Filter Innovations Inc Case

2008 can buoy Dragasevich (president), teensy urine filtration company based out of Toronto, Ontario, considering expansion, increasingly harsh regulations on wastewater management implemented by goernment, invest in refreshful engineering (tissue layer biological reactors)? Industry increased beg for water and water doment, trend expected to continue market projections secureing $348 one trillion million million contend growing for safe drinking water in growth countries sustainability challenges and advancements in environmental regulation result in growth of demand for higher water intercession standards 2008, 1. meg without drinking water, 2. 4 zillion not connected to wastewater systems 40% projected increase in water consumption by 2025, 1/3 of world race affected by water shortage in Canada, more than $2 billion in gross gross sales big(a)st consumers municipalities, both mathematical products and run significant parting of market industria l Competition dominated by 2 large mutli-national companies ( Siemens water tech and Zenon membrane solutions) aspiration targeted large drug users of filtration systems (corporation and municipalities) requiring over 1 million litres/day Siemens 2. million in tax revenue, 6000 employees (150 R&D), serve more than 90% of fortune 500 manufacturing companies, around 100,000 industrial consumers, parent company Siemens AG over 100 billion electronics and engineering company in over 190 countries with 428,000 people, leader in innovation Zenon owned by GE, provided a complete range of filtration processes, offered broadest product line in assiduity, over 100 years of experience, over 300,000 employees in over 100 countries, publically traded with 18 million in revenue smaller competitors, vary in niche market, offer sales and house on a specific type of filtration and treatment product purlieu have to recreate provincial regulations based on standards set by federal legis lation some environmental legislation conductd wastewater treatment discharge limits for sewer use, storm sewers, and groundwater seepage limits vary regionally wastewater dumped for use of a fertilizer must be tempered stricter legislation raising environmental standards required by companies many companies require certificate of praise from ministry of environment and energy, validating compliance with all guidelines strive Innovations Inc dragasevich studied marine biology, worked for major provider of filter presses in NA extensive experience in industrial process and environmental products, sales manager with GAF (industry leader for filter vessels and bag filters) 1992, founded Filter Innovations Company small industrial water filtration company identifies and supplies treatment solutions for groundwater, wastewater, process water and way evaluated clients needs and design appropriate system to welcome need, develop and build system, install it, oversee it regu larly, offer product harbour supplies wide range of environmental products to support filtration systems goal prioritize social and environmental responsibilities at all times to ensure that actions positively enamour both the community and environment ongoing R&D tuition of new technologies for new products and systems weighty to be accepted as be at forefront of the leading engineering science employs 14 people, sales representatives, engineering engineers & technicians, administrative staff alliance with firms acting as distri preciselyors of its products and systems across NA with few sales in Europe and SA serves 500 clients, FII equipment operational in over 1500 business sites 80% sales in Canada, 15% sales in US, 5% sales outside of NA wants to be recognized as primary supplier of environmental equipment and products, offers simple, innovative solutions for air and water treatment wants to be one-stop shop for all filtration needs, offering timely and cost-e fficient solutions Calco Group 2006, FII purchased by CEG (identifies and acquires environmental companies that were leading suppliers of its specific products) membership with Calco allowed companies to dower resources, networks, and knowledge MLE (groundwater remediation) offers similar products as FII MLE benefit from sales expertise FII sufficient to capitalize on MLE strong manufacturing pore Operations high focus on sales/technical knowledge high customer-centric outlook flexibility in meeting needs of customer key to success odd/comprehensive business structure (engineering, manufacturing, and distributing of various filtration products and systems commodity products in memorial for quick sale (filter media, off-the-shelf filtration units), other products ordered from suppliers as postulate (keep schedule investments and storage be low) advantageous membership with CEG and strong supplier networks customized systems engage in collaborative design efforts with clients and engineers once designed, system construct by manufacturing alliances then installed and supported by FII offers rental and leasing option trinity types interested in this those who want to test a system onwards purchase, those who need it for a specific time period only, and those who want to finance system through regular instalment concedements Sales about 65% of revenues from sale of individual products customized products represent 35% of sales Consumers 2 intellectual for demand companies pollute above regulated level obligated to revoke environmental penalties companies recognize opportunity to save money by alter/recycling wastewater by reducing disposal costs demand ranges from short-term, quick- buy off to long-term consultation/installation (ongoing monitoring and support) tend to focus on projects requiring less that 1 million litres/day able to provide personalise support larger companies dont find these projects profitable, less competition cus tomers in 2 equal groups environmental consulting companies/distributors on behalf of their clients end users (buy forecast from FII) Environmental consultants analyse clients wastewater treatment needs, recommend solution and swear out implement it after assessing need, issue request for RFP from each vendor, use industry expertise to recommend best option for client End user no internal capability, FII identify needs, build custom solution to fix problem (incorporating restrictions) if commodity products much more price sensitive necessitate vendor with lowest price, for custom products price less of a business and willing to pay learn through tradeshows, advertising, word-of-mouth, and industry character MBR new, stricter political relation regulations meant that companys existing wastewater treatment designs did not meet new guidelines faced with decision of whether to expand into MBR market MBR new technology for wastewater treatment, allow for water re-use different application than FII MBR designed to treat biological wastewater, predict that MBR system will be used to give reverse osmosis to make water safe for portable water consumption Europe leading in development currently best environmental option FII would benefit from MBR sales and mod knowhow/expertise with respect to manufacturing, engineering, building, and financial backing new systems Potential Customer base MBR system would be important factor for FIIs profitability treating wastewater under 10,000 litres/day kernel government approval to pass building code testing costs (one time) $200,000 over that volume company only needs certificate of approval available at no cost as customer would pay fee based on percentage of system cost FII timorous of competition, FII need to target and seek out contracts that would be profitable but not attractive to large competitors MBR competition Sanitherm (subsidiary of Peak energy services based in western Canada and direct competiti on with FII, provides turnkey solutions, built, installed and fit various products/systems, hold 3% of MBR market, sold water and wastewater treatment systems globally) Enviroquip (division of Eimco Water Technologies, hold 30% of MBR market share in NA, operates in Texas, specializes in design and manufacturing, offers full range of equipment for water pollution control, advanced waste treatment, water treatment and sludge handling) Potential Expansion reputation with MBR will take a while to build, expect sales to be minimal to start but will grow sales could reach a high of $500,000 (before installation) in 1st year, reaching several million in following years additional revenues (half of each system) for installation paid at beginning with allowance of 90 days COGS MBR cost mean(a) of 35% f system sale (20% for membrane and 80% for fabrication) membrane purchase from supplier (SGR AQUIRIS in Europe), minimum start-up membrane inventory of $25,000 on hand and had to pay c ash upon receipt fabrication components bought from member of Calco, extensive credit terms and alwys paid in 60 day, transportation paid for by FII and cost 5% of COGS Other Expenses need to hire technology expert ($48,000), and support person ($38,000) dragsevich and other managers have to co-ordinate with suppliers and customers to monitor new business in terms of R&D 20% of time spent on MBRs ($30,000) more space needed for inventory and personnel, operates in facility that allows for lease of additional adjacent units for expansion $2,250/ month/unit utility $180/month important to brand itself by rights to gain recognition as reliable supplier of MBR business aforethought(ip) an additional $6,400 annually MBR marketing need to purchase software clay sculpture program for $18,000, beneficial for 3 years and amortized using straight-line with zero spare value paid for advertising, attends tradeshows, provided articles 25% of costs would directly relate to new MBR busin ess plan to subscribe to various publications, advertise and attend tradeshows that specialize in MBR if sales reached 1 million would need to hire s MBR sales manager ($70,000) Conclusion is it right time to get into MBR? saucy investment? Sales projection may be overly upbeat and it could vary highly depending on ability to brand itself