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The competitiveness of the organization’s price and costs

The Advanced Environmental Recycling Technologies (AERT) is an American plastics recycling firm that is also involved in the manufacture of hybrid materials for the building and construction industry. These are recycled plastics and wood fibre composites. According to the annual report, released for the fiscal year 2010 (Annual Report, p.1), the company’s product lines include the following, “Commercial and residential decking planks and accessories such as balusters and handrails (MoistureShield® and ChoiceDek®), Exterior door components, Exterior housing trim (MoistureShield®), Deck tiles, and Green, recycled resin compounds.” AERT was established in the United States of America in the year 1988, and operates through a network of manufacturing plants located in the states of Oklahoma, Texas and several facilities in the state of Arkansas (Annual Report, F-8).

Its 2010 Annual Report (Annual Report, p.1) states that the company, “develops and commercializes technologies to recycle waste polyethylene plastics and develops, manufactures, and markets value added, green composite building compounds”.

The company’s products are relatively more expensive than the conventional wooden building materials but they have the advantages of being much more durable and are designed to suit customer preferences (Annual Report, p.3). The prices when compared to those of competing products, AERT’s products seem to offer a more competitive alternative and they are even distributed at a national level. The 2010 Annual Report explains (Annual Report, p.1), “Our products have been extensively tested, and are sold by leading national companies such as the BlueLinx Corporation (BlueLinx), Lowe’s Companies, Inc. (Lowe’s) and Therma-Tru Corporation.”

The costs of production for AERT products is bound to decrease especially as the company shifts from dependency on external sources of raw materials, to recycling waste plastics at the newly commissioned, “Green Age plastic recycling, cleaning and reformulation facility at Watts, Oklahoma”, (Annual Report, p.1). This will enable AERT to offer more competitively priced composite products. In the production of tailor made products, it’s important to note that the cost of production is also tied to an individual customer’s preference.

The company’s strength in comparison to its competitors

AERT is a relatively new entry into the composite building and construction industry. Its key competitors are better established industry players that operate using bigger budgets and posses with huge capital resources. According to the 2010 Annual Report (Annual Report, p.3), “manufacturers of some competing products have long-established ties to the building and construction industry and have well-accepted products. Some of our competitors are larger and have research and development budgets, marketing staffs, and financial and other resources that surpass our resources.” Despite this, AERT has continued to gain much ground in the market as evidenced by the fact that its products are also sold by nationally.

From the available market data (SmartMoney 2011), AERT when compared against its key competitors, ranks as follows;

AERT is competitively weaker in terms of market value and net earnings; AERT ranks the lowest which can be attributed to its relatively smaller size as compared to its competitors. In addition, AERT generates the least annual revenue, again ranking last when compared against most of its key competitors.

However, AERT is a competitively stronger entity into this market as seen in its value of the projected 5-year sales growth;

  1. AERT 3.06%
  2. American Woodmark -12.37%
  3. Louisiana-Pacific Corporation -11.99%
  4. Masco Corporation -11.15%
  5. Weyerhaeuser Company -23.81%
  6. Trex Company -3.19%

The company’s future looks bright and through it strategic marketing (Annual Report, p.2) and nationwide customer support, it should pose as a more formidable competitor in the coming years. With the expansion of its manufacturing plants to include a recycling plant at Watts, Oklahoma, AERT seeks to increase its production volumes and drive down production costs by removing dependency on the volatile petrochemical market for raw material. This is another milestone in the company’s growth strategy and it should enable it to avail more innovative, customer-focussed products that are at a competitive price as compared to those of its competitors (Annual Report, p.2).

In order to cushion itself against the industry’s cyclical nature, AERT marketing strategy seeks to concentrate on “remodel and repair market segment, which we believe is less cyclical than the new homebuilding market” (Annual Report, p.2). Venturing into this new market is a move aimed at placing AERT in a much better position to compete with the other key players in the industry.

Through the company’s tradition of thoroughly testing its products to ensure they meet stringent industry standards, AERT seeks to gain more consumer confidence and acceptability within the market. In order to widen its market, AERT has heavily invested in research and design of new and improved cutting-edge products that are more appealing to both its new and existing the customers (Annual Report, p.2).

Works cited

  1. Annual Report. Advanced Environmental Recycling Technologies Inc., for the fiscal year ended December 31, 2010, Washington, D.C. 20549, Form 10-K, Annual Report Filed 2011.
  2. Smart Money. The Wall Street Journal, Competitive Analysis of Advanced Environmental Recycling Technologies Inc., 2011.

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