Three Oceans by Richard Best

Three Oceans Feasibility Study

Entrepreneurial Ventures BU.152.710.82

Sean Whitney

Kashyap Purani

Paul Jiwoong Kang

Ayu Katada

Ashleigh Dueker

Richard Best

EXCUTIVE SUMMARY Three Oceans

Excutive Summary The mission of Three Oceans is to assist in removal of waste plastic from domestic marine ecosystems and develop a business model that capitalizes on the reduction of plastics into ocean gyres. To do this we will utilizes recycled coastal waste plastics and produce higher value ‘green’ products for consumer purchasing. To maximize our efforts of reducing marine plastics our initial product offering of cell phone cases was selected due to its planned obsolescence, high level of interactivity and visibility with the consumer, minimal material requirements and cheap production costs. As detailed in the following documents, consumption of cell phone accessories is a vastly growing market. This venture will require $634K in start up capital and will break even within 18-24 months. We expect second year revenues on the order $2.7M. Therefore on a regional scale we believe this business concept to be feasible. Our business-to-consumer model will consists of collecting coastal waste plastics, recycling these collected plastics into manufacturable pellets, to be used in injection molding, and then producing higher value consumer goods, which will be sold directly to the consumer or an intermediary distributor. Three Oceans will launch with two casses desinged to be in line with the top two smart phone models on the market. All recycled plastic and manufactured products will be branded with our official Three Oceans seal. This will allow us to differentiate our product from other recycled material organizations, provide validation to consumers that the origin of the plastic was sourced from marine ecosystems and thus provide us with a competitive advantage against other virgin plastic consumer products. Our implementation plan for reducing plastic waste from domestic oceans is both cost effective and efficient. We will collect our raw material from North Eastern and Mid-Atlantic Coastal area, and then ship the material to regional recycling facilities closely located within our collection point. To reduce the overall cost of producing higher value ‘green’ products, we have strategically formed partnerships with recycling facilities and injection molding suppliers, which allow us to deliver product greenness while maximizing the profits of the company. In early stage of our business, we are planning to sell our higher value ‘green’ products in North Eastern and Mid-Atlantic region to make the most of partnerships that we have formed in Coastal area, which will allow us to maximize the efficiency by minimizing the overall transportation cost. Once we successfully establish our market in North Eastern and Mid-Atlantic region, going forward, we will expand into other coastal regions of the U.S that have high level of plastic pollution. Also, as we expand our business into other regions, we will diversify our products (i.e. tablet case) into other goods, so consumers can have more chances of enjoying Three Oceans’ green products. Three Oceans are committed to improve ocean ecosystem, and we are dedicated to environmental improvement that foster a sustainable future and lead to social and economical improvement in the communities we do business. 2

FACES Of the brand leader The work an unknown good man has done is like a vein of water flowing hidden underground, secretly making the ground green.

MARKET ASSESSMENT

Market Summary Market Size and Forecast The mobile phone and tablet accessory market is growing rapidly. This industry is comprised of a very large number of players. The low barrier of entry and growing industry make it a highly competitive market. Mintel reports that as of 2012 wholesale industry revenues reached $1.8 billion. They estimate the market will have steady growth, reaching $2.2 billion in wholesale sales by 2016. While the total size of the mobile phone and accessories market is increasing, it is important to note that there has been a steep drop in the average price per unit of mobile device accessories. As shown in Figure 5, the average price fell from $42 in 2007 to $23 in 2012. Due to mobile phones reaching near-universal adoption, economies of scale have driven these prices down. Mintel suggests that the average retail price will plateau around the $23 price point.

Work Cited: Mintel: Mobile Phone and Tablet Accessories - US - May 2012

MARKET ASSESSMENT

Retail Channels Mobile device accessories have a very board value delivery network. Theses sales channels range from e-commerce, wireless carriers, as well as various merchandize retailers and electronics boutiques. According to Mintelâ&#x20AC;&#x2122;s survey of over 1,600 participants, roughly 48% of those surveyed reported having purchased a mobile device accessory through their wireless carrier. As detailed in Figure 14 the next most popular point of purchase was through mass merchandizers, such as Walmart, or Target.

It is important to note that very few accessory makers have a large marketing budget. This results in most accessories being in impulse purchase. As a result, promotions are often required for most products to increase awareness and sales. These promotions are however beneficial for both retailers and manufactures. Although, accessories are typically a lower priced product, they offer higher profit margins for retails. The average retailer profit margin is roughly 50% industry wide.

Market Drivers As expected, the largest driver in the sale of mobile accessories is led by the increase in sales of mobile phones and tablets. Mintel suggests that the adoption rate of current cell phone owners is estimated to be 92% of US consumers. Unit sales of cell phones have increased by 54% in the last six years, with over 170 million units sold in 2012. Smartphones consist of majority of these sales and make up roughly 64% of all phones sold in 2012. Due to the relatively high price points for unsubsidized smart phones, ranging between $400 â&#x20AC;&#x201C; $600, consumers are willing to spend increasingly more money to protect these devices or make them more useful to them. Over 55% of all survey responded reported having owned a protective case for their mobile phone, and over 74% reported owning a protective case for their tablet device. Work Cited: Mintel: Mobile Phone and Tablet Accessories - US - May 2012

MARKET ASSESSMENT

Macro-Market Analysis The Macro-level market assessment of Three Oceans is a favorable one. Demographic, sociocultural, economic, technological, and natural trends all show that the smart phone market is sizeable and growing, and that consumers are progressively thinking more green in their purchasing behavior as time goes on. Therefore, the market for Three Oceans, on a macro-level, is attractive. Three Oceans can reach a sizeable scale due to the strength of the market in that over half of Americans own a smartphone, wish to spend money to protect that phone, and generally think green when purchasing consumer goods. Future demand of green smartphone cases is likely to grow as only half of the market is currently penetrated. Also, generally every two years individuals upgrade their phone, based on our market survey, and then a new phone case will also need to be purchased. Demand for supporting “green” products is high, our market survey showing 65% of individuals prefer to purchase a “green” case over a non-green case, and this demand will only grow as resources are consumed at a greater rate.

Demographic Trends The vast majority of the primary smartphone market, US adults aged 18-54, already have smartphones. Over half of all Americans own a smartphone, with recent data suggest that the U.S. smartphone market is already more than halfway penetrated. There are approximately 310 million people in the United States, and of these people, approximately 235 million use mobile devices.i It is likely that everyone will eventually have smartphones, making the total addressable market for smartphones about 225 million people in the US. Flurry reports that there are at least 165 million active Android and Apple iOS devices in the U.S. and that they are used by 78% of the adult population (age 1564). The demographics of those who don‘t yet have smartphones, meanwhile, are older Americans (above 65 years old) and those who make less than $50,000 per year. ii

235 million smart phone users

Work Cited: i. http://www.businessinsider.com/us-smartphone-market-2012-9 ii. http://www.pewinternet.org/~/media/Files/Reports/2013/PIP_Smartphone_adoption_2013.pdf

MARKET ASSESSMENT

Figure 5

Economic Trends While in the recession, and with the increasing price of a cell phone and the fragility of the phone, it is becoming increasingly important, integral even, to purchase a strong cell phone case that will protect the phone for the duration of one’s contract. Our survey results show that cell phone owners are willing to pay $25-30 for a cell phone case to protect their valuable phones. Although the world is in a recession, it is very important to have a cell phone and many people are investing in a good-quality phone that will last them years.

Technological Trends The increasing technology of the smartphone is going to make the feature phone nearly obsolete. There are a number of competitors who are the top sellers in the nation, namely: Apple, Samsung, and Droid (these results are confirmed both from Three Oceans Market Survey and http://techland.time.com/2013/09/05/the-top-10-smartphones-on-the-market/), and we will be using those models to build our cell phone cases.

Natural Trends Global warming and depletion of natural resources are increasing the need to be “green”. Our market survey shows that 92% of people rank themselves sensitive or highly sensitive to environmental issues; furthermore, our market survey showed a preference to clean up the ocean over cities, thus confirming the market viability of the Three Oceans Model. Three Oceans

MARKET TRENDS

Sociocultural Trends There is a large trend moving toward the smartphone and away from the feature phone. There are numerous advantages to having a smartphone; the cell phone now acts as a personal computer, camera, phone, internet source, and MP4 player; furthermore it is full of apps that range from the news to social media to coupons. Many phone companies have benefits of texting members of the same phone company, thus helping push out the need for the old flip phone. Worldwide mobile phone sales to end users totaled 1.75 billion units in 2012, a 1.7 percent decline from 2011 sales, according to Gartner, Inc.iii Smartphones continued to drive overall mobile phone sales, and the fourth quarter of 2012 saw record smartphone sales of 207.7 million units, up 38.3 percent from the same period last year. Demand for feature phones remained weak in 2012 and in the fourth quarter. Feature phone sales totaled 264.4 million units in the fourth quarter of 2012, down 19.3 percent yearon-year. Gartner analysts expect feature phones sales to continue to fall in 2013. Gartner predicts that sales of worldwide smartphone sales to end users will be close to 1 billion units in 2013, and overall mobile phone sales to end users are estimated to reach 1.9 billion units. In the fourth quarter of 2012, Apple and Samsung together raised their worldwide smartphone market share to 52 percent from 46.4 percent in the third quarter of 2012. Samsung ended the year in the No. 1 position, in both worldwide smartphone sales and overall mobile phone sale. According to The NPD Group, a leading market research company, revenues from mobile phone accessories in the U.S. increased 32 percent during the first half of 2012 compared to the same period last year. i Mobile phone cases were the most popular accessories category, growing 69 percent over the prior year, followed by stereo headphones with microphones, which grew 67 percent. In addition, case sales grew as average prices for these products rose 25 percent. According to NPD’s “Mobile Phone Accessories Attach 8

Work Cited: i. ii. iii. iv.

Rate Study,” recent mobile phone case buyers cited protection and durability (86 percent) as the top purchase influencers, followed by quality materials (73 percent), and minimal bulkiness (66 percent). Aesthetics and price play a lesser role in the purchasing decision, with just under half of recent case buyers considering these attributes important. “Smartphones tend to feature slim designs and glass materials, so protection accessories have become a virtual necessity to safeguard smartphone owners’ investments,” said Ben Arnold, director of industry analysis at The NPD Group. “Price holds less importance than protection on the list of purchase influencers, and consumer concern over the quality of materials indicates the performance of these accessories is more important than their aesthetics or cost.” In 2010, the mobile phone accessories market was worth $26.5 billion, expected to double by 2015.ii Lastly, our market research shows that 76.67% of people own a case for their smartphone. There is also a trend of general consumers trying to be more “green” amid global warming and high consumption rates. Most western markets have been affected by green consumer behavior, reflecting concern about the effects of manufacturing and consumption on the natural environment. Buying habits have changed by environmentally-oriented consumers and boycotting behavior that resulted from media reporting on companies who severely damage the environment. Up to 71 per cent of consumers consider environmental issues in their shopping behavior, up from 66 percent in 2008; also 71 percent of consumers wish companies would do a better job helping them understand environmental terms. iv Surveys of environmentally oriented consumer behavior indicate that the number of consumers who include environmentally oriented considerations in their buying decision has been relatively stable.

https://www.npd.com/wps/portal/npd/us/news/press-releases/pr_120821 http://hexus.net/business/news/economic-indicators/26583-mobile-phone-accessories-market-worth-265bn-double-2015/ Gartner, 2013, http://www.gartner.com/newsroom/id/2335616 http://www.environmentalleader.com/2013/04/03/71-of-consumers-think-green-when-purchasing

MICRO-MARKET ANALYSIS

Micro-Market Analysis Target Market and its Pain Identified: (Assessment: highly favorable) Market: Smartphone case The mobile phone and tablet accessory market is growing rapidly. It is likely that everyone will eventually have a smartphone, making the total addressable market for smartphones about 235 million people in the US (Business Insider, September 13, 2012 http://www.businessinsider.com/us-smartphone-market-2012-9 ). Among this competitive market, the environmental-conscience group is the biggest target market of our product. The vast majority of the primary smartphone market, US adults aged 18-54, already have smartphones, yet there is an interesting observation from our marketing survey, which indicates that 95 per cent of people renew their phone cases every year or every two years. Young adults between the ages of 18 and 34 are the most likely of all age groups to equate being green with recycling. Half of these young people think of recycling when they think about being environmentally friendly, compared with only 25 percent of those age 55 and older (Green Mountain Energy, 20022). The tremendous potential of growth is expected in green product market. The people in the target market want to take steps toward a greener lifestyle, if given the opportunity.

Target Market Segment, Size, and Growth Rate (Assessment: favorable) According to market research in 2007, consumers’ sensitivity towards environmental issues are categorized by various behavior levels (GfK Roper Consulting, 20073). The study shows that 63 percent of Americans are ‘pro-green’. Of that 63 percent, only 15 percent Genuine Greens are very strong advocates or already doing some action. The other 48 percent Dream Greens are interested, but either are not doing anything green, or do not know how to be green. The Three Oceans primary target market consists of the 63 percent of ‘pro-green’ Americans, and this target group will consist of two secondary consumer groups. First, Three Oceans will target the segment Genuine Greens, the group considered to have least barriers to choose environmental-conscious product over other general products. The market size of each stage is estimated as follows;

• Consumer Group Genuine Greens: 15% of Genius Green- of 235 million phone users in US makes the market segment size 35.25 million people. In the North East-Mid Atlantic Region, 3.25 million people of age 18 to 54 comprise this segment. Our market research shows the cell phone case competitive price at $30. We anticipate this consumer group to gravitate towards our product immediately.

• Consumer Group Dream Greens: 48% of potential market- of 235 million phone users in US makes the market segment size 112.8 million people. In the North East-Mid Atlantic Region, 10.4 million people of age 18 to 54 comprise this segment. Three Oceans anticipates that the majority of this consumer group will gravitate towards our product.

Our total, national, market segment consists of 63% of the current 235 million smart phone users. This equates to roughly 148 million potential consumers. The overall growth rate of the market will be stable growth since over half of the smart phone market is penetrated; yet people will increase green consumer behavior as time goes on due to depletion of resources. 9 Work Cited: i. GfK Roper Green Gauge study. (2007) ii. Gardyn, R. (2002). Being Green. AdvertisingAge. Retrieved from http://adage.com/article/american-demographics/green/44618/ iii. Henry Blodget, (2012) Actually, The US Smartphone Revolution Has Entered The Late Innings. Retrieved from http://www.businessin sider.com/us-smartphone-market-2012-9

FIVE FORCE MARKET ANALYSIS

Five Forces Threat of New Entrants

Bargaining Power of Buyers

(Assessment: moderatly unfavorable)

(Assessment: highly favorable)

The mobile device accessory industry is

highly concentrated. Capital investment required to produce an accessory such as a cell phone case is

The bargaining power of buyers is very high.

This is the case for both business-to-business buyers as well as business-to-consumer. As reported in the

very low. Additionally, new cell phones are released

Mintel survey, over 54% of all cell phone cases are

annually, allowing for new entrants to satisfy market

purchased through wireless carriers retail stores.

demand for new model accessories. This very low

Most retailers require 50% marginal returns. This

barrier of entry contributes to a very high threat of

provides the wireless carrier with much larger profit

new entrants to the market.

margins then through that of mobile devices. Due to the high saturation of accessory suppliers, business-

Bargaining Power of Suppliers

to-business purchasing is largely swayed toward the advantage of the retailers.

(Assessment: highly unfavorable)

The high concentration of market suppliers

Economies of scale also allow these retailers to

and competition has led the mobile device accessory

purchases accessories, such as phone cases, at

market to reach equilibrium. Mintel reports pricing

a deeply discounted rate further decreasing the

for mobile accessories has plateaued at roughly

bargaining power of business-to-business suppliers.

$23.00 per unit. Coupled with the 50% required profit

Business-to-consumer sales also heavily sway

margins of most retail stores gives mobile device

bargaining power toward the buyers. Online sales,

accessory suppliers very low bargaining power. In

which comprise roughly 28% of all cases sold, allow

order to maintain a competitive advantage and

the consumer to shop around for products that

position their products above the $23.00 equilibrium

directly address their needs or personal taste. In

price, suppliers must increase their marketing

order for a new entrant to provide themselves with

budget to spread brand awareness. Otterbox serves

more leverage and a strategic advantage, they again

as the precedent. There increased brand awareness

must clearly market their value propositions and

has allowed the organization to obtain price points

differentiate themselves form the vast alternatives

twice that of the industry standard.

available.

THREE OCEANS

FIVE FORCE MARKET ANALYSIS

Threat of Substitute Products/Services (Assessment: highly unfavorable)

Rivalry Amoung Competotors (Assessment: moderatly favorable) Intensity of Rivalry among Competitors

The threat of substitutes is very high. The market

Unlike the intense rivalry in the mobile device industry,

is extremely saturated with mobile device accessories. This

this is not the case for the accessories market. While the

has led to tough competition, and several new brands that

industry is highly saturated with a wide variety of different

mimic industry leaders. As the respondents of our market

phone cases, most major competitors have positioned

research indicated, over 90% of them purchase a new

themselves into a distinct niche. The lower barrier of entry

smartphone case once every two years. This correlates

does allow for new entrant to mimic the product offering

with the purchasing of a new smart phone, which requires

of the industry leaders. This is hedged against with to high

a new case to be purchased. Due to this high turnover rate,

brand awareness and consumer favorability.

accessory device suppliers can easily adapt their product offering and often mimic designs of the market leaders. High brand awareness is required to maintain customer loyalty in the face of such strong competition.

The position of Three Oceans in the mobile device accessory market will not put us in a rivalry between these industry leaders. Due to our unique product offering, brand awareness and environmental marketing campaign, we will easily distinguish ourselves in the market. This will provide us with protection again substitutions, as our brand will be easily differentiated. Higher brand awareness, will also allow us to sell out product offering at a price point above the industry standard. The high level of planned obsolescence within the mobile device and it accessoryâ&#x20AC;&#x2122;s market, contrasting with our environmentally sustainable products and services will provide us with higher bargaining power for both business-to-business and business-to-consumer buyers.

THREE OCEANS

MICRO-INDUSTRY ANALYSIS

Micro-Industry Analysis Proprietary Elements Although waste plastic taken from coastlines is a unique source of plastic, it is still plastic, therefore the basic elements of the Three Oceans business model are not new to the recycled plastic industry. Therefore, from an industry operations perspective there is no proprietary intellectual property.

Any intellectual property within this business will result from the product design features and elements of the cell phone cases. Decisions on how to handle proprietary designs will need to be negotiated with the design consultancy prior to commencing work.

Organizational Processes, Capabilities or Resources

Step 1

Step 2

Step 3

Our business model can be summarized into five basic steps as shown below;

Step 1. Utilize five teams to collect plastic material from coastal or interior waterways within collection region( North East and Mid-Atlantic).

Step 2. Aggregate and deliver coastal plastic material to regional recycling plant. Receive pelletized recycled plastic in exchange for delivered material and procure additional quantities required.

Step 4

Step 5

Step 3. Develop cell phone case design using design consultant. Deliver pelletized recycled plastic to injection molding supplier.

Step 4. Injection molding supplier fabricates and packages our cell phone into a final finished good. Shipped good is received at our distribution center (Two cases designs).

Step 5. Deliver to final packaged product to retailers (Wireless Carrier and Online).

Collection of our raw material along coastal and inland waterways is a critical operational step. It not only defines our entire business but also dictates our profitability. Identification and mapping of highly polluted waterways which will yield the highest density of our target plastic is paramount to our success. Our team will travel the shortest distances to collect the most plastic possible thereby lowering material costs as much as possible. We will utilize our partner organizations such as Ocean Conservancy, Plastics at Sea and 5 Gyres to assist us in identifying current trends, target regions and local volunteers for coastal plastic cleanup. It may be possible in some scenarios to utilize volunteer campaigns to fulfill our raw material needs. THREE OCEANS

ECONOMIC VIABILITY

Economic Viability Based on our market research, target market and cost of production we anticipate an initial startup cost of $634K consumed over 12 months (Year 0). Our startup capital will cover expenses for collection of plastic for the year, marketing, product design, tooling, salaries, etc. We expect to break even when approximately 75K units are sold and are projecting this to occur between 18-24 months after start up. Please reference Figure 2 for our complete four year profitability schedule We are projecting to only take 0.17% of the cell phone case market in the first year. This estimate is based on survey and market data, as well as some limitations we have on plastic collection quantities. One key factor limiting our market penetration is the available coastal plastic collected per year. Utilizing data from the Ocean Conservancy International Coastal Cleanup, a global one day volunteer event dedicated to marine debris removal, we have calculated plastic per mile and collection rates per hour for all US states, see Appendix IV. The North East and Mid-Atlantic regions have the highest coastal plastic density, i.e. shortest distance travelled to locate plastic within the continental United States. Additionally the marine debris in these regions has a higher percentage of plastics than do other areas in the US. We have elected to start operations in these regions given the combination of these factors and their proximity to each other. We expect to conservatively collect 2,200 lbs of plastic in year 1 using five teams of collectors. By year 3 we will have ten teams bringing in approximately 6,100 lbs of coastal plastic per year. i.

Our research indicates our cell phone cases must maintain as close to 50% coastal plastic to recycled plastic to be considered green. It is our preference to utilize 100% coastal plastic for our raw material needs. However, given the coastal plastic we can collect, we will begin with a 20% blend coastal plastic to standard recycled plastic. If environmental conditions change, such as a natural disaster or seasonal swing, we may be able to increase the blend percentage. Should this occur our operational cash will increase as we will be collecting more material per hour. We expect to be blending 30% coastal plastic with recycled plastic by year 3. Second year revenues are estimated at $2.7M with product gross margins near 285%. This revenue projection shall expand with growth into more retailers. However, plastic collection must expand as well and we will need to conduct an assessment to determine collection efficiencies outside of the North East. Please refer to Appendix II which contains our proforma projections. Customer retention is expected to be high as environmentally conscientious consumers are on the rise. Our product is highly visible given it is removed from enclosed locations with each use by its user. It is often left out by users for long durations of time, i.e. on restaurant tables or bar tops. Similarly we expect to be closely tied to the cell phone market trend. When new phones are released we will follow closely with a case designed for that phone. As such we expect consumers to purchase new cases with each new phone type.

WORK CITED : i HT TP://WWW.OCEANCONSERVANCY.ORG/OUR-WORK/INTERNATIONAL-COASTAL-CLEANUP/PEOPLE-POUNDS-AND-MILES.HTML

PROFORMA ANALYSIS

Break-Even Analysis

Figure 1.

– Projections

– Break-even

Cummlative Net Income ($)

$2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 -$500,000 -$1,000,000

1.5

2 2.5 Years After Start-Up

3.5

4.5

Figure 2.

Break Even Analysis

Time (Years)

Net Income

$ (634,098.48)

$ 14,235

$ 893,937.63

$ 1,913,978.57

*Please see Appendix for Proforma break down.

Ocean Plastics Product Blend Ocean Plastics

Recycled Plastics

30%

70 %

Product Launch Market Penetration Four eastern coastal cities 2,000,000 consumers 20 retail locations at product launch

Product blend by year three Figure 3.

Three Oceans

Figure 4.

MACRO INDUSTRY ANALYSIS

Macro-Industry Analysis Five Force Industry Analysis Currently, there are only few top recycled plastic sellers who largely distributed capacity without any player having a majority concentration, yet reclamation markets are still underutilized. According to a study by The Plastic Division of the American Chemistry Council, despite the total market increase of plating recycling, recovery rates for plastic bottles still remains below 30%. Recycling programs tend to be more prevalent in crowded regions where disposal costs are higher and incentives to recycle are greater. Single-stream recycling systems, in which material is sorted by the recovery facility rather than the resident, are growing in popularity. Although these programs are labor-intensive, they reduce operating costs, and provide incentives for recycling. Coastal plastics can be collected through volunteer programs in partnership with local NGOs. The majority of the plastic recyclers tend to remain in their specialty due to untapped and growing recycling opportunities. Rivalry

Highly Favorable Threat of Substitutes

Moderatly Favorable Threat of Entry

Highly Unfavorable Bargaining Power of Suppliers

Moderatly Unfavorable

Bargaining Power of Buyers

Highly Favorable

Please see Appendix for Five Force Industry Analysis break down. 15

THREE OCEANS

RECEOMMENDATIONS Three Oceans

Recommendations The future of Three Oceans is bright as the mobile phone accessory market is continuously growing rapidly year over year, and there is a huge growth potential in the plastic recycling industry. Unlike any other mobile phone accessory makers in the market, Three Oceans can easily differentiate ourselves in the market due to our unique product offering and brand awareness based on the fact that we manufacture the high value ‘green’ products from ocean plastics collected from Coastal areas. Our feasibility study shows that Three Oceans’ business to consumer business model is extremely feasible with the relatively modest upfront investment for setting up operation teams and purchasing necessary tools and raw materials. To effectively execute the business model and overcome some limitation and hurdles that we have in terms of transportation cost and raw material supply, we have formed partnerships and strategic alliances with recycling facilities and injection molding suppliers. Nowadays, as people are more conscious about environmental matters and they want to be more ‘green’ when they purchase goods, Three Oceans’ product can give a positive appeal and brand awareness to them, and it is highly recommended that Three Oceans’ pursue its business model. In addition to the mobile phone accessory market, Three Oceans needs to investigate into Tablet accessory market for future growth as Tablets are expected to nearly triple in sales volume by 2016 due to tablets relatively new entry into the market and tremendous support from consumer. Thus, it is highly recommended to dive into this market while the entry to barrier is low since tables are relatively new into the market.

APPENDIX

Appendix i. ii. iii. iv.

Survey Results Proforma Five Force Industry Analysis Coastal Plastic Collection Data

SURVEY RESULTS

Survey Results Do you own a protective case for your cell phone?

What is your price range for purchasing a cell phone case?

Yes - 80 %

15 %

$1.00 - $5.00

No - 20 %

17 %

$5.00 - $10.00

21 %

$10.00 - $15.00

15 %

$15.00 - $20.00

31 %

$25.00 - $30.00

Where did you buy your last cell phone case? Wireless Provider 48 % Online

34 % 9%

Merchandize Retailer

Electronics Retailer

Sensitivity to environmental issues.

91%

How often do you purchase a new cell phone case?

91% of respondents reported have a sensitivy to environlental issues, within the top 4 out of 10 sensitiviy levels.

Once Every Two Years 61% 34 % 5%

Once a Year Every Six Months

What percentage of a product needs to recycled to be considered â&#x20AC;&#x2DC;greenâ&#x20AC;&#x2DC;? 80 % - Said 50 %

If you knew that a product was made up of recycled ocean plastic how much extra would you pay for it? 59 %

$1.00 - $5.00

17 %

$5.00 - $10.00

$10.00 - $15.00

17 %

30 %

11 %

$15.00 - $20.00

20 %

$25.00 - $30.00

PROFORMA

Proforma Revenue Projections

PROFORMA

FIVE FORCE ANALYSIS

Five Force Industry Analysis Industry: Recycled plastic product manufacturing Supplier power We plan to use dual sources for acquiring recycled plastic raw material: (i) Ocean plastic- acquiring and recycling surface floating plastic waste and other marine debris on coastlines (ii) Post-consumer recycled plastic- acquiring plastic from traditional plastic recycling players. Supplier switching costs & extent of profits: (Assessment: highly favorable) •

Due to commodity nature of plastic and recycled plastic, the supplier switching costs are low. Ocean plastic can also be acquired from diverse geographic locations as described elsewhere in this document. Recycled plastic is a commodity product; plastic is one of the most commonly recycled materials in the world.i. The price of virgin plastic has direct restrictive effects on recycled plastic.

Degree of differentiation of inputs and presence of substitute inputs: (Assessment: highly favorable) •

Reclaimers of all plastic bottle types are in need of more material to maximize their processing capability and provide product to the demanding end use markets.ii. Although consumer product manufacturers have now many options of using different materials, plastic remains the top choice due to several advantages and also due to availability in different forms.

Supplier concentration & threat of forward integration by suppliers: (Assessment: highly favorable) •

As indicated in Appendix XX, top recycled plastic sellers have largely distributed capacity without any player having concentration. Also, Reclamation capacity and markets are underutilized.iii. A study by The Plastics Division of the American Chemistry Council concludes that plastics recycling is widespread yet recovery rates for plastic bottles remains below 30%. The market for skilled labor in the waste management business is tight, and many workplaces are represented by unions.

Recycling programs tend to be more prevalent in crowded regions where disposal costs are higher and incentives to recycle are greater.iv. Single-stream recycling systems, in which material is sorted by the recovery facility rather than the resident, are growing in popularity. Although these programs are labor-intensive, they reduce operating costs, and provides incentive for recycling.v. Ocean plastics can be collected through volunteer programs in partnership with local NGOs. Majority of the plastic recyclers tend to remain in their specialty due to untapped and growing recycling opportunities.

Overall assessment of supplier power: highly favorable iii

Work Cited: i. ii. iii. iv. v.

http://www.forbes.com/sites/philfava/2011/10/11/plastics-recycling-a-bigger-business-than-you-may-think/ Plastic Recycling Primer (2011), Maine State Planning Office www.mass.gov/dep/public/committee/plasmrkt.ppt‎ 2011 UNITED STATES NATIONAL POSTCONSUMER PLASTICS BOTTLE RECYCLING REPORT Plastic Recycling Primer (2011), Maine State Planning Office

FIVE FORCE ANALYSIS

Rivalry Number of players & growth in the industry (Assessment: highly favorable) •

Plastics comprise of 13% of American trash, and is only recycled/recovered at a 3% rate.i. The plastic scrap industry has developed new technology that will allow these products to be recycled and used.

Fixed cost and exit barriers: (Assessment: moderately favorable) •

Although the supply of used plastic is abundant, equipment costs for processing are high and industry specific, resulting in a high exit cost.

Product differentiation & switching costs for buyers: (Assessment: moderately favorable) •

Recycled plastic is commodity, but consumer products are differentiated and diverse. Ocean plastic can be a huge differentiating factor.

Diversity of competitors: (Assessment: highly favorable) •

The players in the industry are diverse relying on different sources and technologies. The consumer product manufacturers also range in types and quality of their products.

Strategic stakes: (Assessment: highly favorable) •

Due to growth and diversity in the industry, strategic stakes are not high.

Overall assessment of rivalry power: highly favorable

Threat of Substitute Buyer propensity to substitute: (Assessment: moderately unfavorable) •

Apart from low switching-cost of recycled plastic substitutes, other materials like glass can be used instead of plastic in many products. Retails are prone to substitute due to diversification in their product line. End-users have a large availability of options using different types of materials in non-essential consumer products.

• Relative price-performance of substitutes: (Assessment: highly unfavorable) •

Recycling is not always more efficient than producing new plastic. Virgin plastic is not much expensive and can be easier to produce. Other plastic substitutes like green plastic (with additives) are biodegradable and more environmental friendly than recycled plastics. Collecting ocean plastic can increase the cost.

Overall assessment of threat of substitute: moderately favorable

Work Cited: i. http://www.epa.gov/osw/nonhaz/municipal/msw99.htm ii. http://www.bplans.com/plastics_recycling_business_plan/market_analysis_summary_fc.php#.UldO4plUfD7

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FIVE FORCE ANALYSIS

Threat of entry Economies of scale & capital requirement: (Assessment: moderately favorable) •

Equipment costs for processing are high and industry specific, resulting in a high exit cost. However, these costs can be reduced by scaling up the processed quantity which is not difficult considering the availability of different sources for acquiring plastic. Capital requirement for consumer product manufacturing could be low. Vertical integration is an important consideration and difficult to accomplish successfully. ii.

Product differentiation & level of proprietary knowledge: (Assessment: moderately unfavorable) •

The technology for plastic recycling and processing is generally matured and specific for the industry but not proprietary. Product differentiation can, however, play a huge factor for consumer products.

Access to raw material: (Assessment: highly unfavorable) •

The recyclable plastic, including in ocean plastic, is abundantly available Transportation is a major cost of operations; so proximity to the source of supply and markets is important. Hauling plastic materials is costly; so new players will have to consider setting up facilities close to materials and markets.iii Cost-line plastic can be accessed by any player.

Government and legal barriers: (Assessment: highly unfavorable) •

Various states have awarded grants to support recycling. These grants and other government support can provide incentive to new players. Cost-line plastic cleaning efforts can also attract new players including NGOs.

Expected retaliation by existing players: (Assessment: moderately favorable) •

Existing players would have to consider new separate facilities in many cases, reducing economies of scale and making management more difficult. They are also attempting to achieve higher fleet efficiencies, to minimize safety and health insurance costs and to rework routes to make them more cost efficient. On the other hand, it is unlikely to have strong retaliation from consumer product manufacturers.

•

Overall assessment of threat of entry: highly unfavorable

Work Cited: iii. iv.

http://www.bplans.com/plastics_recycling_business_plan/market_analysis_summary_fc.php#.UldO4plUfD7 2011 UNITED STATES NATIONAL POSTCONSUMER PLASTICS BOTTLE RECYCLING REPORT

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FIVE FORCE ANALYSIS

Five Force Industry Analysis Cont. Buyers Power Size and concentration of buyers: (Assessment: highly favorable) •

Buyers are dispersed since consumer plastic products can reach market through an extensive network of wholesalers and retailers. End-users can even buy products online. Big retail chains can also be made partners.

Product differentiation for buyers & threat of backward integration: (Assessment: highly favorable) •

There is a huge scope of product differentiation in consumer products using different materials and designs. Retailers are unlikely to be interested in backward integration due to long value chain.

Switching costs for buyers: (Assessment: moderately unfavorable) •

Switching costs for buyers is low. However, supply chain can be developed by forging partnerships with organizations with shared environmental goals.

Importance of cost & quality for buyers: (Assessment: moderately favorable) •

Consumer product retailers have a very board value delivery network and sell a range of products. Very few accessory makers have a large marketing budget. Even though buyers can be willing to pay a premium for environmental-friendly products, quality will be an important factor for them.

Overall assessment of buyer power: moderately favorable

Overall attractiveness of the industry:

Moderately Favorable iii

COASTAL PLASTIC COLLECTIONS

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THREE OCEANS Feasibility Study