Plastic Packaging Recycling Services (PPRS) is starting a new company and building a marketing plan as part of their analysis and fundraising process. PPRS sees a need for businesses worldwide to recycle plastic packaging material to save expenses and to protect the environment by reducing fossil fuels needed to produce new plastic packaging. Based on published industry research, your company finds that the value of plastic packaging that is currently thrown away by businesses is $120,000,000,000 ($120B) per year.
The current rate of recycling of that material is around 14% or 12,096,000 units.
PPRS does not know the specific number of businesses that recycle plastic packaging. To simplify our calculations and begin to estimate market potential for a plastic recycling business, we will use $1 as the unit of measure for recycling plastic packaging based on the industry research for the value of discarded plastic packaging. We will make the assumption that customers pay $1 per pound to recycle plastic packaging.
PPRS intends to set up annual contracts with businesses to recycle their packaging plastic. Therefore, the quantity per purchase can be assumed to be 12 units (one recycling pickup per month) per purchase.
Looking at the number of customers who could and would buy this service rather than finding a way to dump or discard the material, we project that 20% would be a reasonable percentage of the total market as the buying ceiling. We intend to focus on businesses that process a high volume of plastic packaging and those who are either interested in environmental sustainability, or seek protection against rising packaging costs that use new petroleum resources, or have not had access to recycling services until now. Once established, we expect that 30% of those buyers will purchase our service each year.
Our services will be computed on volume and plastic composition but the average price per unit is projected to be $1.00.
Based on this information please complete the following:
- Using information from the text resources, calculate and state
- the market potential (in units) (0.5 points)
- the market potential (in dollars) (0.5 points)
- the Market Development Index (0.5 points)
- In 2 – 3 paragraphs explain what these calculations tell you about this market opportunity. (1 point)
- Would you invest $10 million dollars in developing this company? Why or why not? (1 point)
- As the company establishes its position in the market and wishes to grow market share, explain the performance measures they will need to track and manage. (1.5 points)
- Explain how the plastic recycling business will use the MDI, SDI and other calculations. (1 point)
- Describe external market forces that could affect market projects and state whether that situation would be an Opportunity or a Threat (1 point for correct Opportunity and 1 point for correct Threat)