WM2 Ndplace

Waste Management, Inc.
Strategic Case Analysis

Submitted for Approval to:
Dr. Jifu Wang

LEADING EDGE
CONSULTING
Houston, TX
The Leaders in Waste Management
Group 1
Consultants
Jason Cummings
Correen Harrell
Deanna Lewis
Jim Upchurch
David Woods
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Table of Contents
1.0 Executive Summary..........................................................................8
2.0 Background Information on Waste Management ..........................9
2.1. Brief History of Company............................................................................... 9
2.2. Historical Timeline of Important Events...................................................... 11
3.0 External Analysis ............................................................................13
3.1. General Environmental Analysis ................................................................. 13
3.1.1. Political/Legal Factors.............................................................................. 13
3.1.2. Economic Factors .................................................................................... 16
3.1.3. Sociocultural Factors ............................................................................... 20
3.1.4. Demographic Factors............................................................................... 21
3.1.5. Technological Factors.............................................................................. 25
3.1.6. Global Factors ......................................................................................... 28
3.1.7. Summary of the General Environmental Analysis.................................... 29
3.1.8. Driving Forces for the Future ................................................................... 30
3.2. Industry Analysis .......................................................................................... 31
3.2.1. Industry Description ................................................................................. 31
3.2.2. Industry Operations ................................................................................. 33
3.2.3. Industry Life Cycle ................................................................................... 36
3.2.4. Industry Dominant Economic Features .................................................... 37
3.2.5. Market Size.............................................................................................. 38
3.2.6. Market Growth Rate................................................................................. 38
3.2.7. Industry Trends........................................................................................ 39
3.3. Five Forces Analysis .................................................................................... 40
3.3.1. The Threat of Entry.................................................................................. 41
3.3.2. The Power of Buyers ............................................................................... 41
3.3.3. The Power of Suppliers............................................................................ 42
3.3.4. The Threat of Substitutes......................................................................... 43
3.3.5. Competitive Rivalry .................................................................................. 43
3.4. Industry Competitive Analysis..................................................................... 44
3.4.1. Industry Competitors................................................................................ 44
3.4.2. Anticipated Competitors Strategic Moves ................................................ 51
3.4.3. Summary of Competitive Analysis ........................................................... 52
3.4.4. Key Success Factors ............................................................................... 53
3.5. Summary of External Analysis .................................................................... 54
4.0 Internal Analysis .............................................................................55
4.1. Organizational Analysis ............................................................................... 55
4.1.1. Corporate Vision and Mission .................................................................. 55
4.1.2. Leadership ............................................................................................... 56
4.1.3. Culture ..................................................................................................... 57
4.1.4. Structure .................................................................................................. 58
4.1.5. Summary of Organizational Analysis ....................................................... 58
4.2. Analysis of Firm Resources......................................................................... 58
4.2.1. Tangible Resources ................................................................................. 59
Leading Edge Consulting Group May 4, 2006

The Waste Management Experts
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4.2.2. Intangible Resources ............................................................................... 62

4.2.3. Capabilities .............................................................................................. 65
4.2.4. Core Competencies and Sustainable Advantages................................... 66
4.2.5. Summary of Firm Resources ................................................................... 68
4.3. Analysis of Objectives.................................................................................. 68
4.3.1. Previous Principal Operational Focus ...................................................... 68
4.3.2. Short-Term Objectives ............................................................................. 69
4.3.3. Long-Term and Financial Objectives ....................................................... 69
4.4. Evaluation of Financial Performance (2005, 2004, 2003) ........................... 69
4.4.1. Financial Condition Analysis .................................................................... 70
4.4.2. Profitability ............................................................................................... 70
4.4.3. Management Effectiveness Ratios .......................................................... 72
4.4.4. Debt, Working Capital, and Liquidity Analysis.......................................... 73
4.4.5. Management Efficiency............................................................................ 74
4.4.6. Market Value Analysis ............................................................................. 75
4.4.7. Growth Analysis....................................................................................... 77
4.4.8. Summary of Financial Analysis................................................................ 79
4.5. Strategic Analysis......................................................................................... 80
4.5.1. Corporate-Level Strategy and Internal Strategy....................................... 80
4.5.2. Business-Level Strategy .......................................................................... 81
4.6. Value Chain Analysis.................................................................................... 83
4.6.1. Summary of Strategic Analysis ................................................................ 94
4.7. SWOT Analysis ............................................................................................. 94
4.7.1. Strengths – Internal ................................................................................. 95
4.7.2. Weaknesses – Internal ............................................................................ 98
4.7.3. Opportunities – External .......................................................................... 98
4.7.4. Threats – External ................................................................................. 101
5.0 Strategic Fit Analysis ...................................................................105
5.1. Current Strategy.......................................................................................... 105
5.2. Current and Long-Term Strategic Concerns ............................................ 106
5.3. Identification and Assessment of Activities for Strategic Fit.................. 106
5.4. TOWS Matrix................................................................................................ 109
5.5. Alternatives ................................................................................................. 112
5.6. Alternatives to Recommendations ............................................................ 115
6.0 Recommendations........................................................................116
6.1. Recommendation I...................................................................................... 117
6.1.1. Objectives .............................................................................................. 117
6.1.2. Deliverables ........................................................................................... 121
6.1.3. Milestones.............................................................................................. 122
6.1.4. Risk Assessment ................................................................................... 124
6.1.5. Long-Term Benefits ............................................................................... 125
6.2. Recommendation II..................................................................................... 127
6.2.1. Objectives .............................................................................................. 127
6.2.2. Deliverables ........................................................................................... 131
6.2.3. Milestones.............................................................................................. 135
6.2.4. Risk Assessment ................................................................................... 136

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6.2.5. Long-Term Benefits ............................................................................... 139

7.0 References ....................................................................................144
8.0 Appendix .......................................................................................149
8.1. Appendix I.................................................................................................... 149

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List of Figures
Figure 3.1-1: Number of Landfills in the United States by Year 15
Figure 3.1-2: Prime Lending Rate During 1955-2006 17
Figure 3.1-3: US Gross Domestic Product Percent Growth From 2002-2005 18
Figure 3.1-4: Change in the Elderly Population and Total Population 23
Figure 3.1-5: Elderly Population (Ages 65+) 24
Figure 3.1-6: Management of Municipal Solid Waste – 2003 26
Figure 3.3-1: Porter’s Five Forces Model 40
Figure 4.4-1: Comparison of Five-Year Cumulative Return of Stock Value 76
Figure 4.4-2: Waste Management, Inc. Cash Being Returned to Shareholders 77
Figure 4.4-3: Waste Management, Inc. 5 Year Revenue Statement 78
Figure 4.4-4: Waste Management, Inc. Cash Being Returned to Shareholders 79
Figure 4.6-1: Waste Management, Inc. Value Chain 85
Figure 6.1-1: New Product Development and Introduction (NPDI) 120
Figure 6.1-2: The Portfolio Management System with its Key Components 121
Figure 6.1-3: Timeline to Implement Project Effectively 122
Figure 6.1-4: The Stage-Gate® Process 123
Figure 6.2-1: Tonnage of Materials Collected 138
Figure 6.2-2: Crude Oil Futures Prices From April 1, 2005 to April 21, 2006 140

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List of Tables
Table 3.1-1: Worldwide Population Figures 22
Table 3.1-2: Municipal Solid Waste, 1960-2003 26
Table 3.2-1: United States Solid Waste Industry Summary 37
Table 3.2-2: United States Solid Waste Industry Growth Rate 39
Table 3.4-1: Current Financial Information for Allied Waste Industries, Inc 47
Table 3.4-2: Current Financial Information for Republic Services, Inc. 50
Table 4.4-1: Waste Management, Inc. Income Statements 71
Table 4.4-2: Waste Management, Inc. and Republic Services Margins 72
Table 4.4-3: Waste Management, Inc. ROA, ROE, and Industry Rank 72
Table 4.4-4: Waste Management, Inc. Industry, and S&P 500 73
Table 4.4-5: Waste Management, Inc. Debt, Working Capital, and Liquidity 73
Table 4.4-6: Waste Management, Inc. Condensed Balance Sheet 74
Table 4.4-7: Waste Management, Inc. Management Efficiency 75
Table 4.4-8: Waste Management, Inc. Market Value Analysis 76
Table 4.4-9: Waste Management, Inc. Revenue and Income Overview 78
Table 4.6-1: Waste Management, Inc. Strengths and Weaknesses 87
Table 4.7-1: Waste Management, Inc. SWOT Analysis 95
Table 6.2-1: Waste Management, Inc. Cost of Initial Start-Up of Program 131
Table 6.2-2: First Five Years – Total Tonnage of Each Item Collected 137
Table 6.2-3: Costs and Revenues for Products Collected by Waste Management, Inc. 141
Table 6.2-4: Proforma Statement for Waste Management, Inc. 142

Section 1.0 – Executive Summary
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1.0 Executive Summary

The purpose of this paper is to provide a complete and detailed strategic analysis
of Waste Management, Inc. The paper will concentrate on a detailed description of the
external and internal factors that affect Waste Management in the present and the
future. In the external analysis, a general environment analysis will be conducted to
determine the driving forces in the industry. It will continue with an industry and
competitor analysis to determine the primary firms competing in the waste disposal
industry. The external analysis will conclude by talking about key success factors that
Waste Management must capitalize on to be successful. The internal analysis will be
broken into seven sections that include an organizational analysis, a look at the firm’s
resources, an objective analysis, a detailed financial analysis, strategic analysis, value
chain analysis, and a SWOT analysis. A strategic fit analysis will then be conducted to
determine the direction Waste Management needs to precede in based on the external
and internal analyses. The strategic analysis will conclude by providing two
recommendations for ensuring the survival and prosperity of Waste Management, Inc.
into the future.

Section 2.0 – Background Information
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2.0 Background Information on Waste Management
Waste Management, Inc. (NYSE:WMI) has risen to be the largest waste disposal
company in the nation and in larger terms, the world, with a large margin over its
competitors. Through its many subsidiaries, Waste Management serves close to 2
million commercial companies and around 25 million residential consumers in the
United States and Canada. The company is divided into five geographic groups, which
include Eastern US, Midwestern US, Southern US, Western US, and Canada. They
also have two functional groups, recycling and the waste-to energy program called
Wheelabrator, which are services to each of the geographic groups. These entities
provide waste collection, transfer, recycling, and disposal services to a large portion of
North America (Hoovers Financial Website, 2006). The company operates around 1200
sites. Theses sites include 429 collection operations that use 366 transfer stations and
289 landfills. The landfills include six specialized sites that are disposal sites for
hazardous waste. Waste Management also recycles and harvests energy from the
waste they collect. The companies recycling program utilizes 138 recycling plants. To
convert waste to energy, there are 17 waste-to-energy sites and 82 landfill gas projects.
In the waste disposal business, Waste Management is the leader with the largest fleet
of collection and transfer trucks with a staggering number of over 25,000. The company
also has 432 of these trucks running on natural gas (Waste Management, 2005).
2.1. Brief History of Company
Waste Management Inc. (WMI) was founded in 1968 when a waste disposal
company in Chicago, called Ace Scavenger, decided to merge with a similar company

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in Florida. This was primarily due to the passing of the Solid Waste Disposal Act in
1965 by the US Government. The owners of the two companies saw this as a sign of
changes in the industry due to the increasing population and their views on pollution
and the environment. The firm went public in 1971 and between the years of 1971 and
1980, the company saw revenue grow at a rate of 48% per year. This phenomenal
growth rate was primarily due to the many acquisitions the company was making each
year. The company continued to grow and enter into new markets, most significantly,
the field of toxic and chemical waste treatment. There were also many joint ventures
that WMI entered into with countries around the world. The company started having
legal problems in the late 70’s and early 80’s, being accused of environmental crimes by
the government and environmental agencies.
During the mid 1980’s, the company continued to grow by acquiring more firms in
their industry. In the late 1980’s and early 1990’s, WMI began investing in recycling,
especially in the waste-to-energy business. The company acquired a controlling
interest in the Wheelabrator Technology Company, which was a leader in the waste-to-
energy industry. They also were a part of the tremendous boom in recycling and rose to
be the largest recycler in the country (Business and Company Resource Center, 2006).
There were many problems that plagued Waste Management since the early
1970’s. These problems dealt with criminal violations, antitrust civil cases,
environmental civil cases, administrative cases, and SEC violations. One of the largest
issues was the accounting scandal with Arthur Anderson and the fraudulent accounting
practices that were in place in the late 90’s to early 2000’s. The accounting company
and Waste Management executives inflated profits by $1.7 billion to meet projected

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earning targets. This cost the company a great deal of money and damaged its image.
Waste Management shareholders lost an estimated $6 billion when the stock price
plummeted 33% after news of the scandal. The overall effect was the merger of WMI
and USA Waste, a company only a third of the size of WMI. USA Waste took control of
the two firms, but retained the Waste Management, Inc. name. Waste Management is
still recovering from this loss and the deceit of their top management, many of which
have been replaced due to the scandal (SEC, 2006).
Waste Management, Inc. continues today to be a leader in the disposal of
multiple types of waste, ranging from solid and medical waste to highly toxic chemical
waste. There have been many changes in the past 5 years and a large re-organization
of the firm after the SEC charges were concluded. The company continues to grow and
its stock price continues to rise at healthy rates. With the cleansing of the Waste
Management brand name, accurate accounting practices, and new programs that have
been initiated, the company should continue far into the future.
2.2. Historical Timeline of Important Events
The following figure shows a brief timeline of the major events that have occurred
in Waste Management’s history. It highlights not only the successes the company has
enjoyed, but also the many of the frauds and litigations that have occurred during the
company’s colorful history.

1965 – Congress Passes
Solid Waste Disposal Act
1965
1968 - Waste Management
Inc. Created
1971 – WMI Goes Public
1970
Mid 1970’s – WMI grows by
conducting over 200 Mergers
and Acquisitions per Year
Mid 1970’s – WMI Enters
Chemical & Toxic Waste Disposal
Leading Edge Consulting Group

1976 – Congress Passes Industry
Resource Conservation and
1975 – WMI Begins
Recovery Act
1975
International Joint Ventures
1979 – First Lawsuits Brought

by EPA for Illegal Practices 1980 – Acquired 20% Stock In
Wheelabrator
1980
1985
1990 – Acquired Controlling

Interest In Wheelabrator
1990
1991 – WMI Largest Collector

of Recyclable Materials
1991 – 1998 – WMI pays Hundreds

of Millions of Dollars in Fines and
Penalties for Illegal Practices
across the Nation
1995
1998 – WMI Admitted to Misstated

Earnings of $3.5 Billion Pretax, 1998 – USA Waste, 1/3 the Size of
Dating Back to 1992 WMI, Merged and Took Control of
the companies
2000
Historical Timeline of Waste Management, Inc.
2005
May 4, 2006
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Section 3.0 – External Analysis
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3.0 External Analysis
The external analysis is critical for a firm to understand to be able to realize the
opportunities and threats that exist in the industry they are competing in to help achieve
a strategic competitiveness. The external analysis consists of a general environmental
analysis, industry analysis, five forces analysis, industry competitor’s analysis, and the
key success factors for the industry.
3.1. General Environmental Analysis
In order for a firm to effectively compete in an industry, an analysis of its specific
industry must be undertaken. This is done to provide the firm with a description of the
elements in society that directly effect the industry and the direction managers must
take to implement appropriate strategies to survive. This study is commonly referred to
as the general environmental analysis. It primarily consists of six primary factors, which
are political/legal, economic, socio-cultural, demographic, technological, and global.
These six sections describe the external environmental factors a firm must understand
to effectively compete in a specific market.
3.1.1. Political/Legal Factors
The politics of many countries have a direct effect on the operations at a waste
disposal company. Since this industry disposes of waste that ranges from curbside
consumer waste to industrial toxic waste, any new laws and regulations that concern
the industry can have a drastic economic impact on the company’s bottom line. The US
Government has instituted many laws and regulations that directly affect this industry.

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There are many environmental, public and occupational health and safety-related
statutes that affect the waste disposal industry in the United States. The one act that
changed the industry to the form it exists in today was the Solid Waste Disposal Act, as
amended, including the Resource Conservation and Recovery Act of 1976. Many
companies changed drastically to adhere to these new regulations. When handling the
disposal and release of hazardous waste, this is regulated under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended. The
Federal Water Pollution Control Act of 1972 (The “Clean Water Act”), as amended
controls the release of pollutants into streams, rivers, groundwater, or other surface
waters. This has the greatest effect on the development and maintenance of landfills.
The industry is also regulated by the amount of pollutants that are released into the
environment by the Clean Air Act of 1970, as amended. Since waste management is a
very physical operation for many of its employees, their safety and well being are
monitored by the Occupational Safety and Health Act of 1970, as amended. This is
very important to keep the workers safe and functioning on the job. There are also
many specific state and local regulations that are relevant to waste disposal that effect
the industry (Waste Management, 2005). These can have as great of effect on the
industry as the national standards currently do.
In Texas, regulations are already being enforced which relate to the locations of
landfills around the state. The new regulations would require wider buffers between
dumps and communities, more stringent runoff controls, and the installation of modern
liners before garbage can be piled on top of older dumps (Cappiello, 2006). This is a

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growing trend across the country as more stringent environmental regulations are
passed and implemented in the industry.
The push for more recycling efforts is also on the rise. This is primarily due to
the lack of land for disposal sites and the lack of cooperation by states to handle
hazardous wastes. The following, Figure 3.1-1, shows the number of landfills in the US
has been decreasing rapidly from 1988 to 2002. This is even more alarming due to the
average life expectancy of a landfill only being 26 years.
Figure 3.1-1: Number of Landfills in the United States by Year

(Source: EPA – Municipal Solid Waste Generation, Recycling and Disposal in the United States, Facts and Figures for 2003)
Corporations need to step up and take a leadership role in the disposal of all
substances and possibly gain government support for the effort. If this is not done,
there could be an increase in illegal dumping around the nation that would have far
greater consequences than disposing of these substances properly. In conclusion, the
political/legal factors that affect the waste disposal industry are a considerable threat

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that must be understood and monitored. It is one of the more important factors that
affect the industry.
3.1.2. Economic Factors
The economy of the US is moving along at a relatively strong pace and is
recovering from the recession that began around 2001, primarily due to the dot.com
bust in the market and the events of 9/11/01. This has been a slow and tedious
recovery. The housing market has been a strong factor in bringing the economy
around. The prime lending rate fell for many years, but has now been on a steady
increase to help slow and control the rate of inflation. This has been somewhat
misleading since inflation has been relatively controlled for the past few years. Figure
3.1-2 shows the prime lending rate as it has fluctuated over the last 50 years. It is
remaining relatively low with respect to the past where it had risen to a high of over 21
percent. This is a good measure on how the economy is doing and the amount of
money consumers are willing to spend. It also has an effect on larger companies when
they borrow for capital projects. If the rate is too high, many companies postpone
projects to a later date and growth begins to slow.

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Prime Lending Rate From 1955-2006
25
20
Prime Lending Rate Value
15
10
0
/2 19 9
/1 19 1
8/ 7/1 95
/2 /19 0
1/ 8/ 1 72
1/ 5/ 1 74
9/ 7/ 1 80
8/ 9/1 82
7/ 6/ 1 84
/1 /20 9
/2 4
11 2/1 68
7/ 7/1 71
4 /1 3
/1 /19 4
3/ 3/1 74
8/ / 1 5
9/ 2/ 1 76
7/ / 1 7
11 7/ 1 78
3/ 9/ 1 79
6/ / 1 9
10 3/ 1 80
/1 19 0
3/ 6/1 80
2/ 6/ 1 81
1 1
/2 19 2
5/ /19 6
2 /1 8
1/ 0/2 01
6
12 25/ 95
11 /1/ 99
12 /8 97
11 22 99
31 00
29 97
11/25 97
12 97
15 97
19 97
12 /1/ 98
11 17/ 98
10/22 98
14 98
1 8
00
1 9
2 9
2 9
2 9
2 9
2 9
/ 9
1 9
1 9
9/ /1/1
/
9
Date
Figure 3.1-2: Prime Lending Rate During 1955-2006

(Source: www.beginnersinvest.about.com – Bank Prime Loan Rate Changes – Historical Dates of Changes and Rates)
The Gross Domestic Product (GDP) has also been relatively stable for the last
few years. It has maintained a steady rate of growth between two to four percent each
quarter for the last couple of years. This shows the output of goods and services has
remained steady, with only the US Government spending slowing it down. Figure 3.1-3
illustrates the growth of the GDP of the United States for the past four years.

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Figure 3.1-3: US Gross Domestic Product Percent Growth From 2002-2005

(Source: US Department of Commerce, Bureau of Economic Analysis)
The economics for recycling programs is astounding. There are currently more
than 56,000 recycling and reuse establishments in the US today. These centers employ
approximately 1.1 million people to run the day to day activities that take place. The
annual payroll for these employees is around $37 billion, with a gross of $236 billion
when it comes to annual revenues. This shows that the number of workers employed in
the recycling industry rivals the amount that are currently employed in the automobile
and truck manufacturing industry. It is also larger than the waste management and
disposal industries. The wages for the industry are actually higher than the national
average of all industries (EPA, 2006)

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The demand curve has also been fluctuating for the past years. This is primarily
due to the increase in population of the country, the amount of regulation that is being
imposed on the industry, the changes in customer’s views on waste disposal, and that
the US society leads the industrial world in waste generation. It is estimated that the
average US citizen creates around 4.5 pounds of waste per day. This is closely
followed by Canada at 3.75 pounds per day (EPA, 2006). This causes a lot of demand
to be placed on the waste disposal companies to safely dispose of the waste being
generated every day. The higher the amount of waste being generated each day
becomes, the more costly it will be to remove it. This shows that the demand curve will
most likely shift to the right to keep up with this trend.
The increased demand for oil in the world is becoming a supply issue. This is
driving the price of oil to all time highs, which in turn does the same for a gallon of
gasoline. Gasoline prices are continuing to increase and are currently at prices that
have not been seen in the past. Since most waste companies spend a great deal on
transportation costs to move the waste from homes or businesses to landfills, this
represents a dramatic increase in the costs to conduct business. Currently, gasoline
and diesel prices are above $2.50 a gallon and show no signs of decreasing in the
immediate future. Until the World’s hunger for oil is stabilized and major oil producing
countries are brought under control, this will continue to be a significant burden on the
profits of waste disposal companies. This is the key element in the economic factors
that affect the industry.

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3.1.3. Sociocultural Factors
The view of the consumer with respect to waste disposal is a major factor in the
survival of a company in this industry. The attitudes and values of the consumer can
affect all other factors in the general environment. The views of the consumer towards
industrial institutions and the environment are elements in the change and reform that
occur in the government. Since the waste industry is a predominant figure in the United
States, it has been a target for environmental groups and government regulations for
many years. This will only increase as prices for waste disposal increase and the
countries population continues to rise.
The increase in environmental activism is a force that needs to be considered.
Anything the waste industry attempts to create and implement needs to be viewed by
the public as morally and ethically proper and follows the beliefs of the consumer.
Otherwise, it will be rejected by a majority of the population and government regulations
might even stop the program entirely. The US is becoming more of a recycling nation,
but many individuals will only change if they are forced to do so. This is primarily where
recycling fails in some communities. If it costs the consumer no additional funding,
time, or effort to just throw everything away, they believe there is no reason to change.
There are some programs that offer incentives for individuals and corporations who do
recycle on a daily basis. This includes lower costs for programs that charge consumers
for the weight or the amount of trash they dispose of. These are considered ‘Pay As
You Throw’, or PAYT programs (EPA Website, 2006). There are also huge tax
incentives for companies that are considered ‘green’ operators and recycle on a large
scale.

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A new environmental push is for what is called “Zero Waste America.” Zero
Waste is defined as “recycling of all materials back into nature or the marketplace in a
manner that protects human health and the environment” (Zero Waste America, 2006).
This is a noble cause, but is somewhat unrealistic at this time. There is too much waste
being created and a lack of concern by consumers and industries, along with deficient
governmental support, to make the change. It is going to be a push by waste disposal
companies to spearhead this effort if there is any chance of it succeeding in the future.
Sadly, most individuals will not change their habits until they are forced to do so. The
sociocultural factor shows the need for an increase in the recycling programs across the
national and the need for increased participation by residential and commercial
customers.
3.1.4. Demographic Factors
The primary purpose for a waste disposal company is to service its customers,
mainly residential consumers, but also includes commercial and industrial customers.
This makes it important for the company to understand the demographics of many
areas in order to determine how to effectively service these areas. The firm also needs
to know the commercial aspects of an area since this is also a section that many
companies service.
Population is a very important factor in determining where a waste disposal
company should operate. The key is the more people in an area, the greater amount of
waste they will produce. The population of different regions of the country is monitored
to help determine which areas would be profitable to expand into. Currently, the
population of the US is over 295 million people. This is crucial since individual

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consumer trash collection is a major portion of the business of a waste disposal
company. The United States is known for its acquisition of many material goods. It is
also known as a society that throws damaged or broken items away and buys new
ones, since this is usually drastically cheaper than trying to repair the items. This
causes a large deal of waste to be created and the need to dispose of it. The
population is expected to grow at a rapid pace. The country is forecasted to gain almost
100 million people by the year 2050 for a grand total of 394 million individuals. The
World is also expected to increase in population from its current value of around 6.5
billion people to more than 9 billion in the year 2050 (United Nations Population
Division, 2004). This illustrates the fact that there will be a dramatically increased need
for waste disposal companies around the world. The following, Table 3.1-1 illustrates
the increase in the worldwide population between the years of 2005 and 2050, in five
year increments.
Year Population
2005 6,464,750,000
2010 6,842,923,000
2015 7,219,431,000
2020 7,577,889,000
2025 7,905,239,000
2030 8,199,104,000
2035 8,462,265,000
2040 8,701,319,000
2045 8,907,417,000
2050 9,075,903,000
Table 3.1-1: Worldwide Population Figures Estimated for the Years Between 2005 to
2050 in Five Year Increments
(Source: US Census Bureau, 2006)

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With the aging of the baby boomers and their increased need of medical care,
this will cause a substantial increase in the amount of medical waste that is created.
This is currently being handled by only a handful of firms and will need to be expanded
in the near future. It is estimated that there are 78.2 million baby boomers living in the
country as of 2005 (US Census Bureau, 2006). This is also the fastest growing
segment of the population around the World and is projected to increase through 2025.
This is shown below in the following two Figures, 3.1-4 and 3.1-5.
Figure 3.1-4: Change in the Elderly Population and Total Population by Region:
2002-2025
(Source: US Census Bureau, International Programs Center, Global Population Composition 2002)

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Figure 3.1-5: Elderly Population (Ages 65+) as a Percent of the Total Population by
Country: 2025
(Source: US Census Bureau, International Programs Center, Global Population Composition 2002)
The elderly is a section of the population that could contribute a substantial
amount of waste in society. This is not only medical waste, but personal possessions
as well. As they begin passing away, something will have to be done with their personal
possessions. Many things may go to family members, but a lot will probably be thrown
out. This includes some of their homes that may be relatively old in age and would be
better torn down than renovated. This could be a rather large problem to deal with.
Today, there are more people living in areas that are prone to natural disasters.
There is also an increasing problem that is unfolding in the US, which is the dilapidation
of the cities and structures around the country. This could create a large amount of
construction debris, demolition debris, and debris from structures destroyed by storms
and other environmental catastrophes. This will either need to be recycled, or a large

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amount of landfill space could be used. These phenomenons are steadily increasing
around the world, which will force the industry to follow the correct path. Due to the
changes in demographics that are expected to take place in the near future, there will
be a large increase in the amount of waste generated and the capacity of landfills will
continue to diminish at an alarming rate.
3.1.5. Technological Factors
With the amount of regulations and environmental laws that exists and are being
created on a daily basis, new methods of waste disposal is in drastic demand. No
longer is it as simple as digging a hole, burying the waste, and then forgetting about it.
With the decrease in disposal locations and the increase in waste production, this is
becoming an alarming problem in today’s society. There are many methods in use
today to combat this growing issue.
The creation and maintaining of landfills is a daunting task due to today’s
regulations and laws that govern them. It is becoming increasingly difficult to gain
permits to create landfills across the country. Companies in waste disposal must create
new methods of removing and disposing of waste products. Many have created clean
incinerators that burn the trash for power. Generators are powered by the burning trash
to create electricity. The smokestacks are filters that remove a large portion of the
pollutants before they reach the atmosphere. Figures 3.1-6 and Table 3.1-2 show the
percentages of materials that are used in combustion for the generation of electricity
and show the overall amount of trash that is recovered on a yearly basis. The amount
of trash is then divided into the methods that are used to dispose of it.

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Figure 3.1-6: Management of Municipal Solid Waste in the United States - 2003
Table 3.1-2: Generation, Materials Recovery, Combustion, and Discards of Municipal

Solid Waste, 1960-2003
Even the landfills are contributing to the creation of energy from trash. The
gases that are omitted from the decaying solid waste is captured and stored in tanks for
power generation. There are generating plants near landfills that create enough power
to provide electricity for small towns and cities. This has become a cheap and

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economical way to produce small scales of electricity and conserve the fossil fuels that
are currently being used. Due to the number of landfills decreasing at an alarming rate,
this generation may not be able to spread to large areas of the country.
The most common and well known technology for decreasing the amount of
waste placed into landfills will be recycling. This is becoming a very profitable industry
due to the increased support that is being provided by the government and the
consumer. With the price of raw materials continually increasing, it is now becoming
even more cost effective for companies to use recycled materials than it is to bring in
and process raw materials. Waste disposal companies are also seeing the benefits.
The companies that recycle enjoy an increase in public perception and less regulation
and protests from governments and environmental groups. Everyday, many more
products are able to be recycled due to technological advances in the industry. The
ultimate goal is to become a waste free society and cease the wasteful practices of just
throwing everything away and forgetting about it.
With the rise in oil prices, this is directly affecting the everyday operations of a
waste disposal company. The biggest cost of the companies competing in this industry
is the fueling costs associated with the massive fleet of trucks needed to transport the
waste to disposal sites. This is an issue that urgently needs to be addressed.
Companies are updating their truck fleets to run on the more clean burning natural gas
than on diesel fuel. The trucks are also being equipped with a more advanced
mechanical system to help in the disposal of the waste. This consists of arms and
hooks that grasp on to the waste can, lifts it up, and dumps it in the back of the truck.
This helps slow down and eliminate the loss of time and productivity when an employee

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claims disability pay by decreasing the amount of manual labor the employees must
conduct. Increased technological advances will improve the handling of waste and
increase the life expectancy of landfills. This new technology will also increase the fuel
efficiency of its transportation fleets. The recycling efforts by consumers will be
increased due to advances in the handling and processing of these materials.
3.1.6. Global Factors
The global segment is one of constant change due to government actions and
events that are occurring on a daily basis. Solid waste disposal is an issue for every
individual around the world, no matter what country they live in. It is an established
industry in many of the industrialized nations around the world. This is due to its
existence dating back over 100 years. This makes it very difficult for firms to break into
these markets and become a successful competitor. There will always be a demand for
this industry for the foreseeable future, but many changes are being initiated on a daily
basis.
These changes are primarily due to the governments of the world imposing
stricter laws and regulations that are created to regulate the waste disposal industry.
There are also many countries around the world that are developing a rapid pace,
sometimes outdistancing the governments trying to serve them. This factor is beyond
the scope of this analysis, since the primary areas of concern are the United States and
Canada.

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3.1.7. Summary of the General Environmental Analysis
The general environment is a force that must be strongly considered for waste
disposal companies to survive in their industry. The biggest force that weighs heavily
on the industry is rising fuel costs and government regulations and that can change the
industry in a short period of time. There are many opportunities to be found in this
industry and they mostly outweigh the threats.
Economically and technologically, the biggest impact will be fuel costs. The price
of oil will no longer be at the low levels most of us enjoyed. The demand has become
too great to make this happen. This will continue to be a large portion of waste disposal
companies costs, unless they take advantage of new types of fuel that are coming
available. This will ultimately show the leader in the industry with respect to driving
down costs and increasing revenue.
The political/legal has a strong affect on the industry. As pollution increases and
there is a larger consumer push for reform, the political powers will ultimately shape the
industry. The only way this will not happen is if the companies participating in this
industry make changes before they are forced to. This could place them ahead of the
competitors when the changes are forced to occur. The sociocultural segment will also
play a role in this, primarily due to the voice of the consumer and the citizenry. The only
time political forces implement new laws is when the public demands a change. People
are still a powerful force in all democracies.
The global and demographic segments round out the rest of the environmental
analysis. With the rise of the world population and the attitudes towards waste, waste
disposal will continue to become a gigantic force to contend with. This not only relates

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to solid wastes, but also to medical, toxic and chemical wastes, which will all continue to
grow as the population grows. The medical waste is going to increase due to the
growing number of baby boomers in the US and elderly around the world. It appears
that waste disposal will continue to be a problem for many years to come.
3.1.8. Driving Forces for the Future
There exist primary driving forces for the industry and waste disposal companies
in order for them to be successful in the future. These forces are outside of the firm and
can change the strategy of the industry and organizations over time. Managers must be
aware of these driving forces that shape the industry in the future, or they will not be
prepared when the actual changes begin to take place.
With the increased demand in waste disposal and recycling services, the major
driving force that will affect the industry is the rising fuel costs for the transportation
fleets. Since most waste disposal services are considered transportation companies,
one of their largest expenses is fuel for the vehicles in their fleet. This can spawn a
decrease in overall revenue, an increase in operating costs, and increases in billing
prices to the residential and commercial customers. This is primarily being driven by
the extremely high oil price that exists in today’s market.
A second driving force that exists deals with the way wastes are currently being
handled. With the increase in stringent environmental regulations, the reduction in the
number of existing landfills, and the decrease in the permits for new landfill locations,
the industry is being forced to change to more environmentally friendly methods for the
management of waste. This is increasing the drive for increased recycling efforts
across the nation and new efforts to reduce the amount of waste being generated.

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These driving forces encompass all of the general environmental factors that
were previously discussed. It is very important that these forces are taken seriously by
all companies in the industry if they wish to be profitable and continue to grow in the
future.
3.2. Industry Analysis
For the waste disposal industry a through understanding of the industry
environment as a part of the external influences serves as an important step towards
proper strategy formulation. Generally, the industry environment has a more direct
impact upon an organization than the external environment as a result of the nature of
competition. Competition within an industry among a group of companies leads to
competitive actions and competitive responses that affect the strategic position of a
particular organization and the profit potential for the industry as a whole (Hitt, Ireland, &
Hoskisson, 2005). This is no different for waste disposal companies competing within
the environmental services industry.
3.2.1. Industry Description
We live in a society where almost anything produce is viewed as disposable by
the consumer and industries. The collection and disposal of this waste is becoming a
monumental problem, mainly due to the extreme amount of waste that is produced
around the world. It has been estimated by the EPA that each man, woman and child in
the United States generates around 4.4 pounds of solid waste every day. This relates
to hundreds of millions of tons of trash produced every year, just in the United States.
The waste management industry primarily disposes of two types of waste: municipal

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solid waste and hazardous waste. The biggest sector deals with the disposal of solid
waste. The main categories of municipal solid waste include household, commercial,
business, institutional, special waste, construction debris, demolition debris, regulated
medical waste, yard waste, sludge, and scrap tires. Hazardous waste is toxic chemicals
that burns readily, are corrosive, or are explosive. The most common industries that
generate this type of waste consist of exterminators, hospitals, auto repair shops,
petroleum refiners, and chemical manufacturers, to name a few.
The waste disposal industry is formally categorized according to the SIC code as
4956 - Refuse Systems and from the NAICS code as 56211 – Solid Waste Collection.
A critical driver or key success factor that characterizes the industry resides from an
organization obtaining economies of density as a result of the heavy laden fixed asset
infrastructure required to operate. The following description highlights the overall
processes surrounding the management of municipal solid waste (MSW).
Refuse system/solid waste collection
The process for MSW management is accurately described as a reverse-flow
channel since materials are moving in a backward motion (Kotler, 2003). Commercial
motor vehicles are dispatched for the collection of solid waste. The collection
commercial motor vehicle trucks either proceed directly to landfills for disposal or are
directed to a transfer station. Landfills for MSW are not the only option for managing
refuse. The use of recycling and incineration help to offset landfills as the only means
for handling MSW. This slows down the velocity of MSW ending up in landfills thereby
extending the active life of the disposal sites. Additionally, waste-to-energy (WTE)
programs in the industry provide meaningful usage of MSW. Such programs include

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the use of gases emitted from landfills as an energy source. Also MSW is processed by
WTE plants for the use of energy.
3.2.2. Industry Operations
Major operations are waste collection, disposal, transfer, and recycling. Waste
collection accounts for about 55 percent of industry revenue, disposal in landfills is 20
percent, and recycling for 15 percent. The refuse volume breakdown is 55 percent in
landfills, 30 percent recycled, and 15 percent combusted (Thompson Gale, 2006).
Small companies usually operate in only one of these segments. Larger companies
often have vertically integrated operations that include all of these components.
Collection
Collection consists of large fleets of trucks and way stations that collect and
consolidate the refuse for disposal in the landfills. The collection trucks are specialized
vehicles designed to pickup refuse and compact the waste.
There are four basic models of garbage truck. Front loaders generally service
commercial and industrial sites. They have large prongs on the front which are carefully
aligned with arms on the dumpster. The dumpster is then lifted over the truck, until it is
upside-down and the trash will then fall out into the receptacle.
Rear loaders commonly service residential areas. They have an opening at the
rear that a trash collector can throw garbage bags or empty the contents of trash cans
into the truck without the operator having to lift the waste by hand. The rear loader is
usually equipped with some type of compactor that will compress the garbage, and
move it towards the front of the vehicle.

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Side loaders are versions of either front or rear loaders that lift small trash
containers or have openings on either side to deposit trash. Some side loaders are
equipped with a mechanical remote-control arm that grasps a trash container such as a
wheeled bin and empties it into the truck in the same manner as front loaders.
Pneumatic collection is a truck as a 24 ton vacuum cleaner. On the top it has a
crane with a tube and a mouthpiece that fits in a hole, usually hidden under a plate
under the sidewalk. From here it will suck up garbage from an underground installation.
The system usually allows the driver to "pick up" the garbage, even if the access is
blocked by cars, snow or other barriers. There are also larger trucks that carry trash
over long distances which are usually modified dump trucks.
Garbage trucks empty their trash in landfills. Most rear loaders lift the rear
section so that the garbage will spill out. Front loaders more commonly have a moving
wall that pushes the garbage out. Some larger landfills will have large contraptions that
tip the entire truck, thus allowing the trucks to not have to carry their own method of
emptying the garbage.
Landfills
A landfill consists of operations, leachate management, water quality sampling,
and quarterly monitoring reports. Operations planning for solid waste landfills including
site life estimates fill sequencing, winterization plans, scheduling of new cell design and
construction. This is after landfill design has been completed and geo-technical/ slope
stability analyses performed.
Leachate management is the evaluation, design, and construction of leachate re-
circulation systems to enhance degradation of wastes.

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Water Quality Sampling is the collection and analysis of groundwater samples at
solid waste landfills. Quarterly Monitoring Reports are preparation of quarterly
groundwater monitoring reports for solid waste landfills including statistical evaluation of
data.
Landfill permits (preliminary and final closure plans), environmental impact
analyses (CEQA), storm water management (NPDES), air quality permits, and
construction/operation permits has to be approved by local governments along with
adhering to federal government guidelines.
Recovered landfill gas can be converted into energy. This is in the form of
electricity, steam, heat, and vehicle fuel to reduce America’s dependence on petroleum
products. The continuing development and management of landfills will grow in to the
next century.
Transfer
Waste is deposited at transfer locations from smaller collection trucks and loaded
onto large transports. The large transports move the refuse to the landfills. This is a
means of optimizing the process of moving refuse to the final destination, the landfills.
This also increases the efficiencies in operations.
Recycling
Recycling is more firmly entrenched than ever. Recycling and composting
activities prevented about 64 million tons of material from ending up in landfills and
incinerators. Today, this country recycles 28 percent of its waste, a rate that has almost
doubled during the past 15 years.

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While recycling has grown in general, recycling of specific materials has grown
even more drastically: 42 percent of all paper, 40 percent of all plastic soft drink bottles,
55 percent of all aluminum beer and soft drink cans, 57 percent of all steel packaging,
and 52 percent of all major appliances are now recycled.
Twenty years ago, only one curbside recycling program existed in the United
States, which collected several materials at the curb. In 2001 there are 9,000 curbside
programs and 12,000 recyclable drop-off centers across the nation. This includes 480
materials recovery facilities that have been established to process the collected
materials.
The recycling program in New York City is collecting paper at the curbside. This
is because it is clearly cost-effective. After getting better prices from the commodity
markets, the city reintroduced multi-material curbside recycling. Last February when
New York City's Independent Budget Office noted that the increase in the cost of waste
disposal, coupled with higher recycling levels, could make recycling into “the cheaper
alternative, creating a strong incentive to promote recycling as a way to hold down the
total cost of waste management.” Recycling is paying with the increase costs of
aluminum, paper, plastic, and glass.
3.2.3. Industry Life Cycle
In the U. S. the solid waste industry generated more than $43 billion in revenue
in 1999. In total, the U.S. solid waste industry managed approximately 545 million tons
of waste in 1999. The breakdown is, (about 374 million tons, or 68 percent) was land
filled, 31 million tons, (5 percent) was incinerated and 140 million tons, (27 percent) and
was recycled. This increased 28% over the last 10years.

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The life cycle of the Waste Industry is exponential in growth. There seems no
end to the refuse that consumers and industry want removed. The market looks
excellent for years to come because there is no incentive to decrease the refuse. This
is illustrated below in Table 3.2-1.
Business Sector Revenues Employees Facilities Equipment Tons

(billion) Owned Owned Managed
(millions)
Publicly Traded
$20.6 119,500 1,840 66,100 218,700
Companies
Privately Held
$12.4 151,700 6,430 101,400 158,200
Companies
Public Sector $10.3 96,600 7,470 38,800 167,800
Total $43.3 367,800 15,740 206,300 544,700

Table 3.2-1: United States Solid Waste Industry Summary
(Source: National Solid Waste Management Association, 2001)
3.2.4. Industry Dominant Economic Features
The revenues solid waste industry generated is estimated to be $43 billion.
Approximately 76 percent of this amount was generated by the private sector. The
relative size of the industry directly accounted for roughly one-half of one percent of the
nation's gross domestic product (GDP). The industry's industrial output and
employment were larger than the individual economics of several such states as North
Dakota, Vermont, and Wyoming.
The economic impact of the industry contributed over $96 billion, 948,000 jobs,
and just over one percent of U.S. GDP to the nation's economy. This included all direct,
indirect and induced effects resulting from solid waste industry activities. For every
dollar of revenue generated by the industry, a total of $1.23 in additional revenue was
generated in the economy through the multiplier effect. The solid waste industry

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employed approximately 367,800 people. Total industry compensation, including
benefits, was estimated at $10 billion. Based on these figures, employees in the solid
waste industry were paid an average of $27,200 per year, including benefits. Similarly,
for every job in the solid waste industry, the multiplier effect created an additional 1.58
jobs outside the industry.
3.2.5. Market Size
Research on the United States waste industry is valued at $ 44 billion in 2004
according to the research firm of Chartwell Information. The break down is as follows:
collection services are 58% ($25.5 billion), disposal services generated 30% ($13.5
billion) and processing accounted for 12% ($5.3 billion).
The National Solid waste Association estimates that there are 15,500
organizations solely in the business of hauling waste. There are 11,500 firms owned
approximately 15,700 facilities that disposed of, recycled, incinerated or processed solid
waste. The majority of these operations were very small. The nation’s top three firms
are Waste Management, Allied waste Industries, and Republic Services. The top three
companies combined for a total of 20 billion in revenues and representatives nearly
50% of the waste disposal market.
3.2.6. Market Growth Rate
The market growth for solid waste in the United States is 4.30% per year for the
years 2003 and 2004.

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YEAR $ Billion % Growth

2001 38 4.00
2002 40 4.2
2003 42 4.3
2004 44 4.3
Table 3.2-2: United States Solid Waste Industry Growth Rate
(Source: Valuline, 2006)
3.2.7. Industry Trends
The current trends in the market place are being dominated by the federal
government. The solid waste landfills dominant disposal position has created two
policies. The first one is encouraging bioreactor technology research. The second one
is rewarding owners who develop landfill gas-to-energy and waste-to-energy projects
with tax credits. The resulting bioreactors could eventually help 80% of today's landfills
use their airspace more wisely. The tax credits should be able to boost renewable
energy project development.
Legislation is moving the processing and recycling sector of the industry also.
Communities that have been recycling for some time are finding it difficult to raise their
diversion rates. Many are imposing disposal bans on specific types of waste to be
recycled, such as e-waste. Overall garbage collection is becoming more difficult, not
easier. Cost increases in fuel, tires, and trucks and insurance are forcing haulers to be
more efficient. Haulers also are facing employee pressures. Metro area workers such
as those in Atlanta and Los Angeles have discussed forming unions. New federal rules
regarding training requirements, seat belts and idling limits are adding to the costs.

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3.3. Five Forces Analysis
In order to better understand the environment in which waste disposal companies
operate, an analysis will be conducted using Michael Porter’s Five Forces Model (Hitt,
Duane, & Hoskisson, 2005). These factors are important, as they affect the company’s
ability to serve its customers and make a profit. A change to any of these forces should
cause the company to re-evaluate the marketplace. The five factors, shown in Figure
3.3-1, consist of threat of entry, power of buyers, power of suppliers, threat of
substitutes, and competitive rivalry.
Figure 3.3-1: Porter’s Five Forces Model

(Source: EPA http://www.themanager.org/Models/p5f.htm
)

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3.3.1. The Threat of Entry
The threat of entry by new competitors in the waste disposal industry is
considered to be low. New entrants must overcome regulatory and legislative barriers
before they can compete in the waste market. At this time, there is no real threat of new
entrants into the market. This is due to two factors. The first is the control of landfills.
There are a few large companies in the industry that control the majority stake of all
landfills. This creates an almost impermeable barrier for anyone entering the market.
Whichever company controls the landfill sites in a geographic market, that firm has an
advantage over the entire waste disposal market. It would be a challenge for
competitors to obtain a new landfill site because of government regulations and
residents in the proposed area.
The second factor that slows entry into this market is the fact that many of the
larger firms operate under the strategy of acquiring new entrants in the market. This
makes it very difficult for smaller entrants in the market to effectively compete and grow
within the market. There is always the fear that the smaller firm will be overtaken by
one of the larger competitors in the industry. There are also restrictions due to the
amount of capital that is required for the smaller firms to participate in mergers and
acquisitions, in order to compete with the major firms in the industry.
3.3.2. The Power of Buyers
The power of buyers in the waste disposal industry is moderate to low.
Consumers in the past have had little bargaining power, but this is beginning to change.
Most agreements and contracts are negotiated with state and local government

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agencies. Many communities are allowing consumers to choose their own waste
collection service and the cities are instituting a ‘hands off’ approach to their operations.
This is creating an affordable and formidable substitute to removal of waste.
Consumers no longer have to abide with the contract that is accepted by the city
government and are able to make their own choices.
High switching costs can lead to low buyer power. This is primarily seen when a
city government is running the program. If a government entity wants to switch refuse
companies, the length of time involved is sometimes two to five years before a new bid
is released. It would cost the government a considerable amount of time and money in
the effort to switch refuse collection companies.
3.3.3. The Power of Suppliers
In evaluating the power of suppliers, it was found to be low to moderate.
Suppliers in the value chain are relatively few, but important. The larger waste disposal
companies own their own not-for-hire fleet of trucks in the United States; therefore, the
truck suppliers, as well as fuel providers, can significantly impact the profits of the
industry. The supply of waste disposal vehicles is in somewhat of an abundance due to
the amount of companies entering the supply chain to offer customized trucks for
specific firms in the industry. The waste disposal companies possess a certain degree
of bargaining power over suppliers of these vehicles due to large volume of the
purchases that waste disposal companies make every year.
While the supply of transportation is accessible, the availability of land for landfills
is not. It has been more and more difficult, due to government regulations and
consumer opposition in the process of obtaining land for additional landfills. It is even

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more difficult to obtain land in a favorable location in order to minimize the costs of
transportation.
3.3.4. The Threat of Substitutes
The treat of substitutes in the waste disposal industry is considerably low. Trash
is not something often thought about, until it is not picked up. What other disposal
options do consumers have? While recycling has become more popular, according to
David Steiner’s interview with the History Channel (April 23, 2006), recycling is not as
profitable as disposal. With the strict environmental regulations, customers have few
options for trash removal and disposal. Environmentalist may eventually have an
impact and recycling may become more profitable, but at the current time, trash
disposal options are very limited.
3.3.5. Competitive Rivalry
The waste disposal market is one that is very high when it comes to competitive
rivalry. The companies in this industry compete in a highly competitive market. These
firms face intense competition from governmental, quasi-governmental and private
sources in all aspects of its operations. In North America, the industry consists of large
national companies and small regional and local companies. There are also government
entities that operate in the industry in small counties and municipalities. Counties and
municipalities have advantages financially since tax revenues are accessible to their
operations, including tax-exempt financing. In the past, larger firms in the industry have
aggressively sought to purchase local and regional competitors in order to reduce the
competition. These major corporations have an advantage since they own most of the

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landfills in the country and control a majority of the market. The main competition arises
when competitors bid lower for a community waste disposal contracts. The larger
companies risk losing a share of that market when this occurs. Much of the competition
is based strictly on price, because other than customer service, there is a low level of
product differentiation in the services delivered.
3.4. Industry Competitive Analysis
The waste disposal business is a mature business characterized by a relatively
stable customer base. Competition is driven by local economic and demographic factors
as well as fluctuations in capacity utilization, in both the collection and landfill business.
Customer service satisfaction levels industry-wide are very high since the collection
customer has a very low tolerance for poor service. The following will provide a
summary of the major competitors in the industry and how their strategic moves affect
Waste Management, Inc. and the rest of the industry.
3.4.1. Industry Competitors
Waste Management, Inc. is the industry leader. The reason that it is number one
is because of the large amounts of resources it controls. Waste Management owns
roughly 290 landfills, 138 material recovery facilities, 85 beneficial-use landfill gas
projects, and 17 waste-to-energy plants. This is a considerable amount of resources
when compared with the other competitors in the industry.
While the industry has a vast amount of competitors, including national, regional
and governmental agencies, the main comparison will focus on Allied Waste Industries,

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Inc and Republic Services, Inc., who are currently the number two and number three
competitors in the industry.
Allied Waste Industries, Inc.
Allied Waste Industries, Inc. (AW) is number two in the industry in terms of
revenue dollars and employees. The publicly traded company provides collection,
transfer, recycling, and disposal services. Allied Waste operates 169 landfills, 166
transfer stations, and 57 recycling facilities. The company provides disposal services
for approximately 10 million residential, commercial, and industrial customers. It
operates in 122 major markets in 37 states and Puerto Rico. The company is vertically
integrated in the pickup of refuse and delivery to landfill sites.
Allied Waste considers the waste collection and disposal business to be a local
business. Therefore, the operations’ characteristics and opportunities differ in each of
its markets. By combining local operating management with standards for best
practices, Allied strives to standardize the common practices across the company. This
is done while maintaining the day-to-day operating decisions at the local level, which is
closest to the customer. The company implements this philosophy by organizing the
operations into a corporate, region and district infrastructure. Allied’s management
believes this model allows them to maximize the growth and development opportunities
in each of its markets. This contributes to its ability to operate the business efficiently,
while maintaining effective controls and standards over its operations and administrative
matters, including financial reporting (Allied Waste Industries, 2005).
Allied has grown from a revenue base of 35 million in 1992 to over 5 billion in
2004. This was due to a number of major acquisitions. The first was Laidlaw, Inc. in

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1996 and then Browning-Ferris Industries followed in 1999. The firm has continued to
acquire smaller companies within the waste industry that provide additional
infrastructure, such as landfills and transfer stations. This also includes companies that
currently deliver refuse into its existing collection stations. Table 3.4-1 shows some of
the primary financial ratios to provide more insight to the performance, size, and
efficiency of the firm.

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Profitability
Profit Margin 3.55%
Operating Margin 15.73%
Management Effectiveness
Return on Assets 4.16%
Return on Equity 6.41%
Income Statement
Revenue 5.73B
Revenue Per Share 17.54
Gross Profit 1.99B
Balance Sheet
Total Cash 56.10M

Total Cash Per Share 0.169
Total Debt 7.09B
Total Debt/Equity 2.062
Current Ratio 0.584
Book Value Per Share 7.625
Cash Flow Statement

Operating Cash Flow 716.60M
Levered Free Cash Flow -193.45M
Table 3.4-1: Current Financial Information for Allied Waste Industries, Inc.
(Source: Allied Waste Industries, Inc. at Yahoo Finance, 2006)
During 2005, Allied’s waste organic revenue growth increased 5.0%, offset by an
approximately 1% decrease in recycled commodities revenue. The organic revenue
growth was driven by increases in average price per unit of approximately 2.2%,
including fuel recovery fees, and volume increases of approximately 2.8%. Operating
income for fiscal 2005 increased by $29.1 million over the fiscal year 2004. Most of the
operating costs increased from volume increases and normal inflation.

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Republic Services, Inc.
Republic Services, Inc. is the third largest company in the industry. The
company owns and operates 92 transfer stations, 59 solid waste landfills, and 32
recycling facilities. There focus strategy is in the high growth markets throughout the
Sunbelt. The markets of California, Florida, Georgia, Nevada, North Carolina, South
Carolina and Texas are included in the Sunbelt region. It also serves markets in 21
states.
The solid waste industry experienced a period of rapid consolidation in the late
1990’s. During that time Republic was able to grow significantly through acquisitions.
However, acquisitions in the industry have slowed considerably since late 1999.
Despite this, the company believes that the opportunity to grow through acquisitions still
exists, albeit at a slower pace than experienced in previous years (Republic Services,
2005). The company has continued to reinvest in its existing fleet of vehicles,
equipment, and landfills. This strategy is a “Grass Roots” internal strategy for growth.
Its business is built by increasing the customer base and expanding existing landfills.
A key component of Republic’s financial strategy, as well as the other
competitors in the industry, is the ability to generate free cash flow. Republic believes
that free cash flow is a driver of shareholder value and provides useful information
regarding the recurring cash provided by its operating activities after expenditures for
property and equipment. Free cash flow also demonstrates management’s ability to
execute its financial strategy. Consequently, Republic has developed incentive
programs and conducts monthly field operating reviews that help focus the entire
company on the importance of increasing free cash flow.

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If the company is unable to identify opportunities that increase growth, it intends
to continue to use the free cash flow to repurchase shares of common stock at prices
that provide value to its stockholders. As of December 31, 2005, the company had
repurchased a total of 51.5 million shares, or approximately 29% of its common stock
outstanding at the commencement of its share repurchase. In January 2006, the board
of directors authorized the repurchase of up to an additional $275.0 million of its
common stock. Republic believes, as does Waste Management, that its share
repurchase program will continue to enhance stockholder value. Table 3.4-2 shows
some of primary financial ratios to provide more insight to the performance, size, and
efficiency of the firm.

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Profitability
Profit Margin 8.86%
Operating Margin 16.66%
Management Effectiveness
Return on Assets 6.62%
Return on Equity 14.59%
Income Statement
Revenue 2.86B
Revenue Per Share 20.112
Gross Profit 1.06B
Balance Sheet
Total Cash 131.8M
Total Cash Per Share 0.959
Total Debt 1.48B
Total Debt/Equity 0.919
Current Ratio 0.723
Book Value Per Share 11.586
Cash Flow Statement

Operating Cash Flow 767.50M
Levered Free Cash Flow 497.63M
Table 3.4-2: Current Financial Information for Republic Services, Inc.

(Source: Republic Services, Inc. at Yahoo Finance, 2006)
The current trend toward consolidation in the solid waste services industry is
further supported by the increasing tendency of a number of municipalities to privatize
their waste disposal operations. Privatization of municipal waste operations is often an
attractive alternative to funding the changes required by Subtitle D of the Resource
Conservation and Recovery Act of 1976. Privatization of municipal waste operations is

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a threat and an opportunity to all public companies that currently operate in this
industry.
3.4.2. Anticipated Competitors Strategic Moves
Allied’s business strategy is aimed at increasing revenue and earnings through
profitable growth, improving returns on invested capital, and maximizing free cash flow
to repay debt. The components of the firm’s strategy include operating as a vertically
integrated, non-hazardous solid waste service business. Allied implements a best
practices program throughout the organization and manages its businesses locally with
a strong operations focus on customer service. Through market rationalization, they
maintain and improve their marketing position. By maintaining the financial capacity
and effective administrative systems and controls, this helps support on-going
operations and future growth. There is also an accelerated move to purchase new
waste collection trucks to offset near term maintenance costs. This will provide the firm
a more advanced and generally new fleet of trucks to compete with others in the
industry. These new trucks may also bring about new methods of collection that will
provide increased amounts of waste to be gathered and disposed of at a faster rate
then their competitors.
Allied Waste also follows the same corporate strategy as Waste Management.
The industry is mature, so growth is either organic or by mergers and acquisitions. In
the fourth quarter of 2005, the company realigned its geographic operating regions from
nine to five, as well as reallocated resources in an attempt to be more operationally
efficient. The further optimization and consolidation of their resources will allow them to

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gain an advantage over Waste Management, who is currently operating on a much
broader scale.
Republic’s operating strategy seeks to leverage existing assets and revenue
growth to increase operating margins and enhance stockholder value. Its operating
strategy to accomplish this goal is to utilize the extensive industry knowledge and
experience of our executive management. The company will institute a decentralized
management structure in overseeing the day-to-day operations that take place. There
will be integration of their waste operations to improve operating margins through
economies of scale, cost efficiencies and asset utilization. This helps to achieve high
levels of customer satisfaction. The firm also utilizes systems to improve consistency in
financial and operational performance
Republic has presence in high growth markets throughout the Sunbelt and in
other domestic markets that have experienced higher than average population growth
during the past several years. This supports the company’s internal growth strategy.
Republic believes that its presence in these markets will provide opportunities for the
company to experience growth at rates that are generally higher than the industry’s
overall growth rate. This could drastically increase the competition in certain markets
where Waste Management operates; ultimately losing some of these markets if the
competition is too fierce.
3.4.3. Summary of Competitive Analysis
Waste Management, Inc. exists in an industry that has many competitors in all
sizes of markets. There are currently two primary companies that compete with WMI in
many different areas of operation. Due to the decline in the number and occurrence of

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mergers and acquisitions, there is a greater need for internal organic growth. There is
also a need to update their current trucking fleets to take advantage of recent
technologies. This will help reduce the collection costs and the amount spent on fuel
and maintenance for their fleets. This plan strives to increase the efficiency of the high
asset infrastructure that is indicative of the industry.
3.4.4. Key Success Factors
There are several key success factors that are critical for a company in this
market to succeed. These include the use of research and development technology in
the waste industry to improve service and minimize environmental impact. This
technology can help extend the life of their current trucking fleets and find new ways to
decrease the amount of expenses due to rising fuel prices and maintenance costs. This
new technology could also be used to increase the efficiencies of the day to day
operations of the firm. New software programs could help determine what portions of
the industry need to be advanced. This could relate to the development of future
methods of waste disposal to increases in customer service across all markets of
competition.
With the market and government regulations demanding more environmentally
conscious services, there is an increased need for ‘Greener’ methods of waste disposal.
Since the lack of landfill space is becoming a major concern, the processes for waste
disposal need to be upgraded and expanded upon. This will include the increasing
need for recycling and waste-to-energy programs. By creating new programs that
increase efforts in recycling and yard waste disposal, this will increase the amount of
current landfill space and slow down the filling of these sites.

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3.5. Summary of External Analysis
The solid waste management industry provides a vital public service that often
goes unseen and operates in the background. The service performed ensures the
health and safety of citizens across America. The demand on the industry depends on
the volume of waste generated, which depends on the level of economic activity and
consumer spending. The profitability of individual companies depends on efficient
operations, because the service is a commodity solely based on price. Big companies
have large efficiencies of scale in operations. Small companies can compete
successfully by offering specialized services or serving local markets. Waste
management involves primarily the collection, transfer, and disposal in landfills of non-
hazardous, solid waste. Companies may also handle and treat hazardous, low-level
radioactive, and liquid wastes. The business is conceptually simple: trash is collected
from businesses, industrial sites, and residences, and is buried. Waste management is
closely related to a number of issues such as urban lifestyles, resource consumption
patterns, jobs and income levels, and other socio-economic/cultural factors.

Section 4.0 – Internal Analysis
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4.0 Internal Analysis
The internal analysis is a very important in determining the core competencies
that exist within a firm. These are the firm’s competitive advantages. The internal
analysis evaluates the capabilities and resources that a firm possesses which relates to
achieving core competencies. This helps to develop solutions and creates a
competitive advantage in the industry. This ultimately provides a strategic
competitiveness the company can use to ensure a profitable future. The analysis
consists of an organizational analysis, the analysis of the firm’s resources, the
objectives of the firm, and an evaluation of its financial performance. This ultimately
leads to a strategic and value chain analysis and concludes with a SWOT analysis for
the firm.
4.1. Organizational Analysis
Waste Management, Inc. is the leading provider of comprehensive waste
management and environmental services in North America. It is headquartered in
Houston, Texas. The company is successful through strong leadership, environmental
services, fleet maintenance, and landfill gas projects.
This section evaluates Waste Management’s organizational structure, resources,
strategies, objectives and financial performance.
4.1.1. Corporate Vision and Mission
Waste Management’s primary goal is to have a focused, world-class supply base
firmly in place and readily accessible, producing a sustainable competitive advantage in

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every corner of their business. It plans on accomplishing this by developing and
delivering meaningful business results. The firm will identify and pursue real business
opportunities to help solve current business problems. They also plan to develop loyal,
skilled, productive, and innovative suppliers. Waste Management will implement and
continually upgrading the best processes, systems, and tools available, while designing,
aligning, and building an organization of highly skilled, business-oriented procurement
professionals. Their mission statement is: “The Company's primary objective is to
maximize stockholder value, while adhering to the laws of the jurisdictions within which
it operates and observing the highest ethical standards” (Waste Management, 2006).
4.1.2. Leadership
Waste Management’s leadership and management teams have enabled it to
become the industry leader. The Corporate Governance Guidelines gives an overview
of the Board of Directors’ mission, responsibilities, structure and operations. The Board
of Directors has nine members and they are responsible for representing the
stockholders, delegating authority to management to pursue the company’s mission,
selecting and evaluating the CEO, overseeing the succession plans, determining the
compensation of senior management, approving annual budgets, advising management
on strategic plans and reviewing systems, procedures, and controls (Waste
Management, 2006). Waste Management’s Chief Executive Officer is David P. Steiner,
who has a bachelor’s degree in accounting from Louisiana State University and a Juris
Doctorate from the University of California in Los Angeles. Under his leadership, the
company's focus on the environment and workplace safety continues to yield results.
The company continues to deliver a strong business performance. This year, Waste

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Management has been selected as the winner of the "Corporate Vision Award" from
Keep America Beautiful for its ongoing work in environmental stewardship. Also this
year, the Wildlife Habitat Council has awarded six of the company's waste and disposal
facilities with certifications for environmental excellence (E.J. Ourso College of
Business, 2006).
4.1.3. Culture
Waste Management is strongly committed to upholding ethical standards and
promoting diversity and inclusion. To ensure this, all employees and others performing
work on behalf of the company are expected to adhere to the laws and regulations that
apply to their work activities and demonstrate ethical behavior in all their decisions and
interactions. The company also established a Business Ethics and Diversity
Department to oversee implementation of the program. One of the tactics used is
ensuring that each employee has a copy of the Focus on Integrity and Inclusion, which
is the company’s Code of Conduct.
Waste Management’s Environmental Management System (EMS) enables the
company to work on continuous improvements in operations by measuring and
evaluating its environmental performance. It consists of five components: WM
Environmental Policy, Planning, Implementation, Assessment and Corrective Action,
and Management Review Process.
Waste Management is involved in local and company wide organizations. It also
supports many events and celebrations through sponsorship, extending services, or
providing employee volunteers. Some of the programs WMI are involved in are
America Recycle Day, Rockin the Corps, Earth Day Celebrations, Conference of

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Mayors City Livability Program, and Wildlife Habitat Council’s habitat management
programs (Waste Management, 2004).
4.1.4. Structure
Waste Management provides solid waste collection, recycling and disposal
options to homes, communities, businesses, and major industries. To help accomplish
such tasks, the company owns the majority of Recycle America Alliance and partners
with Sharp Compliance, Inc. for needle disposals. It is also involved in many projects
regarding converting Waste-To-Energy and Gas-To-Energy (Waste Management,
2004).
4.1.5. Summary of Organizational Analysis
Waste Management operates domestically primarily in the areas of waste
collections, recycling, and disposals. They participate in many programs and
community efforts to enhance their brand image of a ‘green’ company. There have also
been numerous awards given to the firm for their environmentally conscious initiatives.
The company has great leadership and employee dedication, which is ultimately how it
is able to show continuous improvements in its performance.
4.2. Analysis of Firm Resources
Resources, capabilities and core competencies are the characteristics that make
up the foundation of competitive advantage. Resources are inputs into a firm’s
production process and can be classified into three categories: physical, human, and
organizational. Capabilities are the firm’s capacity to deploy resources that have been
purposely integrated to achieve a desired end state. Core Competencies are resources
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and capabilities that serve as a source of a firm’s competitive advantage over rivals.
Basically, resources are the source of a firm’s capabilities; capabilities are the source of
a firm’s core competencies, which are the basis of competitive advantages (Hitt, Ireland,
& Hoskisson, 2005).
4.2.1. Tangible Resources
Tangible resources are assets that can be seen and quantified. The four types of
tangible resources are financial, organizational, physical, and technological (Hitt,
Ireland, & Hoskisson, 2005).
Financial: STRONG
In 2005 Waste Management repurchased 24.7 million shares of common stock,
totaling $706 million. The company produced nearly $2.4 billion in net cash from
operating activities and over $1.4 billion of free cash flow. In 2004 the company
generated $2.2 billion in net cash from operating costs and over $1.05 billion in free
cash flow. WMI’s net cash provided by operating activities has gradually increased from
2002 – 2005. The company credits the recent success to a reduction in income tax
return expenditures resulting from favorable tax audit settlements and after-tax charges
related to asset impairments (Waste Management, 2006).
Organizational: MODERATELY STRONG
Waste Management’s primary objective is to maximize stockholder value, while
adhering to the laws of the jurisdictions within which it operates and observing the
highest ethical standards. The company’s Board of Directors represents the
stockholders by following the Corporate Governance Guidelines. These guidelines
cover the mission, responsibilities, structure and operations of the board members.

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Waste Management is headquartered in Houston, Texas, but has facilities
throughout United States, as well as, Canada and Puerto Rico. It also has facilities in
Hawaii and Alaska. The company is geared towards developing and delivering
meaningful business results in these areas (Waste Management, 2006).
Physical: STRONG
Waste Management has the following regional group offices: Eastern,
Midwestern, Southern, and Western. The firm also owns the subsidiaries Wheelabrator
Technologies Inc in Hampton, NH and Recycle America in Houston, TX.
Eastern - The Eastern group office is located in Fairless Hills, PA. It is
responsible for CT, DC, DE, MA, MD, ME, NH, NJ, NY, PA, RI, VA, VT and WV. In this
region there are 44 landfills and 7 disposal sites. It had total revenue (in millions) of
$3,578 in 2004, $3,442 in 2003, and $3,338 in 2002.
Midwestern – The Midwestern group office is located in Lombard, IL and is
responsible for the following states: CO, IA, IL, IN, KS, KY, MI, MN, MO, MT, OH, ND,
NE, SD, UT, WI and WY. There are 71 landfills and 8 disposal sites in this region. It
had total revenue (in millions) of $2,698 in 2004, $2,601 in 2003 and $2,616 in 2002.
Southern – The Southern group office is located in Atlanta, GA and is
responsible for the following states: AL, AR, FL, GA, LA, MS, NC, OK, PR, SC, TN, and
TX. There are 81 landfills and 13 disposal sites in this region. It had total revenue (in
millions) of $3,480 in 2004, $3,149 in 2003 and $3,105 in 2002.
Western – The Western group office is located in Scottsdale, AZ and is
responsible for the following states: AK, AZ, HI, ID, CA, NM, NV, OR, CA, and WA.

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There are 36 landfills and 5 disposal sites in this region. It had total revenue (in
millions) of $2,711 in 2004, $2,560 in 2003 and $2,506 in 2002.
Canadian – The Canadian group office is located Toronto, ON and is
responsible for Newfoundland, Nova Scotia, Ontario, Montreal, Quebec, Greater
Toronto, SW Ontario, Alberta, Manitoba, Saskatchewan, and British Columbia. There
are 12 landfills and 5 disposal sites in this region. It had total revenue (in millions) of
$635 in 2004, $573 in 2003 and $524 in 2002 .
Wheelabrator – The Wheelabrator Technologies, Inc. office is located in
Hampton, NH. There are 4 landfills in this area. It had total revenue (in millions) of
$835 in 2004, $819 in 2003 and $789 in 2002 (SEC Info, 2004).
Technological: STRONG
Waste Management invests time and resources in the development of innovative
ideas that are used to address issues surrounding the quality of our earth, air and water.
The company joins resources with regulatory commissions, communities, citizens and
other companies to seek solutions together. These solutions have come through
extensive research in bioreactor landfill technology, waste-to-energy practices, and gas-
to-energy practices.
Bioreactor landfill technology represents the next generation in landfill design and
operational practices. It accelerates the biological decomposition of organic wastes in a
landfill by promoting conditions necessary for the microorganisms that degrade the
waste. In practice, this is accomplished by controlling the addition and removal of
moisture from the waste mass, the collection and extraction of landfill gas, and in some
instances the addition of air (Waste Management, 2004). Waste Management signed a

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Cooperative Research and Development Agreement (CRADA), which is a joint research
effort with the Environmental Protection Agency (EPA), to determine which practices
best promote the safe operation of large scale bioreactor landfills (Bioreactors, 2005).
Waste Management has been successful by delivering waste-to-energy projects,
which provide alternate fuels and saving space in local landfills. Its Wheelabrator
division has converted 100 million tons of non-hazardous municipal solid waste into
more than 50 billion kilowatt-hours of clean, reliable power (Wheelabrator Technologies,
2004).
Waste Management has also been successful through its landfill gas-to-energy
projects, which minimize emissions of greenhouse gases as well as generate energy to
power 160,000 homes each day. The gas is a renewable energy source that can be
gathered and used directly as medium Btu gas for industrial use or can be sold to gas-
to-energy plants to fuel engine or turbine-driven generators, which generate electricity
(Waste Management, 2004).
4.2.2. Intangible Resources
Intangible resources include assets that typically are rooted deeply in the firm’s
history and have accumulated over time. The three types of intangible resources are
human, innovation, and reputational (Hitt, Ireland, & Hoskisson, 2005).
Human Resources: MODERATLEY STRONG
Maury Myers, Chairman of Board, once said, “Great companies are admired for
their products, services, people and integrity. We want to be a great company.” Waste
Management is fully committed to becoming a “great company” by upholding ethical
standards and promoting diversity and inclusion.

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All employees are expected to follow laws and regulations that apply to their work
activities and demonstrate ethical behavior in all their decisions and interactions. Some
initiatives taken to ensure this are providing each employee with a current and relevant
Code of Conduct, and developing and delivering diversity and inclusion training to all
employees with people management responsibilities.
Safety is also a core value to Waste Management. Therefore, it monitors and
measures safety performance on a continuing basis. Mission to Zero (M2Z) is a Safety
Certification Training that provides classroom and on the job site instruction in safety
fundamentals for supervisors, drivers and helpers. M2Z means zero tolerance for
unsafe actions, unsafe decisions, unsafe conditions, unsafe equipment, and unsafe
attitudes (Waste Management, 2004).
Innovation Resources: STRONG
Waste Management is actively involved in several projects that address issues
surrounding the quality of our earth, air, and water. These projects focus on preserving
electricity, taking waste and gases and converting them to energy, and recycling.
Arizona’s Gray Wolf Landfill is fueled by the sun. It is the first commercial
application of Arizona Public Service (APS) solar hybrid power system and new type of
solar panels. It uses solar power with battery storage and diesel backup. The electricity
bill has decreased $2000 per month due to switching to a solar hybrid power system.
The Goddard Space Flight Center landfill gas project is the first federal agency to
use landfill gas to produce energy to one of its facilities. It uses renewable energy
sources to heat buildings at the flight center located in Greenbelt, Maryland. The
reduction in fossil fuels used will save taxpayers millions of dollars over the next 10

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years. It will also reduce enough pollution to equate to planting 47,000 acres of trees or
removing 35,000 cars from Maryland’s roads.
Waste Management is partnered with BMW and Ameresco Energy Service to
create a methane gas-to-energy project. It produces electricity and hot water that will
supply 25% of the plant’s energy. This helps stabilize the plant’s power costs. Because
of this, BMW is one of the largest private holders of greenhouse gas emissions
reduction credit in the U.S.
Waste Management formed the Recycling America Alliance, which provides
recycling, materials to brokerage services, container processing, and trading. Its main
objective is to optimize the capacity and improve profitability of Company’s recycling line
of business by combining assets and operations with a number of other key domestic
recycling processors and marketers.
Waste Management joined forces with the Chicago Climate Exchange (CCX), a
non-governmental entity established to develop a voluntary marketplace for reducing
and trading greenhouse gas emissions. As a member, the company has committed to
reducing its emissions of greenhouse gases by 4% below average of its 1998-2001
baselines by 2006. In 2002 WM donated 120,000 metric tons of carbon dioxide needed
to offset the additional carbon dioxide emissions anticipated from 2002 Olympic Winter
Games. The donation helped to create the first game in Olympic history to have net
zero effect on air quality of a host city (Innovative Projects, 2004).
Reputational Resources: MODERATLY STRONG
Waste Management is the leading provider of comprehensive waste
management and environment services in North America. It is ranked 168 on the

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Fortune 500 list and 370 in the Fortune Global 500. The company is a member of the
Better Business Bureau (BBB) since September 2001. Based on the BBB files, the
company has a satisfactory record (Better Business Bureau, 2006).
Waste Management is very active in the community due its concern for issues
regarding quality of our earth, air, and water. It has sponsored programs such as
“Rockin the Corps” and America Recycles Day. This year the company is receiving the
Corporate Vision Award from Keep America Beautiful. The company has also received
the Corporate Award and the President’s Award from the National Forum for Black
Public Administrators and the National Conference of Black Mayors respectively.
4.2.3. Capabilities
Capabilities are the firm’s capacity to deploy resources that have been purposely
integrated to achieve a desired end state. They emerge over time through complex
interactions among tangible and intangible resources (Hitt, Ireland, & Hoskisson, 2005).
Waste Management’s capabilities are waste-to-energy, gas-to-energy, and bioreactor
landfill technology.
Waste Management and Wheelabrator convert 100 million tons of non-
hazardous municipal solid waste into more than 50 billion kilowatt-hours of clean,
reliable electric. With the cost of electricity continuously rising, the company should
further its research in such a way they could become a competitor within the power
industry.
Waste Management is also involved on projects that convert gas-to-energy. The
Landfill gas is produced through the natural breakdown of waste deposited in a landfill.
The gas becomes available as a renewable energy source that can be gathered and

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directly used for industrial use or can be sold to gas-to-energy plants to fuel engine or
turbine-driven generators, which generate electricity (Waste Management, 2004). If
studies show that it is more cost effective for traditional plants to convert to gas-to-
energy plants, then WM can become a leading provider of such services. With the
shortage of fuel throughout the country, this option should be considered by industrial
institutions. These companies should have their R&D department consider developing
a plan that would enable them to convert to a gas-to-energy plant.
It is believed that Bioreactor Landfill Technology represents the next generation
of landfill design and operational practices. Waste Management is leading the industry
in this area, with involvement in several research projects for such practices. This puts
the organization at an advantage over their competitors and can enable the firm to
maintain the lead position within the industry.
4.2.4. Core Competencies and Sustainable Advantages
Core competencies are resources and capabilities that serve as a source of a
firm’s competitive advantage over rivals. Capabilities that are valuable, rare, costly to
imitate, and non-substitutable are core competencies (Hitt, Ireland, & Hoskisson, 2005).
Valuable: MODERATELY YES
Valuable capabilities allow the firm to exploit opportunities or neutralize threats in
its external environment. This permit’s the firm to create value for customers (Hitt,
Ireland, & Hoskisson, 2005). Waste Management’s ability to collect and dispose waste,
recycle and convert waste-to-energy/gas-to-energy has created a “one-stop shop” for its
customers. The company also powers a portion of its trucks with natural gas versus

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diesel fuel. These attributes help portray a company image to society as being one of
extreme concern for the environment (Datamonitor, 2005).
Rare: YES
Rare capabilities are capabilities that few, if any, competitors possess. Waste
Management works with businesses, industries, and public utilities to convert and
distribute landfill gas that is converted to a reliable, renewable energy source. The
company also powers a portion of its trucks with natural gas versus diesel fuel
(Datamonitor, 2005). Although their competitors are collecting and disposing waste,
WMI is the only one currently involved in projects that converts gas and waste to
energy.
Costly to Imitate: MODERATELY YES
Costly-to-imitate capabilities are capabilities that other firms cannot easily
develop. Capabilities that are costly-to-imitate are created because a firm has a unique
and valuable organizational culture that emerged in the early stages of the company’s
history, a link between the firm’s capabilities and its competitive advantage is casually
ambiguous or social complexity (Hitt, Ireland, & Hoskisson, 2005). Waste Management
is the leading provider of waste management and environmental services.
Unfortunately its competitors are able to provide most of the same services. The
competitors have not begun projects involving the waste-to-energy or gas-to-energy. All
other services they are able to provide.
Non-Substitutable: MODERATELY YES
Non-substitutable capabilities are capabilities that do not have strategic
equivalent valuable resources that are either not rare or imitable (Hitt, Ireland, &

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Hoskisson, 2005). The only substitution for using energy as a source of power is fuel.
We constantly hear of shortage within the oil and gas industry. For Waste Management
to be developing alternatives now and not later, puts the company at a competitive
advantage over its competitors.
The only capability that meets the four criteria for sustainable advantage is the
technological capability: waste-to-energy and gas-to-energy projects.
4.2.5. Summary of Firm Resources
Waste Management has more intangible resources than intangible resources.
To improve its financial resources, it needs to work on lowering the firm’s debt to allow
Waste Management the ability to increase spending on capital projects. This would
ultimately improve its physical resources.
The three strongest resources are its technological, innovative, and physical
resources. The capabilities that add the greatest value to Waste Management are the
technological and innovative competencies.
4.3. Analysis of Objectives
Waste Management’s objectives reflect on previous business ventures, current
plans, and prospective deals. This is needed in order to succeed in any business, since
the firm will never know where they are headed if they did not know where they came
from or what state they are in at the present moment.
4.3.1. Previous Principal Operational Focus
Previously Waste Management’s primary focus was on solid waste collection,
recycling, and disposals. With the various competitors within this market, a new niche
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was needed. So many innovative projects were implemented to maintain that
competitive advantage the company possessed.
4.3.2. Short-Term Objectives
Waste Management, Inc. strives to continuously train its employees. The
company feels that the organization itself can continue to grow if they develop skilled,
business-oriented procurement professionals. The company is also involved in many
projects that convert Waste-to-Energy and Gas-to-Energy. Many of these projects have
enabled the company to supply power to facilities, as well as, fuel their vehicles.
4.3.3. Long-Term and Financial Objectives
In the future, Waste Management plans on looking for acquisitions and other
investments to improve current operations’ performance and enhance and expand
services. The company has a large amount of debt and to help suppress it, divestures
of under-performing operations are being implemented. Also, the company plans on
making investments in their landfill Gas-to-Energy, medical waste programs, and land
purchases.
4.4. Evaluation of Financial Performance (2005, 2004, 2003)
In the financial evaluation section, analysis of the company’s performance for the
past five years will be conducted. This performance will be compared to their nearest
competitor, as well as the industry and the S&P 500 when applicable and/or available.
The information was gathered from various sources, including the company’s 10K, the
competitor’s 10K, Yahoo! Finance, Morningstar, and Moneycentral.

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4.4.1. Financial Condition Analysis
The waste management industry has been a difficult industry in which to do
business during the past ten years, although the most recent five years have shown
improvement. The past three years have reflected steadily growing revenues and
earnings. When comparing Waste Management’s stock to its competitors’, the stock
shows mixed success. Morningstar currently gives Waste Management, Inc. stock a B+
rating, which means that the stock should offer a “fair return,” one that adequately
compensates for the riskiness of the stock. The following information will further
evaluate and provide an in-depth view of the financial condition of the company.
4.4.2. Profitability
Years of questionable accounting resulted in massive earnings restatements,
rendering the company profitless from 1997 to 2000. There are only two ways to
increase profit margins, either by increasing revenues or decreasing costs. Waste
Management’s revenues have continued to grow over the past five years and the
company has worked to contain costs. This effort is reflected in recent years and Waste
Management’s performance has improved as evidenced by looking at the bottom line
on the income statement, which is provided below in Table 4.4-1.

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Condensed Consolidated Statements of Operations
(In Millions, Except per Share Amounts, Unaudited)
Years Ended December 31

2005 2004 2003 2002 2001
Operating Revenues 13,074 12,516 11,574 11,142 11,322
Costs and expenses:

Operating (excluded dep) 8,631 8,228 7,517 6,880 6,666
Selling, general, and administrative 1,276 1,267 1,216 1,392 1,622
Depreciation and amortization 1,361 1,336 1,265 1,222 1,371
Restructuring 28 (1) 44 38 -
Asset impairments and unusual items 68 (13) (8) (34) 380
Total costs and expenses: 11,364 10,817 10,034 9,498 10,039
Income from operations 1,710 1,699 1,540 1,644 1,283
Other Income (expense):

Interest expense (496) (455) (439) (467) (544)
Interest income 31 70 12 21 37
Equity in net losses of unconsolidated entities (107) (98) - -
Minority interest (48) (36) (6) (7) (5)
Other, net 2 (2) 16 51 13
Total other: (618) (521) (417) (402) (499)
Income before taxes and cumulative effect

of change in accounting principle 1,092 1,178 1,123 1,242 784
Provision for (benefit from) income taxes (90) 247 404 422 283
1,182 931 719 820 501
Cumulative effect of change in accounting
principle - 8 (89) 2 2
Net income 1,182 939 630 822 503
Table 4.4-1: Waste Management, Inc. Income Statements
(Source: www.wm.com, 2006)
While the company has demonstrated improvements to its net margins, which is
a key profitability measure, through cost-cutting, efficiency improvements and tax
incentives, the operating and EBT margins do not reflect the same improvements. The
average five-year net margins of both Waste Management and their nearest competitor,
Republic Service, are below that of the industry average, as shown in Table 4.4-2.

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Waste Management=WM 5 yr avg

Republic Service=RS 2005 2004 2003 2002 2001 Company Industry
Operating Margin: WM 13.10% 13.60% 13.30% 14.80% 11.30% 13.22%
Operating Margin: RS 16.70% 16.70% 16.40% 19.40% 12.60% 16.36%
EBT Margin: WM 8.40% 9.40% 9.70% 11.20% 7.00% 9.14% 8.4%
EBT Margin: RS 14.30% 14.20% 13.80% 16.30% 9.30% 13.58%
Net Margin: WM 9.00% 7.50% 5.40% 7.30% 4.40% 6.72% 5.5%
Net Margin: RS 8.86 8.78 7.05 13.13 5.56 8.676
Table 4.4-2: Waste Management, Inc. and Republic Services Margins
4.4.3. Management Effectiveness Ratios
The management effectiveness analysis shows an improvement in returns on
assets (ROA) and in returns on equity (ROE) in the past five years, as seen in Table
4.4-3. The improvements to return on assets have more than doubled in the past five
years, going from 2.6% to 5.6%. This reveals a significant improvement in management
effectiveness in generating profits from available assets and is perhaps the single most
important measure of return, especially for a company that has such considerable
dollars invested in assets.
Waste Management: 2005 2004 2003 2002 2001

Return on Assets % 5.6 4.5 3.1 4.1 2.6
Industry Rank 29 35 25 34 26
Return on Equity % 19.3 15.7 11.2 15.5 9.3
Industry Rank 26 32 23 26 22
Ranking: (100=Worst)
Table 4.4-3: Waste Management, Inc. ROA, ROE, and Industry Rank
Return on equity is extension of ROA. In Waste Management’s case, the ROE
for 2005 shows an annual payoff to investors that amounts to 19.3 cents for every dollar
of equity. Table 4.4-4 illustrates the five year average of ROE, ROA and ROC as
compared to the industry and the S&P 500.

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Investment Returns % Waste Management Industry S&P 500

Return On Equity (5-Year Avg.) 14.7 11.7 12.4
Return On Assets (5-Year Avg.) 4.1 2.9 2.1
Return On Capital (5-Year Avg.) 6.1 4.2 5.8
Table 4.4-4: Waste Management, Inc. Industry, and S&P 500 ROA, ROE, and ROC – 5
Year Average
4.4.4. Debt, Working Capital, and Liquidity Analysis
The majority of the companies in the waste management industry have a lot of
debt, and Waste Management is no exception. In fact, its debt/total capitalization ratio
is among the highest in the industry, measuring at 58.7%. The industry standard is
21.4%. This is not necessarily damaging, as long as the company is able to service its
debt; at the current time, the company’s cash flow is sufficient to cover its debt.
Measurement: Last 12 months Waste Management

S&P Industry Republic 2005 2004 2003 2002 2001
Long-Term Debt:
(in millions) 1,472 8,165 8,182 7,997 8,062 7,709
Debt/Equity: 1.04 1.46 0.90 1.33 1.37 1.44 1.52 1.43
Debt Ratio: 0.65 0.70 0.70 0.72 0.73 0.72
Current Ratio: 1.40 1.00 0.72 1.06 0.88 0.78 0.86 0.84
Financial Leverage: 5.70 3.60 2.80 3.50 3.50 3.60 3.80 3.60
Net Working Capital: 194 -386 -744 -473 -597
Table 4.4-5: Waste Management, Inc. Debt, Working Capital, and Liquidity
While the debt/equity ratio is improving, it still stands at 1.33, meaning the
company has $1.33 of long-term debt for every dollar of stockholder’s equity. The net
working capital, calculated by subtracting current assets from current liabilities, returned
a positive $194 million in 2005 after several years of negative values. These are shown
in Tables 4.4-5 and Tables 4.4-6.

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Waste Management Condensed Balance Sheet

for the year ended December 31, 2005
Assets $Mil Liabilities and Equity $Mil

Cash 666.0 Current Liabilities 3,257.0
Other Current Assets 2,785.0 Long-Term Liabilities 8,165.0
Long-Term Assets 17,684.0 Other Liabilities 3,592.0
Total 21,135.0 Shareholders' Equity 6,121.0
Total 21,135.0
Table 4.4-6: Waste Management, Inc. Condensed Balance Sheet

During 2005, Waste Management returned nearly $1.2 billion to its shareholders
through share repurchases and quarterly dividends. The company had a strong cash
balance at year-end and portions of the cash was used to execute a $291 million
accelerated share repurchase in early 2006. Although the repurchases and dividends
may help to boost the stock price, it may leave the company short of cash and
borrowing capability if it were to need cash to grow. The company would probably have
to raise additional capital from outside sources if it continues to grow at its current rate.
4.4.5. Management Efficiency
The management efficiency ratios are presented below in Table 4.4-7. The
company has completed major restructuring in the past five years and has significantly
reduced their headcount and layers of management. This allows them to produce
better ratios for income/employee and revenue/employee ratios than the industry. The
company has major investments in assets and the asset turnover ratio is in-line with the
industry. The company has also been focusing on improving its past due collections,

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enabling the company to turn its receivables faster than both the industry and the S&P
500, which has a positive effect on the cash cycle.
Ratio: Waste Management Industry S&P 500
Income/Employee 24,000 16,000 30,000
Revenue/Employee 261,000 228,000 362,000
Receivable Turnover 6.6 7.1 7.7
Inventory Turnover 91.3 142.9 8.5
Asset Turnover 0.6 0.6 0.4

Table 4.4-7: Waste Management, Inc. Management Efficiency
4.4.6. Market Value Analysis
Waste Management is still battling some negative investor perception due to its
history and problems with the SEC and the requirement to restate its earnings. These
issues are reflected in the company’s current P/E ratio, which is below both the
industries and the S&P 500’s, as shown in Table 4.4-8.
Price Ratios Waste Management Industry S&P 500
Current P/E Ratio 17.0 22.3 18.7
P/E Ratio 5-Year High 40.6 294.0 64.8
P/E Ratio 5-Year Low 12.8 13.4 16.4
Price/Sales Ratio 1.48 1.42 1.52
Price/Book Value 3.17 2.88 2.94
Price/Cash Flow Ratio 7.60 8.70 12.50
Table 4.4-8: Waste Management, Inc. Market Value Analysis


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The company has been working hard to improve its image, as well as control its
costs, in order to improve margins. It is critical that Waste Management regain its
credibility, as analysts must be reasonably confident regarding the quality of the
company’s stock and the reliability of the financial reports. As of April 27th, the stock’s
52 week high is $38.04 and the 52 week low is $26.80.
Figure 4.4-1: Comparison of Five-Year Cumulative Return of Stock Value

(Source: http://www.wm.com/wm/investor/subscriptions/2006/2006proxy.pdf)
During 2005, the company returned nearly $1.2 billion to its shareholders through
share repurchases and dividends. The board of directors has authorized the additional
investment of up to $1.2 billion in combined dividend payouts and share repurchases in
the next two years. This is illustrated below in Figure 4.4-2. This commitment to
returning value to the shareholders places Waste Management among the top dividend-
paying companies in the S&P 500. These factors should have a positive impact on the
stock price, but analysts have remained cautious,

Page 77 of 163
Figure 4.4-2: Waste Management, Inc. Cash Being Returned to Shareholders

(Source: http://www.wm.com/WM/investor/presentations/20060306RaymondJames.pdf, 2006)
4.4.7. Growth Analysis
As evidenced by Figure 4.4-3 and Table 4.4-9, Waste Management’s revenue
shows continued growth over the past five years. In the past, the company has posted
results that are some of the best in its industry.

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Revenue for the Past 5 Years
(in Millions)
13,500
13,000
12,500
12,000
11,500
11,000
10,500
10,000
2005 2004 2003 2002 2001
Figure 4.4-3: Waste Management, Inc. 5 Year Revenue Statement

Waste Management, Inc. Revenue and Income Overview
2005 2004 2003 2002 2001

Sales $Mil 13,074 12,516 11,648 11,211 11,322
Operating Income $Mil 1,710 1,699 1,540 1,644 1,283
Income Tax $Mil -90 247 404 --- ---
Net Income $Mil 1,182 939 630 822 503
Earnings/Share $ 2.09 1.61 1.06 1.33 0.80

EPS (Cont Ops) $ 2.09 1.60 1.21 1.33 0.80
Dividends/Share $ 0.80 0.75 0.01 0.01 0.01
Total Shares Mil 560 576 589 613 629
Table 4.4-9: Waste Management, Inc. Revenue and Income Overview
In contrast to its peers, the stock’s earnings per share have grown at a very high
rate over the past three years. However, the stock’s sustainable growth rate is quite a
bit less than the rate at which its earnings per share have grown.

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Below in Figure 4.4-4 is Waste Management’s project spending for 2006. The
company projects to have $888 million in cash equivalents and short-term investments
at year end. The projection shows no growth from acquisitions, as it expects to sell
approximately $250 million in assets, which is the same amount it plans to reinvest in
acquisitions. Waste Management does project to spend $1.45 billion on capital
expenditures, which should help to generate more revenue and/or costs savings that
should advance future growth.
Figure 4.4-4: Waste Management, Inc. Cash Being Returned to Shareholders

(Source: http://www.wm.com/WM/investor/presentations/20060306RaymondJames.pdf, 2006)
4.4.8. Summary of Financial Analysis
After a careful analysis of the financial data, it is our finding that Waste
Management may be sacrificing long-term growth for short-term returns. The company
recently posted better-than-expected returns for the first quarter of 2006 and the stock

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price is trading around $38.00 per share. Morningstar analyst, Gregory Barry, estimates
a fair market price for Waste Management stock to be $33.00 per share.
This data leads us to question the continued stock buyback program. Most
companies continue to buy back stock when the stock is undervalued, but that does not
appear to be the case for Waste Management. This leads us to conclude that the
reason for the stock buyback program is to increase EPS by decreasing shares
outstanding, which can boost EPS in the short-term, but this is not a viable way to
continue growth.
With the amount of debt that the company is carrying, some of the free cash flow
generated should be used to pay down debt, so there is working capital available for
real growth. The stock buyback program should be discontinued, as we believe it is
only a short-term fix for the stock price. Instead, we recommend using the remaining
free cash flow be used to invest in research and development. This is addressed in
detail in our recommendations.
4.5. Strategic Analysis
This section will analyze Waste Management’s past and current corporate and
business strategies, as well as review the company’s objectives and goals.
4.5.1. Corporate-Level Strategy and Internal Strategy
There are two key questions that need to be answered when selecting a
corporate-level strategy: what businesses should the company be in and how should
the corporate office manage the group of businesses? Waste Management has chosen
a directly related diversification strategy. The company offers a select variety of

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services to many different consumers, but it concentrates on one industry-waste
management.
The corporate office manages its operations through six operating groups, four of
which are organized by geographic area while the other two are organized by function.
The geographic groups include Eastern, Midwest, Southern and Western groups and
the two functional groups consist of the Wheelabrator Group, which provides waste-to-
energy services and the Recycling Group.
After several years of growth through acquisitions, the company is now focusing
its attention on executing strategies based on four objectives:
• Revenue growth through pricing initiatives
• Lowering operating and selling, general, and administrative costs through
process standardization and productivity improvements
• Improving the asset portfolio through the “fix or seek exit strategy” and
• Generating strong and consistent cash flow from operations that can be
returned to shareholders.
4.5.2. Business-Level Strategy
Whether by choice or by default, all firms choose at least one business-level
strategy. This strategy describes how the firm will compete and several key issues
must be addressed. These key issues include:
• What goods or services should we offer to our customers?
• How will we provide these services?
• How will we distribute these services to the marketplace?

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In seeking to respond to these key issues, founders Dean Buntrock and Wayne
Huizenga began to implement a differentiation strategy. They understood that, while
trash collection was historically provided by numerous, small, regional companies,
domestic trash collection could be a national business. They saw on opportunity to
profit from economies of scale. The result of more than 2,000 mergers and acquisitions
produced the Waste Management of today. It is now the leading provider of integrated
waste services in North America. The company has a vast network of assets and
employees that provide a comprehensive range of waste management services.
Through subsidiaries, the company offers collection, transfer, recycling, disposal and
waste-to-energy services. In addition, while providing these services, the company
seeks projects and initiatives that they believe make a positive difference for the
environment, including recovering and processing the methane gas produced through
landfill decomposition.
Waste Management has been working to improve their organization by
concentrating on operational excellence and profitability rather than on revenue growth.
(Waste Management, 2005). In order to accomplish operational excellence, the
company continuously reviews the operations and works to identify best practices,
implement these best practices as standards, and work to continuously improve them.
The company’s revenue growth and pricing excellence strategy centers around
attaining a return on invested capital that fittingly takes into account the cost of capital,
risks in the business, and the unique disposal assets owned by Waste Management.
The company is using a more disciplined approach to pricing, carefully analyzing
operations and making decisions based on market specific information, while taking

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costs into account. In 2005, this strategy was most apparent in the collection line of
business, where the company focused on new business pricing, minimizing price roll-
backs, and charging an environmental cost recovery fee and revised fuel surcharge. In
addition to these actions, the company has implemented fee programs to recover costs
incurred for such items as accounts receivable collections, container delivery and other
various services
According to Waste Management’s chief executive officer, David P. Steiner in his
letter in the 2005 annual report, WM is changing and so, too, is their strategy. The
company is changing the way they think-about the business, the company and their role
in the world. The approach to running the business has become more of a science,
relying on solid facts and good data. The company is shifting to a longer-range view
and this has caused Waste Management to look at everything it does as an investment,
which has long term consequences. The commitments that are made must benefit the
stakeholders, today and far into the future.
4.6. Value Chain Analysis
Value chain analysis permits an organization to have a greater understanding of
the functional operations as resources and capabilities that create value while pointing
out the areas that do not add value. Comprehending this type of analysis is critical
since an organization earns above average returns only when value chain creation
exceeds the costs associated with the value chain (Hitt, Ireland, & Hoskisson, 2005).
The primary and support activities of the value chain for Waste Management are
analyzed in terms of strengths and weaknesses.

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This analysis of Waste Management concerning the value chain concept further
expands upon the original model by integrating a four-stage process where
competitively relevant strengths and weaknesses are revealed that add or subtract
value as competitive advantages or disadvantages which ultimately lead to the
identification of a proper strategy formulation (Duncan, Ginter, & Swayne, 1998). This
approach examines the organizational value chain in a holistic manner in terms of
sustaining a competitive advantage and recognizing strategic implications. Improved
decision making results from the process of this enhanced value chain model.
The initial stage of Waste Management’s value chain analysis emerges by
developing an exhaustive list of strengths and weaknesses and a corresponding
location on the organization’s value chain as seen in Figure 4.6-1 (Datamonitor, 2005;
Dignan, 2004; SAP, 2005; Value Line, 2006; Waste Management, 2006).

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S1 Brand Name Recognition
S2 Vast Resources/Asset Base S3 Fleet Route System Savings
S9 Excellent Leadership S5 Environmentally Conscious
S10 Environmentally Conscious Services
Innovative Culture S6 Landfill Gas Projects
S16 Industry Leadership Role S8 SAP/ERP System
W1 High Debt Structure S13 “Best Place to Work Program”
W3 Overly Dependent on W2 Temporary Employees S7 Volume Purchasing Efficiencies
Inorganic Growth
W5 Landfill Dynamics
Organizational Infrastructure
Su
pp Human Resource Management
ort M
Ac arg
tiv in
iti Technology Development
es
Procurement
s
vi tie
cti Inbound Outbound Marketing in
y A
Logistics
Operations
Logistics & Sales
Service arg
ar M
rim
P
S4 Transportation Management S11 Integrated Environmental

Service Offerings
S12 Excellent Website

S14 Driver Sales Referral Program
S15 “Think Green” Promotional
Program
W4 Volume Growth
Figure 4.6-1: Waste Management, Inc. Value Chain
(Source: Duncan, Ginter, & Swayne, 1998)

Page 86 of 163
The second stage of the expanded value chain analysis involves four steps
where the primary and support activities are assessed for attaining the distinction as
competitively relevant strengths and weaknesses. The first step re-categorizes and re-
conceptualizes the strengths and weaknesses as resources or capabilities. The second
step entails a deeper inspection of the strengths and weaknesses as resources and
capabilities based on four criterions which include value, rareness, imitability, and
sustainability. In step three, a value rating is assigned to the process from step two.
The value ratings consist of a categorization that includes inadequate, adequate,
attractive/unattractive, potential, competitive/uncompetitive, and distinctive. For a
strength to develop into a competitively relevant strength, a substantial number of
distinctive or competitive value ratings must transpire. Likewise, for a weakness to
transform into a competitively relevant weakness, a significant amount of inadequate or
noncompetitive value ratings must emerge. The final product from the stage two
process leads to competitively relevant strengths and weaknesses as depicted in Table
4.6-1.

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Power of the Strength or Weakness

Strengths/Weaknesses
Val ue Rareness Imitability Sustai nability
Resources
S1 Brand Name Recognition Competitive Distinctive Competitive Competitive

S2 Vast Resources/Asset Base Distinctive Distinctive Distinctive Distinctive
S6 Landfill Gas Projects Competitive Competitive Competitive Competitive
S8 SAP/ERP System Competitive Competitive Potential Potential
S9 Excellent Leadership Distinctive Distinctive Competitive Competitive
S15 “Think Green” Promotional Program Distinctive Distinctive Competitive Competitive
S16 Industry Leadership Role Distinctive Distinctive Distinctive Distinctive
W1 High Debt Structure Uncompetitive Uncompetitive Uncompetitive Uncompetitive
W2 Temporary Employees Unattractive Unattractive Unattractive Unattractive
W3 Overly Dependent on Inorganic Growth Uncompetitive Uncompetitive Uncompetitive Uncompetitive
W4 Volume Growth Unattractive Unattractive Uncompetitive Uncompetitive
W5 Landfill Dynamics Uncompetitive Uncompetitive Uncompetitive Uncompetitive
Strengths/Weaknesses
Capabi lities
S3 Fleet Route System Savings Competitive Competitive Competitive Potential

S4 Transportation Management Distinctive Competitive Competitive Potential
S5 Environmentally Conscious Services Distinctive Distinctive Competitive Competitive
S7 Volume Purchasing Efficiencies Distinctive Competitive Competitive Competitive
S10 Environmentally Conscious Innovati ve Culture Distinctive Distinctive Competitive Competitive
S11 Integrated Environmental Service Offerings Distinctive Competitive Competitive Competitive
S12 Excellent Website Competitive Competitive Potential Potential
S13 “Best Place to Work Program” Competitive Competitive Competitive Competitive
S14 Driver Sales Referral Program Potential Potential Potential Potential
Table 4.6-1: Waste Management, Inc. Strengths and Weaknesses in Resources and Capabilities
(Source: Duncan, Ginter, & Swayne, 1998)

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Only those competitively relevant strengths and weaknesses as resources and
capabilities are carried over for further probing and evaluation in stage three. These
competitively relevant strengths and weaknesses are assessed for the potential to
contribute a competitive advantage or disadvantage as either a cost or uniqueness
driver. Attaining a competitive advantage resides from adding value to customers.
Adding value as a result of a cost driver leads to a competitive advantage on a basis of
cost leadership. Conversely, adding value from a uniqueness driver translates into a
competitive advantage on a basis of differentiation. Through this process, the original
strengths and weaknesses in relation to primary and support activities of the expanded
value chain are adding or subtracting value which ultimately leads to strategic
implications encompassing cost leadership or differentiation. Waste Management’s
strengths and weaknesses for potential competitive advantage and disadvantage as a
result of adding or subtracting value on the basis of cost and uniqueness drivers are
illustrated on the following pages.

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Strengths and Weaknesses as Potential Sources of Competitive Advantage and Disadvantage
Potential Source
of Competitive
Advantage/ Location on
Strength/Weakness Description Disadvantage Value Chain
S1 Resource Waste Management possesses a distinctive brand name that Uniqueness Driver Organizational
is synonymous with the industry, similarly to other industry Infrastructure
leaders such as Xerox and Coca-Cola. Waste Management’s
brand name represents the industry and is visible and respected
throughout the world.
S2 Resource The organization has a vast resource and asset base with more Uniqueness Driver Organizational
than $20 billion in total assets which amount to 40 percent Infrastructure
of the disposal capacity in the United States. The assets
encompass 22,000 commercial motor vehicles, 413 collection
operations, 370 transfer stations, 283 active landfill disposal
sites, 17 waste-to-energy plants, 131 recycling plants, and 95
beneficial-use landfill gas projects. These assets permit a wide
environmental service offering which garners strong barriers to
entry.
S3 Capability Waste Management has implemented “Waste Route” which aids Cost Driver Technology
in achieving economies of density concerning the operations Development
of the commercial motor vehicle fleet. The company continues
to seek improvements in this area which enables substantial
operating cost savings. As of late 2002, the organization has
reduced the number of routes from nearly 20,000 to currently
15,000. Eliminating a route will save $120,000 annually. The
implementation of the program was high at $20 million during
2003-2004; however, these costs are more than offset with
operational savings of approximately $500 million over a five
year period. The truck fleet for the company was reduced from
25,000 in 2004 to 22,000 in 2005.
S4 Capability Transportation management and outbound logistics serve as a Uniqueness Driver Outbound
core competency for Waste Management. Solid waste Logistics
collection accounts for 58 percent of the revenues and provides
great visibility and excellent customer service.
S5 Capability Waste Management earns a significant amount of revenues Uniqueness Driver Technology
from environmentally conscious services through recycling Development
services and waste-to-energy programs. A strong partner
relationship with the Environmental Protection Agency
exists in an effort to find alternative technology for waste
disposal. This transpires from waste-to-energy programs
such as methane gas usage where Waste Management powers
a portion of the commercial motor vehicles as opposed to
using diesel fuel. Waste Management has positioned itself
into a “greener services” organization which places the
company as a role model by not only disposing of waste but
also developing innovative solutions in an environmentally
friendly manner.
S6 Resource Waste Management throughout North America is working Uniqueness Driver Technology
with businesses, industries, and public utilities in the Development
development of beneficial-use projects from landfill gas.
This gas is a reliable and renewable energy source that is
naturally produced from the decomposition of waste in
landfills. This energy source is used as a medium BTU gas
for industrial use that is sold to gas-to-energy plants that fuels
engine or turbine driven generators that produce electricity.
With 95 landfill gas projects, Waste Management produces
enough landfill energy to generate 250 megawatts of “green
energy.” On an annual basis this is enough power for 225,000
homes thereby replacing more than 2 million barrels of oil per
year.
S7 Capability Waste Management has capitalized on greater volume Cost Driver Procurement
purchasing efficiencies through the company’s Total Customer
Satisfaction program. As of 2001, when this program was
initiated, procurement costs were reduced by $75 million in the
first year. By the end of 2004, savings have amounted to $303
million as a result of half of the company’s procurement
expenditures flowing through the 105 supplier partners.

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Potential Source
of Competitive
S8 Resource The SAP/ERP safe passage program enables Waste Management Uniqueness Driver Technology
to focus on streamlining costumer service and billing functions Development
thereby increasing efficiency, improving customer satisfaction,
and allowing for a greater competitiveness. Waste Management
intends to use SAP/ERP for container management, waste logistics,
and on board computing to achieve operational excellence and to
permit employees to focus more on strategic issues.
S9 Resource The employment of a proper organizational structure by Waste Uniqueness Driver Organizational
Management facilitates excellent managerial leadership where Infrastructure
decision making occurs at the appropriate time and location.
Much decision making and controls transpire at the regional and
local level thereby making the organization more responsive and
competitive at the point of service.
S10 Capability As demonstrated by the greener service offerings, the Uniqueness Driver Organizational
organization fosters a culture of innovation regarding Infrastructure
environmental solutions.
S11 Capability Waste Management offers the most comprehensive Uniqueness Driver Service
environmental service solutions in the industry. This resides
with the company’s integrated solutions of disposal operations,
recycling, transfer stations, waste removal, trading, collection,
resource recovery, landfill, wheelabrator operations, in plant
service, and needle disposal.
S12 Capability Excellent website Not Competitively Marketing and

Relevant Sales
S13 Capability As part of the “Best Place to Work” program, Waste Uniqueness Driver Human Resource
Management strives to earn a reputation for taking care of their Management
employees. This is accomplished by developing programs for
extensive training, capturing ideas and best practices which lead
to empowerment, and rewarding employees along with a
commitment of safety towards the workforce. Waste Management
is a company that bolsters opportunities, training, excellent
benefits, and competitive compensation and rewards.
S14 Capability Driver sales referral program Not Competitively Marketing and
Relevant Sales
S15 Resource The “Think Green” promotional program is more than a slogan Uniqueness Driver Marketing and
due to the communicated content and nature of the topic. The Sales
credibility and reputation of the company is paramount with the
“Think Green” program and Waste Management exceeds the role
as an environmental service provider with recycling and waste-to-
energy initiatives.
S16 Resource Waste Management through various service offerings has attained Uniqueness Driver Organizational
the status as an industry role model by partnering with the Infrastructure
Environmental Protection Agency and other stakeholders.
W1 Resource The high level of indebtedness poses a significant constraint Uniqueness Driver Organizational
upon the organization. By the end of 2005, the company amassed Infrastructure
$8.6 billion in total debt with a debt ratio of about 70 percent and a
debt to equity ratio of 1.33. This is simply too high and creates to
many negative implications. High debt levels encourage
organizational pressure and stress while at the same time limits
the ability for flexible planning or for reacting to changes in the
business and marketplace. Also, Waste Management’s high debt
structure subjects the company to a greater risk of non-compliance
with financial and other entities.
W2 Resource Temporary Employees Not Competitively Human Resource

Relevant Management

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Potential Source
of Competitive
W3 Resource Waste Management is too dependent upon acquisitions for Uniqueness Driver Organizational
revenue growth. This surely accounts for a substantial reason Infrastructure
for the high debt structure. Long term negative affects are possible
since the organization cannot sustain the recent acquisition sprees
to propel revenue growth. Also, excessive acquisitions serve as
high opportunity costs due to integrative measures. These efforts
use scarce resources that are better utilized for investments with
service and product offerings.
W4 Resource The revenue growth for Waste Management has occurred Uniqueness Driver Marketing and
primarily from price increases rather than volume growth. Sales
W5 Resource Active and inactive landfill oversight is not exclusive to Waste Uniqueness Driver Organizational
Management within the industry; however, these assets require Infrastructure
a great amount of time, energy, and effort to manage. Available
landfill capacity is a serious long-term concern for the industry and
Waste Management is in a position to seek other viable alternatives
which can ultimately turn this weakness into a strength.
As the concluding process of the expanded value chain analysis, stage four
highlights the generic business level strategic implications for sustaining a competitive
advantage. Assessing the competitively relevant strengths and weaknesses as
resources and capabilities on the basis of cost and uniqueness drivers identifies the
proper generic business level strategy for Waste Management. This evaluation reveals
that a differentiation strategy permits the greatest potential for sustaining a competitive
advantage due to the uniqueness drivers located within the value chain. Even though
cost controls are important for the environmental services industry, these cost attributes
do not lead to a sustained competitive advantage. Cost controls are a necessity, a
given, and a requirement in order to compete and survive due to the nature of the
industry which is typified by a heavy laden fixed asset infrastructure producing
substantial fixed and variable costs.

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To conclude, Waste Management occupies resources and capabilities for
pursing differentiation through the organizational infrastructure, outbound logistics,
technology development, and service offerings. These functional areas of the value
chain enable the apparent and potential sustained competitive advantage for the
organization. Nevertheless, Waste Management possesses the possibility for a
competitive disadvantage regarding uniqueness drivers that are associated with the
debt structure and overly dependence upon inorganic growth. The strategic
implications of competitive advantage for Waste Management are portrayed in detail on
the following page.

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Strategic Implications and Competitive Advantage
Strategic Strength/Weakness Strategic Implication
Strengths:
S1 Resource-Uniqueness Driver- Waste Management’s resources and capabilities particularly with a recognizable brand name
Organizational Infrastructure along with an abundance of assets enable the organization to offer a wide array of
environmental service and product solutions which provide substantial possibilities for further
S2 Resource-Uniqueness Driver- differentiation in services and additional advancements in the market place.
S3 Capability-Cost Driver- Waste Management’s environmentally conscious innovative culture and excellent leadership
Technology Development permit unprecedented opportunities for service differentiation in a unique industry where cost
controls are already a requirement to survive and competing on cost advantage alone is
S4 Capability-Uniqueness Driver-
difficult to attain.
Outbound Logistics
Technology Development
S6 Resource-Uniqueness Driver-
S7 Capability-Cost Driver-
Procurement


Service

Human Resource Management

Marketing and Sales

Weaknesses:
W1 Resource-Uniqueness Driver-
Organizational Infrastructure Waste Management has the potential to incur a competitive disadvantage regarding uniqueness
drivers that are associated with the weaknesses of a high debt structure along with an overly
dependence upon inorganic growth.
Marketing and Sales

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4.6.1. Summary of Strategic Analysis
Waste Management pursues a differentiation strategy and should continue in this
direction concerning the broad scope of environmental service solutions that are offered
to customers. This generic business level strategy in conjunction with a directly related
diversification corporate level strategy places the organization in the best position for
earning above average returns while sustaining a competitive advantage in the
environmental services industry. The corporate and business level strategies are
fostered by added value for customers that emerge through competitively relevant
strengths in the primary and support activities of the value chain (Hitt, Ireland, &
Hoskisson, 2005).
4.7. SWOT Analysis
A SWOT analysis is a methodology used to identify the strengths, weaknesses,
opportunities, and threats to an organization (Hitt, Ireland, & Hoskisson, 2005). The
following Table 4.7-1 and bullet summary is an effective manner in identifying Waste
Management’s internal and external concerns (Datamonitor, 2005; Dignan, 2004; SAP,
2005; Value Line, 2006; Waste Management, 2006).

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Strengths Weaknesses
♦ Brand name recognition ♦ High debt structure
♦ Vast resources/asset base ♦ Temporary employees
♦ Fleet route system savings ♦ Overly dependent on inorganic growth
♦ Transportation management ♦ Volume growth
♦ Environmentally conscious services ♦ Landfill dynamics
♦ Landfill gas projects
♦ Volume purchasing efficiencies
♦ SAP/ERP system
♦ Excellent leadership
♦ Environmentally conscious innovative culture
♦ Integrated environmental service offerings
♦ Excellent website
♦ “Best Place to Work Program”
♦ Driver sales referral program
♦ The “Think Green” promotional program
♦ Industry leadership role
Opportunities Threats
♦ Increased demand for environmental services ♦ Cyclical nature of business
♦ Single source supplier of environmental services ♦ Regulatory environment
♦ Recycling ♦ Competitive environment
♦ Planning for the divestment of underperforming ♦ Minimization of waste
operations along with organizational restructuring ♦ Fluctuating fuel costs
♦ Information management systems
Table 4.7-1: Waste Management, Inc. SWOT Analysis
4.7.1. Strengths – Internal
As revealed while conducting the value chain analysis for an internal assessment
of Waste Management, the following strengths provide the greatest potential for adding
value and sustaining a competitive advantage:

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♦ Brand name recognition – Waste Management possesses a distinctive brand name
that is synonymous with the industry, similarly to other industry leaders such as
Xerox and Coca-Cola.
♦ Vast resources/asset base – The organization has a vast resource and asset base
with more than $20 billion in total assets which amount to 40 percent of the disposal
capacity in the United States.
♦ Fleet route system savings – Waste Management has implemented “Waste Route”
which aids in achieving economies of density concerning the operations of the
commercial motor vehicle fleet.
♦ Transportation management – Transportation management and outbound logistics
serve as a core competency for Waste Management.
♦ Environmentally conscious services – Waste Management earns a significant
amount of revenues from environmentally conscious services through recycling
programs and waste-to-energy programs.
♦ Landfill gas projects – Waste Management throughout North America is working with
businesses, industries, and public utilities in the development of beneficial-use
projects from landfill gas.
♦ Volume purchasing efficiencies – Waste Management has capitalized on greater
volume purchasing efficiencies through the company’s Total Customer Satisfaction
program.
♦ SAP/ERP system – The SAP/ERP safe passage program enables Waste
Management to improve numerous functional areas with the company.

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♦ Excellent leadership – The employment of a proper organizational structure by
Waste Management facilitates excellent managerial leadership where decision
making occurs at the appropriate time and location.
♦ Environmentally conscious innovative culture – As demonstrated by the “greener”
service offerings, the organization fosters a culture of innovation regarding
environmental solutions.
♦ Integrated environmental service offerings – Waste management offers the most
comprehensive environmental service solutions in the industry.
♦ Excellent website – The organization’s website is dynamic and of the highest quality.
There is an abundance of information presented in an orderly manner and most
importantly, an availability of waste management solutions for customers and
potential customers.
♦ “Best Place to Work Program” – Waste Management is a company that bolsters
opportunities, training, safety, excellent benefits, and competitive compensation and
rewards.
♦ Driver sales referral program – With about 9000 drivers the company has initiated a
program for drivers to refer leads to the sales force.
♦ The “Think Green” promotional program – The “Think Green” promotional program is
more than a slogan due to the communicated content and nature of the topic.
♦ Industry leadership role – Waste Management through various service offerings has
attained the status as an industry role model by partnering with the Environmental
Protection Agency and other stakeholders.

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4.7.2. Weaknesses – Internal
As revealed while conducting the value chain analysis for an internal assessment
of Waste Management, the following weaknesses provide the greatest potential for
allowing a competitive disadvantage:
♦ High debt structure – The high level of indebtedness poses a significant constraint
upon the organization. By the end of 2005, the company amassed $8.6 billion in
total debt with a debt ratio of about 70 percent and a debt to equity ratio of 1.33.
♦ Temporary employees – The company has approximately 15,000 temporary
employees.
♦ Overly dependent on inorganic growth – Waste Management is too dependent upon
acquisitions for revenue growth.
♦ Volume growth – The revenue growth for Waste Management has occurred primarily
from price increases rather than volume growth.
♦ Landfill dynamics – Active and inactive landfill oversight is not exclusive to Waste
Management within the industry; however, these assets require a great amount of
time, energy, and effort to manage. Available landfill capacity is a serious long-term
concern for the industry and Waste Management is in a position to seek other viable
alternatives which can ultimately turn this weakness into strength.
4.7.3. Opportunities – External
After an in-depth analysis and scanning of the external environment, the
following opportunities present the greatest potential positive growth for Waste
Management:

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♦ Increased demand for environmental services – The worldwide market for
environmental services is presently valued at $515 billion and is projected to rise to
$688 billion by 2010. With this expected increase, the environmental services sector
is one of the fastest growing industries. Increasing pressure on organizations is
occurring on a worldwide basis regarding the development and commitment for
environmentally sensitive and friendly technology. As previously discussed, Waste
Management is in the ideal position to capitalize on these trends and developments
due to organization’s industry role model leadership status and the broad scope of
environmental service offerings.
♦ Single source supplier of environmental services – The present and future
development in the United States waste management environmental service
industry resides with environmental service companies offering services that
address all of a customer’s needs. This bundling of services is referred as a “one-
stop-shop.” With this current and continuing trend, many environmental service
providers must broaden service offerings in order to remain competitive and survive.
Coupled with this development arises the employment of research and development
in an effort to expand environmental service solutions. Innovative technological
offerings assist by keeping up with market demands while enhancing the reputation
and respect in the marketplace. The market along with stakeholders will appreciate
the organization that provides efficiency, effectiveness, competitive pricing, and
environmentally friendly technologies leading to a comprehensive service offering
where solutions are available. This “one-stop-shop” and single source supplier
movement once again places Waste Management in the ideal position to capitalize

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on these market inclinations and leanings due to organization’s industry role model
leadership status and the extensive portfolio of environmental service offerings.
♦ Recycling – In late 2005 Waste Management acquired the remaining minority
interests in Recycle America Alliance thereby instituting the Recycling Group as a
wholly owned entity. This is a unifying progressive move for Waste Management
since the Recycling Group reinforces and optimizes the entire activity system in an
interlocking and integrative manner. This is illustrated by the structural arrangement
of Waste Management’s four geographic operating groups providing particular
recycling services which are interwoven with the other operations of those vary
geographic groups. The geographic group’s recycling operations and financial
results are not included within the Recycle America Alliance’s performance;
nonetheless, the Recycle Group’s sharing of knowledge and expertise with the
geographic groups unequivocally produce competitive advantages for Waste
Management as a whole.
Waste Management is the largest recycler in North America. In addition, the
company also fulfills an industry role model status by heavily promoting the recycling
and reuse of materials as opposed to these remnants filling up landfills. Waste
Management intends to lead recycling efforts into the future and this line of service
presents exceptional growth opportunities especially with the coupling of other
environmental service solutions.
♦ Planning for the divestment of under performing operations along with organizational
restructuring – Recent announcements towards improvements in efficiency by
Waste Management consist of the removal of under performing and non-strategic

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operations coupled with the simplification of the organizational structure serve as
opportunities for superior company performance. The resources for divestment
mainly consist of collection facilities and transfer stations. These operational assets
contributed approximately $22 million in operating income for 2005. Meanwhile, the
organizational changes aim to increase responsiveness in local and regional
markets, enhance daily decision making at the point of service, and reduce costs at
the group and corporate offices. These organizational and operational changes will
produce about $30 million in cost saving during 2005 followed by $70 million in
annual cost savings starting in 2006. Such savings allow Waste Management the
opportunity to redirect these resources towards initiatives that increase the
company’s standing in the environmental service industry.
♦ Information management systems – Waste Management’s recent and continued
enactment of managerial information systems strive to increase functionality within
the organization. This occurs from projects such the revenue management system
piloted in Phoenix, Arizona, the Compass program for allowing annual fleet
maintenance savings of $40 million, and the Waste Route program which expects to
reduce transportation truck costs of $500 million over a five year period. Certainly,
other opportunities abound for a company of the size of Waste Management to
improve operational efficiency and effectiveness while serving customers.
4.7.4. Threats – External
After an in-depth analysis and scanning of the external environment, the
following threats present the greatest potential negative outcomes for Waste
Management:
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♦ Cyclical nature of business – Unfortunately, Waste Management’s business at times
succumbs to the seasonality of inclement weather conditions. Historically, the
organization’s operating revenues decrease during the winter as a result of lower
volumes of construction and demolition waste along with reductions in the volume of
commercial and residential waste. In addition, extremely deteriorating weather
surroundings could potentially shut down various operations.
♦ Regulatory environment – Obviously, due to the nature of Waste Management’s
enterprises, the company is subject to existing and evolving regulations. These
regulations include environmental, health, safety, and transportation laws at the
levels of the federal, state or provincial, and local or municipal jurisdictions.
Numerous agencies administer these regulations which primarily include the
Environmental Protection Agency; however, other governmental entities oversee
such areas involving the company’s activities concerning zoning, transportation, land
use, health and safety. These agencies routinely monitor Waste Management’s
operational activities and have the power and authority to enforce compliance,
implement injunctions, and inflict civil or criminal penalties where violations may
arise which can negatively impact the company. Regulatory compliance with
environmental and other laws equate to substantial costs for the organization.
♦ Competitive environment – Waste Management incurs significant competition in all
areas of business operations from other private or public companies and
governmental municipalities. The environmental services industry in North America
comprises of large national waste management companies and local or regional
players that vary in size and financial resources. Another factor that limits

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opportunities for Waste Management resides with large commercial and industrial
companies that conduct internally driven waste collection and disposal. Industry
dynamics that affect the competitive nature of the business include geographic
location, the excellence of operations, availability and capacity for landfill disposal,
and alternatives to landfill disposal such as recycling and incineration. An added
unique dimension of the environmental services industry pertains to Waste
Management and other companies competing with governmental entities. This
competition typically occurs with local municipalities carrying out internal waste
collection and disposal operations for residential and commercial purposes. This
presents considerable challenges for Waste Management since local municipalities
subsidize operating costs from tax revenues and other funding mechanisms such
tax-exempt financing thereby creating a competitive advantage. Also, governmental
municipalities and entities posses the ability for flow control and areas accessible for
operations.
♦ Minimization of waste – Industrial manufacturers and producers are responding to
the movement for minimizing waste. This transpires from a variety reasons which
include the benefits of lower manufacturing and disposal costs, as well as a desire to
implement systems that represent “greener” and environmentally friendly processes.
Examples of these manufacturing developments consist of process changes, raw
material alternatives, process equipment adjustments, and limiting the requirements
for end of process waste control equipment by preventing remnants in earlier stages.
With the advent of hazardous waste minimization and recycling programs across the
United States, a continuing and ongoing effort to reduce waste places pressure and

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limits the potential growth for disposal services. With the increasing cost of waste
disposal coupled with the “greener” movement, industrial manufactures and
producers are indefinitely going to continue to limit the amount waste thereby
minimizing the need for waste disposal.
♦ Fluctuating fuel costs – Prices for fuel and availability of supply are often times
unpredictable. This situation arises from circumstances outside the control of Waste
Management and is predicated by factors such as international, political, and
economic developments. Waste Management is dependant upon fuel to run
collection and transfer commercial motor vehicles as well as a host of equipment in
conducting operations. Unquestionably, increases in fuel prices or supply
disruptions are going to negatively impact the organization’s financial performance.

Section 5.0 – Strategic Fit Analysis
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5.0 Strategic Fit Analysis
Strategic fit analysis evaluates the primary and support activities in relation to the
value chain in order to determine if these activities function in an integrative manner
with the aim of achieving a sustainable competitive advantage by delivering value to
customers (Hitt, Ireland, & Hoskisson, 2005). Successful deployment of strategically fit
integrated activities enhances the overarching corporate and business level strategies
of an organization. Further assessment of strategic fit analysis reveals the viability of
current strategies while providing direction for future endeavors through alternatives and
recommendations.
5.1. Current Strategy
Waste Management’s strategy resides with the company’s comprehensive
offerings of environmental service solutions through the vast base of resources and
assets while continually developing and implementing cost containment measures.
Waste Management employs a directly related diversified corporate level strategy with a
portfolio that consists of a wide array of environmental service offerings. The directly
related diversified strategy is permitted by the sharing of numerous resources, assets,
and activities across the organization. The directly related diversified strategy is
appropriate since this position offers a bundle of environmental services that enable a
competitive advantage in the marketplace. As a result of the abundant environmental
service offerings, Waste Management pursues a differentiation business level strategy.
Gaining a competitive advantage by providing various environmental service solutions
allows Waste Management to compete on the basis of differentiation. Cost controls are

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already a requirement to survive and competing on cost advantage alone is difficult to
attain due to the nature of the industry which is typified by a heavy laden fixed asset
infrastructure producing substantial fixed and variable costs.
5.2. Current and Long-Term Strategic Concerns
The following issues pose significant strategic implications for Waste
Management:
1. Strengthening the bundle of service offerings through existing resources and
innovative measures.
2. Continuing to advance environmentally friendly and greener services.
3. Balancing the core revenue source of collection for landfills with alternative
means of disposal that diversify away from the finite capacity and negativity
associated with landfills.
5.3. Identification and Assessment of Activities for Strategic Fit
An activity analysis of Waste Management will demonstrate that the primary and
support functions allow for a strategic fit and alignment of activities with the overall
strategy of the company.
Internal Resources and Capabilities for Facing External Environmental
Challenges
Waste Management’s resources and capabilities particularly with a recognizable
brand name along with abundant assets enable the organization to offer a wide
assortment of environmental service solutions which provide substantial possibilities for
further differentiation in services and additional advancements in the marketplace. The

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company’s environmentally conscious innovative culture and excellent leadership permit
unprecedented opportunities for service differentiation in a unique industry where cost
controls are already a requirement to survive and competing on cost advantage alone is
difficult to achieve. Waste Management faces several external challenges while
competing in the environmental services industry. Such obstacles include compliance
with various regulators, strong competition, and a conservation or greener movement
for waste minimization. Waste Management is in a position where external challenges
serve as areas for potential opportunities.
Activities Enabling a Strategic Fit
An integrated system of activities is paramount for maintaining a sustained
competitive advantage (Hitt, Ireland, & Hoskisson, 2005). Waste Management’s
interlocking system of activities aid the organization with this endeavor. The activities
also align with the overall strategies of the company which pertain to the corporate and
business strategic initiatives. The following activity system map illustrates the inter-
workings of these activities.

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“Best Place
to Work
Trading Program”
Collection
Brand
Name
Disposal Value From

Operations Infrastructure Fleet Route
System
Savings
Integrated
Environmental
Service Transfer
Offerings Stations
Landfill Wheelabrator
Needle Gas Operations Transportation
Disposal Projects Management
In-Plant
Services
Recycling
Waste To
Energy
Program
Cost
Excellent Controls
Leadership
Environmentally
Conscious
Services
Partnering SAP/ERP
Industry with the EPA Systems
Leadership
Role
Volume
Purchasing
Efficiencies
Environmentally
Conscious
Innovative “Think Green” Total
Culture Promotional Customer
Program Satisfaction
Community
Relations

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The dark colored green objects represent higher-order themes which are
supported and implemented through the light colored green clusters of tightly linked
activities (Porter, 1996). The entire system of activities facilitates the overarching
strategy of Waste Management while simultaneously fostering a sustained competitive
advantage. A collection of activities purports significant barriers for imitation by rival
environmental service providers.
The resources and capabilities of Waste Management propel the robust
environmental service offerings. This position allows for a sustained competitive
advantage and creates opportunities for further differentiation of services.
5.4. TOWS Matrix
The concluding portion of the strategic fit analysis employs the use of the TOWS
matrix developed by Professor Heinz Weihrich. This situational model provides a
systematic analysis that links the external threats and opportunities with the internal
weaknesses and strengths of an organization (Weihrich, 2006). The SWOT analysis is
expanded upon with the TOWS matrix where strategy formulation emerges. The unique
and dynamic application of the TOWS matrix transforms the SWOT analysis by
illustrating how strengths are utilized to take advantage of opportunities or counter
threats. Also, weaknesses are examined for the purpose of overcoming deficiencies in
order to exploit opportunities. This process of strategy formulation yields strategies,
tactics, and actions for an effective and efficient coupling with organizational objectives
and the mission. The key beneficial outcome of the TOWS model occurs with the
generation of alternatives that lead to choices for recommendations. The following

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TOWS matrix applied to Waste Management illuminates numerous alternatives for
discussion:

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INTERNAL FACTORS STRENGTHS (S): WEAKNESSES (W):

-Brand Name recognition -High debt structure
-Vast resources/asset base -Temporary employees
-Fleet route system savings -Overly dependent on inorganic
-Transportation management growth
-Environmentally conscious services
-Volume growth
-Landfill gas projects
-Volume purchasing efficiencies -Landfill dynamics
-SAP/ERP system
-Excellent leadership
-Environmentally conscious innovative
culture
-Integrated environmental service
offerings
-Excellent website
-“Best Place to Work Program”
-Driver sales referral program
-The “Think Green” promotional
program
EXTERNAL FACTORS -Industry leadership role
OPPORTUNITIES (O): SO STRATEGIES: WO STRATEGIES:

-Increased demand for environmental Alternative 1 – Offer expanded service Alternative 5 – Seek expanded/
services options alternative services to diversify
-Single source supplier of away from the collection/landfill
environmental services Alternative 2 – Continue to foster model
-Recycling conservation/greener services
-Planning for the divestment of Alternative 6 – Capitalize on
underperforming operations along Alternative 3 – Further implementation environmentally conscious
with organizational restructuring of information management systems innovative culture to promote
-Information management systems organic growth
THREATS (T): ST STRATEGIES: WT STRATEGIES:

-Cyclical nature of business Alternative 4 – Bolster partner
-Regulatory environment relationships with regulators and
-Competitive environment communities to seek environmental
-Minimization of waste service solutions
-Fluctuating fuel costs
Alternative 1 – Offer expanded service
options to counter competitive
environment

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5.5. Alternatives
The TOWS matrix coupled with the SWOT analysis produced the following
alternatives:
Alternative 1 – Offer expanded service options (SO and ST Strategy: Strong)
As identified with the original SWOT analysis, the movement towards providing
environmental solutions as a bundle of services and also as a single source supplier is
a developing standard in the industry. Waste Management occupies the ideal position
to capitalize on this trend due to the expansive resources of the company. This is also
congruent with Waste Management’s differentiation strategy of offering comprehensive
environmental service solutions. Waste Management could modify existing services in
an effort to achieve more responsiveness to customer and marketplace needs or
innovate and develop new services.
An example of possible growth for Waste Management might involve the
modification or alteration of the collection line of service. New developments for the
collection process include programs such as customers incurring charges for actual
waste generated rather than flat of fixed rates which are the predominant industry
standard. This type of program is analogous to utility providers assessing charges on
actual consumption of energy rather than a flat rate. Another analogous comparison
with utility providers centers on the theme of conservation. Since energy conservation
is a nationwide concern, charging consumers for actual energy consumed reinforces
behavior to conserve power usage. Similarly, assessing fees to consumers for actual
waste generation as opposed to a flat rate encourages environmentally friendly

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behavior. Such a program in conjunction with recycling by partnering with communities
and regulators could prove attractive for Waste Management.
Alternative 2 – Continue to foster conservation/greener services (SO Strategy:
Strong)
As a strength, Waste Management possesses an environmentally conscious
innovative culture as mentioned in the SWOT analysis and environmentally
friendly/greener solutions for the industry represent an ongoing and long-term reality for
success. Undoubtedly, Waste Management is the leader with environmentally friendly
programs. The challenge for Waste Management is to strike a balance between the
core revenue sources of collection for landfill disposal with alternative means of waste
removal.
Alternative 3 – Further implementation of information management systems (SO
Strategy: Strong)
Recently, within the past couple of years Waste Management has enacted
information management systems which have produced substantial benefits for the
company. This serves as an opportunity for further development. Waste Management
could cease the stock buy back program from internally generated earnings and plough
these scarce resources back into the organization by investing in information systems
that systematically analyze projects or initiatives for the future.
Alternative 4 – Bolster partner relationships with regulators and communities to
seek environmental service solutions (ST Strategy: Medium)
Waste Management attains the position as an industry leadership role model
through environmentally friendly service initiatives and partnering with the

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Environmental Protection Agency and communities. Environmentally friendly service
solutions are a long-term reality and compose a significant portion of the company’s
broad scope of environmental offerings. Waste Management should continue to
cultivate strong working relationships with regulators and communities.
Alternative 5 – Seek expanded/alternative services to diversify away from the
collection/landfill model (WO Strategy: Strong)
Landfill dynamics embody a weakness for Waste Management. Available landfill
capacity is a serious long-term concern for the industry and Waste Management is in a
position to seek other viable alternatives which can ultimately turn this weakness into a
strength. Finding an equilibrium between the collection for landfill disposal model with
differing means of disposal that diversify away from the finite capacity and negativity
associated with landfills presents considerable strategic implications for Waste
Management.
Alternative 6 – Capitalize on environmentally conscious innovative culture to
promote organic growth (WO Strategy: Medium)
Waste Management must seek ways to grow internally instead of depending
upon inorganic growth. The company’s culture and resources should enable the ability
to grow internally going forward. Constant acquisitions are costly from a variety of
standpoints and surely contribute to the organization’s high debt structure. Now that the
company is stabilized from the turnaround mode period, an emphasis for organic growth
should ensue with an aim towards substantial debt reduction.

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5.6. Alternatives to Recommendations
Logical decisions must transpire to build a sound strategy formulation based on
alternatives that provide choices for recommendations. Incorporating the TOWS matrix
yielded SO, ST, and WO strategies where the most pragmatic selection of alternatives
lead to the following recommendations:
• Recommendation I
o Alternative 3: Further implementation of information management systems
• Recommendation II
o Alternative 1: Offer expanded service options
o Alternative 2: Continue to foster conservation/greener services
o Alternative 4: Bolster partner relationships with regulators and communities to
seek environmental service solutions
o Alternative 5: Seek expanded/alternative services to diversify away from the
collection/landfill model

Section 6.0 – Recommendations
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6.0 Recommendations
After the detailed review of Waste Management Inc., the group offers two
recommendations to allow the firm to remain competitive in the waste disposal market
and to continue to grow and be successful. These recommendations coincide with the
strategic analysis that was previously performed and will help give WMI a competitive
advantage in the future. The recommendations consist of the following:
I. Discontinue the stock buyback program and invest in long-term projects.
Scientifically decide what projects to invest in by implementing project
portfolio software.
II. Implement programs that allow consumers to pay for only the waste they
generate and help increase recycling efforts in communities.

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6.1. Recommendation I
According to Waste Management’s 2005 Annual Report, 2005 was a year of
change for Waste Management. In many ways, it was a year of changing the mindset
of the company and how it thinks. The company changed its view of time; instead of just
looking at the next quarter and the next year, it now looks to the next decade. These
changes have caused Waste Management to look at everything it does as an
investment. The stakeholders in these investments include employees, customer,
communities, shareholders and the environment. The company now evaluates it
investments-in capital, in resources, in the role as the industry leader-and only
continues the commitment if it benefits the stakeholders.
With this commitment in mind, we have evaluated the current business strategy
with regard to the stock buyback program and recommend the company discontinue
this practice. Instead, the company should begin to invest in research and development
to find more profitable and environmental friendly ways of reducing solid waste.
In 2005, management began to approach the running of the business more as a
science, beginning to rely on solid facts and good data. This mindset, as well as the
practice of approaching business decisions as investments, has led us to recommend
the implementation of project portfolio software to more scientifically and systematically
evaluate the selection of proposed projects and progress of new projects.
6.1.1. Objectives
A fundamental question in the new product battleground is, “How should
corporations most effectively invest its R&D and new product resources? This is what

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portfolio management is all about-resource allocation to achieve corporate new project
objectives. Portfolio management of projects and new products is a major business
challenge.
Today's new projects help decide what products Waste Management will offer
tomorrow. Portfolio management for new products is a dynamic decision process
wherein the list of active new products and projects are continuously reviewed and
revised. During this process, new projects are evaluated, selected, and prioritized.
Existing projects can be accelerated, killed, or de-prioritized and resources are allocated
(or reallocated) to the active projects. Much like stock market portfolio managers, senior
executives who optimize their R&D investments have a much better chance of winning
in the long run.
The crucial need for successful selection of R&D spending has heightened
interest in portfolio management, not just for the technical community, but in the CEO's
office as well. Recent benchmarking studies have identified portfolio management as
the most inadequate area in new product management. Management teams confess
that there are rarely serious go/kill decisions or go/kill decision points. As a result,
companies are facing too many projects for the limited resources available.
Considering the following criteria will allow Waste Management to correctly allocate
resources to new projects.
• Maximize Value-To allocate resources in order to maximize the value of the
portfolio in terms of company’s key objectives (such as profitability, ROI,
acceptable risk). A variety of methods are employed to achieve this maximization
goal, ranging from financial methods to scoring models.

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• Achieve Balance-To achieve a desired balance of projects in terms of a number
of parameters: risk versus return; short-term versus long-term; and across
various markets, business arenas and technologies. Typical methods used to
reveal balance include bubble diagrams, histograms and pie charts.
• Align Business Strategy-To ensure that the final portfolio of projects reflects
Waste Management’s business strategy and that the breakdown of spending
aligns with the company’s strategic priorities. The three main approaches are:
top-down (strategic buckets); bottom-up (effective gating and criteria) and top-
down & bottom-up (strategic check).
It is our recommendation that Waste Management should immediately begin
researching which project portfolio software would best integrate with its other computer
software-there are several that are compatible with SAP, the soft are currently being
used at Waste Management. The software package should be selected within three
months and implementation should begin immediately thereafter. The software should
be up and running in Houston’s headquarters within nine months and should not exceed
a cost of approximately $1.5 million.

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Figure 6.1-1: New Product Development and Introduction (NPDI)

(Source: http://www.sap.com/solutions/npdi/pdf/BWP_NPDI.pdf, 2006)

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Business Strategy &

Product Innovation &
Technology Strategy
1. Strategic 50,000
Buckets ft.
Gating Process: Portfolio Review:
• Individual • Holistic
2. Project projects • All Projects
Decisions:
• In depth • Right mix? 10,000
• Go/Kill • Right ft.
Go/Kill
Prioritization decisions priorities?
• Based on • Alignment?
scorecard
Figure 6.1-2: The Portfolio Management System with its Key Components
(Source: http://prod-dev.com/portfolio-diagram.shtml, 2006)
6.1.2. Deliverables
Deliverables in the first phase of implementation include the specifications
required by Waste Management. These specification include, but are not limited, the
software must integrate with SAP, the software currently being implemented. The
software must be able to be utilized mainly at the Houston headquarters, but may also
need to be used by branch offices. The software chosen needs to be able to assess at
least 150 projects at any one time and be expandable.

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The second phase of deliverables defines specifically what hardware will be
necessary to run the program and how much custom programming will be necessary.
The third actual beta testing at the Houston headquarters for selected projects. This
test will include ensuring data flows freely between the main system(s) and the project
portfolio software.
After successful testing, the system will be on-line for the Houston office and a
technical manual will be completed. When this is in place and has been proved
successful, the software would begin to be available for data analysis at the branch
offices.
6.1.3. Milestones
The following Figure 6.1-3 is an approximate timeline needed to effectively
implement the project.
May 1 August 1 January 1, 2007 April 1 May 1

Begin Software Search Define Hardware and Begin beta testing at HQ Technical Manual Select Sites to
Determine Custom And HQ on-line Have Access
Programming
Figure 6.1-3: Timeline to Implement Project Effectively
As previously discussed, the selected software must be able to integrate with the
current software used at Waste Management. The software should be able to analyze
at least 150 projects at one time and be expandable for future growth. Security features
must also be included.

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Ideally, the software would include a process such as the one shown below:
Figure 6.1-4: The Stage-Gate® Process

(Source: http://prod-dev.com/stage-gate.shtml, 2006)
Leading companies have overhauled their new product processes, incorporating
the critical success factors discovered through best practice research, in the form of a
Stage-Gate® new product process. According to a Product Development &
Management Association (PDMA) best-practices study, 68% of leading U.S. product
developers now use some type of Stage-Gate® process (R. Cooper, 2001).
A Stage-Gate® process is a conceptual and operational road map for moving a
new-product project from idea to launch. Stage-Gate® is a product development process
that segments the effort into distinct time-sequenced stages separated by management
decision gates. Multifunctional teams must complete a prescribed set of related cross-
functional tasks in each stage prior to obtaining management approval to proceed to the
next stage of product development.
The software will be installed by a contract company, but once in use, the Waste
Management Information Technology (IT) department will be the trainers. The in-house
IT department will also be responsible for maintaining the system. The project
management teams will be responsible for the evaluation and integrity of the data.

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6.1.4. Risk Assessment
The Waste Management IT department will be responsible for obtaining all the
necessary information, monitoring the implementation, timing and budgeting as well as
ensuring the necessary personnel has received training from the outside contractor.
At the point the system is turned over, the company’s IT department should verify
the system is working as designed in terms of risk assessment, financial returns,
prioritization, etc. for the project management teams, as well as the executives.
Companies without effective new product portfolio management and project
selection face a downhill road. Many of the problems that plague project development
initiatives in businesses can be directly traced to ineffective portfolio management.
According to studies done by Drs. Cooper and Edgett, when portfolio management is
lacking, the following problems may arise:
1. A Strong Reluctance to Kill Projects
There are typically no consistent criteria for Go/Kill decisions. As a result,
projects are simply added to the 'active list' of projects with no clear directional
focus. The end result is: resources are thinly spread; long times to market; poor
quality of execution; and higher-than-acceptable failure rates.
2. Poor Go/Kill & Project Selection Decisions
This leads to many mediocre projects in the pipeline (i.e. extensions,
modifications, enhancements) and a lack of high return projects. Those few good
projects that do exist are usually starved of resources and fail to achieve their full
potential.

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3. The Wrong Projects are Selected
Decisions are not based on facts and objective criteria, but rather, on politics,
opinion & emotions (i.e. manager's pet projects). Many of these 'ill-selected'
projects fail to bring reward to the company.
4. Strategic Criteria are Missing
There is no strategic direction to projects selected and therefore, projects are not
aligned with the business's strategy. This means that projects are typically a poor
fit with strategy and overall spending does not reflect the strategic priorities of the
business.
It is very difficult to put a dollar value on the cost of not implementing this
recommendation. The risk to the company is not the actual cost of approximately $1.5
million dollars for software and implementation. This is a tangible cost, but the lost
opportunities could be infinite if the projects are not implemented or the wrong projects
could consume critical resources. If the correct projects are chosen, the results provide
a portfolio that is properly balanced and most importantly, supports Waste
Management’s business strategy.
6.1.5. Long-Term Benefits
One of the driving forces in the industry today is the rising cost of fuel. Waste
Management is already positioned to effectively manage this factor. With its current
Wheelabrator technology, the company can turn waste-to-energy and harness it for a
variety of uses. The company currently owns or operates 17 of these facilities and six
independent power plants (IPP) that are capable of processing up to 24,0000 tons of
solid waste each day.

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Our above recommendation proposes that Waste Management begin investing in
long-term projects. Along with the rising costs of fuel, the company needs to find ways
to deal with the limitations currently being imposed by governmental regulations and the
reductions in landfill space. The Wheelabrator can reduce the need for landfill space,
while at the same time, produce energy. With the implementation of the project portfolio
software, Waste Management can begin to assess which geographical areas would
best benefit from converting current landfills to waste-to-energy facilities. The
Wheelabrator technology has been profitable and given the current demand for oil, it
should remain profitable in the long-term. Investing in Wheelabrator technology would
allow Waste Management additional ways to increase revenues in a mature market.
In addition to Wheelabrator construction, Waste Management needs to address
the environmental issues concerning solid waste disposal. The U.S. continues to
produce trash at a rate of 4.5 lbs per person per day (Interview with David Steiner on
the history channel, April 23, 2006). Continually disposing of this trash in landfills is no
longer a long-term viable solution and at this time, recycling does not seem to return the
profits necessary to grow this side of the business (which leads to our next
recommendation). Implementing the project portfolio software will assist the company
with research and development decisions that can better address these issues in a way
that is systematic, “scientific,” and produces better long-term profits for the company.
Ideally, it would also provide technology that would benefit the environment; this is what
consumers expect of an industry leader.

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6.2. Recommendation II
With the increase in demand of more environmentally friendly services and to
provide a one-stop-shop of waste collection and recycling, it has been proposed that the
company institute a new program called ‘Pay To Be Green’. The main goal of this
program will be to reduce the amount of trash the everyday consumer and commercial
businesses create and force them to increase their recycling efforts to save the
environment. The underpinnings of the program are properly aligned with the activities
of Waste Management as discussed in the strategic analysis since the normal collection
and recycling functions reinforce and optimize the entire activity system of the
organization.
6.2.1. Objectives
The program can provide many benefits to waste management’s shareholders
and customers. The primary benefit to the consumers is the equity it will create in the
billing process. Currently, the majority of Waste Management’s billing is done on a set
price for all of the consumers, no matter how much waste the consumer generates.
This in turn has the tendency to overcharge consumers who produce minimal waste and
undercharge those who create a great deal of waste. This would bring the billing for
waste collection service in line with the other utility bills consumers currently pay.
Further benefits would be economic and environmental sustainability. Many
communities have voluntary recycling programs that provide bins for each household
and are collected once a week. In most cases, consumers don’t want to take the time
to drag their recyclable goods to the bin when it is easier just to toss it in the trash. The

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primary reason for this is consumers have no economical benefit to recycling. They pay
a flat rate for the collection, whether they recycle or not. Human nature has always
been that a person will not change their normal habits unless forced to do so. Under
this program, there will be economic benefits to recycling and the consumer can take
control of their waste disposal bill. The added benefit to WMI would be the re-selling of
the recyclable goods to industry to create more products for the consumer to purchase
at a cheaper and more environmentally friendly fashion. This will also save the
manufacturers money and time by reducing the amount of natural resources that need
to be extracted to produce their products.
There are programs in use in communities across the nation and are showing to
be a successful endeavor. The problem is that the communities are the primary force
behind the initiation of these programs. This forces the waste disposal companies to
adhere to these programs or leave the community. If WMI takes the initiative to
introduce the programs to the communities first and control the creation and
implementation in the community, this will allow them to possibly force competitors out
that are not able to immediately change to the program. It will also help the brand
image of WMI that has been recently branded as environmentally unsound.
Specifics of the Program
The main focus of the program is to charge the consumer only for the waste they
create and rewarding them for recycling by reducing their current monthly flat fee bills.
The way this is done is by the distribution of resources to hold, collect, and dispose of
the waste and recyclables that the consumer generates. This program could also
reduce the amount of money commercial businesses spend each year in waste disposal

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if recycling programs were initiated for this sector. The products needed to undertake
this task is outlined below.
Residential Collection Bins for Waste – Collection bins will be ‘rented’ to the consumer
on a monthly basis to allow the waste to be measured by volume or weight. The
consumer can decide whether they wish to be billed by the volume of the bin, or by the
weight of the waste in the bin. Sizes for the bins could range from 30 to 100 gallon
sizes. Each bin will also have a bar code placed on the side to allow the truck to
properly bill the consumer for the weight of the bin. To help further reduce improper
waste disposal in the bin by outside parties that are not affiliated with the homeowner, a
locking mechanism could be activated by the consumer before the bin is placed on the
curb. The collection truck could electronically release the lock as it reads the barcode
on the bin. This would deter neighbors from throwing trash in another homeowners bin
to reduce the amount they would pay. There would also be special bins that would be
available during the grass cutting season to handle all yard waste. This would be
charged by volume and the waste taken to compost piles to be resold as mulch, another
revenue generator for Waste Management, Inc.
Tags for Individual Waste Bags – Due to different pricing strategies effectively working
in different parts of the nation, an alternative to the collection bins is to buy tags or
stickers to attach to each bag of trash to be collected. These stickers will range in value
to correspond to the size of bag they are attached to. Yard waste bags would require a
smaller value sticker, since the contents can be recycled. There will also be stickers
provided for large item collection, such as appliances, furniture, or other large bulk
materials.

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Residential Collection Bins for Recycling – Recycling bins will be provided to each
homeowner and will be collected free of charge to the consumer. The price for the
service will be included in the waste collection fees. A small fee could be charged if the
community wishes to lower the price of the normal waste collection.
Commercial Bins for Recycling – Bins could be provided to office buildings and
commercial businesses for the collection of all types of paper waste that is generated.
This would include newspapers, magazines, catalogs, junk mail, office white paper,
phone books and cardboard boxes. This is a large portion of waste that these
institutions generate on a daily basis. Due to the confidentiality of these materials, the
trucks that collect these materials would be equipped with shredding devices that would
reduce the waste to confetti size pieces.
Industrial Bins for Bulk Materials – Large metal bins would be provided to industrial sites
for certain types of recyclable materials. This could include wood only bins for
construction of homes, demolition, and environmental disaster cleanup. Other bins
could be provided to remove different types of metals that are used in all industries.
The metals would not be required to be removed at the site, but would be separated in
the collection yards.
Initial Costs of the Program
The entire program would be fairly easy to initiate since WMI already has a good
infrastructure in place in many communities. The ‘Pay to be Green’ project could be
executed in under a year’s time with a minimal cost. The total estimated cost is outlined
below.

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Initial Cost for Program (Community of 100,000 Residents) Dollar Amount

Public Advertising $ 400,000
City Meetings and Advisory Boards $ 20,000
Refurbishing Current Trucking Fleet $ 550,000
Ordering of Waste and Recycling Containers $ 1,200,000
Implementing Tags and Distribution $ 100,000
Delivery of Containers and Instructions $ 150,000
Increase in Routes and Trucks $ 450,000
Creation of New Recycling Locations for Consumer Drop-Off $ 830,000
Increase Hiring of Personnel $ 600,000
Government Subsidies for Creation of Program $ (1,000,000)
Total Cost for initial Start-Up: $ 3,300,000
Table 6.2-1: Waste Management, Inc. Cost of Initial Start-Up of Program
For the pricing structure above to succeed, the communities already have
collection and recycling programs in use. This would allow for minimal costs to be
absorbed by WMI. In most cases, the current waste collection trucks already in use
would only have to be fitted with a hydraulic lift system in order to accurately weigh the
collection bins for billing. In some cases, the consumer will only be charged a flat fee
for the bin, where no modification of the truck will be necessary. The recycling trucks
will already exist in the area and should be adequate for the increased amount of
materials. There may be a need for additional recycling trucks, but WMI would already
have these trucks available in their fleet.
6.2.2. Deliverables
As mentioned before, the entire process of implementation of the project will take
approximately one year. This will be adequate time to teach a community of around
100,000 residents how to ‘Pay To Be Green.’ The following schedule provides details
on the planning, design, implementation, and post-review of the entire program.

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Schedule for events for residential

customers:
Time Dates of
Management Approval of Process Frame Execution
June 3, 2006 –
Development of Program by WMI Management 6 Weeks
July 15, 2006
July 15, 2006 –
Gathering of Resources in WMI 4 Weeks
August 12, 2006
August 12, 2006 –
Creating Task Force to Design and Implement 2 Weeks
August 26, 2006
August 26, 2006 –
Final Documentation of the Program 2 Weeks
September 9, 2006
Milestone: WMI Formal Announcement of New
September 9, 2006
Initiative
Evaluation of Cities and Communities
Formal Introduction and Negotiations with Cities September 9, 2006 –
8 Weeks
and Communities November 4, 2006
November 4, 2006 –
Gaining approval to begin process. 1 Week
November 11, 2006
Distributing information to residential November 11, 2006 –
4 Weeks
households December 9, 2006
Meeting with local retailers to explain tag December 9, 2006 –
3 Weeks
system December 30, 2006
Milestone: Complete Information Sharing and
January 1, 2006
Begin Implementation
Initiating Program
Acquiring necessary materials to implement December 4, 2007 –
8 Weeks
program January 29, 2007
January 29, 2007 –
Distribution of tags to the retailers 4 Weeks
February 26, 2007
Ordering period for Residential consumers of February 26, 2007 –
4 Weeks
bins March 26, 2007
Begin showing changes in billing system in each March 26, 2007 –
1 Week
consumer’s monthly bill. April 2, 2007
April 2, 2007 –
Distribution of bins to consumers 3 Weeks
April 23, 2007
Trial period for collection and additional April 23, 2007 –
4 Weeks
information distribution May 21, 2007
Formal Implementation of program with May 21, 2007 –
2 Weeks
households June 4, 2007
Milestone: Complete Implementation of
June 4, 2007
Program
Post-Monitoring of the Program
Monitoring period to determine effectiveness of 12 June 4, 2007 –
program and recommend changes. Weeks August 27, 2007
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Bring recommendations to management and August 27, 2007 –

1 Week
city council. September 3, 2007
September 3, 2007 –
Begin implementation of changes to program 4 Weeks
October 1, 2007
Milestone: Complete Changes and Upgrades
October 1, 2007
to Program

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ID Task Name Duration Start Finish

Qtr 3, 2006 Qtr 4, 2006 Qtr 1, 2007 Qtr 2, 2007 Qtr 3, 2007 Qtr 4, 2
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
1 Managem ent Approval of Pr oce ss 75 days Sat 6/3/06 Sat 9/9/06
2 Development of Program by WMI Management 32 days Sat 6/3/06 Sat 7/15/06
3 Gathering of Resources in WMI 21 days Mon 7/17/06 Sat 8/12/06
4 Creating Task Forc e to Des ign and Implement 11 days Mon 8/14/06 Sat 8/26/06
5 Final Documentation of the Program 11 days Mon 8/28/06 Sat 9/9/06
6 Milestone : WMI Form al Announcem ent of New Initiative 0 days Sat 9/9/06 Sat 9/9/06 9/9
7
8 Evaluation of Citie s and Com munities 85 days Sat 9/9/06 Mon 1/1/07
9 Formal Introduction and Negotiations w ith Cities and Communities 42 days Sat 9/9/06 Sat 11/4/06
10 Gaining approv al to begin process 6 days Mon 11/6/06 Sat 11/11/06
11 Distributing information to Residential Households 22 days Sat 11/11/06 Sat 12/9/06
12 Meeting w ith Local Retailers to explain Tag System 17 days Sat 12/9/06 Sat 12/30/06
13 Milestone : Complete Inform ation Shar ing and Begin Implem entation 0 days Mon 1/1/07 Mon 1/1/07 1/1
14
15 Initiating Program 133 days Mon 12/4/06 Mon 6/4/07
16 Ac quiring necessary materials to implement program 43 days Mon 12/4/06 Mon 1/29/07
17 Distribution of tags to the Retailers 21 days Mon 1/29/07 Mon 2/26/07
18 Ordering period for Residential Cons umers of bins 21 days Mon 2/26/07 Mon 3/26/07
19 Begin show ing changes in billing sy stem in each consumers monthly bill 6 days Mon 3/26/07 Mon 4/2/07
20 Distribution of bins to Consumers 16 days Mon 4/2/07 Mon 4/23/07
21 Trial period for collection and additional information distribution 21 days Mon 4/23/07 Mon 5/21/07
22 Formal implementation of program w ith hous eholds 13 days Thu 5/17/07 Mon 6/4/07
23 Milestone : Complete Im ple mentation of Program 0 days Mon 6/4/07 Mon 6/4/07 6/4
24
25 Post-M onitor ing of the Program 86 days Mon 6/4/07 Mon 10/1/07
26 Monitoring period to determine effectiveness of program and recommend changes 61 days Mon 6/4/07 Mon 8/27/07
27 Bring recommendaitons to Management and City Council 6 days Mon 8/27/07 Mon 9/3/07
28 begin implementation of changes to program 21 days Mon 9/3/07 Mon 10/1/07
29 Milestone : Complete Changes and Upgrades to Program 0 days Mon 10/1/07 Mon 10/1/07 10/1

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In order for the ‘Pay To Be Green’ program to be successful, the timeline needs
to be strictly followed and all of the milestones must be met. Any delay will cost
additional funds which will increase the overall cost of the project. The original design
and implementation takes a year to complete. The post-monitoring period lasts a little
over five months, which is adequate time to review and make any changes to the
program that the residential consumer demands.
6.2.3. Milestones
The primary milestones must be met if the project is to be successful. The
schedule in Section 6.2.2 outlines the specific milestone and the time it must be
completed. If any of these are missed, this will delay the project and could drastically
increase the cost of implementation.
The first milestone occurs around 14 weeks after the initial start of the
development of the program. This one deals with the final design of the program
completed internally and formal introduction to the public of Waste Management’s new
initiative. The upper management within the company must fully back the program in
order for it to succeed.
The second milestone is one that will start the project rolling in a community.
This step should take around 15 weeks to complete. After many weeks of review with
the city government and officials in the community, the city gives formal approval and
signing of the contracts to start the official implementation of the project. The residents
in the community will also be informed and educated in the new program to show them
the many benefits that are available. Residential involvement and understanding is
critical if there is hope of the project succeeding.

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The next milestone is the completion of the implementation of the project. This is
where the project begins to pay off for Waste Management. This step actually begins
around four weeks before the second milestone is met. This is when Waste
Management begins to order the materials to implement the project and occurs right
after the city gives formal approval of the project. This is to help minimize the lead time
needed to manufacture the bins and print the tags for the program. This step should
take around 23 weeks to complete. After the milestone is met, the program has been
fully initialized and is making profits for the firm. This is where the year of design and
implementation has ended and the monitoring of the program begins.
The final step is the post-monitoring of the successes and problems that are
occurring within the newly implemented program. The monitoring and updating of the
program should take around 17 weeks. This will help provide Waste Management with
information that will allow it to modify and enhance the program for future
implementation in additional communities. This is the quality assurance portion of the
project that, in the long run, will save Waste Management substantial amounts of money
in future implementation of the ‘Pay To Be Green’ program.
6.2.4. Risk Assessment
With any new program, there exists a certain amount of risk that is inherent in
business. No program has ever worked exactly as designed and many require
modifications during and after the implementation period. This should be stressed to
any company board and the consumers before the project is even considered. The
‘Pay To Be Green’ program is no different than any other project when in comes to risks
and problems that need to be addressed in order to be successful.

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The biggest risk is lack of acceptance of the program by residential customers,
which turns into lack of participation and dissatisfied consumers. With any new
initiative, most consumers naturally fear what they don’t fully understand. It is human
nature to be afraid of something you are not comfortable with. This could devastate the
program if it happens to a majority of the residential customers. This is where good
literature and large efforts of advertising is critical. The more the consumer knows, the
more likely they are to participate.
The initial cost may seem large to many executives in the company, but this
money will be recouped in a few short years. The amount of recyclable products
gathered in the first two years could be sold for a large profit. This is due to the demand
for recyclable products increasing due to the cost of raw materials being on the rise.
Recycling is expected to increase to almost four times its original rate when the program
started. The amount of yard waste is also showing drastic increases. This is also an
area of profit for Waste Management. The company can sell the composted material as
landscape mulch through its own facility or with the help of a 3rd party contractor. The
estimated amount of materials collected in the first five years of the ‘Pay To Be Green’
program is shown in Table 6.2-2 and Figure 6.2-1.
Typical community of 100,000 people

Yard Waste
Year Waste Landfilled Waste Recycled Collected
1 55000 4000 0
2 44000 5000 12000
3 42000 7000 14000
4 41000 10000 15000
5 39000 15000 16000
Table 6.2-2: First Five Years – Total Tonnage of Each Item Collected

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Waste Stream for the First Five Years of the 'Pay To Be Green' Program
70000
60000
Tons of Waste
50000
40000
30000
20000
10000
0
1 2 3 4 5
Yard Waste Collected
Years Waste Recycled
Waste Landfilled
Figure 6.2-1: Tonnage of Materials Collected for the First Five Years of the ‘Program
Another risk associated with the program is the increase in illegal dumping that
might occur due to refusal to pay the fees that are required. This is something that has
happened in other programs that have been initiated by city governments in the past.
The good news is that it has always been on a small scale and only lasts for a few
years. After this time, there are still cases reported to the authorities, but they are few
and far between. The local law enforcement should crack down as much as possible on
illegal dumping, but due to the dumping occurring on such a small scale and scattered
over a large area, the police participation is usually minimal. There are usually too
many larger crimes that need to be dealt with and manpower could not be spared. The
fines and criminal charges need to be in place and to some extent severe in the
punishment. This alone is usually a large enough deterrent to keep illegal dumping
from ever happening.

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6.2.5. Long-Term Benefits
The most significant long term benefit for the company and its stakeholders in the
amount of increased revenue that will be created through the selling of the recyclable
materials Waste Management is collecting. The price of oil is increasing rapidly over
the last couple of years and many are unsure of where it will end. Raw materials,
especially aluminum, steel, and copper, are continually rising in price to harvest out of
the ground. Industries are now paying good prices for these metals when they are
recycled. This is being found to be a cheaper way of producing the raw materials that
are needed. Below is a graph that shows the increasing price of oil. Oil is the main
ingredient for all plastics manufactured today and, at these high prices, plastics should
not be a product that is thrown away on a daily basis. Oil is also the primary ingredient
in the substance that Waste Management spends a great deal of money on each year,
diesel fuel for their trucks. With the immense size of their trucking fleet, the company
spends millions on fuel each year. The problem is that many of these trucks are
running recycling routes with very poor results in the amount of product they are
collecting. Many communities have voluntary recycling programs that very few people
participate in. This is primarily due to the increased work that is involved to recycle and
there is no benefit provided to the consumers. By instituting the ‘Pay To Be Green’
program, residential and commercial customers will have initiative to recycle due to the
cost savings that could be available due to the decrease in the amount of waste
generated and disposed of. This not only provides monetary benefits, but it also helps
to save the environment for future generations to enjoy.

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Figure 6.2-2: Crude Oil Futures Prices From April 1, 2005 to April 21, 2006
(Source: Energy Economics Newsletter, 2006)
There will also be savings in the slower filling of existing landfills. The program
will increase the life of the landfills and decrease the amount of capital spending
required to continually acquire and build new ones. This will not only help place the
revenue in more advantageous projects within the company, it will also show the
stockholders that Waste Management has a environmentally friendly path into the
future. The brand image of the company dramatically increase for the better and will
now be seen as one of the leaders in the fight to reduce, reuse and recycle. At this
current stage, Waste Management could use some good publicity to increase the brand
image that has been tarnished heavily in the last 20 years.
As previously mentioned, Waste Management, Inc. stands to gain considerable
amounts of revenue from the institution of the ‘Pay To Be Green’ program. In Table 6.2-

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4 is a proforma statement of operations for the next five years. The table is based on
the following costs and revenues for waste, recycling, and yard waste recycled.
Product Cost per Ton Revenue per Ton
Solid Waste $88.02 $75.00
Recycling $88.50 $500.00
Yard Waste Recycling $35.02 $200.00
Table 6.2-3: Costs and Revenues for Products Collected by Waste Management, Inc.
The amounts in Table 6.2-3 are applied to the expected tonnage amounts of
waste and recycled materials to be collected. The costs and expenses are then
calculated for what normally would be incurred from the waste collection and disposal.
The first year, 2006, shows the one-time operating expenditure that will be incurred for
the creation and implementation of the ‘Pay To Be Green’ program. This year will also
show a government subsidy paid to Waste Management for instituting a program to help
protect the environment. Due to the initial costs, the company will show a loss for this
community in the year 2006.
The proforma shows that after an initial decrease in the first years profits due to
initialization costs, the remaining years show a healthy profit that continues to grow.
The program will pay for itself partway into the third year, which is in 2008. Profits will
continue to climb in the future years of the program and as it becomes more established
in the community. This will also be a point where participation has increased.

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Proforma Statements of Operations
Years Ended December 31

2010 2009 2008 2007 2006
Operating Revenues:
Landfill Waste 2,925,000 3,075,000 3,150,000 3,300,000 4,125,000
Recycled Waste 7,500,000 5,000,000 3,500,000 2,500,000 2,000,000
Yard Waste 3,200,000 3,000,000 2,800,000 2,400,000 -
Total Operating Revenues 13,625,000 11,075,000 9,450,000 8,200,000 6,125,000
Costs and expenses:

One-time operating expenditures - - - 3,280,000
Operating (excluded dep) 5,332,120 5,034,000 4,823,420 4,754,340 5,219,580
Selling, general, and administrative 1,148,019 1,114,582 1,082,118 1,050,600 1,020,000
Depreciation and amortization 562,754 546,364 530,450 515,000 500,000
Total costs and expenses: 7,042,893 6,694,945 6,435,988 6,319,940 10,019,580
Income from operations 6,582,107 4,380,055 3,014,012 1,880,060 (3,894,580)
Other Income (expense):

Government subsidies (1,000,000)
Total other: - - - - (1,000,000)
Net income 6,582,107 4,380,055 3,014,012 1,880,060 (2,894,580)
Table 6.2-4: Proforma Statement for Waste Management, Inc.

Page 143 of 163
The ‘Pay To Be Green’ program can be easily replicated to meet the needs of
any community in the United States and Canada. Each scenario will have to be fully
examined to determine the extent of changes to the program that are required. The
biggest hurdle will be the community’s willingness to participate in the program and not
see it as a burden on their lives. The program will also easily handle any increases in
population that may occur in the future. This will primarily be seen in the increase of
waste capacity the cities now have. With recycling taking a portion of the waste from
the landfills, the waste trucks will not be as heavily burdened and the life of all the
landfills in the area will be increased.
It will also allow Waste Management to diversify away from their current process
of running the business, which is considered the landfill model. The company would
now be contributing to the safety and health of the environment and decrease the
amount of waste being placed in landfills. It will be difficult at first since the waste
disposal portion of their core business is where a majority of the profits are. This is
primarily due to the cyclical nature the price of recyclable materials possess and the
smaller profits that are being made. With time and more communities being involved in
the program, Waste Management will turn this around in the selling of the recyclable
materials that are sold. This will also strengthen the company’s relationship with the
EPA and other government entities. This is needed at this time due to their poor track
record in the past with these agencies. It will also reduce the amount of fines and fees
that are paid each year due to poor handling of waste since the company will now be
seen as the ‘green company of the future.’

Section 7.0 – References
Page 144 of 163
7.0 References
Barry, Gregory. (2006). Waste Management. Morningstar. Retrieved April 8, 2006,
from http://quicktake.morningstar.com/Stock/MorningstarAnalysis.asp?
country=USA&Symbol=WMI
Better Business Bureau. (2006). Waste Management. Retrieved February 12,2006,
from http://search.bbb.org.
Bioreactors. (2005). Retrieved February 10,2006, from
http://www.epa.gov/epaoswer/non-hw/muncpl/landfill/bioreactors.htm%236.
Business and Company Resource Center. (2006) Waste Management History.
Retrieved April 15, 2006 from www.uhv.edu Victoria College Library System in
the Business and Company Resource Center.
Cappiello, D. (2006, March 1). Landfills Seek Space Before Rules Change. Houston
Chronicle, pp. B1 and B7.
City of Fort Collins, CO Public Works Department. (2006). Refuse and Recycling
Collection. Retrieved April 13, 2006 from http://fcgov.com/recycling.
City of Loveland, CO Public Works Department. (2006). Refuse and Recycling
Collection. Retrieved April 13, 2006 from
www.ci.loveland.co.us/publicworks/solidwaste/swd_refusecollection.
DATAMONITER. (2005, May). Global Environmental & Facilities Services Industry
Profile. Retrieved April 26,2006, from http://uhv.edu
Dignan, L. (2004). Waste Not. Baseline.

Page 145 of 163
Duncan, J.W., Ginter, P.M., & Swayne, L.E. (1998). Competitive Advantage and
Internal Organizational Assessment. Academy of Management Executive, 12(3),
6-16
E.J. Ourso College of Business. (2006). David P. Steiner. Retrieved February 11, 2006,
from http://mba.lsu.edu/speakerseries/2006/steiner.asp.
Energy Economic Newsletter. (2006). Crude Oil Futures. Retrieved April 20, 2006
from www.wtrg.com/prices.htm.
EPA Website. (2006). Municipal Solid Waste Generation, Recycling and Disposal in
the United States, Facts and Figures for 2003. Retrieved March 22, 2006 from
http://www.epa.gov/epaoswer/non-hw/muncpl/pubs/msw05rpt.pdf.
EPA Website. (2006). Pay as you throw. Retrieved April 1, 2006 from
http://www.epa.gov/payt/.
Evans, P. & Wurster, T. (2000). Blown to Bits: How the New Economics of Information
Transforms Strategy.
Gray-Larson. (2005). Project Management: The Managerial Process-Defining the
Project. McGraw-Hill Company, Third Edition.
Hitt, M., Duane, R., & Hoskisson, R. (2005). Strategic Management: Competitiveness
and Globalization. Mason, Ohio: Thomson South-Western.
Hoovers Financial Website. (2006). Waste Management Industry. Retrieved March
23, 2005 from www.hoovers.com
Innovative Projects. (2004). Retrieved February 10,2006, from www.wm.com.

Page 146 of 163
International Programs Center, US Census Bureau. (2004). Global Population
Composition 2002. Retrieved March 31, 2006 from
http://www.census.gov/prod/2004pubs/wp-02.pdf.
James, R. (2006). PowerPoint presentation. Retrieved April 13, 2006 from
http://www.wm.com/WM/investor/presentations/20060306RaymondJames.pdf
Kotler, Philip. (2003). A Framework for Marketing Management, (2nd ed.), Pearson
Education Inc.
Miranda, M., & Aldy, J. (1996). Unit Pricing of Residential Municipal Solid Waste:
Lessons from Nine Case Study Communities. Retrieved on March 25, 2006 from
http://www.epa.gov/epaoswer/non-hw/payt/pdf/unitpric.pdf.
Morningstar. (2006). Financial data retrieved on March 15, 2006 from various pages on
Morningstar’s website at http://quote.morningstar.com/Quote.html?pgid=
hetopquote&ticker=wmi
MSN Money. (2006). Financial data. Retrieved March 15, 2006 from various pages on
MSN Money’s website at http://moneycentral.msn.com/investor/research
/profile.asp?Symbol=WMI
Porter, Michael. (1996). What is Strategy? Harvard Business Review. Retrieved
January 28, 2006, from http://uhv.edu
Prime Lending Rate. (2006). Bank Prime Loan Rate Changes – Historical Dates of
Changes and Rates. Retrieved April 20, 2006 from
www.beginnersinvest.about.com.
Project Portfolio Management. (2006). Retrieved April 1, 2006 from
http://www.prod-dev.com/

Page 147 of 163
R. Cooper, 2001. Winning at New Products. Product Development and Management
Assoc. Retrieved on March 15, 2006 at http://www.prod-dev.com
/pdf/Working_Paper_10.pdf#search='winning%20at%20new%20products'
Republic Service. (2005). 10K Report. Retrieved March 15, 2006 from
http://nocache.corporate-ir.net/ireye/ir_site.zhtml?ticker=RSG&script=800&
layout=8
SAP (2005). Waste Management Selects SAP safe Passage Program. Retrieved
January 18, 2006 from http://www.sap.com/company/press/Press.epx?PressID=5471
SAP solution brief. (2006). New Product and Development Introduction. Retrieved from
http://www.sap.com/solutions/npdi/pdf/BWP_NPDI.pdf
SEC Info. (2004). Waste Management. Retrieved February 11, 2006, from
www.secinfo.com/dsvRu.z1Cs.htm#1stPage.
SEC Website. (2006). “Fraud at Waste Management.” Retrieved March 22, 2006 from
www.sec.gov
SEC Website. (2006). Waste Management Founder and Five Other Former Top
Officers Sued for Massive Fraud. Retrieved April 1,2006 from
http://www.sec.gov/news/press/2002-44.txt.
Stolovitsky, N. (2006). Project Portfolio Management for New Product Development:
Tracking the Project Cycle from Idea to Launch. Retrieved March 15, 2006 from
http://www.technologyevaluation.com/search/for/project%20porfolio%20manage
ment
Thomson Gale: Encyclopedia of American Industries. (2006). Refuse Systems.
Retrieved April 26, 2006, from http://galenet.galegroup.com.ruby2.uhv.edu

Page 148 of 163
United Nations Population Division. (2004). World Population Prospects. Retrieved
March 15, 2006 from www.esa.un.org/unpp/p2k0data.asp.
US Census Bureau. (2006). Population Estimates. Retrieved April 3, 2006 from
www.census.gov.
US Department of Commerce. (2006). Bureau of Economic Analysis. Retrieved March
23, 2006 from www.bea.gov/bea/newsrel/gdp_glance.htm.
ValueLine. (2006, Mar. 10). Allied Waste. Retrieved April 26, 2006, from http://uhv.edu
ValueLine. (2006, Mar 10). Environmental Industry. Retrieved January 28, 2006, from
http://uhv.edu
ValueLine. (2006, Mar. 10). Republic Waste. Retrieved April 26, 2006, from
http://uhv.edu
ValueLine. (2006, Mar. 10). Waste Management. Retrieved January 28, 2006, from
http://uhv.edu
Waste Management, (2004). 10K and annual report. Retrieved March 15, 2006 from
http://www.wm.com/wm/investor/subscriptions/archives/AnnualReport(10-K)-
12312004.pdf.
Waste Management, (2005). 10K and annual report. Retrieved April 13, 2006 from
http://www.wm.com/wm/investor/subscriptions/2005/2005Annual_with_10k.pdf
Weihrich, Heinz. (2006). The TOWS Matrix: A Tool for Situational Analysis. University
of San Francisco Publishing. Retrieved April 18, 2006, from
http://www.usfca.edu/fac_staff/weihrichh/docs/tows.pdf
Zero Waste America. (2006). Retrieved March 3, 2006 from
www.zerowasteamerica.org.

Section 8.0 – Appendix
Page 149 of 163
8.0 Appendix
The following Appendix provides additional informational sources that were used in
the formation of the case study on Waste Management, Inc.
8.1. Appendix I
Interviews
The following shows the details of the interviews the group conducted in order to
gain first hand knowledge on the intricacies of Waste Management, Inc. This is from
the viewpoint of employees and the cities that contract their services.
The individuals contacted are listed below.
1. Adam Smith, Environmental Manager for Waste Management – Replied with
answers to survey questions
2. Victor Diemert, IT Problem Manager for Waste Management – Replied in
Telephone interview to survey questions
3. Sue Treanor, Manager of Fixed Assets at Waste Management – Replied with
answers to survey questions
4. Jose Garcia, Commercial Motor Vehicle Operator with Waste Management –
Replied with personal interview to survey questions
5. David Cohen, Waste Management Analysis for Value Line – Replied in Phone
interview to questions
6. John Frye, Facilities Manager for a small manufacturing company – Replied in
personal interview to questions

Page 150 of 163
7. Randy Tanner, Traffic Manager and Hazardous Material Specialist for a small
manufacturing company – Replied in personal interview to questions
8. Leslie Speight in the Public Relations office at Waste Management, Inc. – No
Reply
9. Investor Relations at Republic Waste – No Reply
10. Solid Waste Manager at the City of Missouri City – No Reply
11. First Colony – No Reply

Page 151 of 163
Sent via email to Adam Smith, Environmental Manager for Waste Management.
Date: Tue, 21 Feb 2006 16:50:12 -0600
From: "Adam M. Smith" <asmith@sugarlandtx.gov>
To: cnbharrell@yahoo.com
Subject: Re: Waste Management

Correen,
I answered the following questions as best I could. I am really not one to dodge a
question, but some that you asked were very difficult to answer given my position
and the fact that I work for a City. If you need anything else just let me know.
1-How does the City of Sugar Land decide on its trash removal
company? If it is through bids, how often are these bid out?
The City follows all state and federal regulations developed to make sure
municipalities award such contracts are awarded fairly. It is a bid process and the
current contract is for a 5-year term. If you need more specific details I would
have to refer you to our Purchasing Department. They are the most
knowledgeable about and advise us with all aspects of this process.
2-What do you consider to be the most important factor in choosing

the contract?
Because we are a municipality, and are funded with tax dollars, the most
important aspect is cost. Every company must submit a bid to provide the same
level of service. Of course, there are some other factors that come into the
equation. It is not 100% determined on cost. Again, I hate to dodge the question,
but our employees in the Purchasing Department are the experts on this subject
and they could more accurately explain to you in what instances a company that
was not the lowest bidder can be awarded the contract.
3-Do you consider one trash company to be superior? If so, why?
I cannot speak of any specific companies. I will tell you about what
qualities that could make a trash company superior to others in the
industry.
1) A well maintained fleet or trucks.
2) Permanent staffing as opposed to using temp agencies
3) Proven, effective management
4) Good history of providing good service and not having legal problems.

Page 152 of 163
4-As a city, are you required to follow more regulations in waste

removal than a rural area? What is the most difficult regulation you have
to deal with?
I cannot answer this question as well as a city representative that

maintains their own fleet. We have very few regulations we must follow
because we contract out our services and make any regulations fall back on the
contractor and the landfill.
Adam Smith
Environmental Manager
City of Sugar Land Public Works
Office (281) 275 - 2497
Cell (281) 513-3475

Page 153 of 163
Telephone interview with Victor Diemert, IT Problem Manager for Waste

Management
.
1. Do you know WM’s current strategy?
Every employee attended a mandatory 2 day meeting where management

discussed WM goals and strategy, but didn’t provide the framework on how to
achieve these goals.
2. One of the strategies I have read about is the focus on correct pricing to improve
margins. Do you think the customers are accepting this?
The customers seem to be accepting the price increases, the focus is now on
customer service and customers are willing to pay a little more for good service.
3. What can you tell me about the new routing software?
WM is one big trucking company. The biggest expense is the trucking.

Implementing the new routing software really did save the company a significant
amount of money.
4. What is your opinion of the current morale?
Employee morale has improved. The company seems to be through the

difficulties after many acquisitions and is truly beginning to value its employees.
5. Do you think WM has competitive benefits?
The benefits are ok relative to other companies. All companies are struggling
with how to pay for the double digit health insurance increases. The benefits
include stock options, stock purchase plan, and bonuses. Every exempt
employee is usually on a bonus plan and the bonuses paid in March of this year
were very good.
6. Are you continuing to see layoffs?
The company has layoff about every three months it seems. There was a small
one in January of this year. The last big layoff was in October of last year. It hit
a lot of management levels.
7. Does the company use an integrated software?
The main software for HR and financials is PeopleSoft. Since PeopleSoft was
acquired by Oracle and it will no longer be supported, the company is looking into

Page 154 of 163
SAP. SAP is what is currently being implemented for the customer service
package.
The company has hundreds of applications and thousands of servers. The IT

department managers, about 40 of us, meet every morning to discuss problems
users are experiencing and how to improve the systems.
The other main software was adopted when WM acquired Mid-America. Mid-
America had a good system, so WM began to use it.
8. Do you know much about the president, David Steiner?
David Steiner used to be the legal council for WM.
9. Do you think the company will continue to be profitable?
The Wheelabrator is the most profitable portion of the business. The rest of the
business trends with the housing and construction market.

Page 155 of 163
Email Interview Questions with Sue Treanor, Manager of Fixed Assets at Waste
Management, Inc.
Hello Sue,
Thank you again for taking the time to answer these questions that will help my group with
the concluding competition project that encapsulates the MBA program at University of Houston
– Victoria
Jim,
Please note that these responses are strictly mine personally and should not be represented as
those of Waste Management. I hope this is helpful.
Thanks,
Sue
1.) What do you consider as the most significant driving forces in the external environment
that affect the environmental services industry (examples of driving forces are
governmental regulations and technological innovations)?
a. Definitely government regulations.
2.) What do you consider as core competencies (company strengths such resources and
capabilities) that enable a competitive advantage for Waste Management in the
environmental services industry (examples of core competencies would include Waste
Management’s environmentally conscious innovative culture, transportation
infrastructure/management, or the organization’s brand name recognition)?
a. I believe customer service is our number one core competency, along with the
other items you have noted above.
3.) Typically, how long does Waste Management keep the collection and transfer
commercial motor vehicles in operation and once these vehicles are taken out of service
are they sold, scraped or removed in some other process?
a. 10 years.
b. They are normally scrapped for parts.
4.) What is the depreciable life of commercial motor vehicles (such as 5 years)?
a. 8 years for Front-End Loader Trucks. All others, 10 years.
5.) Can you help explain asset swapping (like renting or available usage) in the industry such
as transfer stations and landfills with other environmental service competitors such as
Republic Waste or Allied.
a. Swaps of Transfer Stations and Landfills are rare due to the permit. I’m not
aware of any swaps related to these lines of business. Several years ago Waste
entered into a swap with Allied Waste involving hauling companies. The reasons
involved synergies and to better align the business in specific market areas.

Page 156 of 163
6.) Does Waste Management use technology such as RFID to keep track of trucks for
operational and accounting purposes?
a. This technology is currently being piloted in a few select market areas.

Page 157 of 163
Interview with Jose Garcia, commercial motor vehicle operator with Waste
Management on 4/26/06.
Jose Garcia is a commercial motor vehicle operator providing industrial service by

picking up and dropping off containers. Jose Garcia operates out of the 1901 Afton
facility at the approximate intersection of Antoine Drive and Hempstead Highway in
Houston Texas.
1.) What is the nature of your position?
I am an industrial roll off container operator.
2.) How do you like your position with Waste Management?
I like driving commercial motor vehicles, and I enjoy working for Waste Management.
The “Best Place to Work Program” is really beneficial for the employees. This program
encompasses excellent benefits, training, and safety which create a positive work
environment.
3.) Do you know much about the Waste Route program that strives to seek
efficiencies with the commercial motor vehicles for collection and other processes?
Waste Management dispatches the routes in an efficient manner based on information

technology software programs. Currently, the significant awareness pertains to fuel
costs. The drivers are informed to operate the commercial motor vehicles and run the
routes properly in an effort to conserve on fuel costs.
4.) What locations do you travel to?
I travel from the truck domicile location at 1901 Afton to customers for pick up and drop
off of containers. I am also routed to transfer stations and to landfills.

Page 158 of 163
Phone call with David Cohen, Waste Management Analysis for Value Line:
April 7, 2006
The only information Mr. Cohen could share was to go to the investor relations web
page and review the documents, especially the 10K.
He said if that didn’t give us enough information, we should contact public relations and
wished us good luck.
Personal interview with John Frye, facilities manager for a small manufacturing
company.
March 21, 2006
1. Which waste disposal company does your company use? Republic Waste.
2. Have you considered Waste Management? Yes, we have used them in the past,
but they were more expensive and their service was terrible.
3. Would you consider using them again? No, even if they were cheaper, their service
was not nearly as good as Republic Waste’s.
4. Do you have any other waste disposal needs? Yes, we dispose of hazardous
waste, but neither Republic or Waste Management handles this type of disposal.
Personal interview with Randy Tanner, traffic manager and hazardous material
specialist for a small manufacturing company.
March 21, 2006
1. Do you have hazardous waste that needs to be disposed? Yes.
2. Please tell me about the disposal of this waste. There are only two companies
currently that handle this type of disposal; none of the major trash companies handle
this type of disposal. The hazardous material is only allowed to be disposed of in
Canada-and possibly one place in the US, so all of the disposals are sent there.
3. Do you know how they dispose of the material? I think it is actually incinerated.

Page 159 of 163
Sent via email to Leslie Speight in the PR office at WM. No reply was received.
Leslie,
Thanks for taking time to talk to me today and helping me out. Below are the questions
that I would appreciate if someone in your office could answer.
Please allow me to introduce myself, my name is Correen Harrell and I am an MBA

student at UHV-Sugar Land. In the final class for an MBA, the class are assigned is
assigned a case competition; our case study is on your company, Waste Management.
I would appreciate it if you would answer the following questions:
1-What is your current business strategy? I have read David Steiner's letter in the 2005
annual report which talks about strategic goals set forth in the business strategy; I would
to become more familiar with this strategy.
2-What do you consider to be the most influential "general environment" factors in your
business?
3-Please describe Waste Management's core competencies. What makes this

company better than the competition?
4-Do you have any plans to grow internationally? If so, how?
5-What government regulations would you like to see implemented/deleted?
6-WM has gone through a significant turnaround and appears to be better for it! What
was the biggest obstacle WM had to overcome during this turnaround period?\
7-What is the next biggest challenge WM faces?
8-I noticed your income statement does not have any R&D expense. How do you
innovate without R&D?
Please include any other information you think would be applicable.
Thank you for your time and assistance in this matter.
Correen Harrell
281-240-3558 (work)
281-261-7180 (home)
cnbharrell@yahoo.com

Page 160 of 163
Sent via email to the investor relations address on Republic Waste’s website. No reply.
Date: Mon, 20 Feb 2006 13:26:40 -0800 (PST)
From: "Correen & Bill Harrell" <cnbharrell@yahoo.com>
Subject: Information request. Thanks!
To: contact@repwaste.com
Hi,

student at UHV-Sugar Land. In the final class for an MBA, we are assigned a case
competition. This semester the company we have been assigned is Waste
Management. With this assignment, I am trying to gather information regarding Waste
Management. I would appreciate it if you would answer the following questions:
1-What do you consider to be the most influential "general environment" factors in your
business?
2-Please describe Republic's Waste's core competencies. What makes this company
better than the competition?
3-Do you have any plans to grow internationally? If so, how?
4-What government regulations would you like to see implemented/deleted?
Please include any other information you think would be applicable.
I appreciate your time in assisting me with this!
Correen Harrell
281-240-3558 (work)

Page 161 of 163
Sent via email to the solid waste manager at the City of Missouri City. No reply.
Date: Mon, 20 Feb 2006 12:56:48 -0800 (PST)
Subject: Solid Waste information needed
To: ldorger@ci.mocity.tx.us
Hi,

Management. I would like to know the following:
1-How does the City of Missouri City decide on its trash removal company? If it is
through bids, how often are these bid out?
2-What do you consider to be the most important factor in choosing the contract?
4-How strict are the government regulations that the city must comply with and which
one is the most difficult?
5-What is the relationship with the City of Sugar Land and the City of Missouri City (and
FCCSA) regarding trash removal?
6-I see there are a variety of companies serving the City of MoCity. Why is this? Since
you have experience with the various companies, please give me your opinion on what
you feel are the strengths and weaknesses of the companies.
Please include any other information you think
Correen Harrell
(City of Missouri City resident)
281-240-3558 (work)

Page 162 of 163
281-261-7180 (home)

Page 163 of 163
Sent via email to First Colony. No reply.
Date: Mon, 20 Feb 2006 12:49:05 -0800 (PST)
Subject: Please forward to your solid waste manager. Thanks!
To: FirstColony@FirstColony.org
Hi,

Management. I would like to know the following:
1-How does FCCSA decide on its trash removal company? If it is through bids, how
often are these bid out?
2-What do you consider to be the most important factor in choosing the contract?
4-How strict are the government regulations that the city must comply with and which
one is the most difficult?
5-What is the relationship with the City of Sugar Land and the City of Missouri City
regarding trash removal?
Please include any other information you think
Correen Harrell
281-240-3558 (work)
281-261-7180 (home)


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Waste Management, Inc.

Strategic Case Analysis

Dr. Jifu Wang

The Leaders in Waste Management

Leading Edge Consulting Group May 4, 2006

4.2.2. Intangible Resources ............................................................................... 62

Leading Edge Consulting Group May 4, 2006

6.2.5. Long-Term Benefits ............................................................................... 139

Leading Edge Consulting Group May 4, 2006

Figure 3.1-2: Prime Lending Rate During 1955-2006 17

Figure 3.1-3: US Gross Domestic Product Percent Growth From 2002-2005 18

Figure 3.1-4: Change in the Elderly Population and Total Population 23

Figure 3.1-5: Elderly Population (Ages 65+) 24

Figure 3.1-6: Management of Municipal Solid Waste – 2003 26

Figure 3.3-1: Porter’s Five Forces Model 40

Figure 4.4-1: Comparison of Five-Year Cumulative Return of Stock Value 76

Figure 4.4-2: Waste Management, Inc. Cash Being Returned to Shareholders 77

Figure 4.4-3: Waste Management, Inc. 5 Year Revenue Statement 78

Figure 4.4-4: Waste Management, Inc. Cash Being Returned to Shareholders 79

Figure 4.6-1: Waste Management, Inc. Value Chain 85

Figure 6.1-1: New Product Development and Introduction (NPDI) 120

Figure 6.1-3: Timeline to Implement Project Effectively 122

Figure 6.1-4: The Stage-Gate® Process 123

Figure 6.2-1: Tonnage of Materials Collected 138

Leading Edge Consulting Group May 4, 2006

Table 3.1-1: Worldwide Population Figures 22

Table 3.1-2: Municipal Solid Waste, 1960-2003 26

Table 3.2-1: United States Solid Waste Industry Summary 37

Table 3.2-2: United States Solid Waste Industry Growth Rate 39

Table 3.4-2: Current Financial Information for Republic Services, Inc. 50

Table 4.4-1: Waste Management, Inc. Income Statements 71

Table 4.4-2: Waste Management, Inc. and Republic Services Margins 72

Table 4.4-4: Waste Management, Inc. Industry, and S&P 500 73

Table 4.4-6: Waste Management, Inc. Condensed Balance Sheet 74

Table 4.4-7: Waste Management, Inc. Management Efficiency 75

Table 4.4-8: Waste Management, Inc. Market Value Analysis 76

Table 4.4-9: Waste Management, Inc. Revenue and Income Overview 78

Table 4.6-1: Waste Management, Inc. Strengths and Weaknesses 87

Table 4.7-1: Waste Management, Inc. SWOT Analysis 95

Table 6.2-4: Proforma Statement for Waste Management, Inc. 142

Leading Edge Consulting Group May 4, 2006

1.0 Executive Summary

future. In the external analysis, a general environment analysis will be conducted to

Waste Management must capitalize on to be successful. The internal analysis will be

resources, an objective analysis, a detailed financial analysis, strategic analysis, value

into the future.

Leading Edge Consulting Group May 4, 2006

2.0 Background Information on Waste Management

competitors. Through its many subsidiaries, Waste Management serves close to 2

million commercial companies and around 25 million residential consumers in the

2.1. Brief History of Company

Leading Edge Consulting Group May 4, 2006

the government and environmental agencies.

especially in the waste-to-energy business. The company acquired a controlling

Leading Edge Consulting Group May 4, 2006

have been replaced due to the scandal (SEC, 2006).

Waste Management, Inc. continues today to be a leader in the disposal of

2.2. Historical Timeline of Important Events

company’s colorful history.

Leading Edge Consulting Group May 4, 2006

1971 – WMI Goes Public

Leading Edge Consulting Group

1979 – First Lawsuits Brought