The Water and sanitation industry in recent times have been among the most dwindling industry in the United States. Many industry leaders indicate that despite the fact that the United States has one of the most sophisticated water and sanitation industry in the world, it is still affected by various external factors. According to the industry leaders, the water and sanitation industry is faced with the market structure growth constraints and the barriers to entry of innovators. Utility preference, according to some studies, point towards slow innovation in the water and sanitation industry. Recent studies indicate that the industry is also affected by decaying infrastructure which is considered among the oldest in the nation. Also, the funding gap is one of the biggest in the country with most politicians showing uninterested in the industry. Regulations posted on the industry is also an all-time high leading to greater obligations and operator costs. This continues to destroy the industry, with many companies affected – for example, the Washington Suburban Sanitary Commission WSSC –, which was once considered the biggest in the nation.
Washington Suburban Sanitary Commission (WSCC) is one of the largest, covering about 1000 square miles in Maryland, and oldest water and wastewater utilities in the United States. It serves over 3 million people today, with most of the clients hailing from two counties; Montgomery and Prince George ( WSSC, 2017) . It has three water reservoirs which impound up to 14 billion gallons of water. It manages two infiltration plants and seven wastewater treatment plants. The WSSC also boast of being among the leading water and sanitation company which has the largest mile coverage of both clean main water line and wastewater lines; 5,500 and 5,400 miles respectively ( WSSC, 2018) .
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According to the leadership of the Washington Suburban Sanitary Commission (WSSC), the company has always committed itself to be the leading in clean water and wastewater services across the globe. It is determined to provide safe, healthy, quality, and safe waters to ensure healthy living to the communities in the two counties, Montgomery and Prince George. As such they strive to ensure better services by evaluating their performance both internally and externally. However, due to the recent problems facing the water and sanitation industry, they have also been affected by external factors which they might have no control over. It is, therefore, important to analyze the external factors that would influence WSSC VMO, strategy and goals. This paper analyses those external factors affecting the WSSC following the PESTEL, Porter’s five forces, and SWOT.
PESTEL Analysis of WSSC
Before dwelling on the PESTEL Analysis of the WSSC, it is important to understand the strategies that WSSC have put or planning to put in place to ensure they achieve their goal of becoming the leading water and sanitation service provider to the community of Montgomery and Prince George and other clients from the United States. Firstly, WSSC has heavily invested in IT infrastructure and many other technical innovation aspects over the years ( WSSC, 2018) . This, the company considers will be important in solving issues of lack of innovation, reduced capacities, and increased stakeholder demands; problems facing the industry in totality. Gonzalez and Rudzki (2015) say that to address the demand, the company is also looking to lay more sewer and water line in addition to the about 10, 000 miles it currently has. The company has also come up with an environmental stewardship despite the fact that most water and wastewater utility firms shying away from engaging on such issues ( WSSC, (2018) . The company is looking to maintain its capacity of supplying water and wastewater services to the residents of Montgomery and Prince George through leadership in conservation of the environment. This WSSC hopes to set it in the competitive advantage, especially among people who are more concerned about environmental conservation. These strategies – competitive advantages – however, would greatly be affected by Macro-environmental factors; political, economic, social, technological, environmental, and legal factors (PESTEL Framework).
Political factors : It is no doubt WSSC among other utilities dealing in water and wastewater treatment are affected by political factors. For instance, as previously explained, the political class in the United States have failed to enact any new policies to address the issues of innovation and funding in the industry. Oppositely, the government has enacted regulations that have imposed substantial obligations and operation costs and leaving efficiency voluntary. This affects the ability of WSSC to renovate its systems.
Economic factors : Economic factors are the most influencing ones facing the water and wastewater utility companies today. Over the years the resources have reduced in the sector of water and wastewater. The funding gap remains unresolved and underemphasized which reduces the ability of WSSC to repair its infrastructure and limits its ability to fund the IT infrastructure it has put in place. Also, after the 2008/2009 recession, the disposable income of the Americans reduced consequently affecting their payment ability for the WSSC services.
Social factors : over the years the United States have experienced population growth and households increasing the demand for water and wastewater services. This increases the pressure on the water and wastewater utility companies such as WSSC because of increase in demand. Today the demand for water and wastewater services from WSCC have risen from 2 million in the year 2000 to about 3 million in 2015.
Technological Factors : this is another factor that is prone to affect WSSC. Due to the continuous technological advancement, it is clear that technologies the WSSC adopts may become obsolete in a few years to come making it a major roadblock to meeting and executing its goals, especially because of less fund to keep up with technology advancement.
Environmental factors : increasing climate volatility, global warming, is affecting the water quantity available for consumption. This constantly affects the availability of water to supply clients by the WSSC.
Porter’s Five Forces Analysis
To understand further the environment of the water and wastewater services utilities in the United States it would prudent to use Porter's five forces analysis. Unlike the PESTEL analysis which concentrates on the industry as well as the activities of the WSSC, Porter's five forces analysis concentrate on the industry as a whole; include the competitor organizations. This model was introduced by Michael Porter in 1979 and has become critical in analyzing an entire industry by measuring its competitiveness, and by so doing determine how attractive it is. Many organizations in the water and wastewater utilities are therefore able to determine the risks and threats. The five forces analyzed include Threat of new entrants, the threat of substitute product or services, bargaining power of the buyers, bargaining power of the suppliers, and competitive rivalry among the existing firms. The following is the five force analysis of water and wastewater utility industry with respect to WSSC.
The threat of New Entrants or potential new competitors : Low Pressure.
Entry barriers in the water and wastewater utility business are relatively high preventing new brands from joining in. Very few individuals, groups, or even companies would consider entering the industry because of lots of regulation and huge funding gap. Also, the huge capital and resources needed to start a water and wastewater utility company. However, in case of new entry company, WSSC would have little to worry about because of its massive presence in Maryland being the largest in the state serving many counties.
The threat of substitute Service : Low to Medium Pressure
Firstly, it is important to note that many Americans are not prone to changing their services when it comes to water and wastewater services. Most of the homes are served by specific industries. Also, specific utility companies operate within specific localities. However, it is also important to note that most of the residents of Maryland, for instance, have various companies they can choose from. WSSC can deal with this particular risk by ensuring efficient, relatively cheap, and high quality services.
The Bargaining Power of Buyers : Low Pressure
Bargaining powers of individual clients (households) on issues to deal with water and wastewater services is low. This is driven by the fact that the services offered by the water and sanitation utility companies are basic. However, large firms may have some bargaining power because of being heavy consumers. These may include manufacturing companies.
The Bargaining Power of suppliers : Low Pressure
Most of the maintaining service providers to the water and wastewater utility companies are neither concentrated nor differentiated as such reduce their bargaining power. Also, the utility companies do not require heavy maintenance.
Rivalry among existing firms: High Pressure
Currently, Washington Suburban Sanitary Commission faces competition from various water and wastewater utility companies. These include Beaches Water Company (BWC), Chesapeake Utilities Corporation (CUC), Easton Utilities, and Washington County Water and Sewer Department (WCWSD). Most of these companies are major players in Maryland, however, most of them operate in other counties. The major competitor is the WCWSD. However, WSSC can eliminate the threat of competition through increasing their service areas given that it is the strongest brand in the state.
Strategic Group and Mapping .
According to Porter, the strategic mapping is the only best way in revealing industry member market position. As such it can be used in the Water and wastewater utility industry to identify the group of companies with similar potentials, locating WSSC position in the market in Maryland State. Also, WSSC can use it to move from one strategic group to another. This would help the WSSC to exploit opportunities as well as avoid possible threats. Some studies in the past have used various means to analyze strategic groups and finance. In this case, we can use the years of experience as a variable to demonstrate the size and potential of the water and wastewater industries in Maryland. The clarification will be based on the years of experience against the distribution prowess, the IT infrastructure, and population served. The reason for this strategic grouping is because the classification reveals a group of utility companies which a very close in terms of services in Maryland State. As such it gives a clear indication of WSSC position in Maryland as shown in the Strategic map below.
NOTE: The values are not a representation of the experience years nor the distribution and water quality and wastewater services. Any value below 1.7 represents low experience years on the x-axis and low distribution and IT infrastructure on the Y-axis. The values above 1.7 represent high experience years on the x-axis and high distribution and IT infrastructure on the Y-axis.
Also; WSSC – Washington Suburban Sanitary Commission
WCWSD - Washington County Water and Sewer Department
CUC - Chesapeake Utilities Corporation
BWC - Beaches Water Company
SWOT Analysis and Extent to which Current strategies benefit for WSSC
|
Strengths Strong brand portfolio Strong distribution network |
Weaknesses Massive water and sewer main breaks Aging infrastructure |
|
Opportunities New environmental policies cloud-based technologies |
Threats Water shortages Funding Gap |
Finally, it would be important to analyze the opportunities and threats faced by WSSC in order to evaluate the viability of the strategies.
Opportunities
Most of the water supply companies in the USA use the hydroelectric power that runs on fossil fuels to supply water. However, due to new environmental policies, the companies are required to reduce their carbon emissions and in extent pay for carbon taxes. On the other hand, WSSC has adopted the use of wind power and solar power that provides up to 30% and 17% of its energy needs (WSSC, 2018). The company has the ability to improve on the same. This helps them attract clients, a huge number, who have become more interested in conserving the environment.
Another opportunity is technological advancement, which the WSSC has since welcomed especially in relaying of information to clients. Aranda and Garcia (2013) say that before, WSSC used old filing system of spreadsheets. Despite the fact that this is still going on, new technology advancement could help the company transfer to cloud-based information management system. According to Aranda and Garcia (2013), this would reduce time both in relaying, finding, and securing information. This would help the WSSC in quick decision making helping it achieve its goals.
Threats
As previously mentioned, there is severe climate change leading water scarcity across the globe – climate volatility. This has affected many rivers across the globe, including the Colorado and Mead rivers, the biggest rivers in the USA which have seen substantial drops in levels of water despite the increase in population and demand for water ( Snyder, n.d) . The main river suppliers of the WSSC – Potomac and Patuxent rivers – have also seen some drop in the water levels reducing the water supplied by WSSC. However, the WSSC has started an environmental stewardship with an aim to reduce environmental degradation. Also, the company has greatly invested in natural sources of energy such as solar and wind reducing pollution. These are strategies which will contribute towards making the environment safe.
The other threat WSSC faces are the funding gap. The industry has seen unresolved and underemphasizes funding by the government. This continues to happen despite the need for a serious revamping of the sector. This will eventually prevent WSSC from achieving its mission, vision, and goals.
It is clear, that the strategies put in place by WSSC will help it move forward especially towards ensuring better services to the clients. The use of a natural source of energy such as wind and sun help reduce pollution and contributing to the conservation of the environment. Also, the environmental stewardship helps the company steer towards attracting environment aware clients, consequently increasing profits. The IT infrastructure funding is also another strategy which will help the organization improve on its services, especially in the information management sector. Moving towards cloud-based technologies will help the WSSC achieve its goals.
Conclusion
In conclusion, the Washington Suburban Sanitary Commission is well placed strategically against its competitors and to ensure business continuity. Despite the problems facing the industry in general, WSSC still remains one of the largest water and wastewater utility companies in the United States. Its strategies of innovating by use of technologies, environmental stewardship, and use of natural sources of energy will help it achieve its goals.
References
Aranda, S. R., & Garcia, A. (2013). Using technology to meet the demands of replacing aging infrastructure: Journal American Water Works Association , 105 (7), 54-59
Gonzalez, J., & Rudzki, R. A. (2015). Raising the public sector bar through private sector best practices: Washington Suburban Sanitary Commission (WSSC), one of the nation's largest and oldest public utilities, turned to best-in-class procurement practices from the private sector to deliver significant savings to the bottom line: Supply Chain Management Review . Retrieved on 1 October 2018, from http://www.scmr.com/article/raising_the_public_sector_bar_through_private_sector_best_practices
Snyder, S. (n.d). Water scarcity-The U.S connection. The Water Project . Retrieved on 1 October 2018, from https://www.wsscwater.com/business--construction/major-projects/pipes--infrastructure-improvement/aging-infrastructure.html
WSSC. (2018, February 7). Environmental stewardship . Retrieved on 1 October 2018, from https://www.wsscwater.com/water-quality--stewardship/environmental-stewardship.html
WSSC. (2017, March 15). Pipes and infrastructure improve External environment Report WSSC
ments and maintenance.Aging infrastructure. Retrieved from https://thewaterproject.org/water-scarcity/water_scarcity_in_us
