Cook Composites and Polymers Co.

5 Pages   |   2,564 Words

Executive Summary:

This case study report provides a detailed analysis of the situation faced by Cook Composites and Polymers based on the thorough understanding of the problem. An in depth analysis and thorough understanding of the case identified the handling of resin styrene, a hazardous waste, as the root cause of all issues. The problem of difficulty in handling the resin styrene ascended more of problems and now, CCP has to come up with a solution to handle these problems effectively. The decision to handle these issues is based on the primary reason of business existence, profit making. In addition to profit making, the company should adhere to the maintenance of high quality and not compromising over the social responsibility. There were three different options available to the CCP these options included:
  1. Continue with business-as-usual, sending its rinse styrene to cement kilns
  2. Sell its rinse styrene on a waste exchange; or
  3. Proceed with developing the concrete coating that uses its rinse styrene (BPS)
Out of these options, where CCP should adopt the third option of developing a new product development that utilizes the rinse styrene. This option will not only bring revenues but also will help to utilize the hazardous waste. Since, with the development of new product the company can identify new market segments, which can bring in revenues. This way, they are not forgoing their quality and also participating in the safe utilization of resin styrene.
 

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Problem Definition:

Cook Composites and Polymers Co, (CCP) is the manufacturer of gel coats. These Gel Coats are customized as per the demand of customer with quite tight specifications.CCP strongly believes on the maintenance of a high quality. To accomplish and retain a high quality, CCP has strong control system, where even a single gel is checked and improved numerous times until it achieves perfection. As a result of such strong inspection and maintenance of their quality standards, quality assurance serves as their competitive advantage for CCP.

Within the production of the gel coats, styrene is used to rinse mixing vessel between the production batches.  However, Styrene has been nominated as a hazardous waste; if a higher level of styrene is used the quality of gel increases; if the low level of styrene is used, it compromises quality. This compromise can have grave consequences on the brand image. CCP has to come up with a solution to not only reduce or dispose of the styrene but, also maintain the quality. In order to handle this situation CCP came up with various options.

CCP has the option of carrying out the business as they are doing, and sending the rinse styrene to the cement kiln. The second option is to sell the styrene to the waste exchange and third option is to develop a new product. Since, during the Kansas City Regional BPS initiative, CCP realized that it might be able to find a business partner that can use the product having foundation of styrene This idea though, quite attractive, also has many oppositions within the organization. If CCP pursue this option, there is a general sense that the organization is deviating from its competitive advantage of making high value products. Addition to this, this option will also cause them huge initial investments in term of product development and R&D.  However, these options should be analyzed after setting a decisive decision making criteria. This decision making criterion sets the reason for the option. As, decision making criteria is set on bases of business vision, mission, goals and philosophy.
 

Decision Criteria:

Maintenance of quality is engrained within the company’s value and such quality standards also serve as a competitive advantage for the organization. As a result, company cannot give up on quality. Styrene is an essential product in maintaining quality. Addition to this, there is no other choice for the organization, but to use styrene. So, company will have to figure out an option to handle styrene.

These businesses around the world have an objective of making profits. The businesses usually exist because they make profits, serve its employees and add value to the society. These profits and value addition can be achieved through different means; for instance, by providing the superior products as in the case of CCP. Further, organizations try to maximize profits by achieving superior supply chain or technology to produce products at lower costs, like Wal-Mart; while, other organizations achieve profits through development of new products and create new categories, in this way they can charge high premiums. In other words, the businesses achieve different means to maximize their profits. As a result of this one can say that no matter what business does, the primary objective is to maximize profits. Consequently, in the evaluation of the alternatives, one would consider profit making as primary criteria.

Despite all these facts, the organizations today are quite aware of the environmental laws and regulations. Organizations have shifted from a product focused approach to consumer focused approach. Ethics and reputation of those organizations depend on their effort and seriousness about the corporate social responsibility (CSR). In order to become socially responsible organizations, not only they have to abide by the environmental laws; but, they also take many initiatives to prove themselves a corporation considering their social responsibility.

These CSR steps are then marketed to make consumer aware of those efforts to translate a positive image in the minds of the consumers. As part of CSR and following strict regulations, these organizations are committed to develop products that are not hazardous for the users and environment. One of the primary concerns for CCP is also an environmental concern. They proved themselves to be an ethical organization as they took part in the disposal of waste. Moreover, even if they are not taking part in the CSR activities, the NGOs and laws will not allow an increase in usage of styrene, which has been nominated as environmental hazardous. As per the importance of these environmental factors, one would be considering it to be one of the most important factors in decision making criteria.
In the case of CCP, they have strict quality control systems and strong belief on providing products that are environmental friendly. However, they have to use styrene to maintain their quality, and find a way to use styrene, a hazardous waste. This decision to handle Styrene is also related with organization’s strong belief on social responsibility. No matter what decision CCP takes, they have to consider factors like profit making, brand image, and successful disposal of styrene.
 

Analysis of Alternatives:

Businesses exist to make profits, but these profits should not be at the cost of injuries to consumers and environment. One of the major problems faced by CCP is handling of styrene. In doing so, CCP came up with three different options to handle this situation.

First Option:

The first option for CCP is to carry on the business as they are doing i.e. to send styrene to the cement Kiln. This is an attractive option for the CCP; as, they are already doing it and it is helping business to run smooth. However, the problem with this option is the rise in the emission of Carbon dioxide. On the basis of above criteria, if CCP continue these practices, they will lose the opportunity of making some money, which they can do by selling their waste and earning profit. It is just like they are being stagnant with and not capitalizing upon the window of opportunity.

One of the most interesting options they are forgoing is that they can make a new product out of styrene, concrete coating. This will cause them to have a new product category, causing them to be a category leader. As a result of that, they can charge premium for their products. In this way, they will have the opportunity of making profit for the organization. As part of CSR, CCP took the responsibility to dump the old styrene drums, though they were not responsible, but at the end of the project, EPA demanded $, 500,000 for its overhead, administrative and investigation cost. CCP is quite concerned about the environment, if the styrene is used in the cement kiln; they are causing an accelerated increase in the carbon dioxide emission. This can cause them to be forced to use lower level of styrene or choose another option to dispose of it.

Second Option:

The second option is to sell the rinse styrene to the waste exchange program. This is aligned with the business ethics of existing to make profits. In doing so, they will not only be making profits but also will be able to show strong belief on CSR; since, these waste management companies will effectively be handling the styrene. Since, the waste management organizations have expertise in handling the waste; their handling of the waste is effective to cause least harm to the environment. In this way, they can run a marketing campaign to be an ethical organization. Attraction of this option has been enhanced; as, they already have experienced to sell the waste material to such organizations and this experience was positive. As per the decision making criteria, this is one of the strongest options for the organization to pursue. Now, they are getting this opportunity through BPS group, as they have close monitoring of closed members.
Doing so, they will be able to maximize the supply chain efficiency. A superior supply chain can further reduce the costs of the organization.  Additionally, these partners are responsible for the quality and supply issues. If CCP involves itself in this group, they will be getting many other business opportunities and back up of the group in case of the problem. This option is quite attractive, but again, it’s limiting the growth opportunity of the organizations. Businesses develop to grow and come up with new product lines, especially when they can create a category. If they do so, they can extend their business lines and earn superior products.

Third Option:

The third option is to come up with a new product. In that BPS, they came across a partner that might demand a product to paint a concrete storage and CCP can make a product based on rinse styrene. This is an extremely attractive option for CCP, as they are finding new business partner. CCP along with 10 other operators cater to 50% of market size; so, it’s a good way to challenge a competitor and cater more of the market. Usually the when an organization has a product category, it gives them the opportunity to lead that category and earn superior profits.

This industry has a low level of differentiation and so competitors fight on low profit margins. The players in this field have to adopt the red ocean strategy to compete. CCP, in order to gain competitive edge, got an opportunity to create a new category by creating a new product. When an organization leads a category, the product itself becomes category that results in increasing sales and profits. If CCP makes this product, this will not affect their current product line; also, they will be able to utilize the resin styrene.

It means that they are not deviating from their core of producing high quality product. If they adopt this strategy, it will not affect their current product line, but, they will have t produce the new product. There are other options available in the market using chemical formulations, but BPS support will be an important factor to win customer. However, despite that CCP is convinced that it can provide its consumers with styrene based coating. As per the environmental factor, this is again an important choice to make. Because of the fact that, the styrene is converted into product, it’s not burning in the kiln and has no carbon emission. Moreover, the disposal and transportation cost will also be decreasing in the long term.
Despite many attractions in his options, this idea is opposed within CCP because of the fact that in order to pursue this option CCP will be forgoing the company core value of high end gel coats. If a company deviates from its core, it can have serious consequences on its brand image. Moreover, they will have to develop a new product line; this product line will cost them huge investments in the terms of R&D.
 

Recommendation and Justification for Decision:

CCP is one of the leading organizations, among top 10, in the industry. CCP voluntarily participated in the disposal of waste; causing an increase in the costs and despite that CCP got $500,000 charges as overhead, administrative and investigation costs from EPA. From this, one can assume that if CCP is willing, it has handsome investable cash. As a consultant, one would suggest the organization to pursue the third option and set off for the development of low end concrete coating that use rinse styrene. In addition to this, they can also sell the overhead or surplus resin styrene to the waste management organizations. Both of these options are attractive, but, making of new product is more profitable and environmental friendly option.
This, development of new product line, is one of the most attractive options, since the organization is highly quality conscious and socially responsible. Styrene has always been a trouble to handle, and one of the best options to handle such waste is to convert them into a product. This will not only be environmental friendly option but also a medium to earn some profit. If they develop a product line, it will not be affecting their production of high end gel coating, so they are not deviating from their values and core product. In other words, they will need a separate marketing campaign and production facility. If they pursue this option, it will cause them the initial investments. One can observe in daily life that many organizations run different product lines under different brand names. Even if it’s a low end product, the new setting can act as a subsidiary, having different facility and marketing campaign. This will provide them with the opportunity to increase business and increase their market share.

This can cause costs for the organization, but usually initial R&D costs or marketing campaigns are not considered as costs and currently, company is in a position to make such investments; because of the fact, these campaign later bring in consumers. By introducing a concrete coating, CCP will be creating a new category and they can charge premium for it. Though current customers are BPS based, but later they can enhance the customer data base through strong Business to Business campaigns. The reservation about the marketing, R&D department are temporary, since they are analyzing efforts, not the benefits.

As per the environmental factor, if they are using styrene to make a product, they are utilizing that environmental hazardous product. As a result of that, they can reduce its impact on the environment. This utilization is also causing an impact on the reduction of carbon emission. CCP can also run a marketing campaign on their waste disposal schemes and steps. If there is a surplus of the waste, they can sell that to the waste management organization. They will be a great option as it’s also satisfying both the decision making criteria CCP as an ethical organization and of the profit making enterprise.

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