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MGMT 411 InterfaceRAISE Sustainability

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on 20 October 2014

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Transcript of MGMT 411 InterfaceRAISE Sustainability

According to the United Nations, water use has grown at more than twice the rate of population increase in the last century.

By 2025, an estimated 1.8 billion people will live in areas plagued by water scarcity, with two-thirds of the world's population living in water-stressed regions as a result of use, growth, and climate change.

P.E.S.T.E.L Analysis
Value Chain Analysis
Alternative 1: Green Architectural Consulting
Market Ratios
Hartzfeld was a leader on LEED (Leadership in Energy and Environmental Design)

Many corporations seek LEED certification. There are currently 13,500 LEED-certified non-residential buildings in the United States. Another 30,000 have applied for LEED certification.

By 2015, an estimated 40-48% of non-residential buildings will be green.

Alternative 2: Project-Focused Differentiation Strategy
Alternative 1: Green Architectural Consulting
Due to core competencies found at InterfaceRAISE, entering the green building architectural industry would make a lot of sense.

Competencies from the parent company, Interface would also help in this business.

This could tremendously increase the level of impact that InterfaceRAISE has on the environment.

InterfaceRAISE
Overview
Ryan Davey
Andrew Fochler
Dan Klein
Matt Lemieszewski

1973 - Ray Anderson Founded Interface Flooring Systems
1994 - Anderson decided Interface, Inc. should become environmentally sustainable
"Mission Zero" - Net-zero environmental impact by 2020
Modified to "becoming restorative through the power of influence"

InterfaceRAISE
2006 - CEO, Dan Hendrix, created consulting entity - InferfaceRAISE
Jim Hartzfeld appointed as Managing Director
3 Goals of InterfaceRAISE
1. Further Interface’s restorative goals by helping other organizations launch or accelerate their sustainability efforts
2. Create a halo effect on Interface’s brand and foster contacts with new companies to increase carpet sales
3. Become a financially sustainable business by charging fees for its service
2010 - Hendrix Challenged Hartzfeld to develop a plan by early 2011 that would push InterfaceRAISE further
External Environmental Analysis
Macro Level Environment - PESTEL Analysis

Industry Environment - Porter's Five Forces

Competitive Environment
Alternative 1: Implementation of our strategy
Most green architectural consulting firms have under 10 employees.

We propose to hire four employees at a rate of around $100,000 per year (the industry average for green architects is around $70,000 but depending on the firm and level of expertise could be up to $108,000).

Architectural consulting firms generally make around 10-15% of the total building budget per project.

Porter's Five Forces
Political factors - conflict in the middle east makes the prices of oil volatile. government subsidies are being given to companies for going green. especially with regards to fossil fuels.

Economic factors - recovery from the recession of 2008

Sociocultural factors - going green is increasingly trendy. companies are making it a larger part of their company’s goal to be green.

Technological factors - restorative technologies exist and are continuing to be made. government money is being given to companies that research and develop new technologies…

Ecological factors - water is becoming more scarce. greenhouse gas emissions

Legal factors - Laws - increasing legislation promoting sustainability in the united states and abroad.

Threat of entry - high. lots of companies from large firms from different industries have begun to expand into environmental consulting.

Power of supplier - not very high… could increase with new legislation. probably will.

Power of buyer - not so high.

Threat of substitutes - not very high, but corporations could try to create an internal sustainability department… who won’t have much experience.

Rivalry among existing competitors - brand name players (PwC, Deloitte, IBM) joined environmental consulting market. high.

(6th force) Strategic role of complements - using InterfaceRAISE to help sales in Interface’s carpet tile manufacturing department
Internal Environmental Analysis
Alternative 1: Target Markets
We would target companies that InterfaceRAISE has worked with in the past to do architectural consulting.

Because InterfaceRAISE has worked with large names such as Walmart who have facilities costing around $100 million, many jobs would produce huge revenues if the companies are billed for 15% of building costs ($15 million).

What are the firm’s resources, capabilities, and competencies?

VRIO analysis

Value Chain Analysis

SWOT analysis


VRIO Analysis
1. Value - All InterfaceRAISE employees and volunteers have worked with Interface Inc. for years and have experience in the environmental sustainability department

2. Rare - only experienced leaders are put on projects

3. Costly to imitate - takes a lot of time and resources to train and educate consultants

4. Organized to capture value from the resources - 3 main full time staff responsible for nearly all operations. when additional staff is needed, InterfaceRAISE obtains these employees internally within Interface or through leaders in partner organizations

SWOT Analysis
Strengths - experts in their field, experience, reputation, leadership

Weaknesses - limited manpower

Opportunities - importance of sustainability in emerging market industries

Threats - big firms that are leaders in sustainability related to their industry. i.e. PepsiCo

Core competencies in environmental sustainability within the textile manufacturing industry
Implement sustainable/restorative technology within US manufacturing companies
Focus on clients looking for project-based services
“The more success we have in InterfaceRAISE, the more we will fund it.”
Projects are currently most significant revenue drivers (40%)


Financial Performance Ratios
Alternative 2: Project-Focused Differentiation Strategy
Clients that use similar resources
Ex. Major Theater Equipment Corp.
Market/advertise to narrow market, and bait companies with free one-day clinics
Fees based on billable working hours accumulated throughout the project's life
Demonstrate the importance of sustainability and environmental impacts
Invest now, save later
Alternative 2: Project-Focused Differentiation Strategy
Projects created high variability on their cash flows
Low return on revenue
Net profits/Revenue
Too few clients who are willing to take a chance and make adjustments to their companies’ operations
Alternative 3: Diversification through Global Expansion
Major Risks
Development of International Strategy targeting emerging markets in Asia.
Utilize core competencies in textile sustainability consulting to provide services for firms seeking to operate and manufacture in developing countries.
Capture a niche market and capitalize on the forecasted increase in demand for highly sustainable firms operating in Asia, due to a predicted increases in water scarcity and pollution.
Interface, Inc.
InterfaceRAISE along the Industry Value Chain
Alternative 3: Diversification through Global Expansion
Growth of $10,000
Criteria for Strategy Selection
Dan Hendrix (CEO) challenged Jim Hartzfeld (managing director) to develop a plan by early 2011 that would push InterfaceRAISE further
Hartzfeld had 2 months to develop a plan for Hendrix
Hartzfeld asked himself:
How should InterfaceRAISE define impact?
What strategy should he propose to achieve it?
What structural changes or investments were needed to be successful?
Key Problems
1. Projected growth rate in new industry

2. Similarities between current core competencies in interfaceRAISE and ones necessary for new industry

3. Profit potential in new industry

4. Amount of positive impact that this new endeavor will have on the environment
Alternative 3: Diversification through Global Expansion
In Asia the situation is already acute. Due to the phenomenal growth of
some Asian economies, coupled with inadequate governance, water crises regionally have begun to emerge
, not least in the world‘s factory – China. The challenge a country the size of China faces in managing this finite resource sustainably is arguably without parallel in global terms.

China is in the throes of a water crisis that
threatens to only worsen under present conditions.
Its economy has grown at an average rate of more than 9.5% annually for the past 28 years, four times the rate of first world economies.

As a result,
skyrocketing water demands, overuse and systemic inefficiencies, combined with persistent pollution of major water resources have resulted in depleted supplies of both ground and surface water, with devastating consequences.
If current trends continue, the strain on China‘s water resources will be extraordinary, potentially threatening economic development and social stability.

Alternative 3: Diversification through Global Expansion
Hire experts and professionals in sustainability from abroad.
Acquire tacit knowledge related to international practices and strategies.
Become a global leader in international sustainability consulting, leadership and implementation.
Appeal to firms seeking to hedge against political and environmental risks related to ongoing threats of pollution, government regulation.
Alternative 3: Diversification through Global Expansion
Highest potential for expansion and growth
Able to directly apply InterfaceRAISE's core competencies to China's Textile industry
High profit potential due to niche market with few competitors in international sustainability consulting
Highest potential for net positive impact by spreading sustainability to countries with dangerously high environmental risks
Suggested Course of Action
Alternative 1: Green Architectural Consulting
Major Risks
Competencies associated with architecture are less similar to InterfaceRAISE's current core competencies than the other alternatives.
Green Architectural Consulting will most likely have less of a positive impact on the environment than the top alternative
CAGE Distance Framework
Cultural Distance
Liability of foreignness - cultural and language barriers can cause confusion
Administrative and Political Distance
China's distance is slowly decreasing as new sustainability regulation is continues to emerge
China plans to decrease greenhouse gas emissions by 40% by 2020 compared with emissions from 2005.
They are expected to make encouraged low-carbon regulations mandatory in order to accomplish this.
Geographic Distance
Only 3 full-time staff - Can't be in two places at the same time
Managing director, director of business, and project manager
Economic Distance
Poor countries don't have the capital to invest in sustainability technology
China's Textile Industry
(i) Growth in industrial scale
According to statistics, total volume of fiber produced in China textile industry is 43.1 million tons in 2011, up by 22.8% than that of 2008. The yearly increase rate (2008-2011) is 7.1%, which is down by 3.8 percentage points than that of three years before crisis’s outbreak (2006-2008).

Specifically, total fiber production in 2011 is 33.9 million tons, up by 40.4% than that of 2008. The yearly increase rate is 12%.

Total export value of China textile and garment is USD 254.12 billion in 2011, up by 34% than that of 2008.
The yearly increase rate (2008-2011) is 10.3%, which is down by 7 percentage points than that of three years before crisis’s outbreak (2006-2008).

In the next few years,
key sustainability technologies will still be the focuses of industrial R&D
.
The goal is to make breakthroughs concerning industrial sustainability
, such as high performance fibers and technical textiles, composite materials, new bio-fibers, energy-saving and environment-friendly printing and dyeing technologies, and advanced textile equipment.

To ensure new strengths of technical innovation, China textile industry stress importance of basic research work:
research on theories, standards and basic disciplines, effective integration of scientific and technological resources
, smooth cohesions among institutes, industry and market, cooperation between industrial chains and set-up of technological innovation system.
China's Stance on Sustainability in the Future
Implementation of Globalization Strategy
Develop an international sustainability management team: hire experts with experience operating MNE's
Target domestic firms operating in emerging markets or seeking to expand globally.
Provide sustainability consulting to hedge against political risks associated with government shutdowns of unsustainable firms.
Any Questions?
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