Water & Wastewater Industry Competition Fundamentals

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Read about water and wastewater industry competition fundamentals

Water and wastewater businesses serve people and different industries; such as food an and beverage, pharmaceutical, oil & gas, semi-conductor, etc. There are various companies providing services in the industry, however, a few players are operating globally. SUEZ WTS is one of the market leaders.

Competition is intense in the industry. The big players compete at all levels while the smaller companies compete locally and based on the technology they use to treat water and wastewater. The rivalry within the large corporations includes in cost minimization, diversifications both organic and inorganic, product specification and differentiation and possibly economy of scale. Such companies compete on technology and products as well as geographical locations. The smaller companies benefit from focused expertise in one or a few areas as well as lower overhead costs which make them competitive to the larger companies. Such companies cannot compete in all projects due to the economy of scale and technology constraints. They become partners or licensees of the larger corporations. This type of rivalry dominated within water industry is the same as “Industry Competitors” which Porter outlined.

Companies whether large or small are threatened by the new entrants. Recent expired patents and the impact of communication/networking technology have attracted a lot of people to enter the water and wastewater business. For example, 20 years ago, there were a few companies manufactured Reverse Osmosis (RO) membranes. The number of engineering companies designed and built RO water treatment were not a lot. Today, the RO membrane and its engineering have become a commodity that small companies can offer anywhere. Therefore, the high margin product of 40-50% has diminished to 10-18% mainly because of the new entrants’ influence.

The “Substitute Competition” within industry is not very much dynamic due to the nature of technologies utilized in each treatment plant. There are few dominating technologies around for the buyers to choose . The logistic of changing a running plant to another technology is risky and includes tremendous investments. However, it is possible. The buyers enjoying the bargaining power of manufacturers’ competition and the rapid growth of new entrants. The buyers are more educated in the details of the plant designs that could use it against the water companies to negotiate lower costs.

Water and wastewater suppliers’ bargaining power also is a key factor in the industry competition dynamic. There are various heavy equipment such as pumps, blowers, compressors, etc. required to build a treatment plant, each has some specifications and/or includes exotic materials which are price sensitive. Any changes on the material will directly impact the profitability of a water company and ultimately the rivalry within the industry.



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