Ventures In Salt: Compass Minerals International

Description of Case and Major Issues

Humans used salt for thousands of years but known as a mineral around the 20th century. Salt had been used for thousands of applications worldwide, in the USA it was primarily used for highway dicing, and as an input into the chemicals, food-processing, water-treatment, and agricultural industries (Henderson et al., 2009). Compass Minerals International, Inc a public company and a leading producer of minerals, including salt, magnesium chloride, sulfate of potash, and other plant nutrition products based in Kansas City. It also produces consumer dicing and water conditioning products, consumer and commercial culinary salt, and other mineral-based products for consumer, agricultural, and industrial applications. They are the third-largest manufacturer of salt in their region and this means they are operating in a pretty fierce market space. Michael Ducey, the president and CEO of Compass minerals International Compass was determined for the company to go public, and on Dec 12, 2003, the company completed its IPO and began trading as a stand-alone company. (Henderson et al., 2009).

Major Issues: Compass International was the third-largest salt producer in the USA, with a total of 1541 employees, including Canada, and the United Kingdom, 725 of whom were employed in the United States (Henderson et al., 2009). Competition, price, environmental impacts, and faces uncertain future and challenges were key challenges in the USA. They need investors to carry out the tasks for the new phase of the organization. However, investors have other options which include investing in one of the two organizations that produce more salt than Compass Minerals International. Stating the strategy that they intend to deploy is important in the pitch that would be presented to potential investors. Coming up with the right strategy will not give them a better standing before stakeholders and investors, but it would give them the empathy of their target market.

Market Analysis

By the early 2000s, there were 66 establishments owned by 29 firms producing dry salt in the United States. In 2012, Compass Minerals had total sales of $942 million and ended the year with a market capitalization of just $2.5 billion (Henderson et al., 2009). The company was included in Fortune magazine’s 2010 listing of the “100 Fastest-Growing Companies”. Its subsidiary was the third biggest producer of general trade salt in North America constituting a little over 50% of the revenue total and roadway dicing salt constituted 40%. Salt consumption is varied from time to time but mainly used for highway dicing about a third of total yearly salt consumption in the USA, and general-purpose salt sold to a chemical manufacturer, hardware, grocery stores, automotive stores, agricultural feed suppliers, and salt consumption is varied from time to time but mainly used for highway dicing about a third of total yearly salt consumption in the USA, and general-purpose salt sold to a chemical manufacturer, hardware, grocery stores, automotive stores, agricultural feed suppliers, and salt.

The environmental impact and government regulation may slow down salt consumption and affect the salt revenue. The report shows that the salt used for dicing the road will cause an ecological impact on the plant, land, water, and animal. In the future, the government may adopt a regulation to reduce the use of salt to protect the environment (Henderson et al., 2009). Cooperation among salt companies within regions had help kept the price of the product stable overtime. However, the company would continue to wrestle with how to price its product and respond to competitive and environmental challenges as a publicly-traded company. Kaushal and his team found that trends in population growth, road construction, and automobile use suggested that, under current policies, the environmental impacts of road salt would worsen substantially in coming decades as well as the growth in salt use for highway dicing (Henderson et al., 2009).

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Cooperative and Competitive Moves

Different strategies and methods they can use to take advantage of the current situation in the marketplace and increase their competitive advantage. The moves can be competitive or cooperative or both. Competitive moves include being a first-mover, Disruptive Innovation, Blue Ocean strategy, and Bricolage (Ketchen & Short, 2012). While a cooperative move can also be with other firms through joint ventures and strategic alliances. However, the risk of the inclusion of information makes it not the best idea to use. As the environmental impact on the business, road salt would worsen substantially in the coming decades as well as the growth in salt use for highway dicing, the company could introduce other products (applications of salt instead of highway dicing). Therefore, the Blue Ocean strategy which involves producing products or services where there is no competition could be the best move to take because they develop new products. The company will start with new products/applications depends on salt this means that it is a new market, where there will be no competition, they should also consider to expand in other regions not just in the US as they are the only player there also experimenting with product designs using different materials so that if the prices go up of one raw material then company can shift to another. Freedonia (2019) notes that the global salt market consumption in 2018 at 214 million metric tons and estimated annually will be around 2% a year through 2023, about 346 million metric tons.

Also, for the cooperative moves, the company can use a strategic alliance with IMC Global and other firms in the industry to find new product categories and make as an agreement or plan to face the decline of salt price as well as other issues. A strategic alliance is an arrangement between two companies to undertake a mutually beneficial project while each retains its independence. The agreement is less complex and less binding than a joint venture, in which two businesses pool resources to create a separate business entity (Kenton, 2019). A company may enter a strategic alliance to expand into a new market, improve its product line, or develop an edge over a competitor. The arrangement allows two businesses to work toward a common goal that will benefit both which could lead to a long or short relationship.

Most Effective Choice and why and Tactic

Competitive move: The compass minerals international should move forward to create a competitive advantage in the USA market segment by investing in a new product to disrupt the salt industry due to massive competition in the USA. The purpose is to be apart from the game that cannot match the competition. The ultimate aim is to build sustainable competitive advantage by using a disruptive innovation method to penetrate the market slowly until it wins the game. The criteria method of disruptive innovation takes time for the consumer to absorb the product, low price, easy to access, and the product must be a new invention with a better idea that no one can easily copy (Kenton, 2019). This competitive move will be better for compass minerals international to dominate the salt market in the USA market and maybe the opportunity to expand in the global market

As technology advances, there are more ways of making salt without having to cause a big problem for the environment or at least cause minimal damage. Proposing a method of production like crystallization as a tactic is a way to enforce its value proposition. One of the simplest chemical hot packs possibles involves dissolving calcium chloride, also known as rock salt, into water. As the crystals of rock salt dissolve, they generate heat from the process of the calcium chloride dissolving into its collective ionic parts (Reportlinker, 2014).

Conclusion

Selecting the right strategy is very important for business growth. A proper analysis of the business landscape and thinking has to go into choosing the right strategy. Michael Ducey, president, and CEO of Compass Minerals International was worry-free after the company became a public trade. However, the company still challenges the uncertain future of growth in the USA market due to several factors that could affect the company revenue in the future, for instance. The competition, government regulation may restrict the amount to use with highway dicing because the salt product could have an impact on the environment. The most effective strategic plan for future growth to avoid the revenue decrease is seeking a joint venture partner in business to establish in a new market, and competitive move to invent a new product that can disrupt the old product in the industry.