Porter's Five Forces Model

Barriers to Entry
HIGH: Explicit barriers to new entries on environmental services industry are high. The industry depends
heavily on the commercial presence mode of services. This would limit a firm’s ability to establish a
commercial presence and to employ a national image for these services. The environmental service
industry requires tremendous investment from the new entry. Firms operating in this industry need to
possess a large supporting network of transfer stations. These will transport waste collected to firms’
landfills using long-haul trailers, barge containers and rail cars. Besides, new firms have to obtain the
right to specific assets such as ownership of landfills and sewage system to dispose waste. Stiff federal
regulations and restrictions limiting the use of land for landfills and forcing firms to operate within
established guideline impact significantly on the new entry. The environmental service is an intensive
labor industry. It is affected by limitation on the movement of human labor between regions and
countries internationally. Globally, nationality requirements prevent firms from hiring inexpensive labor
from foreign countries. Some foreign firms may face discrimination from host countries. High taxation
and subsidization are some of the keys for such a barrier. In addition, strict environmental regulations
from federal agencies and limited cross-border supply and consumption compromise the penetration of
foreign firms in the industry.

Product Substitutes
LOW: Substitution for the environment service seems to be low. There is virtually no substitution for the
environmental services at this point in time. However, changes to reducing waste output from the
customer’s side would significantly negatively impact the industry growth. These changes result from
clean operations, and green operations. High technology would help reduce large amounts of waste and
thus reduce the need for waste services.

Bargaining Power of Buyers

MODERATE: The bargaining power of buyers is moderate. On the customer base standpoint, the market
for the environmental services can be divided into 3 segments: residential, business, and industrial
segments. The residential customers do not seem to have much bargaining power over the providers.
For the economy of scale and unique physical boundary, the city or a legal organization that manages
the communities will select the waste services provider base on its comparability for the entire
community. Individuals are not entitled to the right to choose a waste service provider for his or her
household. The business and industrial customers--especially the national industrial customer, on the
other hand, has more power to make decisions on the service provider. With its huge size and its
complex operations across the nations, the industrial customer requires a consolidated waste service
provider that is modern and big enough to serve its needs. Thus, the business and industrial customer
have significant power on the industry.

Bargaining Power of Suppliers

MODERATELY HIGH: Bargaining power of suppliers is moderate to high. Key suppliers to the
environmental service industry consist of people – human labor, landfills, network of transportation
stations, and facilities to process waste collected.
Relying on intensive human labor forces the industry to rely on real people to perform tasks that
automated machines hardly can perform. Unions that represent these labored people can negotiate in
favor of them. Firms that operate in the environmental service industry also negotiate to obtain
ownership of landfill and licenses from the government agency to dispose waste. These restrictions and
regulations leave no choice but to force firms to pay a premium for the license and ownership rights.
Firms in this industry necessarily utilize special tools and equipments for these services. These
equipment and tools are specially made for the environmental service needs. The huge trucks that
transport collected waste from residential or business sites are custom made only for this kind of service
in limited numbers. Thus, equipment suppliers to the industry dictate the power on the industry.
Facilities to process waste are normally huge in size, modern, and in compliance with strict federal
regulations. They require strong, large, and competent companies to design and make them. As a result
these equipment suppliers have bargaining power over the players in the industry.

Competitive Rivalry
MODERATE: Firms within this industry face moderate competition. The consolidation movement
through mergers and acquisitions in the 1990’s created momentum for the price wars between rivals in
the oversupply condition. The oblique market features just a few compatible players in specific regions.
Though there are just a few players in the region, the competition is fierce because of powerful
customers who prefer a modern and consolidated service provider for their national operations. In
addition, customer loyalty to a particular provider is low due to short renewal contracts. Demand for
environmental services is growing at a very slow rate, coupled with powerful customers and low loyalty
proves that the industry is fiercely intense.

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