Harvard Case - Manila Water: From Privatisation to Sustainable Growth
"Manila Water: From Privatisation to Sustainable Growth" Harvard business case study is written by Chee Wei Kwan, Christopher Dula. It deals with the challenges in the field of Strategy. The case study is 9 page(s) long and it was first published on : Oct 23, 2014
At Fern Fort University, we recommend that Manila Water Company (MWC) adopt a multi-pronged strategy focused on sustainable growth, leveraging its existing strengths and adapting to the evolving needs of the Philippine market. This strategy will involve innovation, digital transformation, and strategic partnerships to solidify MWC's position as a leading water utility provider in the region.
2. Background
This case study focuses on Manila Water Company, a private water utility provider in the Philippines, and its journey from privatization in 1997 to its current position as a leading player in the industry. The company faces challenges such as increasing water demand, regulatory changes, and the need to maintain service quality while ensuring environmental sustainability.
The main protagonists in this case are:
- Manuel Pangilinan, the Chairman and Chief Executive Officer of MWC's parent company, who spearheaded the privatization of the water sector and has been instrumental in MWC's growth.
- The Philippine government, which plays a crucial role in regulating the water industry and setting policies that influence MWC's operations.
- MWC's management team, responsible for implementing the company's strategy and navigating the challenges of the industry.
3. Analysis of the Case Study
Industry Analysis:
- Porter's Five Forces:
- Threat of New Entrants: High due to the relatively low barriers to entry in the water utility sector.
- Bargaining Power of Suppliers: Moderate, as MWC relies on a limited number of suppliers for critical infrastructure and materials.
- Bargaining Power of Buyers: Low, as consumers have limited alternatives for water supply.
- Threat of Substitutes: Low, as there are no readily available substitutes for potable water.
- Competitive Rivalry: High, as MWC faces competition from other private and public water utilities in the Philippines.
SWOT Analysis:
Strengths:
- Strong brand reputation and customer loyalty.
- Experienced management team with a proven track record.
- Advanced technology and infrastructure.
- Established relationships with government agencies and stakeholders.
- Commitment to environmental sustainability.
Weaknesses:
- Dependence on a single source of water supply (Angat Dam).
- Potential for regulatory changes impacting operations.
- Limited international expansion.
- High operating costs.
Opportunities:
- Growing demand for water in the Philippines.
- Increasing investments in infrastructure development.
- Expanding into new markets through acquisitions and partnerships.
- Leveraging technology and data analytics for operational efficiency.
Threats:
- Climate change and water scarcity.
- Political instability and regulatory uncertainty.
- Competition from other water utilities.
- Public perception of water privatization.
Value Chain Analysis:
MWC's value chain includes:
- Inbound Logistics: Sourcing raw materials, infrastructure components, and technology.
- Operations: Water treatment, distribution, and customer service.
- Outbound Logistics: Delivering water to customers.
- Marketing & Sales: Building brand awareness and customer relationships.
- Service: Providing 24/7 customer support and addressing service issues.
Competitive Advantage:
MWC's competitive advantage lies in its:
- Strong brand reputation: Built on a commitment to quality service and customer satisfaction.
- Technological expertise: Utilizing advanced technology and data analytics for efficient water management.
- Environmental sustainability: Implementing sustainable practices and promoting water conservation.
Business Model Innovation:
MWC can explore business model innovation through:
- Value proposition expansion: Offering new services such as water efficiency audits, water conservation consulting, and water treatment solutions for industrial clients.
- Digital transformation: Leveraging the internet and mobile technology to enhance customer service, improve operational efficiency, and develop new revenue streams.
- Strategic partnerships: Collaborating with technology companies, environmental NGOs, and other water utilities to access new technologies, expertise, and market opportunities.
4. Recommendations
1. Sustainable Growth Strategy:
- Invest in water conservation and efficiency programs: Implement innovative water conservation technologies and educate customers on water-saving practices.
- Explore alternative water sources: Diversify water sources by investing in desalination plants, rainwater harvesting systems, and other technologies.
- Enhance infrastructure resilience: Upgrade existing infrastructure and invest in new infrastructure to mitigate the impact of natural disasters and climate change.
2. Digital Transformation:
- Implement a comprehensive digital strategy: Leverage technology and data analytics to optimize operations, improve customer service, and develop new revenue streams.
- Develop a customer-centric mobile app: Provide customers with real-time information on water supply, billing, service requests, and water conservation tips.
- Utilize AI and machine learning for predictive maintenance: Optimize infrastructure maintenance and reduce operational costs by leveraging AI-powered predictive analytics.
3. Strategic Partnerships:
- Form strategic alliances with international water utilities: Collaborate with global players to access new technologies, expertise, and best practices.
- Partner with technology companies: Develop innovative solutions for water management, billing, and customer service.
- Engage with environmental NGOs: Collaborate on water conservation initiatives and promote sustainable water management practices.
4. International Expansion:
- Explore opportunities in Southeast Asia: Expand into neighboring countries with similar water challenges and infrastructure needs.
- Consider mergers and acquisitions: Acquire or merge with existing water utilities in target markets to gain access to new markets and resources.
- Develop a global brand presence: Build a strong international brand reputation by showcasing MWC's expertise and commitment to sustainable water management.
5. Basis of Recommendations
These recommendations are based on a comprehensive analysis of MWC's strengths, weaknesses, opportunities, and threats. They align with the company's mission to provide safe, reliable, and affordable water services while promoting environmental sustainability. The recommendations are also consistent with the evolving needs of the Philippine market and the global trends in the water utility sector.
6. Conclusion
Manila Water Company has the potential to become a leading water utility provider in the region by embracing innovation, digital transformation, and strategic partnerships. By implementing the recommendations outlined above, MWC can achieve sustainable growth, enhance its competitive advantage, and contribute to the development of a more resilient and sustainable water sector in the Philippines.
7. Discussion
Alternatives:
- Focusing solely on domestic market: This approach would limit MWC's growth potential and expose it to greater risk from local economic and political factors.
- Aggressive acquisition strategy: While acquisitions can be a valuable growth strategy, they also carry significant risks, such as integration challenges and high costs.
Risks and Assumptions:
- Regulatory uncertainty: Changes in government policies and regulations could impact MWC's operations and profitability.
- Climate change: Climate change could lead to water scarcity, increased infrastructure damage, and higher operating costs.
- Technological advancements: Rapid advancements in water management technologies could require MWC to continuously invest in new technologies to stay competitive.
8. Next Steps
- Develop a detailed implementation plan: Outline specific actions, timelines, and resources required to execute the recommendations.
- Establish a dedicated team: Assemble a team of experts to lead the implementation process.
- Secure funding: Identify and secure the necessary financial resources to support the implementation of the strategy.
- Monitor progress and adjust as needed: Continuously monitor the progress of the implementation and make adjustments as necessary to ensure success.
By taking these steps, Manila Water Company can position itself for sustainable growth and become a leading player in the global water utility sector.
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Case Description
In order to resolve severe water management problems in Metro Manila, the Government of Philippines began rolling out a privatisation scheme in 1995 with the objective to provide piped water to everyone in the city with regular 24-hour access. The scheme aimed to auction off service provision of Metropolitan Waterworks and Sewage System (MWSS), a government agency that handled all water and sewage services, through two 25-year concession agreements that divided Metro Manila into East and West. On August 1, 1997, Manila Water won the East Concession. By 2013, after 16 years of management and operations, Manila Water had more than doubled their customer base and achieved 24-hour access to safe and affordable piped water to 99 percent of its distribution network in the East Concession, whereas before just two-thirds had any access at all and only 26 percent had regular 24-hour access. Moreover, system leakage and pilferage were improved from 63 percent to 12 percent water loss. To come so far, Manila Water had to overcome both internal and external challenges. Internally, the company had to transform its highly centralised organisational structure and bureaucratic culture into a de-centralised one where actions could be undertaken through bottom-to-top directives. Human capital and leadership development, as well as putting in place the right incentives, were key to accomplishing this objective. Externally, Manila Water had to address environmental, socio-economic and political challenges. In this regard, tri-sector engagement between government, business and civil society was essential. Moreover, the company had to seek out new business and a means to sustainable growth if it were to stay relevant in the future.
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