Project assignment 2

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Chemical Manufacturing to Produce Mineral Spirit (Canada)

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Chemical Manufacturing to Produce Mineral Spirit (Canada)

Approach

Background Information

Before starting any form of business, stakeholders need advice and guidance from third parties. One of the best third-party companies can seek help from are business consultants. Business consultants are private or public firms, an individual or groups of individuals that provide different types of assistance to new and developed businesses. This also includes providing company management with generalists and industry specifics that can help the company remain competitive. Consultants also offer recommendations for achieving business goals, managing business projects, and finances. In this case, our client, a foreign investor in Canada, wants to put up a production plant in Canada to manufacture mineral spirit. The client needs help in different areas, which will be discussed under a separate section in this paper.

Problem situation

The current issues prevailing are the five primary entrepreneurial challenges that the client wants us to address. The first challenge is researching the state that is more feasible for putting up a production plant. There are two options provided, British of Colombia (BC) and Alberta. It will be the first step in helping the client because running a business dealing with the manufacturing of mineral spirit requires operating from an environment that best fits the company's requirements. And this means just not choosing any location but conducting sufficient research about different options available.

Another prevailing problem is governmental regulations, permits, incentives, and limitations for the project. Whether a privately owned or government-owned project, every business must conform to specific required laws and regulations. The client must understand these aspects before starting the project to avoid future legal penalties. Environmental limitations that may affect the project are also another issue that needs to be addressed by our team. Manufacturing of mineral spirit is not the type of business that one can say that will be operated inside a room. No, this is a project that may have both positive and negative effects on the environment. Therefore, this is a puzzle that the client wants us to help with. Another prevalent issue is the business model needed to start the business. Every business operates on a different business model depending on its size and requirements. Our client does not have a business model in place, and this research will help give insights on the best model. The last prevailing issue is the competitors and what might be the competitive advantage of this manufacturer. Every business need to clearly understand the competitors present in their scope of operation and target market. The client also needs to be aware of the competitive advantages he may have to take advantage of.

Scope

As a team, there are specific things that we shall do. One, we will research each of the five aspects highlighted above. We will not do any research that is not related to the five topics. We will also ensure to involve our client and brief him in every stage of the research. Our team will not disclose or sell these findings to any third parties because we value our client's privacy. In our project, we will ensure to follow all the ethical requirements of research, including not stealing other companies' information. We will not illegally acquire information from other parties, and our data will be first-hand and primarily collected by our team. This research will not incorporate any illegal measures or field practices that may put other parties at risk. Our relationship with the client will be strictly professional, which means we will not meddle in any of our client's other business plans without his approval.

Methodology

In conducting this research, there are various steps that we shall incorporate to ensure the success of the project.

Step 1: Problem definition

According to Snyder (2019), problem definition is a step that involves uncovering the boundaries and nature of the main issue to be tackled. In defining the research problem, our team will begin by developing a clear understanding of the five areas listed above; the state that is more feasible for the production plant, governmental regulations and limitations for the project, environmental constraints, the business model needed to start this business, competitors and competitive advantages of the manufacturer. The problem definition step will also involve understanding all the required information related to these five issues.

Step 2: Design of the research plan

After identifying the specific issues that the research is supposed to handle, the next step is to generate a research plan. A research plan outlines how the overall project will be conducted (Snyder, 2019). It includes the project's start date, milestones of each activity, and the date each activity will be completed. Our plan will also include methods of data collection, sampling process, and data analysis plans.

Step 3: Data collection

With our research plan ready, the team will then start the process of data collection. Data collection is one of the most significant steps in conducting research. This step is involved around obtaining information and data that will be needed to solve the problems defined in step one. The team will use four powerful data collection techniques; interviews, observations, questionnaires, documents, and records (Snyder, 2019). First, our client will be the first person to be interviewed to get any details he knows about the project to be launched. We will also interview businesspeople dealing with the selling of mineral spirit both in Alberta and British Colombia (BC) to get their opinions regarding establishing a mineral spirit production plant in these zones.

Our team will also observe different shops and stores selling mineral spirits to understand the demand for mineral spirit in BC, Alberta, and other parts of Canada. These observations will be conducted without letting them know because it might cause them to fake sales reports. With this, it will help get real-time and accurate statistics. We shall also generate questionnaires and distribute them to stores selling mineral spirit. We will collect the questionnaires back after two weeks. For this case, our main target will be the stores because they are the ones who the production plant will directly impact. We will also use online documents and records to collect secondary data. Our online documents will be all related to the manufacturing of mineral spirit. These documents will help us get details about the number of competitors and the rate of competition in mineral spirit manufacturing in Alberta and BC.

Step 4: Interpretation of research data

This stage involves analyzing the collected data to conclude if it is sufficient to solve the problems defined in step one ("Research and data collection," n.d.). In interpreting our data, we will organize data into different categories based on the other regions where data will be collected. This will help us in separating data related to BC from data pertaining to Alberta. After dividing the data, each set of data will be analyzed independently to generate a summary. Later, the team will compare the generated summaries to help us in drawing conclusions. Through this, we will be able to put all our findings in one document. These findings are discussed in the "findings" section of this paper.

Project diagnostic tools

Our research will utilize three main project diagnostic tools; Gantt chart, Logic network, and Work Breakdown Structure. Gantt chart is a diagnostic tool that tracks tasks across the entire project (Mulders, 2019). It will help us outline the essential components of the project and how each task will be handled. The logic network is also important in developing a sequence in which the tasks in the project will be conducted. In this case, of the five tasks, the first task will be researching the state where the manufacturer will set the plantation. The other tasks will sequentially follow this until all tasks are handled. Work Breakdown structure is a tool that helps to divide project tasks into smaller manageable deliverables. For example, when dealing with the first task of defining the more feasible state for the production plant, we will further break down this area into different deliverables like raw materials availability, market availability, and electricity supply. We will then work on these areas individually before incorporating them into the main project.

Key Findings

State

In researching the state more feasible for the production plant setup, we must base on the two listed states; Albert and BC (British Columbia). BC and Alberta are both located in the western parts of Canada. In choosing the best state, there are various factors to consider. First, we have to consider the availability of sufficient space where the production plant can be set up. A plant requires a space big enough to accommodate all the types of machinery to be set up. We also have to consider the availability of raw materials in each region (Montgomery, 2017). The proximity of raw materials is an important factor because it will help reduce transportation costs and other costs of outsourcing raw materials. The primary raw materials to base on for manufacturing mineral spirit are petroleum distillates. When considering the proximity of raw materials, the project should also consider the availability of suppliers of petroleum distillates. We need a state with a sufficient number of suppliers. Alongside the number of suppliers, the cost of these petroleum distillates in the two different states is also an essential consideration to base on. Labor is also another vital factor to consider when setting up a new production plant. This plant will need both professional and casual laborers to handle manual jobs. This means that the manufacturer will have to operate in an area where he will not have to go overseas to recruit employees. Besides, the availability of labor also reduces recruitment costs.

Another factor to consider is the availability of markets (Montgomery, 2017). Our manufacture should set up a production plant in a region with a ready market, a market where the business can directly sell mineral spirit. For markets, we have to consider stores selling mineral spirit and companies manufacturing paint. Mineral spirit is a raw material in paint production, and thus it would be profitable to go for a state with companies manufacturing paints. Additionally, the production plant must be set up in a state with constant electricity and water supply. In this range, we have to find out about any thermal power plants and water bodies near these two states. Lastly, we should look at disposal facility waste products. In manufacturing mineral spirit, there would be different forms of waste to be disposed of. Thus, the production plant must be located in a state that it will be easier for the production plant to dispose of waste products. Globally, Canada is the fourth largest country in petroleum production, and approximately 80% of Canada's oil comes from Alberta and BC. Moreover, Both BC and Alberta have more than 200 thermal power generating stations.

Governmental regulations, permits, incentives, and limitations for the project

First and foremost, the manufacturer will have to obtain a business license from the government of Canada. The license will be an authorization allowing the manufacturer to do business in Canada. Another business regulation the manufacturer will have to consider is the Antitrust laws. Antitrust laws include discussing prices with competitors and setting prices that are in line with other players in the industry. This is a law that many businesses fail to accomplish because different companies have diverse operating costs, and setting a price standard with other players can be challenging. Another restriction to this project is the advertising restrictions. Advertising restrictions require that companies must be honest about their products when advertising them to the public. This is a limitation because the manufacturer will have to advertise its products using different platforms. Therefore, he must be aware of this to avoid legal implications.

Another regulation is the employment and labor protection laws. According to the client's profile, the client's employment target is 80 jobs. Therefore, he must be aware of the employment and labor restrictions, including employee pays and compensation. Employee safety is also essential. Different incentives are also limiting factors to this project. Running a production plant means that probably the plant will function 24/7 hours. Some employees will have to work extra hours. Therefore, the manufacture must be prepared to incur such bonuses. Besides, motivation is the best strategy to motivate employees. The project must therefore include a list of incentives to be rewarded to employees. Another limitation of this project is the financial risk. The client has a capital of 10 million dollars, while the project estimate is 52 million dollars. There is a deficiency of 42 million dollars. And, there are other unpredictable costs like unplanned plant maintenance, employee training, and outsourcing of raw materials in case local suppliers run out of stock. There are also government and business taxes to be paid. This means he will have to look for external sources of capital to start the business, plus the finances required to keep the business going before it starts generating constant revenue. Options available include bank loans and investor shares. This will be a problem because it will not be easy to convince investors to buy shares in a new business. Moreover, if our client decides to borrow loans from banks, this is a new business; there is no guarantee that the company will perform well to repay these loans on time.

Another limitation is the workforce. Setting up a new production plant requires a skilled workforce to operate the machines and maintain the plant. It might be challenging for the client to get a team of experts specializing in mineral spirit manufacturing. Additionally, gaining the trust of the market may be a problem. Usually, it takes a business approximately one to three years to blend in the market successfully. This project has a budget estimate of 52 million dollars; it means that the company needs a ready market to generate profits to cover up this starting capital. Therefore, the project must be completed in time to seize the market with full potentials.

Environmental limitations that might be applied to the project

One environmental limitation that might be applied to this project is waste management. The production plant will use a lot of water in refining the petroleum distillates, cleaning machinery, cooling, and dilution. After the end of the process, these wastes will have to be disposed of either in the form of fluids or solids. The problem is if the project will be able to employ the best disposal methods, which will not harm the community or the general environment. If this waste is deposited in rivers, people depending on water from these rivers will be affected. Therefore, it is a challenge to ensure that the waste products are well disposed of. Another environmental limitation is global warming. Across many countries, including Canada, global warming is an issue, and the leading cause of global warming is fossil fuels emitted from factories (Jahangiri & Rahmani, 2018). Manufacturing mineral spirit is a project which will involve running heavy machinery which consumes high amounts of energy. This means fossil fuels will be released at high rates. And this is a threat to the environment. Therefore, the project can be rejected by the government of Canada if the country will conclude that the production plant will pose a danger to the country's environment.

Packaging of the produced mineral spirit might also be a challenge. On an average basis, many spirit products are often packed in plastic bottles. Plastic bottles do not decay when disposed and sometimes, they are impossible to reuse and recycle. When these plastic bottles are released into the environment, they can block water sources. Besides, one way of marketing a company's products is by labeling product packages with the company's brand name. So, let's say the plant starts running and sells 20 jerry cans of mineral spirit to a particular painting company. If this company depletes using this spirit and dispose of these jerry cans, the jerry cans can be buried in the soil without decomposition and even block rivers. When these bottles are found in these rivers, the first party to question is the manufacturer because of its label on the package. This can cause a hard hit to the company and a legal fine for contaminating the environment. Therefore, there are so many environmental limitations that may limit the operations of this project.

Business model needed to start this business

For a start, the best business model for this business model is business to business(B2B) model. According to Carmona-Lavado et al. (2020), the B2B model refers to a business system where a manufacturer sells products to a company, a wholesaler, or a retailer instead of selling the products directly to the final consumer. This is the best model for this new business because the manufacturer is unknown in the market and might take time to know customers' needs. Thus, by interacting with retailers, the business will be able to supply their products in different parts of Canada without the problem of reaching out to individual clients. Business to business model will also be the best option because it will help the company to generate higher profits through selling in wholesale quantities. When dealing with retailers and wholesalers, the company will sell large amounts, unlike selling to customers directly because one client can only buy a one-liter bottle of spirit after one month. The B2B model is also beneficial because it improves financial security (Carmona-Lavado et al., 2020). For instance, if the company signs a contract with another company to supply 100 liters of mineral spirit monthly, this guarantees that sales will be made every month, and the other company must pay for the products to fulfill the terms of the contract. Hence, this is an aspect of financial security.

Competitors and competitive advantage of the manufacturer

Spirit manufacturing is not a new business in Canada, and the country has several companies dominating the market. However, there are three biggest market giants that the manufacturer must be prepared to meet in the industry; Alberta Distillers, Univar Solutions company, and Halton company. Alberta Distillers is a well-known company in Canada and the United States for being the best producer of purely refined mineral spirit. Besides, this company produces more than 300 products that are used alongside mineral spirit. Therefore, the manufacturer should expect stiff competition in the market. Univar solutions is also a company that serves the markets in Canada and international markets with suppliers from different parts of the world. Competing with such a global market player will not be an easy task for the manufacturer. Halton company has also been in the business long enough to pose a threat to this new manufacturer. But, regardless of these industry giants, the manufacturer has an advantage. All these three companies and others in the market sell their products at costly prices. The manufacturer can take advantage of this to produce mineral spirit at lower prices and target local distributors.

References

Carmona-Lavado, A., Gopalakrishnan, S., & Zhang, H. (2020). Product radicalness and firm performance in B2B marketing: A moderated mediation model. Industrial Marketing Management, 85, 58-68. https://doi.org/10.1016/j.indmarman.2019.08.013

Jahangiri, A., & Rahmani, F. (2018). Undefined. Applied Thermal Engineering, 141, 444-455. https://doi.org/10.1016/j.applthermaleng.2018.05.108

Montgomery, T. (2017). What critical factors do companies consider when selecting innovation ideas? Muma Business Review, 1, 069-080. https://doi.org/10.28945/3843

Mulders, M. (2019). Gantt chart. 101 Management Models, 159-161. https://doi.org/10.4324/9781003022022-43

Research and data collection. (n.d.). Data Collection: Key Debates and Methods in Social Research, 3-4. https://doi.org/10.4135/9781473914230.n1

Snyder, H. (2019). Literature review as a research methodology: An overview and guidelines. Journal of Business Research, 104, 333-339. https://doi.org/10.1016/j.jbusres.2019.07.039