Tom Szaky Case
Intro
TerraCycle was founded in 2001 by Tom Szaky and Jon Beyer, two students from Princeton University with great ambitions. Through research at the Rutgers University Eco-Complex, both partners created their main product “All Purpose Plant Food”, an environmentally friendly and “all natural fertilizer used to foster growth in plants” (BOOK). In 2003, Tom Szaky took an extended leave to pursue this company full-time and bring it to the next level. Despite a certain amount of growth, the largest breakthrough occurred in 2004 when Home Depot accepted to sell the product through its online system. This soon created a chain reaction where many retailers across North American generated interest in this new eco-capitalist business. Companies such …show more content…
as Wal-Mart Canada, Wild oats and Do-it-Best quickly began selling TerraCycle’s product.
Started by collecting dining hall waste, then feeding it to worms: organic waste being fed to worms who then turn this into solid, granular plant fertilizer. This is then liquefied to create a liquid plant fertilizer.
Internal Analysis
Assessing the internal analysis of the company is essential in order to comprehend the current elements contributing to its success as well as its weaknesses.
Competitive Advantage
The company’s current competitive advantage relies in its business model. Indeed, a business model is described as “the rationale of how an organization creates, delivers, and captures value” (WIKIPEDIA). TerraCycle’s business model is Eco-Capitalism. Through a differentiated manufacturing and packaging process, TerraCycle is able to distinguish itself from other companies producing in the same fertilizer manufacturing industry. This ability to be innovative since the beginning also brings in a lot of media coverage and consumer buzz. The majority of the recognition comes from their production process which has become, along the years, the major aspect differentiating them in the market and reinforcing their position. Media such a NBC news, Eye on America, The Big Idea, Report on Business and so on. Moreover, by having an all-natural and environmentally friendly processing approach, TerraCycle emphasizes how crucial it is in today’s society to be environmentally aware of the consequences of polluting and over-consumption. Hence, the two partners take it at heart to help reduce organic waste and its impact on the environment by using recycled pop bottles to store their product and using waste to create food for plants. This eco-friendly philosophy and way of doing business truly sets them apart in today’s society, conferring a value of ecological and sensible business to outside buyers. In addition, this ideology provides moral benefits for environmentally forward Businesses.
Company’s Main Value and Vision
The company’s main vision, which is essential for any company who projects a long-term view.
Both partner’s mission is to reduce waste and improve the earth’s environment. By transforming waste that could otherwise accumulate and pollute, TerraCycle generates a high-quality organic plant food. The company does this without harming the environment, but rather by saving it one step at a time. Basically, it is a known fact that North Americans dispose a great amount of what they buy in a year or less. In fact, data collected from the State of Garbage in America in 2004 estimates that 64.1% of municipal solid waste is land filled while only 28.5% is recycled and composted. The rest (7.4%) is combusted in plants.(SOURCE WEBSITE)Thus, through its process and finals products, TerraCycle hopes to educate the population on the possibilities of eliminating pollution and renewing the planet’s …show more content…
resources.
This way of doing business also transcends in their values. In fact, TerraCycle and its two owners preach community values while cherishing a world of more environmentally conscious consumers. Indeed, TerraCycle seeks help from many schools to provide it with empty bottles. By giving either 5 cents a bottle to the schools or donating to charities, TerraCycle demonstrates its willingness to give to society. Hence,
Products Offered
TerraCycle’s main product consists of the All purpose Plant Food which is an all natural fertilizer. The company has also been contributing to gardening products providing products such as “Water-Less” and “ProFusion”. Just like TerraCycle’s main product, these two gardening products are packaged using reusable containing. However, their market segmentation approach relies more on micromarketing, filling in for a specific need at the request of a customer.
Target Market
TerraCycle’s consumers range from individual gardeners who are eco-conscious to organic farmers. In fact, both partners are currently aiming individual customers rather than industrial type entities.
Distribution Channel
An important element to consider in the internal analysis of the company is its distribution channel. In fact, a distribution strategy, if used strategically, can provide sustainable competitive advantage in the long-run(JOESEP LIM). Currently, TerraCycle is using an indirect channel selling its product to retailers who then promote it in their stores and sell to the final consumers. The top three retailers are Wal-Mart USA representing 44% of the total sales, Home Depot with16% and Wal-Mart Canada with 15%. Another important element is how TerraCycle strengthens its market power through vertical integration. Indeed, the company manages its production. In other words, TerraCycle does not depend on any suppliers to get their final product. The fact is that many places are actually willing to pay someone in order to get rid of their waste.
Financial Management
TerraCycle’s current financial management is quite faulty. All its sales are currently on credit and there is no discount offered for customers who buy in cash.
Also, TerraCycle is not very rigid on its retailers, thus often receiving payments late. However, both partners strongly trust their retailers and are thus willing to be more tolerant on such issues. This however could be a potential threat for the company considering that in the long-run, accepting late payments from important retailers such as Wal-Mart and Home Depot could be quite costly to the company. Hence, possibly opting for tighter regulations could be an option. Like mentioned above, TerraCycle is doing business with high powered Reatilers. In order to uphold their power ruthless market, TerraCycle sees itself obliged to compensate through good product displays and leniency with customers returns which are both important losses in money.
60Day pay back period
All sales on credit- no discount for cash. (We should have a discount for cash)
Another important element to consider is how TerraCycle is currently a cost-leader in the market. While organic products are usually priced a lot higher than regular products, TerraCycle has been offering consistently cheaper prices than competitors. Hence, TerraCycle has not only proven to be innovative and unique in its process, but its eco-capitalist business model has also brought forth reduced costs. Indeed, by re-using recycled pop-bottles, there is little money invested in packaging their plant food. This is turn maintains an environmentally friendly approach while diminishing its costs of production compared to its competitors.
Production:
- Uses an all-natural environmentally friendly production process. (waste fed to worms)
- Currently no Economies of scale. However Possibility in the future
Made poor investment decision:
Finally, despite TerraCycle’s positive outcomes from its All Purpose Plant Food, the company has unfortunately made some poor investment decisions in the past. Indeed, products such as Water-less-Gel and Profusion Fertilizer have both been discontinued due to the lack of demand and the high cost of production. Indeed, both partners had decided to use micro-marketing, thus tailoring these products on demand of customers’ requests. However, demand never caught on, thus
Invested in Water-less Gel- (reduced need to water)
Profusion- Fertilizer for water plants
Both have been discontinued due to lack of demand and cost of production. Based to fit request for customer.
*** Because some retailers are quite big and occupy an important role in TerraCycle’s sales, they have great negotiating power, hence TerraCycle finds itself being lenient for product retruns.
USE PUSH STRATEGY
External Analysis
Exploring the different elements of the external environment is also crucial in order to understand the different opportunities and threats that may arise in the future while correctly positioning the business into the market.
CHECK FOR GROWTH IN HOUSEHOLDS WITH GARDENS
INCREASED POPULATION = MORE WASTE
Environment:
The first important element to consider is the environment and the different trends that are affecting the fertilizer industry as well as many other industries. As stated briefly previously, consumers are become more and more aware of the impact their waste is having on the environment. Hence, proposing an eco-friendly product like what TerraCycle is offering has many benefits attached to it. Indeed, Among the population there is an increase in environmental awareness and a demand for organic across all product categories. The website “University Business” states is its article entitled “A Greener Attitude” how “…as social factors are driving more environmentally responsible solutions on campus, top management has become directly involved in green/sustainability decisions…Overall, 84 percent of respondents indicated that their schools take sustainability issues into consideration when deciding on facility construction/renovation, as well as on purchases of new products….”. Hence, while North Americans in general are more conscious about the environment, companies must find a way to follow in the same direction by finding more sustainable alternatives. Important green trend is taking over society. Not many of the competitors are focusing on this. Indeed, many companies believe that going green also entails high costs and thus lower profits. However, because of TerraCycle’s eco-capitalist mentality, DEFINITION OF ECOCAPITALISM. Once again, the key word which sets TerraCycle apart is Eco-Capitalism
KEY WORD: ECO-CAPILISIM
- Reduce impact on environmental resources
- How to renew them
Therefore products are more profitable if they benefit the environment and give profits. (this works in theory not in practice
- Also, many big names are pitching in, trying to invite the population on beingh more eco-friendly. Companies such as Google, and celebrities such as the Black Eyes Peas are creating awareness on this subject. The website “GreenerTrends” helps evaluate and explain the different trends “in sustainable business, technology and consumers goods” to help consumers learn how to “live green and save green” (WEBSITE)
- Customer preference is currently in favor of organics products (WEBSITE TO SUPPORT THIS: http://www.universitybusiness.com/ViewArticle.aspx?articleid=549).
This study supports that many business professionals follow the green trend when making buying decisions.
TerraCycle, however, has a unique business model that differentiates itself from other strategic groups, that is TerraCycle products do not have the usual higher price point associated with organic product choices. COST DIFFERENTIATION?
EXTERNAL COMPETITION;
- Very competitive industry, significant gross sales
- 2 main competitors: Scotts Miracle-Gro Company: wide variety under DIFFERENT BRAND NAMES. Operates globally, quite big.. Number 1 selling products in almost every market. BRAND NAME RECOGNITION AND CUSTOMER LOYALTY. (concentrate of which a small amount was added to water to feed plants) NOT ALL NATURAL the company donates $0.05 per bottle or collectors can opt to save ten square feet of rainforest through the Nature Conservatory in their name. This program promotes the TerraCycle name positively and reinforces their company image of being environmentally-conscious in the pubic arena. More importantly, this is how TerraCycle acquires a large amount
bottles they use in the manufacturing process of their products. They also collaborate with many recycling centers across the nation providing the primary source of bottles for the company. The company recently made a deal with centers which proactively employ handicapped people to work in their recycling centers.
- SPECTRUM BRANDS: variety and different brand names. Most threat are the two lines: Peters Professional line and Garden Safe line(very similar to what TerraCycle is offering, but less well-knownproducts.offer different fertilizers that can be used on different types of plants.
PUBLICITY: public recognition, positive press… Ex: Red Herring Magazine named teracycle as one of the most innovative company’s… Home Depot awarded the Environmental Stewardship Award.
- BOTTLE BRIGADE: program which allows school and other groups to collect pop-bottles and give them to Terracycle. TerreCycle even pays for the shipping and will in return either give 5cents per bottle or make a donation.
-
- DO IT YOURSELF COMPETITORS: reduce need of buying fertilizers (environmentally concerned , reduce their own overall waste ) very time consuming and you need space to do it,
- )
Promotion:
-Positive Public Recognition
-Positive press release
Awards:
Red Herring: 100 most innovative companies
Home Depot: Environmental Stewardship Award 1 of 2
Competition
TerraCycle operates in the fertilizer manufacturing industry. Within this industry there are two major groups: organic and chemical fertilizer producers. The primary difference between the two groups is the way they are produce and the level of environmental harm that they use and production creates (organic and nonorganic)
Small Business, Multinationals, Many Vary size competitors
Two Large Competitors:
-Scotts Miracle Gro and Spectrum Brand
SCOTT MIRACLE GRO
- Global, Many brands, Public, Large in terms of employees and financially
Main Market: Lawn and Garden
Number one product in almost every market
Net Sales 2.3 Billion
Advantages: Customer Loyalty and Brand name
However- NOT NATRUAL PRODUCTION nor Natural Ingredients
SPECTRUM BRANDS
Rayovac Batteries
- 10000 employees
- 2.8 billion in sales
- Public
Main Lines:
Peter Professional: Home Gardening product – Vargigate Violet and Orchard plant food
Garden Safety line: - Liquid (Similar product as ours) not as much recognition, not a lot of market share.
DO IT YOURSELF
- Time consuming
- Space Consuming
- Inconvenient
- Not as effective
Summary Competitor:
We stand in a strong market with our product. We have a competitive advantage towards both our competitors, through being environmentally friendly and stronger brand recognition then some of our competitor products. Spectrum Brand already makes the products that we are looking to expand ourselves into, this may be a competitive risk for us, unless we can reposition our self as highly environmentally friendly.
TerraCycle was founded in 2001 by Tom Szaky and Jon Beyer, two students from Princeton University with great ambitions. Through research at the Rutgers University Eco-Complex, both partners created their main product “All Purpose Plant Food”, an environmentally friendly and “all natural fertilizer used to foster growth in plants” (BOOK). In 2003, Tom Szaky took an extended leave to pursue this company full-time and bring it to the next level. Despite a certain amount of growth, the largest breakthrough occurred in 2004 when Home Depot accepted to sell the product through its online system. This soon created a chain reaction where many retailers across North American generated interest in this new eco-capitalist business. Companies such …show more content…
as Wal-Mart Canada, Wild oats and Do-it-Best quickly began selling TerraCycle’s product.
Started by collecting dining hall waste, then feeding it to worms: organic waste being fed to worms who then turn this into solid, granular plant fertilizer. This is then liquefied to create a liquid plant fertilizer.
Internal Analysis
Assessing the internal analysis of the company is essential in order to comprehend the current elements contributing to its success as well as its weaknesses.
Competitive Advantage
The company’s current competitive advantage relies in its business model. Indeed, a business model is described as “the rationale of how an organization creates, delivers, and captures value” (WIKIPEDIA). TerraCycle’s business model is Eco-Capitalism. Through a differentiated manufacturing and packaging process, TerraCycle is able to distinguish itself from other companies producing in the same fertilizer manufacturing industry. This ability to be innovative since the beginning also brings in a lot of media coverage and consumer buzz. The majority of the recognition comes from their production process which has become, along the years, the major aspect differentiating them in the market and reinforcing their position. Media such a NBC news, Eye on America, The Big Idea, Report on Business and so on. Moreover, by having an all-natural and environmentally friendly processing approach, TerraCycle emphasizes how crucial it is in today’s society to be environmentally aware of the consequences of polluting and over-consumption. Hence, the two partners take it at heart to help reduce organic waste and its impact on the environment by using recycled pop bottles to store their product and using waste to create food for plants. This eco-friendly philosophy and way of doing business truly sets them apart in today’s society, conferring a value of ecological and sensible business to outside buyers. In addition, this ideology provides moral benefits for environmentally forward Businesses.
Company’s Main Value and Vision
The company’s main vision, which is essential for any company who projects a long-term view.
Both partner’s mission is to reduce waste and improve the earth’s environment. By transforming waste that could otherwise accumulate and pollute, TerraCycle generates a high-quality organic plant food. The company does this without harming the environment, but rather by saving it one step at a time. Basically, it is a known fact that North Americans dispose a great amount of what they buy in a year or less. In fact, data collected from the State of Garbage in America in 2004 estimates that 64.1% of municipal solid waste is land filled while only 28.5% is recycled and composted. The rest (7.4%) is combusted in plants.(SOURCE WEBSITE)Thus, through its process and finals products, TerraCycle hopes to educate the population on the possibilities of eliminating pollution and renewing the planet’s …show more content…
resources.
This way of doing business also transcends in their values. In fact, TerraCycle and its two owners preach community values while cherishing a world of more environmentally conscious consumers. Indeed, TerraCycle seeks help from many schools to provide it with empty bottles. By giving either 5 cents a bottle to the schools or donating to charities, TerraCycle demonstrates its willingness to give to society. Hence,
Products Offered
TerraCycle’s main product consists of the All purpose Plant Food which is an all natural fertilizer. The company has also been contributing to gardening products providing products such as “Water-Less” and “ProFusion”. Just like TerraCycle’s main product, these two gardening products are packaged using reusable containing. However, their market segmentation approach relies more on micromarketing, filling in for a specific need at the request of a customer.
Target Market
TerraCycle’s consumers range from individual gardeners who are eco-conscious to organic farmers. In fact, both partners are currently aiming individual customers rather than industrial type entities.
Distribution Channel
An important element to consider in the internal analysis of the company is its distribution channel. In fact, a distribution strategy, if used strategically, can provide sustainable competitive advantage in the long-run(JOESEP LIM). Currently, TerraCycle is using an indirect channel selling its product to retailers who then promote it in their stores and sell to the final consumers. The top three retailers are Wal-Mart USA representing 44% of the total sales, Home Depot with16% and Wal-Mart Canada with 15%. Another important element is how TerraCycle strengthens its market power through vertical integration. Indeed, the company manages its production. In other words, TerraCycle does not depend on any suppliers to get their final product. The fact is that many places are actually willing to pay someone in order to get rid of their waste.
Financial Management
TerraCycle’s current financial management is quite faulty. All its sales are currently on credit and there is no discount offered for customers who buy in cash.
Also, TerraCycle is not very rigid on its retailers, thus often receiving payments late. However, both partners strongly trust their retailers and are thus willing to be more tolerant on such issues. This however could be a potential threat for the company considering that in the long-run, accepting late payments from important retailers such as Wal-Mart and Home Depot could be quite costly to the company. Hence, possibly opting for tighter regulations could be an option. Like mentioned above, TerraCycle is doing business with high powered Reatilers. In order to uphold their power ruthless market, TerraCycle sees itself obliged to compensate through good product displays and leniency with customers returns which are both important losses in money.
60Day pay back period
All sales on credit- no discount for cash. (We should have a discount for cash)
Another important element to consider is how TerraCycle is currently a cost-leader in the market. While organic products are usually priced a lot higher than regular products, TerraCycle has been offering consistently cheaper prices than competitors. Hence, TerraCycle has not only proven to be innovative and unique in its process, but its eco-capitalist business model has also brought forth reduced costs. Indeed, by re-using recycled pop-bottles, there is little money invested in packaging their plant food. This is turn maintains an environmentally friendly approach while diminishing its costs of production compared to its competitors.
Production:
- Uses an all-natural environmentally friendly production process. (waste fed to worms)
- Currently no Economies of scale. However Possibility in the future
Made poor investment decision:
Finally, despite TerraCycle’s positive outcomes from its All Purpose Plant Food, the company has unfortunately made some poor investment decisions in the past. Indeed, products such as Water-less-Gel and Profusion Fertilizer have both been discontinued due to the lack of demand and the high cost of production. Indeed, both partners had decided to use micro-marketing, thus tailoring these products on demand of customers’ requests. However, demand never caught on, thus
Invested in Water-less Gel- (reduced need to water)
Profusion- Fertilizer for water plants
Both have been discontinued due to lack of demand and cost of production. Based to fit request for customer.
*** Because some retailers are quite big and occupy an important role in TerraCycle’s sales, they have great negotiating power, hence TerraCycle finds itself being lenient for product retruns.
USE PUSH STRATEGY
External Analysis
Exploring the different elements of the external environment is also crucial in order to understand the different opportunities and threats that may arise in the future while correctly positioning the business into the market.
CHECK FOR GROWTH IN HOUSEHOLDS WITH GARDENS
INCREASED POPULATION = MORE WASTE
Environment:
The first important element to consider is the environment and the different trends that are affecting the fertilizer industry as well as many other industries. As stated briefly previously, consumers are become more and more aware of the impact their waste is having on the environment. Hence, proposing an eco-friendly product like what TerraCycle is offering has many benefits attached to it. Indeed, Among the population there is an increase in environmental awareness and a demand for organic across all product categories. The website “University Business” states is its article entitled “A Greener Attitude” how “…as social factors are driving more environmentally responsible solutions on campus, top management has become directly involved in green/sustainability decisions…Overall, 84 percent of respondents indicated that their schools take sustainability issues into consideration when deciding on facility construction/renovation, as well as on purchases of new products….”. Hence, while North Americans in general are more conscious about the environment, companies must find a way to follow in the same direction by finding more sustainable alternatives. Important green trend is taking over society. Not many of the competitors are focusing on this. Indeed, many companies believe that going green also entails high costs and thus lower profits. However, because of TerraCycle’s eco-capitalist mentality, DEFINITION OF ECOCAPITALISM. Once again, the key word which sets TerraCycle apart is Eco-Capitalism
KEY WORD: ECO-CAPILISIM
- Reduce impact on environmental resources
- How to renew them
Therefore products are more profitable if they benefit the environment and give profits. (this works in theory not in practice
- Also, many big names are pitching in, trying to invite the population on beingh more eco-friendly. Companies such as Google, and celebrities such as the Black Eyes Peas are creating awareness on this subject. The website “GreenerTrends” helps evaluate and explain the different trends “in sustainable business, technology and consumers goods” to help consumers learn how to “live green and save green” (WEBSITE)
- Customer preference is currently in favor of organics products (WEBSITE TO SUPPORT THIS: http://www.universitybusiness.com/ViewArticle.aspx?articleid=549).
This study supports that many business professionals follow the green trend when making buying decisions.
TerraCycle, however, has a unique business model that differentiates itself from other strategic groups, that is TerraCycle products do not have the usual higher price point associated with organic product choices. COST DIFFERENTIATION?
EXTERNAL COMPETITION;
- Very competitive industry, significant gross sales
- 2 main competitors: Scotts Miracle-Gro Company: wide variety under DIFFERENT BRAND NAMES. Operates globally, quite big.. Number 1 selling products in almost every market. BRAND NAME RECOGNITION AND CUSTOMER LOYALTY. (concentrate of which a small amount was added to water to feed plants) NOT ALL NATURAL the company donates $0.05 per bottle or collectors can opt to save ten square feet of rainforest through the Nature Conservatory in their name. This program promotes the TerraCycle name positively and reinforces their company image of being environmentally-conscious in the pubic arena. More importantly, this is how TerraCycle acquires a large amount
bottles they use in the manufacturing process of their products. They also collaborate with many recycling centers across the nation providing the primary source of bottles for the company. The company recently made a deal with centers which proactively employ handicapped people to work in their recycling centers.
- SPECTRUM BRANDS: variety and different brand names. Most threat are the two lines: Peters Professional line and Garden Safe line(very similar to what TerraCycle is offering, but less well-knownproducts.offer different fertilizers that can be used on different types of plants.
PUBLICITY: public recognition, positive press… Ex: Red Herring Magazine named teracycle as one of the most innovative company’s… Home Depot awarded the Environmental Stewardship Award.
- BOTTLE BRIGADE: program which allows school and other groups to collect pop-bottles and give them to Terracycle. TerreCycle even pays for the shipping and will in return either give 5cents per bottle or make a donation.
-
- DO IT YOURSELF COMPETITORS: reduce need of buying fertilizers (environmentally concerned , reduce their own overall waste ) very time consuming and you need space to do it,
- )
Promotion:
-Positive Public Recognition
-Positive press release
Awards:
Red Herring: 100 most innovative companies
Home Depot: Environmental Stewardship Award 1 of 2
Competition
TerraCycle operates in the fertilizer manufacturing industry. Within this industry there are two major groups: organic and chemical fertilizer producers. The primary difference between the two groups is the way they are produce and the level of environmental harm that they use and production creates (organic and nonorganic)
Small Business, Multinationals, Many Vary size competitors
Two Large Competitors:
-Scotts Miracle Gro and Spectrum Brand
SCOTT MIRACLE GRO
- Global, Many brands, Public, Large in terms of employees and financially
Main Market: Lawn and Garden
Number one product in almost every market
Net Sales 2.3 Billion
Advantages: Customer Loyalty and Brand name
However- NOT NATRUAL PRODUCTION nor Natural Ingredients
SPECTRUM BRANDS
Rayovac Batteries
- 10000 employees
- 2.8 billion in sales
- Public
Main Lines:
Peter Professional: Home Gardening product – Vargigate Violet and Orchard plant food
Garden Safety line: - Liquid (Similar product as ours) not as much recognition, not a lot of market share.
DO IT YOURSELF
- Time consuming
- Space Consuming
- Inconvenient
- Not as effective
Summary Competitor:
We stand in a strong market with our product. We have a competitive advantage towards both our competitors, through being environmentally friendly and stronger brand recognition then some of our competitor products. Spectrum Brand already makes the products that we are looking to expand ourselves into, this may be a competitive risk for us, unless we can reposition our self as highly environmentally friendly.