To determine a strategy for Business Services in this industry, it is necessary to forecast the likely 'shape'; or structure of the sector, the key drivers or aspects that are probably going to impact on the sector and then select a strategy for Business Services that is the most likely to be successful.
Definition of the Industry
It is important to determine exactly what is the 'industry'; or 'sector'; under review. For example, to include the recycling of computers from the large business and Government sectors changes the structure of the industry.
The definition of the business that this report seeks to address can be defined as follows:
The safe and environmentally responsible dismantling and sale of unwanted, old and unused computers from the household and small business sector.
Note that a key assumption is that the strategy will be designed to directly target the household sector. The recycling of computers from the large business/corporate sector and Government will not be specifically targeted at this stage but any opportunities to service these areas will be followed up.
In the initial stages of the development of the business, the dismantling of TV's and other items of electronic equipment have not been included, although it is noted in other parts of this report that this could be an expansion opportunity, particularly for smaller centres where the volumes of computers to be recycled may be too small to support a full time activity.
The refurbishment and subsequent sale of used computer equipment is expected to continue and whilst it will be included in the revenue forecasts, sales are not expected to grow due to the continuing decline in the price of new entry-level computers impacting on the sale of second hand equipment. Thus the focus remains the recycling of computers from the household sector.
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Competitive Forces
The following competitive forces are now analysed to gain an understanding of the sector and thus the identification of a successful strategy for Business Services.
Legislative Changes
The fundamental change forecast to take place in the sector is the requirement by the Federal Government, State Governments and Territories that computers will not be accepted at landfill sites and that the industry must accept the new reality of recycling or change will be forced on it.
The pressure for change is building with the industry being asked to present a plan by October/November of 2006. Previous plans from industry have been rejected and there are suggestions that the previous approach consisted of delaying tactics by the computer industry to avoid as long as possible any requirements to recycle computers.
Customers/Buyers
There are potentially four different groups of customers:
- The buyer(s) of the recycling services. The principal customer is likely to be the organization controlling the funding scheme that calls for and awards tenders. If this industry evolves in a similar manner to the consumer electronics industry then the principal industry association is likely to control the funding. Thus the Australian Information Industry Association or a subsidiary company, possibly with an overseeing board will be the 'customer'; or buyer of the services. Individual computer companies who have elected to operate their own scheme may wish to use the services of this entity in some or all locations.
- Metal and plastic recyclers will be customers for the disassembled computer parts.
- Members of the public will be the customers for those computers suitable for resale.
Potentially, existing computer companies who operate their own recycling schemes, could be customers/buyers should they choose to use a third party to carry out their 'in house'; recycling work for computers suitable only for dismantling.
This may happen outside the capital centres. For example, why pay the freight to bring back computers from say a country based University when there is a Business Service located nearby that is already dismantling computers and recovering the scrap. Thus a computer company may operate its own recycling schemes in the major centres but could sub contract in rural and regional areas, potentially to Business Services.
The buyer(s) of the dismantling services are likely to represent around 75% by value of the revenue projected to be earned by a Business Service followed by the revenue from the sale of dismantled components and lastly the revenue from the sale of computers to the general public.
Note that potentially there will be only one buyer for the dismantling services and this will put it in a very strong negotiating position with the opportunity to 'play'; the suppliers of recycling services off against each other.
Competitors
There are a number of competitors already in the market, including, the medium to large players as well as other smaller commercial recyclers based in the main centres of population
Not for profit organizations which in some cases have had their origins in 'work for the dole'; schemes';
Business Services who have usually been involved in general recycling work, typically for their local councils and have then moved into some activities based around the computers they have collected or being given/donated.
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New entrants
Companies that become involved in the recycling of TV's and other electronic equipment could move into the computer area.
Companies involved in computer recycling overseas are possible new entrants.
Clearly another possibility could be a company from a lower cost economy who could provide a similar service. If computers were packed into shipping containers shipped overseas and dismantled in another country with lower costs, this could be a source of possible competitors.
Suppliers
Suppliers of goods and services to the sector are of limited significance. The tools and technology used to dismantle computers are widely available. Specialized equipment such as air operated screwdrivers and vacuum lifts are easy to obtain 'off the shelf'; and require minimal instructions to operate.
Technology
However, within the parts used in a typical computer there are some specialized items, which do contain heavy metals and other contaminants that must be handled with care. The most difficult product is the CRT referred to above. Any organization will need to be able to demonstrate that it has an effective way of dismantling and disposing of these components.
Distribution/Collection
The Australian Information Industry Association and other participants in the sector have all acknowledged the importance of operating at the lowest possible cost. Part of the approach will be to use the existing infrastructure where possible. An example could be the use of 'Transfer Stations'; as collection points for computers from households.
These computers and especially the glass CRT's will need to be collected in a manner that ensures they are still capable of being dismantled. This will require careful handling and transport and will add to the cost. Any organization that can use existing facilities or has a lower cost collection system will be at an advantage.
Future Developments
The penetration by computers into households will continue to increase but at lower rates according to the industry. Price decreases and new developments are likely to continue to support these trends.
However, the accumulation of unused and obsolete equipment including computers continues to grow. There is no information or forecasts/studies about the possible release of this material into the waste stream. It is reasonable to suppose that this will occur but is unlikely to cause a sudden demand or peak in recycling capacity.