Oil Skimming: Business Potential and Strategic Options Facing a Marginalised Business Segment at Sandvik Process Systems
Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
The purpose of this thesis is to study the oil skimming market and evaluate what drives company competitiveness and market attractiveness. Throughout the thesis, the total oil skimming market has been divided into an industrial market and an offshore market as these applications have entirely different requirements. However, the skimming market in general is underdeveloped and the long lifetime of the equipment has a negative impact on the market development speed. It is therefore characterised by a fragmented body of competitors and diverging pricing. Instead of price being an order-winning aspect, recovery rate and ability to pick up a large variety of oils has been found to be important.
In this inductive, and interpretivistic case study, a model for market analysis of an underdeveloped market is developed and applied to Sandvik Process Systems’ oil skimming business. The study is based on an extensive interview program with oil skimming equipment manufacturers, and oil spill response companies. The model comprises of an external, and an internal analysis synthesised into a SWOT-matrix from which five strategic directions are extracted. These directions are described as well as their respective business impact on Sandvik Process Systems.
Sandvik Process Systems’ skimmer is a steel belt skimmer developed in the 1960’s. With a lifting height of up to three metres and a width of up to 400 mm, the Sandvik oil skimmer is capable of lifting 354 litres per hour in optimal conditions. Compared to its competitors, the skimmer is a low cost alternative priced at 66-75% below industry average.
However, the results of the analysis indicate a poor competitiveness of Sandvik Process Systems’ product. Due to an inferior technology, Sandvik Process Systems’ skimmer lacks the capacity needed to target the offshore market. Therefore, the product can only target the industrial market. Meanwhile, many competitors offer complete solution packages including as pumps, storage tanks, and a variety of specialised skimmers in order to increase their competitiveness.
Looking at the competitors it is clear that Sandvik Process Systems’ skimmer does have advantages. However, many of the advantages are based on organisational strengths which are difficult to leverage. Also, the organisation does not have any experience from the oil skimming market and due to the small size of the market, it is doubtful if Sandvik Process Systems are able to devote the necessary resources to overcome this hurdle. Due to a revenue target set at EUR 2.33 million, Sandvik Process System’s skimmer would require a 23.9% of the market value or 119% of the number of skimmers sold.
Despite this thesis reaching the conclusion that Sandvik Process Systems should not enter the oil skimming market; it also stipulates that Sandvik Process Systems does have the potential to successfully sell skimmers. However, reaching the goal of EUR 2.33 million is deemed unlikely.
Place, publisher, year, edition, pages
2013. , 123 p.
Oil, Oil skimming, Skimming, Business potential, Market analysis
Business Administration Energy Engineering
IdentifiersURN: urn:nbn:se:kth:diva-127660OAI: oai:DiVA.org:kth-127660DiVA: diva2:644788
Subject / course
Master of Science in Engineering - Industrial Engineering and Management
2013-06-11, Brinellvägen 68, Stockholm, 11:00 (English)
Lundqvist, Per, Professor