The Competition Situation Analysis of Environmental

Service Industry in China:Based on Porter's Five

Forces Model
Yuanlin Hu Shuang Yang

Faculty of Management and Economics Faculty of Management and Economics

Kunming university of Science and Technology Kunming university of Science and Technology

Kunming, China Kunming, China

Huyuanlin2000@126.com 6050 86163@qq.com

Abstract-Faced with serious industrial pollution and The growth of annual income and profit in 2004 and 2011 was
ecological damage, China has been developing environmental more than 100%.All above mentioned shows that Chinese
industry to solve these problems in recent
environmental service has certain development since 2000.
decades.Environmental service, as one of the most rapidly
The income of environmental service accounted for less
growing part of environmental industry, has been playing more
than 1% of GDP since 2000. Although the growth of
critical role in economic sustainability.This paper,based on
Michael Porter's Five Forces Model theory for assessing the
environmental service is rapid,the overall level of the
competitive environment and situation of an industry,illustrates development in the national economy was 10w.Tt has not yet
the main five forces namely played an indispensable role for Chinese economy. Also the
suppliers,buyers,substitutes,competitors and potential income of environmental service accounted for less than 1%
competitors that affect the competition situation of the of environmental industry since 2000 and the proportion has
environmental service industry.Finally some suggestions for decreased from 2000 to 201l.The level of the development of
China government and enterprises in the industry was proposed
the environmental service in the whole environmental
to provide theoretical guide in order to keep the sustainable
industry is still low too.
development of the industry.
As for the structure of environmental service,pollution

Keywords-Porter's five forces model,. environmental service

treatment and environmental protection facility management
industry ;competition and environmental technology service accounted for 73. 8% of
the total environmental service, others accounted for 26.2%.
Chinese environmental service is still in its beginning stage
1. INTRODUCTION and the structure is relatively simple.
Many researches of the environmental service is mainly
Tn recent years, due to industrial pollution and ecological
about the situation , policies and recommendations . There are
damage, our country has been developing environmental
very few studies dealing with competitive analysis of the
industry to solve the current environmental problems . The
environmental service, especially the use of Porter's five
environmental services is one of the most important part of
forces model . So the competitive analysis of environmental
the environmental industry. Its development will not only
service is not only theoretical but also practical .The
provide technical support for the control of environmental
conclusions and suggestions provide a useful reference for
pollution and ecology improvement, but also be benefit for the
enterprises in environmental service as well as government in
restructure change and sustainable development of China' s
China.
economy.
Environmental service refers to the environment-related
II PORTER'S FIVE FORCES MODEL
business activities, including environmental technology
service,pollution treatment and environmental protection Porter's Five Forces Model was introduced by Michael
facility management, environmental information consulting , Porter and mainly used for the analysis of the competition and
ecological restoration and protection ,environmental trade and competitive degree of a industry,involving five different
financial services and etcLlJ• power-supplier,buyers,substitutes,potential competitors and
Chinese environmental industry document shows that industry competitors. These five forces presents five different
only the growth of staff decreased in 2004;the number of threats:the bargaining power of suppliers,the bargaining
organizations,the annual revenue and profit has kept power of buyers,the threat of substitutes,the threat of new
r1
increasing since 2000.The number of organizations in 2011 entrants,the degree of rivalry 2 . These five competitive forces
increased by 160.41% compared with 2004.And the number affect the status and development of a industry.Suppliers
of staff in 2011 increased by 204.71% compared with 2004 .

978-1-5090-2842-9/16/$31.00 ©Q016 IE
 ecological
rest()ration and
others, 7.50% protedion ,

threat of new 3.71J%

environment�1
Industry i nform at io n
pollution treatment
The bargaining conju�ing, 15%
and environ�ntal
power of buyers
protectioo filcifitie5 "'\
management,
42.30%
Degree of
rivalry environmental
technology,

3150%

threat of
substitutes
Fig 2.the revenue of environment service in China
Source:China environmental industry document

State-owned companies,restructured from government

departments ,have advantages of public relations and resources
in specific areaL3J. But in cross-regional area, the development
of them compared with the national company is delayed.
Fig.l Porter' s five forces model
Investment companies,such as listed companies, is relatively
strong in the overall competition and have been actively
affect the profitability and competItIon of a industry via its
expanding market share through joint venture, merger and
ability to raise the price. Buyers primarily affect the
acquisition and other means. In many medium-sized cities, it
profitability and competition of existing enterprises by its
has performed well with cross-regional business structure.
ability to bargain the price and require higher quality of
Foreign companies have advanced technology, but the
products or services.Substitutes poses threat to the existing
number of it is small.
industry enterprises by providing similar products and
services of lower price but better quality.New entrants, 2) ecological restoration and protection
bringing in new production capacity and resources, will grab In recent years, domestic ecological restoration lacking
market share and pose threat to the existing enterprises in the technology development in our country is still in it beginning
industry.Every company in the industry wants to get the stage .The enterprises in this industry is not competitive in the
advantage different from the competitors,which will deepen scale of their operation and the creation of their technology
the degree of rivalry. Competition among industry enterprises compared with foreign companies because many of them work
is often reflected in the price, service and etc. on plane or soil slope engineering but few of them involves in
the project of rock slope.The most important factors that affect
the degree of competition in the field of ecological restoration
ill ENVIRONMENT SERVICE INDUSTRY ANALYSIS IN CHINA are construction techniques, ecological research and
cross-regional experience in complex construction and other
APPLYING PORTER'S FIVE FORCES MODEL
aspects of the environment. Currently, most of companies are
A. industry competitors competitive in a certain aspect,only a few of companies
Fig.2shows that there are four main competitors-Pollution located in Shenzhen and Beijing have comprehensive
treatment and environmental protection facility management, competition in the field.With rapid development of ecological
environmental technology service,environmental information protection, there many companies involving in this field but
consulting and ecological restoration and protection in China the industry concentration is low now.Among the regional
environmental service. market, there have been some industry-leading enterprises with
1) pollution treatment and environmental protection strong competition.So the degree of competition in this field is
facility management and environmental technology service still fierce.
The main competitors in the two industries can be divided 3) Environmental consulting services
into state-owned companies, investment companies and Environmental consulting service industry includes
foreign companies. State-owned companies still occupy most environmental assessment,environmental planning,
of the industry market. They provide services via franchise environmental engineering consulting,environmental
acquired from government and the public,but make most of its supervision,environmental management systems and
profit from government tenders. environmental labeling product certification, organic food
certification, environmental technology assessment, life cycle
assessment, cleaner production auditing and training and etc. C. suppliers
In China, the competition of the environmental consulting Environmental service is a technology-intensive and
industry is mainly reflected in two aspects. Firstly service-oriented industry.Equipment production and
environmental consulting industry is not yet fully engineering project is based on advanced technology.
market-oriented because the majority of business are owned by Enterprises have specific needs for equipment suppliers, which
the institute. Secondly every part of this industry has not yet will enhance the bargaining power of suppliers.It also rely on
fully developed,only environmental assessment has been professionals,technicians and specific managers to develop.
advanced developed due to government policies. These persons are the main suppliers for the industry and these
4) Foreign competitors human resources is relatively valuable.The shortage of specific
With the development of China environmental service human resource makes the bargaining power of suppliers
and government policies, many foreign companies began to stronger.
enter Chinese market. In some emerging fields of
environmental service, it has unique advantages based on D.Potential competitors
advanced technology and management.The Entrance of 1) policies
foreign enterprises makes the industry more competitive. With the increasing demand of environmental service and
Environmental protection service has been gradually serious environmental crisis, the government adopted a series
developed from single service to comprehensive service of related policies and regulations to guide and support the
consisted of decision-making, management, fmance and development of the industryL4J.
operational service, which will make the degree of competition China attaches great importance to environmental
more fierce in the environmental service. service as the key area of the energy and environmental
industry since the Twelfth Five-Year Plan . According to the
B.Buyers requirements of The Decision of the State Council on
With the development of economy and constant promote Accelerating the Cultivation and Development of Strategic
to environmental service in China,the industry has been Emerging Industries ( The State Council[2010] No.32) and The
developed in the direction of industrialization and socialization. Notice of the State Council on the Comprehensive Energy
The consumption of environmental service has been growing Conservation Program ( The State Council [2011] No. 36), the
and expending steadily. Fig3.shows that the investment of State Council issued the Twelfth five-Year Energy-Saving and
environmental pollution control has nearly kept increased since Environmental Industry Development Plan (The Sate Council
200S.From 2009 to 2011,the growth of investment has a large [2012]No.19) to promote the rapid and healthy development of
fluctuations .After 2011,the growth had became steady and the the industry, and proposed the main goals and missions in
amount had increased year by year.All above mentioned that developing environmental industry during the Twelfth
the consumption of this industry has increased trend.And,in Five-Year Plan period. In 2013, the State Council issued the
recent decades, the extensive growth of economy in China has Opinions on Accelerating the Development of Energy-Saving
caused serious environmental pollution and ecology Environmental Industry ( The Sate Council [2013] No.30),
damage.The air,water and waste pollution have increased year proposed the further measures to accelerate the development of
by year.But the pollution control and ecological protection is energy-saving and environmental protection industry and
not enough .Environmental service has huge consumer market. pointed out the direction of the environmental service in the
As the number of enterprises of environmental service has future.
been increasing rapidly,customers can choose the services in Environmental Service Administrative Measures (2014)
consideration of price and quality. The bargaining power of aimed at performance-oriented environmental service proposed
buyers is becoming stronger. to tightly combine the environmental service industry with
environmental protection.Environmental Service Management
Approach (2014) proposed a new model the third-party
governance of environmental pollution control to establish a
new situation in the industry-Polluters Pay and Professional
Governance.
New Environmental Protection Law (2015) could lead to
the change of industry structure in the environmental industry
and the integration of environmental services.After the
implementation of the revised new Environmental Protection
law, the market in the industry will be more transparent and
fair.
The benefit of policies to environmental service will be
Fig.3 Investment of environmental pollution control in China from 2005 to more obvious in the long term.
2014 2) industrial structure adjustment and upgrade
Source:China environmental industry document
 Environmental protection industry is still in the process of
restructuring and upgrading.Pollution treatment
environmental protection facility management
environmental technology service have been developing faster
than other areas in the industry. Both of China government and
enterprises of environmental service have been making effort
to adjust and improve the structure of the industry in recent
decades. For potential competitors, structural adjustment and
upgrading of the environmental service is undoubtedly a great
opportunity. So for existing enterprises in the industry, the
threat of potential entrants is existed.
3) industlY profit margin
Annual income and annual profit of environmental
service in 2004 and 2011 achieved more than 100% growth.
Based on the environmental industry data, statistics shows that
profit margin of environmental service in 2000 was 9. 8%,in
2004 was 10% ,in 2011 was 10. 8% ,which is a strong appeal
for potential entrants.
As for the content mentioned in this section, the threat of
new entrants is strong for the industry competitors in the
environmental service industry.
B. Suggestions
and The government should not directly partIcIpate in the
and market competition, but play a guiding role in the development
r1
of environmental service 6 .China government should continue
to improve the system of policies and regulations in the
environmental service industry.
For the enterprises in the industry, they should know the
importance of buyers and the bargaining power of buyers,
make effort to enhance the quality of service and product to
reduce the threat from bargaining power of buyers.Enterprises
should strategically train professionals and administrators, for
whom enterprises should provide better working conditions
and career development.Tt is also critical for enterprises to
cultivate their own professional teams to improve the ability of
technique innovation that is the core of their
competence.Enterprises in the environmental service should be
alert to the strong threat of the new entrants.The threat of
substitutes is the secondary question. Enterprises could put less
attention on it.

E. Substitute suppliers
At present, Environmental services in China are still
mainly non-professional management. Enterprises provide Potential
pollution treatment and environmental services for themselves
entrants
because of government policies.For example, the phenomenon
of pollution self-governance in industrial enterprises is Pollution
strong consu 1 ting
widespread. Industrial enterprises buy equipment for pollution treatment

treatment and assign staff for the operation and maintenance of

consumer
these facilities. However, due to technical limitations, these technologist
Industry
services is not professional and can not meet the needs of most
enterprises compared to specialized environmental service
strong strong
enterprisesLSJ.However, the alternatives to environmental
service industry is still relatively small and uncertain. . The
threat of substitute is weak.

Increasing
IV Conclusion and Suggestion administrator
consumpL io
A. Conclusion Ecological Iechnologv
Based on the analysis above, we can summarize and estoratio service
develop the five forces model of environmental service
industry in Fig4.The degree of rivalry in the industry Substitutes
competitors is strong according to the analysis of competition
suppliers
situation of the four main environmental service industry
sectors.The main suppliers of the environmental service
industry is professional technologists and administrators,and
Sc 1 f-support uncerlainly
the bargaining power is strong because of the shortage of the
specific human resources.The bargaining power of buyers is
strong due to the increasing consumption of environmental
protection and pollution treatment. Because of the changing
and upgrading industry structure,preferential policies and
attracting margin,the threat of new entrants is strong.As for the Fig4.Porter·s five forces model of environmental service
substitutes,the threat is weak due to the uncertainty of the
substitutes .
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gas industry in China:Applying Porter' s five forces and scenario
The research is supported by National Natural Science model,Renewable and Sustainable Energy Reviews ,2014,pp.798-805.
Foundation of China (71362023). [4] Zhen-Yu Zhao,Competitiveness assessment of the biomass power
generation industry in China: A five forces model study, Renewable
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