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2011
Finance: Molok Case Two
Mike Flear and Rohit Myadam
International Finance
11/13/2011
International Trade Finance: Molok Case Two
November 13, 2011
Section 1: Environmental Scan
Environmental Scan: Competitors Direct/Indirect
Indirect competitors in Texas: Waste Management, Republic/Allied Waste, and Progressive
Waste Solutions
Waste Management:
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Waste Management is North America’s largest waste disposal provider
Over fifty locations in throughout the state of Texas (Waste Management, 2011)
The company offers a range of services: residential, industrial services and
commercial
Waste Management is an industry leader an innovator in recyclables
Republic Services / Allied Waste
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Republic Services acquired Allied Waste Services in 2008
Republic Services have a large stake in waste disposal in Texas.
Republic Services/Allied Waste provides disposal, recycling and collection services
for over sixty of the states towns and municipalities. (Republic/Allied Waste, 2011)
Progressive Waste Solutions
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Progressive Waste Solutions - third largest solid waste management firm in North
America
Progressive Waste Solutions offers: residential, commercial and industrial services
Firm has twenty six locations throughout the state of Texas. (Progressive Waste,
2011).
Environmental Scan: Business Climate/Political Stability
Texas is politically stable. Government officials are democratically elected through
the state legislature and Texas congressional delegation. Currently, the Republican Party
holds majority control. The State of Texas has established and maintains strict environmental
waste regulations. For example: the document, “State Environmental, Law Affecting Texas
Agriculture” explains Texas Laws and Regulations on: Water Quality, Water Standards,
Texas Pollutant Discharge Standards, Groundwater, Air Quality, Solid Waste and Hazardous
Material Laws and Regulations, Bio Solids, Pesticides and Chemigation, Protection of
Wildlife, and Enforcement of Texas Environmental Law (State Environmental Laws, 2011).
International Trade Finance: Molok Case Two
November 13, 2011
Legal System
The legal system in Texas is broken into three branches: The Legislative, Executive,
and Judicial. The judicial branch is responsible for interpretation of the law and resolving
disputes. There are two types of cases heard in Texas, criminal and civil. In Texas criminal
cases are defined as, “those in which someone is charged in court with having violated certain
laws, called criminal or penal statutes.” (Courts Texas, 2005) Civil cases are defined as,
“disputes between two or more parties (usually persons or businesses) and which are not
criminal in nature.” (Courts Texas, 2005)
Legal Permits
In order to operate legally in Texas, Molok would need to acquire a series of Solid
Waste Management Permits and Registrations. Examples include: Hazardous and Industrial
Waste Permit, Medical Waste Permit, Municipal Solid Waste Permits and Sludge Permits and
Registrations (Texas Commission on Environmental Quality, 2011).
Protection of Intellectual Property
Intellectual property is protected in the United States by the United States Patent and
Trademark Office: An Agency of the Department of Commerce. The USPTO both develops
and strengths, domestic and international property protection (trademarks, copyrights, patents
protection). Within the USPTO, The Office of the Administrator for Policy and External
Affairs – Trade will be important for Molok. The Trade group is responsible for international
standards and intellectual property covered by the World Trade Organisation’s Agreement on
Trade-related Aspects of Intellectual Property Rights (TRIPS Agreement). In the United
States, intellectual property cases are filed in the dispute jurisdiction civil court. Molok
intellectual property disputes within Texas would therefore be filed under Texas Civil Law.
International Trade Finance: Molok Case Two
November 13, 2011
General Economic Information/Statistics: Texas
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According to the U.S. Bureau of Labour Statistics Texas added 230, 000 jobs
in 2010. More than any other state in The United States.
2010-2011 expected growth of 2.3 percent
Population: 25, 145, 561 million. (2010 Census)
2nd largest state population behind California
Fastest growing state in United States
By 2015 Hispanics are expected to become the majority population at 37.5
percent
Annual Income per capita: $37, 706 (BEA indicate)
Texas has the second largest total state personal income of $1.01 trillion
Texas universities are a leader’s in Research and Development in many
industries (including bio-technological, advanced materials and energy)
2010, 7,618 patents issued in Texas
2010, Texas homes had a median price of $139, 100 well above national
median
Economic Information Related to Waste Management
According to Texas Waste Disposal, Texas disposed of 30, 045 million tons of solid
waste disposed in 2006 (Texas Waste Disposal, 2006). In 2010 Landfill operators in Texas
charge customers a tipping fee based on the weight of volume and the type of waste
delivered. Landfill operators charged on average, $30.10 per ton of waste (Texas Waste
Disposal, 2006). In 2006, total landfill revenues from solid waste disposal totalled nearly 780
million dollars. Total landfill space in 2010 totalled 1.81 cubic yards which, at current
disposal rates, would last the state of Texas for the next forty years (Texas Waste Disposal,
2010).
Economic International Trade
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In 2010, Texas ranked 1st in the United States in terms of international export
revenue dollars. Exports totalled $206.4 billion up 27.2 percent from 2009.
Texas’ largest export partners are NAFTA (Canada and Mexico) which
imported $91.08 billion
Texas imports 2010 imports totalled $302.49 billion increase of 28 percent
from 2009.
International Trade Finance: Molok Case Two
November 13, 2011
Transportation
According to the website, Texaswideopenforbusiness, “Texas’ central location
facilitates timely access to national and international markets via, air, rail, roads and water.
Ease of product transportation is important for Molok once the product arrives at port. Texas
has 307, 000 thousand miles of highway, more than any other state in United States. It ranks
2nd in railroad transportation, rails covering 104, 000 miles. Texas also has 13 deep water
ports along the Gulf coast (Texas Wide Open for Business, 2010).
Communications
The State of Texas maintains strong communication lines, which are necessary for the
proper integration of the Molok product.
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Over ninety-one percent of the US population is uses a cell phone (Ars Technia,
2011).
78.1 percent of Texans have use the internet (Public Data, 2011)
74 percent of Texans have access/use telephone landline (Public Data, 2011)
Cultural/Ethnic Business Variations in Texas
According to the Office of the Governor, 2007 Economic Development and Tourism report
on business in Texas:
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Women owned business = 610, 162
Hispanic owned firms = 447, 556
Black owned firms = 152, 873
Native Hawaiian owned firms = 1,974
Asian owned firms = 114, 593
Language
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Over 2/3rds of the population speak English in Texas
29 percent of people speak Spanish in Texas.
Attitude toward foreign investment
The state of Texas welcomes and encourages foreign investment. In 2010, foreign
owned and controlled firms employed 441 thousands Texas workers (International Trade
Administration, 2010). Overall, foreign investment in Texas totalled 5.1 percent of Texas’
International Trade Finance: Molok Case Two
November 13, 2011
total private industry employment (International Trade Administration, 2010). Most foreign
investment in Texas comes from Canada, France, United Kingdom and Germany.
Tax System
The Texas tax system mainly collects revenues from taxes on: corporations,
individual income, energy consumption, motor vehicles, and individual sales. As of February
2010, Texas no longer has a state corporate income tax.
Section 2: Target Market
Molok has developed a group of products which attract different customer wants and
needs. The Molok product is will help customers reduce overall waste disposal costs, with a
dependable, and atheistically pleasing product. Molok Ltd’s customer profile will have a
large range. Customers will either be environmentally conscious of Molok’s product
advantage or will be interested in Molok product cost savings. In Texas customers may
include: municipalities, state run institutions (schools, colleges, Universities), state parks and
recreation centres, highway waste stops, developers and businesses. Target clients will be
distributed throughout the state of Texas; however, the first implementation of Molok
products in Texas will most likely be to large cities like Houston, where the Waste
Management head office is located. Clients will use bank issued and approved letters of
credit to ensure client payment of purchased Molok products. Seasonality will not affect
Molok purchases. The weather in Texas is conducive to yearlong purchase and installation.
As previously stated, Molok has no direct competition in Texas. The Molok product is
functionally different from current products offered by Molok’s biggest indirect competition.
Unlike competition that sells “above” surface waste disposal bins, the majority of Molok
deep collection space is located below the surface. This allows for collection of more
International Trade Finance: Molok Case Two
November 13, 2011
disposed materials before servicing. Because Molok containers do not need to be serviced as
often, Molok can pass servicing savings on to the customer eventually reducing their costs.
Quantification of Target Clients/ Potential Revenue
Customer
Number (State Wide)
Potential Revenue
Municipalities
1,200(.1)=120
$1.2 million (120*10,000)
State Run Institutions
1000(.1)= 100
$800,000
(100*8,000)
State Parks/Recreation
93(.4)
$222,000
(37*6,000)
Highway Waste Stops
2000(.05) = 100
$215,000
(100*2,150)
Developers/Businesses
50(.2) = 10
$850,000
(10*8,500)
Total Interest State Wide
=(120+100+37+100+10)
=$3,287,000 total potential
=367
revenue
= 37
Municipality Calculation Example = Assumption: 10 percent of municipalities will be
interested in Molok product. Based on this assumption, we also assume that municipalities
will be interested on average in the purchase of $10, 000 dollars in Molok products.
There are approximately 1200 municipalities in Texas.
Therefore: 1,200*.1 = 120
Total Municipal Revenues = 120*(10,000) =$1,200,000.
Customers Fit/Molok Product
Municipalities – are a good fit for the Molok product. Municipalities need: recycling, waste
diversion, good looking product, mixed wastes and cost savings.
State Run Institutions – are a good fit for Molok product. State Run Institutions need:
recycling, waste diversion, good looking product, mixed wastes and cost savings.
State Parks and Recreations – are a good fit for the Molok product. State Parks and
Recreation need: recycling, waste diversion, fewer services, mix wastes and cost savings.
Highway Waste Stops – are a good fit for the Molok product. Highway waste stops need:
recycling, waste diversion, fewer services, mixed waste and cost savings.
Businesses / Developers – are a good fit for the Molok product. Businesses/ Developers
need: recycling, waste diversion, fewer services, mixed waste solutions and cost savings.
International Trade Finance: Molok Case Two
November 13, 2011
Section 3
Market Entry and Marketing Strategy
Molok Ltd will enter the Texas market by means of an agent. Molok has chosen to
enter the Texas market with an agent for a number of reasons. First, an agent will be able to
attain relevant market information which would be otherwise difficult to find.
Communication with the agent will allow Molok insight into market trends, market
stability/instability, and certain barriers to entry. Second, an agent does not take title of
“goods”. An agent is usually paid on by a percentage of sales. Therefore, the agent has a
vested interest in making commission based on Molok sales. Finally, an agent will act as an
intermediary securing contracts and payment between Molok and client. Molok intends on
finding an agent by contacting the International Trade Administration. According to the
website, The International Trade Administration offers local export assistance and can
provide agent information. An agent will be chosen by Molok based on related experience,
and background.
Marketing Strategy
Product
Basic Containers are the original Molok product. The cover is made of a strong but
lightweight, polyethylene. The lifting bag is composed of a tough textile material and is
normally double layered. Molok Basic Containers are available in 7 colours: aluminium, red,
gold, wood green, wood, black, and composite. Molok Basic Containers are available in five
models: 300L, 800L, 1,3m, 3.0m, and 5.0m. This product is different than the competition.
Currently, there are no deep collection container systems in Texas.
International Trade Finance: Molok Case Two
November 13, 2011
Lifting containers are constructed of a two piece polyethylene main cylinder. The
special double bottom system allows liquids to separate to the lower liquid collection
compartment. Lifting containers are safe and easy to trigger system opening the container
with a light-weight rope. Molok Lifting Containers are offered in three sizes: 1.3m, 3.0m, and
5.0m. Lifting containers offer two special benefits. They collect and separate liquids as well
as glass and metal waste. The competition offers no comparable product in Texas.
The BioSystem is a hygienic and efficient method for collecting organic waste. It is
installed inside the Molok containers. The BioSystem offers a separate liquid container where
fluid from organic waste is drained through a perforated plate. The use of a compostable bag
in the BioSystem container keeps the system clean. The system is much safer and cleaner
than other systems. The BioSystem is offered in two sizes: 1300mm/800l and 800mm/500l.
The BioSystem offers the buyer a dynamic and environmentally friendly product. The
competition does not offer a comparable product in Texas.
The Molok CityScape is a litter bin for parks and streets of the modern city
environment. According to Molok, its “...overall design including its shape and size and
materials has been engineered to offer superior waste handling capability within a city
environment.” (Molok, 2011) The CityScape is offered in one size and three different
colours. This product offers the buyer a clean look, with the stability and functionality needed
for the city environment. The Molok CityScape offers the buy a modern, high quality
product. Functionally, the CityScape is similar to the competition.
Molok Domino is a deep collection container designed to withstand heavy use and
vandalism. The Molok Domino is a modern design intended for city streets. Unlike all other
Molok products the Molok Domino is made of concrete and is square shaped. The Molok
Domino is suitable for many different environments including: demanding construction areas,
International Trade Finance: Molok Case Two
November 13, 2011
demanding architectural environments, high ground areas, and flood risk areas. The product
has a 10 year guarantee and it completely liquid proof. The Molok Domino is constructed
differently than the similar products of the competition.
Battery Box is a made of polyethylene and is shockproof and waterproof. Features
include: colour light grey, installs on the side of the Molok container, quick and easy to
empty, capacity of 15 litres, and equipped with a lock. The Battery Box attaches to Molok
containers. The Battery Box will benefit the buyer allowing users easy disposal of batteries.
Battery boxes sold by the competition in Texas do not attach to existing models.
Locking Lid System increases the fire safety for containers and enables customers to
lock containers close to buildings. The locking system also restricts unwanted users from
using Molok containers. The Locking System Lid offers buyers a secure and safe locking
system. The competition in Texas does not use the same technology to secure their waste
bins.
*Based on availability of information, need for Molok product modification in Texas is
unknown*
Price
Molok will offer products to customers at a flexible price. There is a large difference
between the cost to produce and suggested retail price to justify this decision. Molok believes
that volume sales are important when entering into a new international market, and will
therefore offer a flexible price. Molok’s target market will mainly include municipalities,
state institutions, and state parks and recreation. Customers are mainly state and federally
funded with the potential of offering Molok high volume orders. A flexible pricing strategy
will allow Molok to work with these customers, maximizing potential. Molok’s price is on
International Trade Finance: Molok Case Two
November 13, 2011
average higher than the competition. Because Molok will be using a flexible cost strategy,
cost calculations will be done on an individual order basis by marginal cost pricing.
Place
Molok will face a number of shipping issues surrounding the shipment of their
product. First, water transportation will be needed to ship the Molok product across the
Atlantic Ocean and into the United States. Molok products will leave from Finland and arrive
at the port in Galveston, Texas. From Galveston, the product will be loaded onto a large
transport and shipped to the required destination. The shipping terms will depend on the
agreement between Molok and buyer. Molok will try and arrange CPT (Carriage Paid To)
where Molok pays for the shipment, but risks transfer to the buyer upon handling the goods
over to the first carrier. Molok will need warehouse space throughout Texas (depending on
location of demand) to store products. Molok also must ensure that their packaging and
labelling adhere to American packaging and labelling standards for waste containers.
Molok’s methods of transportation will be different from that of the domestic competition.
The domestic competition will have pre-existing, and established warehouse space and
distribution networks. Molok’s distribution systems will be dependent on customer demand
and volume and where they are located within Texas.
Promotion
Molok’s first methods of promotion will be through hired agents and word of mouth.
However upon entry in to the Texas market Molok will conduct promotions within specific
waste disposal print and online associations. For example, Molok would seek promotional
space in the Special Waste Disposal Texas website. Molok could also promote their product
in the Texas Municipal Waste Associations website.
The cost of such promotions is
International Trade Finance: Molok Case Two
November 13, 2011
unknown. For potential customers interested in the Molok product, most information
regarding Molok and its product can be found on the Molok website. This promotional
strategy is the most viable for Molok in Texas. An agent, with a vested interest in selling
product, will be the best promoter of the product. And instead of spending on television and
radio advertisements, Molok should look to industry specific advertisements.
People
Molok customers will be environmentally conscious and understanding of the
potential cost-saving benefits the Molok product offers. The Molok customer will want a
good quality product which is also athletically pleasing. Molok customers will have a
relatively high budget. Most Molok customers will be municipalities, and state institutions.
They will be located throughout Texas and the quantity of customers is dependent on product
demand. Previously, we estimated that upon entry into the Texas market, that Molok would
receive business from between 10 and 20 percent of potential customers. For example, there
are approximately 1,200 municipalities in Texas. Based on our estimations Molok would
receive business from between 120 and 240 municipalities. Molok would like to do business
with municipalities and state institutions because purchasing criteria and purchasing methods
are established. They are likely to make payment for goods received.
After Sales Service
Molok does not directly handle after sales service within North American markets. It
provides parts for replacement; however, subcontracts the replacement service. As for the
collection of waste, Molok subcontracts waste collection from their bins and does not provide
this after-sales service.
International Trade Finance: Molok Case Two
November 13, 2011
According to the Molok North American Ltd. Warranty Certificate,
“Molok warrants that the MOLOK Product is free from manufacturer defects in
material and workmanship under normal use. WARRANTY PERIOD: The warranty period is
(2) years for the lifting bag and lid, and 10 years for the main well, effective date and
delivery.” (Molok North American, Warranty Certificate, 2011).
International Trade Finance: Molok Case Two
November 13, 2011
Sources:
International Trade Administration, Retrieved Nov 6, 2011 from:
http://trade.gov/
Texas Courts 2005, Retrieved Nov 5, 2011 from:
http://www.courts.state.tx.us/oca/pdf/JudSysPam0604.pdf
Molok Ltd Website, Retrieved Nov 4, 2011 from:
http://www.molok.fi/eng/article_page.php?loc_id=44&show_article=24
Texas Commission on Environmental Quality 2011, Retrieved Nov 6, 2011 from:
http://www.tceq.texas.gov/permitting/waste_permits/waste_mgmt.html
Office of the Governor: Texas, 2011, Retrieved Nov 6, 2011 from:
http://governor.state.tx.us/
United States Patent and Trademark Office, Retrieved Nov 6, 2011 from:
http://www.uspto.gov/ip/global/trade/index.jsp
Texas Waste Disposal, 2006, Retrieved Nov 6, 2011 from:
http://www.tceq.texas.gov/assets/public/comm_exec/pubs/as/187_11.pdf
Texas Wide Open for Business 2010, Retrieved Nov 6, 2011 from:
http://www.texaswideopenforbusiness.com/
Ars Technia website 2011, Retrieved Nov 6, 2011 from:
http://arstechnica.com/telecom/news/2010/03/wireless-survey-91-of-americans-have-cellphones.ars
Waste Management Website, Retrieved Nov 6, 2011 from:
http://www.wm.com/residential.jsp
Republic/ Allied Services, Retrieved Nov 5, 2011 from:
http://www.alliedwaste.com/
Progressive Waste Solutions, Retrieved Nov 4, 2011 from:
http://www.bficanada.com/
State Environmental Law, Affecting Texas Agriculture, Retrieved Nov, 6 2011 from:
International Trade Finance: Molok Case Two
November 13, 2011
http://www.nasda.org/nasda/nasda/Foundation/state/Texas.pdf
Molok North America Ltd. Warranty Certificate, Retrieved Nov, 8 2011 from:
http://www.molokna.com/downloads/Certificates/Warranty-all-en.pdf
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