Liberty Recycling is at a very interesting point in its lifecycle as a business, a prolonged period of growth and expansion was followed by a period of consolidation which saw the business divest a number of international businesses and close some Australian yards whilst under the Arrium umbrella. The subsequent act of Arrium Limited going into Voluntary Administration served as something of a turning point for Liberty Recycling (then Onesteel Recycling), despite the many challenges presented by operating in Voluntary Administration the business redoubled its efforts and was able to grow the business through the Administration process. The financial performance of Liberty Recycling was so strong as to cause GFG Alliance to throw out the Forecasts and Budgets previously generated for FY18 as the business was outperforming those targets significantly. The Budget for the remainder of FY18 was reset in line with the 3 Month forecast that was performed just prior to the takeover. Liberty Recycling remains in front of budget.
Despite the positive Financial performance there remain other issue for the business, an upward trend in Safety Incidents particular a much higher than normal frequency of low consequence injuries (Report Only or First Aid Treatment) led to a survey of employees to help determine the likely cause of this rise in incidents. One of the most common responses to the survey was that employees felt under-appreciated for their efforts over the Administration period, and that changes they had hoped might come post takeover had to this point come to nothing, leaving them not as focussed as previously on their day to day tasks.
This survey result points to an issue that can be seen anecdotally across the Recycling business, whilst the business is performing strongly financially, there is a general negative tension in its daily operations. A far higher than standard turnover of staff has been seen in a number of states along with a difficulty in filling roles. Despite the certainty provided by the new owners in their statements regarding the future of the Recycling Business, there has to this date been no physical change, not even rebranding across the business, to demonstrate this commitment to the business. My recommendation of a Marketing and Branding Campaign would be the first step in demonstrating GFG’s commitment to its employees and its customers.
This demonstration of commitment would be backed up by my recommended measures of updating processing equipment and operational sites, but more importantly these would improve the customer experience and service times, capitalising on an already positive culture towards the customer. In an industry where customer service is generally average at best it is my judgement that by providing the best customer experience in the industry is the key to generating a sustainable competitive advantage.
Section 1: Strategic Overview
Liberty Recycling is a part of the GFG Alliance, for the purposes of this report I will be discussing the Liberty Recycling business not the overarching GFG Alliance business.
Industry Position: Metals Recycling
Market Position: Buyers of a wide range of recyclable metal products.
Product & service position: Services include fit-for-purpose Scrap Metal Bins for placement and collection and large volume site clean-ups including rural locations deploying mobile excavators and shears, bailers, car compactors and oxy-cutting with appropriately site inducted, safety trained and licenced personnel. Liberty OneSteel Recycling caters for all business types from multi-national companies to trades people and the general public.
Organisational position: Operational base in Australia, major processing facilities in capital cities close to GFG owned Steelmaking Facilities. Trading Offices across the globe ensuring access to global sales markets. Yards primarily set up to handle larger volume customers due to economies of scale.
Outcomes: Australia’s second largest Metal Recycler, basic customer offering grossly similar to major competitor, advantage due to supplying own Steelmaking Facilities.
The values of Liberty Recycling as outlined in detail in the “Our Values” attachment are:
Family; We will embrace all stakeholders as members of our extended family.
Sustainability; We will operate our business for the long term and build a legacy for the future.
Change; We will be courageous, maintain an open mind-set and continually challenge the status quo.
Liberty Recycling’s Vision is to reshape the metals recycling supply-chain to provide feed for the GFG Alliance owned steel manufacturing facilities. Our mission is to be a significant global contributor to providing the raw material requirements to the steel industry.
Liberty Recycling’s model involves reshaping the metals recycling supply-chain to provide abundant high-quality raw materials for its manufacturing processes.
The business’ experience in international non-ferrous trading and marketing, key relationships with consumers and close proximity to as well as local market knowledge are key assets of the non-ferrous recycling business.
The diverse geographical spread of global offices are staffed by a, multi-national and multi-cultural team of trading and administrative support professionals providing a unique offering to our suppliers and customers alike.
Expanding on the well-established Australasian footprint and knowledge base, the Alliance is developing its network of suppliers as well as advanced collection and processing facilities for both ferrous and non-ferrous metals across the UK, USA and continental Europe. We will use locally sourced ferrous scrap metal to supply Liberty Steels’ electric arc furnaces and steel mills with feedstock to manufacture and distribute new steel products through our downstream businesses and supply-chain expertise. The sustainability of this fully integrated GREENSTEEL approach will be further enhanced in the future by use and investments in renewable energy.
Section 2: PESTEL ANALYSIS
The PESTEL Analysis as attached finds the Recycling Industry in Australia to be an industry that is likely to undergo a great deal of change over the next few years. There are both challenges and opportunities presented across most aspects of the PESTEL Analysis. While tightening of Political and Legal obligations while create some difficulties within the industry, they will also create some opportunities external to the industry as governments look to minimize material going into landfill. Economic changes show a likely fall in Australian Scrap volumes once the demolition projects associated with the closure of the Australian Automobile production industry are completed, along with cost challenges coming from rising wage and energy costs. The Social impact will be positive form an industry perspective as wider awareness of the environment drives improved recycling rates at a household level, but will provide challenges in attracting and keeping staff in lower level positions. Technological advancements will provide great benefits in some areas of the industry where it is possible to see great cost and out-turn benefits via the use of improved processing technologies, but the wider access to basic processing equipment will reduce some of the advantages held by the bigger players as formerly rare processes become more commonplace. Increasing numbers of Electric Cars, Solar Panels and Lithium Ion Batteries will come in to the market as people move away from fossil fuels, this will cause short term issues for the industry as it is currently not well equipped for the recycling of these items, but presents great opportunity for growth once suitable processing technology can be developed.
Section 3: Attractiveness of Industry, and future trends
Metals Recycling is, as evidenced by the Porter’s Five Forces Analysis attached, an Unattractive Industry. Metals Recyclers are metaphorically the meat in the sandwich, on the purchase side most scrap generators are looking to extract maximum value and given fairly similar customer service offerings across the market price is the key driver for them in the decision of where to sell their material, on the sales side the scrap end user has a global market to choose from all offering mostly standardised product with no significant differentiation in quality so again price becomes a key driver in selecting where to buy from. The key sources of competitive advantage for any businesses in the industry are costs and processing advantages, both from new or differing technologies and methods, and from economies of scale. The future trend for the industry is bleak, whilst there will always be a need for Metal Recycling, as manufacturing slows in developed countries the economies of scale offered by buying large quantities direct from source dwindle, seeing a higher percentage of scrap arising’s being generated at a household or light industrial level which major recyclers are not designed to handle. On the sales side of the business the increasingly connected nature of the world, through communications and ease of travel, gives easier access to smaller players to the end users of the scrap. These market movements serve to squeeze the larger processors in the middle and make the industry look even more unattractive in the future.
Section 4: VRIO analysis + Summary
Using the VIPA analysis template Liberty Recycling is shown to be competing from a position of parity, or at best Temporary Advantage when compared to its major competitor Sims Metal Management. The two business operate on vastly similar business models and employ similar processes and technologies. Both Liberty Recycling and Sims Metal Management hold some competitive advantage over the other independent localised players in the Australian market, by virtue of their broader national networks, highly capital involved processing equipment, and first mover advantage in key markets where processing capability already outweighs available scrap arisings making it difficult to justify the large capital outlay. Liberty Recycling has a culture which is dynamic and capable of seizing opportunities when they arise whilst being cost focussed and able to quickly reduce variable costs if volumes drop. We have a reputation for having a greater customer focus than our major rival, who after a long period of industry dominance and having spent a long period of time as the only major exporter in some markets, are perceived by many within the industry as being arrogant and expecting things to always be on their terms. A recent Liberty Recycling commissioned “Secret Shopper” style survey showed Liberty Recycling to have above industry standard Customer Service outcomes, despite in many cases having inferior equipment and conditions.
Section 5: Discussion of results and limitations of data sources and collection method
My discussions with a Liberty Recycling C Suite Executive were somewhat limited regarding the Strategic plan for the business. At the time of the interview the Liberty Recycling Executive team were in the process of designing their strategy for the business following a recent Organisational Structure Announcement which outlined the business structure moving forward following our acquisition by GFG Alliance, as such the Strategy Statement outlined above is light on detail and I expect that it will be significantly fleshed out in the coming months by the Executive Team. My experience with the Australian Liberty Recycling Lead Team is that they are haphazard at best in their application of Strategic Management tools and rely far more on experience and gut instinct than an analytic-empirical approach.
Section 6: Recommendations
A TOWS Analysis has highlighted a wide range of opportunities for improvement for the Liberty Recycling Business. My recommendations would be as follows-
Implement marketing campaign and branding exercise to ensure the new Liberty Recycling Identity is clearly known and accepted, not only in the Metals Recycling industry but in associated industries such as Demolition, Manufacturing and Construction who are major generators of scrap. This campaign should also make it very clear that Liberty Recycling is a part of the GFG Alliance to leverage the value related to the goodwill surrounding the business following its takeover of the Arrium Group.
Assess key operational sites for condition and suitability. Upgrade where possible or shift sites if necessary, a number of current sites are constricted in the volumes they can handle currently due to either the condition or basic layout of the site.
Assess condition of key processing and handling equipment as well as transport fleet and prioritise replacement or refurbishment where required. Discussions with many people in Liberty Recycling have revealed that following a period of poor performance by the Arrium parent company, a lengthy Administration process and subsequent takeover by GFG Alliance that there are a large number of tired pieces of plant and equipment in the business that requiring updating before they cause further disruption to our customers and our profitability.
Ensure International Trading Resources are allocated to the correct areas of focus, current trading team is heavily geared around the Chinese market, these relationships should be maintained but a particular focus needs to be placed on the emerging markets as driven by the recent Chinese customs crackdown. This will help greatly with a short term problem facing the business, and the broader spread should ensure the business is better protected in future if a similar issue were to arise again.
Rothaemel, F., 2017. Strategic management (customized eBook). 3rd ed. New York, NY: McGraw-Hill