Filter Innovations Inc Case

Industry

• increased demand for water and water treatment, trend expected to continue

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• market projections reaching $348 billion
• demand growing for safe drinking water in developing countries
• sustainability challenges and advancements in environmental regulation result in growth of demand for higher water treatment standards
• 2008, 1. billion without drinking water, 2. 4 billion not connected to wastewater systems
• 40% projected increase in water consumption by 2025, 1/3 of world population affected by water shortage
• in Canada, more than $2 billion in sales
• largest consumers – municipalities, both products and services
• significant portion of market – industrial

Competition

• dominated by 2 large mutli-national companies ( Siemens water tech and Zenon membrane solutions)
• competition targeted large users of filtration systems (corporation and municipalities) requiring over 1 million litres/day
• Siemens – 2. million in revenue, 6000 employees (150 R&D), serve more than 90% of fortune 500 manufacturing companies, around 100,000 industrial consumers, parent company Siemens AG over 100 billion electronics and engineering company in over 190 countries with 428,000 people, leader in innovation
• Zenon – owned by GE, provided a complete range of filtration processes, offered broadest product line in industry, over 100 years of experience, over 300,000 employees in over 100 countries, publically traded with 18 million in revenue
• smaller competitors, specialize in niche market, offer sales and support on a specific type of filtration and treatment product

Environment

• have to meet provincial regulations based on standards set by federal legislation
• some environmental legislation required wastewater treatment
• discharge limits for sewer use, storm sewers, and groundwater seepage; limits vary regionally
• wastewater dumped for use of a fertilizer must be treated
• stricter legislation raising environmental standards required by companies
• many companies require certificate of approval from ministry of environment and energy, validating compliance with all guidelines

Filter Innovations Inc

Dragasevich studied marine biology, worked for major supplier of filter presses in NA  extensive experience in industrial process and environmental products, sales manager with GAF (industry leader for filter vessels and bag filters) 1992, founded Filter Innovations.

Company

small industrial water filtration company identifies and supplies treatment solutions for groundwater, wastewater, process water and air  evaluated client`s needs and design appropriate system to meet need, develop and build system, install it, monitor it regularly, offer product support  supplies wide range of environmental products to support filtration systems  goal – prioritize social and environmental responsibilities at all times to ensure that actions positively influence both the community and environment ongoing R&D development of new technologies for new products and systems; important to be recognized as being at forefront of the leading technology employs 14 people, sales representatives, technology engineers & technicians, administrative staff alliance with firms acting as distributors of its products and systems across NA with few sales in Europe and SA serves 500 clients, FII equipment operational in over 1500 business sites; 80% sales in Canada, 15% sales in US, 5% sales outside of NA  wants to be recognized as primary supplier of environmental equipment and products, offers simple, innovative solutions for air and water treatment; wants to be one-stop shop for all filtration needs, offering timely and cost-effective solutions.

Calco Group

2006, FII purchased by CEG (identifies and acquires environmental companies that were leading suppliers of its specific products) membership with Calco allowed companies to share resources, networks, and knowledge MLE (groundwater remediation) offers similar products as FII; MLE benefit from sales expertise; FII able to capitalize on MLE strong manufacturing focus Operations: high focus on sales/technical knowledge; high customer-centric outlook; flexibility in meeting needs of customer key to success; unique/comprehensive business structure (engineering, manufacturing, and distributing of various filtration products and systems commodity products in inventory for quick sale (filter media, off-the-shelf filtration units), other products ordered from suppliers as needed (keep inventory investments and storage costs low) advantageous membership with CEG and strong supplier networks customized systems – engage in collaborative design efforts with clients and engineers; once designed, system built by manufacturing alliances then installed and supported by FII offers rental and leasing option; three types interested in this – those who want to test a system before purchase, those who need it for a specific time period only, and those who want to finance system through regular instalment payments

Sales

• about 65% of revenues from sale of individual products; customized products represent 35% of sales

Consumers

• 2 reason for demand – companies pollute above regulated level obligated to avoid environmental penalties; companies recognize opportunity to save money by cleaning/recycling wastewater by reducing disposal costs; demand ranges from short-term, quick-fix to long-term consultation/installation (ongoing monitoring and support) tend to focus on projects requiring less that 1 million litres/day; able to provide personalized support; larger companies don’t find these projects profitable, less competition customers in 2 equal groups – environmental consulting companies/distributors on behalf of their clients; end users (buy direct from FII)

Environmental consultants

analyse clients’ wastewater treatment needs, recommend solution and help implement it; after assessing need, issue request for RFP from each vendor, use industry expertise to recommend best option for client

End user

no internal capability, FII identify needs, build custom solution to fix problem (incorporating restrictions); if commodity products much more price sensitive choose vendor with lowest price, for custom products price less of a concern and willing to pay; learn through tradeshows, advertising, word-of-mouth, and industry reputation MBR: new, stricter government regulations meant that company’s existing wastewater treatment designs did not meet new guidelines; faced with decision of whether to expand into MBR market MBR – new technology for wastewater treatment, allow for water re-use; different application than FII  MBR designed to treat biological wastewater, predict that MBR system will be used to add reverse osmosis to make water safe for portable water consumption Europe leading in development currently best environmental option; FII would benefit from MBR sales and advanced knowhow/expertise with respect to manufacturing, engineering, building, and supporting new systems

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