Strategic Management Report an External Environment Analysis

Strategic Management Report an External Environment Analysis

Submission: 18/06/2015
Word count: 2,150 words
Introduction 212/200
PESTEL 802/800
Porters Five 699/600
Recommendations/Conclusion
437/400

Strategic Management Report an External Environment Analysis

Strategic Management Report an External Environment Analysis

This essay will provide two aspects of environmental assessments
undertaken on 800 Super Holdings Limited (800): a macro-environmental PESTEL
analysis, and an industry analysis using Porters Five Forces of how 800 fairs in
todays competitive environment.

800 Super Holdings Limited

800 is a local integrated environmental solutions-provider company with
humble beginnings in 1986 before its IPO listing on the SGX-Catalist in July 2011.
Illustration 1 800 Super Holdings business lies in a diverse range of services
such as
Waste Management (WM) and Recycling, Cleaning and Conservancy; and
Horticultural Services

Source: Company

With its broad range of services, 800s customer base is diverse and
ranges from municipals to the industrial, institutional and commercial sectors.
800 has posted healthy profits, with FY2014 revenue increasing by 17.9% to
S$115 million and net profit after tax improving by 57.1% (Chairman Statement,
2014); as of HY2015, revenue has increased by 95.4%, pushing current net profit
to S$4.6 million (800 super, 2015).
Table 1 - 800 Super year after year revenue & profits
ASSETS (BS)
Property, Plant & Equipment
Liabilities (BS)
Borrowings (current)

2010
$
35,256,071
$
65,190
$
18,107,871
$
2,611,880

2011
$
37,615,182
$
79,257
$
17,834,416
$
3,373,895

2012
$
50,697,000
$
19,046,000
$
20,315,000
$
3,389,000

2013
$
67,018,000
$
35,941,000
$
32,601,000
$
2,252,000

2014
$
91,593,000
$
51,835,000
$
50,041,000
$
6,772,000

Strategic Management Report an External Environment Analysis

$
5,255,352

$
5,642,817

$
5,076,000

$
17,429,000

Revenue

$
69,580,324

$
77,748,062

$
88,668,000

$
97,542,000

Net Profit

$
5,205,904

$
4,618,498

$
5,938,000

$
5,775,000

Borrowings (non-current)

Source: 800 Super Annual Reports

$
28,055,000
$
114,959,00
0
$
9,072,000

Strategic Management Report an External Environment Analysis

800s recent prominent deals include:

Ministry of Home Affairs S$38.6million three-year contract for

cleaning and horticultural services in the East and West regions
(shareinvestor, 2015);

Winning two of eight integrated public cleaning (IPC) seven-year

contracts to the tune of S$302.2million;

Table 2 NEAs 8 Integrated Public Cleaning Contracts in Singapore

SERVICE

REGION

CLEANING SERVICES

PROVIDERS
Public carriageways, pedestrian thoroughfare, recreational
Ramky Cleantech
1

South-east

beaches, public parks, vacant state lands, periphery of HDB

Services Pte Ltd

electrical substations, drains
Public carriageways, pedestrian thoroughfare, recreational

800 Super
Waste

North-west

electrical substations, drains

Public parks, vacant state lands, periphery of HDB electrical

Management
Pte Ltd

beaches, public parks, vacant state lands, periphery of HDB

South-west
substations, drains
Public carriageways, pedestrian thoroughfare, recreational
Centralbeaches, public parks, vacant state lands, periphery of HDB
north
electrical substations, drains
Public carriageways, pedestrian thoroughfare, recreational

Veolia ES
3

Singapore

Central-

Industrial Pte Ltd

south

beaches, public parks, vacant state lands, periphery of HDB

electrical substations, drains
Public carriageways, pedestrian thoroughfare, recreational
South-west
beaches
Public carriageways, pedestrian thoroughfare, recreational
Chye Thiam
4

North-east

beaches, public parks, vacant state lands, periphery of HDB

Expresswa

electrical substations, drains

Expressway carriageways, pedestrian thoroughfare, drains

Maintenance Pte
Ltd

y
Source: NEA

Receiving one of four NEA-approved solid WM provider (PWC)

licenses; and

Re-contracted seven-years for one of six public waste collection

(PWC) tenders in the Ang Mo KioToa Payoh sector worth
S$160.6million.

Strategic Management Report an External Environment Analysis

Table 3 - Only 4 Public Waste Collectors

Operating in Singapore
1
Veolia ES Singapore Pte Ltd
2
Colex Environmental Pte Ltd
3
Sembwaste Pte Ltd
4
800 Super Waste Management Pte Ltd
Source: NEA

Figure 1 NEA divided the Public Waste

Collection
into 6 Sectors. Source: NEA

Other key milestones in the last five-years include:

the Enterprise 50 Award in 2010, and

the successful bid of 3 JTC land parcels in 2012 for a material

recovery facility (MRF) plant, vehicle maintenance depot, storage
and possibly an integrated waste-to-energy (WTE) plant (800 super,
2012).

PESTEL ANALYSIS
The use of the PESTEL framework analyses the macro-environment in which 800
operates and identifies the forces that has the most impact on its performance.
Political
Singapore is a democratic country with a stable government and strong
ministerial and statutory administration. A highly urbanised and industrialised
island-city state with a limited land area of 704km 2 and a population of 5.5 million
(Department of statistics Singapore, 2015); it is essential for Singapore to
maintain a high-quality living environment. As such, the political direction,
legislature, general attitudes and investments in the WM industry is positively
emphasised upon and garners huge support. International Enterprise Singapore
(IE) actively pushes for the development of the industry and positions Singapore

Strategic Management Report an External Environment Analysis

as the centre for WM technology (IE Singapore, Unknown). The National

Environment Agency (NEA) actively formulates objectives and partners all
stakeholders: the 3Ps Public, Private and People; to implement strategies and
roll-out programmes towards an advanced sustainable WM system (Waste
management world, 2015; NEA, 2015). However, because of the need to
judiciously control environmental pollution, 800 has to comply with stricter
standards and requirements.

Economical
Local companies hold a bullish sentiment on economic growth amidst global
risks, greater geopolitical uncertainties and a faltering global economy (Today,
2015). This confidence, coupled with Singapore economys modest continual
expansion and a GDP2.8% increase in 2014 (Bloomberg, 2015) creates an ideal
environment for 800 to expand current operations through avenues such as M&A.
800s current total asset of S$1.09 million as of 31 December 2014 and a flow of
stable income; also ensures financing (Gurufocuscom, 2015). General higher
economic growth also leads to higher incomes and spending, hence an increase
in packaging materials and more wastes generated equating to more business.
Additionally, with the governments heavy support for the industry in recognising
the rising costs due to labour, fuel and higher service standard demands; and the
subsequent implementation of key interventions such as re-zoning, uniform fees
and tariffs to ensure companies benefit from economies of scale to optimise and
realise efficiency gains and mitigate expenses (NEA, 2015); 800 with its two core
business segments in the PWC and IPC sectors is geared for expansion.

Social
Illustration 2 On average a person generates 1,370kg worth of waste. WM is a

Strategic Management Report an External Environment Analysis

recession-proof, non-cyclical industry.

Source: Zerowaste.sg

Source: Tradingeconomics.com

Singapores population is set to increase continually to an estimated 6.5 million

by 2030 (MND NPTD, 2013); with the corresponding increase in waste products
generated (Zero waste, 2015); 800 - one of the leading players in the WM
industry, provides an essential necessary service. However, with the
governments efforts to curb the influx of foreign workers (Bloomberg, 2015); 800
being a blue-collar labour intensive business, can expect expenses to significantly
increase and hence decelerate growth and affect earnings. 800s Chairman, Mr
Lee Koh Yong notes that whilst 800s services are directly influenced by economic
and population factors, the company has spotted a trend change in consumer
lifestyles towards greater environmental ownership (Sharesinvestment, 2011)
and has positioned itself to capitalise on the movement having diversified into
recycling with two MRFs and a third in construction.
Illustration 3 800 Supers Material Recycling Process.
800s Forward Integration & Holistic One-stop Solution

Source: Company

Strategic Management Report an External Environment Analysis

Technological
Technological developments in processes like collection, sorting, reprocessing or
end-use technologies in the WM industry is key to maintaining the competitive
edge of the company. IE Singapore spearheads local businesses growth and
expansion into the region via external partnerships by selling advanced WM
practices and customised solutions such as a Clean Development Mechanism
project to reduce emissions and the Semakau Landfill project.
Table 4 800 on the lookout for partnerships to expand in the region
Project
MOUs with:
1 WTE
FutureNRG Asia Limited and Solutions Using Renewable Energy Pte Ltd
in 2011
2

WM &

(800 super, 2011)

Liwan District with the Urban Administrative Bureau of Liwan District,

Recycling

Guangzhou City, the Peoples Republic of China (800 super, 2012).

800 also continually stream-lines operational processes for greater efficiencies

and has invested into a new fleet, plant and equipment to ensure they remain
robust.
Illustration 4 - Semakau Landfill Project & the Transporting, weighing & moving of wastes .
Source: NEA.

Strategic Management Report an External Environment Analysis

Environmental
The option of using landfills to contain wastes is not a sustainable and viable
option for Singapore with its land scarcity and the amount of waste generated by
a rapidly increasing population. As such an advanced WM solution was
formulated to minimise land usage. In 2014, with 7.5tonnes of waste generated,
60% was channeled into recyclable materials, 38% was incinerated - which
provided 3% of Singapores electricity needs; and only 2% went to the Semakau
landfill. This is part of Singapores Green Plan (SGP) 2012 multi-faceted approach
to minimise waste through the 3Rs; and an aim towards a zero landfill (NEA
Singapore, 2003). 800 aligned early to the governments plans and has
capitalised well on the waste recycling portion towards environmental
sustainability resulting in economic advantages.
Illustration 5 Part of Singapores Green Plan, the 3Rs - REDUCE, REUSE & RECYCLE and
Packaging Agreement. Source: NEA.

Legal
The WM industry in Singapore is heavily regulated. From the first SGP in May
1992 to its revision in 2002; laws, regulations, policies and goals were established
by NEA to revamp and set industry standards. By introducing a National
Recycling Programme and creating a framework for stakeholders to adopt the
3Rs initiative alongside awareness campaigns targeted at industry, community
and schools, Singapore has impressively increased its recycling efforts to 60%.
NEA also targets the wastes at source in an effort towards waste minimization

Strategic Management Report an External Environment Analysis

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and has initiated a Voluntary Packing Agreement with industries to reduce

packaging wastes.

PORTERS FIVE FORCES ANALYSIS

Porters Five will be used to analyse 800s profitability by understanding the
competitive forces and the current industry structure in the WM local market
(Katherine arline, 2015).
Threat of New Entrants - LOW
Barriers-to-entry is strong due to several factors.
Government regulations: there are only four PWC licensed companies in
Singapore, and the extended length of contracts awarded in both the PWC and
IPC sectors; makes it difficult to enter. However, this makes it harder and more
crucial for 800 to gain and cement market share as losing a contract means a
wait-out period of seven years (NEA, 2015).
High capital requirements: the business requires specific, specialised heavy
assets making it difficult for new competitors to enter.
Economies of scale: in order to be profitable, companies require scale (NEA,
2015); this severely limits entry from smaller players.
Brand identity: as compared to the other major players in the WM market, 800
lacks a strong brand presence, building up on this will help increase consumer
awareness and hence market share.

Threat of Substitutes HIGH

There is considerable threat facing 800 as explained by the following.

Strategic Management Report an External Environment Analysis

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Propensity for substitution and inclination to change: although there is no direct

substitution for WM services, there is little differentiation between the major
players. As such, decision makers are not bound by brand loyalty. There are also
no strong opposing factors to change providers as the services provided are basic
and easily duplicable across the major players.
Switching costs and price competition: as the industry is heavily structured and
regulated, there is little resistance to switch providers. Also as the threat is high,
800 is limited in its ability to set the prices it wants (NEA, 2015). As such, if 800
cannot control labour and disposal costs its two biggest expenses; the bottom
line will be affected (800 Super, 2015). Long term, this limits its ability to lower
pricing and therefore dulls its edge over its competitors in the tender for
subsequent contracts.

Supplier Power - MODERATELY HIGH

Bargaining power of suppliers is towards the high side based on the following
factors.
Labour supply cost: the business relies intensively and heavily on blue-collar
manpower which is curtailed because of the foreign labour restriction and the
reluctance of the local populace to be employed in this industry (Bloomberg,
2015).
Landfill, WTE and MRF suppliers: 800s next big ticket expense is in the disposal
of wastes charged by the four WTE plants (NEA, 2015). As there are only two
operators - although regulated, suppliers are in position to set terms, availability
and prices. Since there are no current alternatives that 800 can switch to, this
affects profitability. This risk is migrated slightly however, as 800 has its own

Strategic Management Report an External Environment Analysis

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MRFs, and is therefore able to generate maximum income from the sorting of
wastes into recyclable materials (Corporate profile, 2104).
Table 5 Only 4 Waste-to Energy (WTE) Plants for Waste Disposal and
Incineration in Singapore
Waste-to-Energy Plants

Operated by

Disposal Costs per

1
2
3

Tuas Incineration Plant (TIP)

Tuas South Incineration Plant (TSIP)
Senoko Waste-to-Energy Plant (SWTE)

NEA
NEA
Keppel Seghers

tonne
$77
$77
$81 (only plant not in

Keppel Seghers Waste-to-Energy Plant

Keppel Seghers

Tuas)
$77

(KSTP)
Source: Company, NEA, IE Singapore, Keppel Seghers

Strategic Management Report an External Environment Analysis

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Buyer Power - MODERATE

Bargaining power of customer is evened out by both high and low factors.
Low: the PWC and IPC sectors and contract awards are governed by NEA; hence
buyers do not exert much bargaining power over the choice of provider. Also,
they are divided into groups of high concentration in essence NEA is the sole
decision-maker. Further, 800 as a recognized home-grown firm; is supported
readily by the government.
High: the commercial and industrial markets on the other hand, have greater
power over the service providers as they fall under the General Waste Collection
(GWC) category with a wide range of choice. There is also little differentiation in
this industry since the services offered are standard, resulting in low-switch costs.
Intensity of rivalry - MODERATE
Competitive rivalry: is low in the PWC and IPC market with Singapore divided into
6 and 8 sectors, and only three competitors respectively (NEA, 2015); with each
player holding considerable market share. The commercial and industrial
markets are however fragmented, and competition can be intense.
Exit barriers: since exit barriers are significant, this intensifies the competition.
800 must focus more on its marketing efforts to set itself apart and give it a
bigger competitive edge over other players. Also, 800 can take advantage of its
current mass volume and asset-base, by negotiating for better prices with
suppliers.

Strategic Management Report an External Environment Analysis

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RECOMMENDATIONS
ONE. Half of 800s expenses are a result of labour costs. Therefore 800 should
look into how technological advancement and a continual review of operational
routines can improve systems and processes to increase productivity and
efficiency; therefore easing labour requirements. 800 should also pay heed to
having a fantastic human resource management system in place, and place
emphasis on maintaining a good culture and work environment to retain effective
personnel.

TWO. 800 should seek aggressive expansion into both the cleaning and
horticulture industries, so as to solidify its business diversification and create
sustainable income in the local market.
Also, although 800 re-branded its image to look cleaner it needs a revamp to
focus on a stronger brand identity that the decision-making millennial generation
of customers can relate with. I also recommend capitalising on the fact that 800
is a home-grown firm; and should increase its presence exponentially by
volunteering to participate in national events with wide coverage like NDP.
Further, 800 can capitalise strongly on its one-stop environmental solutions to
merge the various operations cleaning with recycling efforts, into creating
incentives for decision makers to choose 800 over its competitors.

THREE. 800 must continue to cast its sights abroad to create another income
stream as the local market is limited and saturated. Also, if 800 were to lose a
PWC or IPC sector it would be severely affected. As such with profits and income
secured for the next four to five years, 800 must aggressively seek to diversify its
portfolio.

Strategic Management Report an External Environment Analysis

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FOUR. Should 800 be able to further refine the process of sorting recyclables,
revenue from the sale of recyclable products and expenses from the disposal
charges arising from incineration costs at WTE plants would enable 800 to be
more profitable.

FIVE. With NEAs Innovation for Environmental Sustainability Fund, 800 should
conduct feasibility studies to make further improvements in technology and take
a serious look into the avenue of developing a WTE plant.

CONCLUSION
In view of the above analysis, 800 has emerged as one of the leading waste
management companies in Singapore. This has been achieved from the
nimbleness of the leadership in identifying and aligning with the external
environment and its fluidity in adapting to changes. However, 800 must remain
vigilant in order to maintain its strategic competitiveness. As of now, 800 is set
for solid returns in the next four to five years but it needs to secure another
market to create sustainable growth for the company to mitigate the risks of the
PWC and IPC markets should they fail to be re-contracted or the policies shift to
allow more entrants into the market.