This case was written with generous financial assistance from the Hill-Ivey Case-Writing Fund.
In early 2008, Paul Antle, president and chief executive officer (CEO) of Phase Separation Solutions (PS2), received a call from the State Environmental Protection Agency of China, expressing interest in PS2’s Thermal Phase Separation (TPS) technology. PS2 was a small, Saskatchewan-based environmental solutions company that had grown, under Antle’s entrepreneurial direction, to become a North American leader in the treatment of soil, sludge and debris impacted with various organic contaminants. The company specialized in the cleanup of two waste streams using its TPS technology. The first was the remediation of soil contaminated with persistent organic pollutants (POPs), such as pesticides and poly-chlorinated biphenyls (PCBs). The second was recovering usable oil from industrial sludge generated in various industries, such as the oil and gas industry.
Despite Antle’s initial concerns that the call had been a scam, he soon visited China to learn more about the market in China and to build relationships. The Chinese inquiries were sincere. By mid-2010, nearly one and a half years after Antle’s first visit, potential cooperative opportunities had emerged with two separate Chinese organizations: one in soil remediation, and the other in oil recovery from oil sludge. The two potential opportunities were attractive to PS2. The international geographic diversification would transform PS2 from a domestic player to an international player, and in so doing, would significantly improve its growth potential.
The PS2 management team was no stranger to international markets. The TPS technology had been successfully employed in 14 countries in the past 15 years. However, the modes of international involvement had been on a non-equity basis, in the forms of equipment exporting, licensing and service contracts. Although the cooperative opportunities in China would bring PS2 to a higher level of internationalization, the decision was not to be taken lightly. A series of questions needed to be answered. Should PS2 enter the Chinese market? Which of the two opportunities should it pursue? Would it be feasible to pursue both? Did PS2 possess the required resources and capabilities to pursue an equity-based entry? What ownership levels should PS2 assume for each option? How would PS2 staff its Chinese operation(s) if PS2 decided to pursue the opportunities in China?
Case Study: Phase Separations Solutions (PS2): The China Question
Read the case study located on page 310 of the section titled Case Studies in your textbook and prepare a 4-6-page report in Microsoft, based on the following situation:
Entrepreneurial firm, PS2, has been presented with two opportunities to significantly expand their business in China. Paul Antle, President and CEO of PS2, has come to you asking for your advice regarding these opportunities. Review the information available to you in the case and write a response to Mr. Antle’s questions:
- Should PS2 enter the Chinese market?
- Which opportunity should PS2 pursue?
- Could PS2 pursue both opportunities? Should they?
- Did PS2 possess the required resources and capabilities to pursue an equity-based entry?
- What ownership levels should PS2 assume for each option?
As you respond to each question, be sure that you explain the major issues that need to be considered. For example, what should be considered when thinking about entering the Chinese market?
preview of the answer..
PS2 is a company that deals with purification of soil using the TPS technology that enables it to either obtain usable oil from sludge or make soils be usable.
PS2 has to consider a number of factors before deciding on whether to enter the Chinese market. The factors include government policies, competition, consumer behavior, financial requirements, and withdrawal plan. In government policies, PS2 should consider all the rules governing entry of companies of its kind in the Chinese market. PS2 can ascertain this by familiarizing themselves with all the rules of the Chinese government on the area that PS2 wants to invest in China. PS2 should consider the amount of competition it will face on entry to the …
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