of

waste in landfills and speeds the production of landfill gas. In

addition WMI has deployed FastLane, an automated point-of-sale


system for management of scale house ticketing and Compass, a

fleet maintenance system that automates shop functions and

repairs (WMI Annual Report, 2007).

Allied Waste and Republic Services

The majority of Allied Waste and Republic Services use of

technology is in the maintenance of their landfills. As the

smaller firm Republic Services has no landfill gas projects

while Allied Waste has 50 on-going landfill gas projects.

Currently neither company has any waste-to-energy facilities.

(AW and RSG Annual Report, 2007)

Strategic Groups

Waste Management, Allied Waste, and Republic Services

together manage over fifty percent of the solid waste business

in the United States. After these major players the market is

highly fragmented with over 10,000 companies in the industry.

Many of these companies have operations in small local

territories. The main strategic group in this industry is made

up of Waste Management, Allied Waste, and Republic Services.

Financial Analysis

In this section the financial performance of Waste

Management will be compared with its top two competitors, Allied

Waste and Republic Services. The financial data presented below

was compiled from each company’s 2007 annual report and form 10K
from their websites, from Morningstar.com, and Yahoo.com. The

majority of the ratios were independently calculated.

The financial analysis covers six areas: general income

data, profitability ratios, liquidity ratios, leverage ratios,

turnover ratios, and solvency ratios. All of this data was

collected from the company websites of Allied Waste, Waste

Management, and Republic Services.

General income data

Revenue

As of December 2007, revenues at WMI were 13.31B, down .37% from

2006 (13.36B). Allied Waste (AW) had 2007 revenues of 6.1B up

1.5% from 2006 (6.02B). Republic Services (RSG) revenue for 2007

was 3.19B up 3.9% from 2006 (3.07B).

Revenue - 4
Yr.
2004 2005 2006 2007
WMI 12,516.0 13,074.0 13,363.0 13,310.0
AW 5,362.0 5,734.8 6,028.8 6,068.7
RSG 2,708.1 2,863.9 3,070.6 3,176.2

Table 2

Net Income

Net income rose at all three companies during 2007. Waste

Management’ net income was up 1.2%; Allied Waste had a

significant net income increase of 70% from 2006. Republic Waste

had a moderate increase of 3.8%.


Net Income - 4
Yr.
2004 2005 2006 2007
WMI 939.0 1,182.0 1,149.0 1,163.0
AW 49.3 203.8 160.9 273.6
RSG 237.9 253.7 279.6 290.2

Table 3

Profitability Ratios

Profitability ratios show the combined effects of


liquidity, asset management, and debt on operating results.

FOR COMPLETE REPORT AND DOWNLOADING

VISIT

HTTP://PAKISTANMBA.JIMDO.COM