Case study

The world leader in the field of biopolymers is company called Braskem. Braskem is an innovative company that heavily invests into innovation in petrochemical products. It is the 8th largest resin producer worldwide and the world's leading biopolymers producer generating 200,000 tons of Green PE plastic made from sugarcane-based ethanol. Braskem earns $8 billion in export sales, owns 650 patents around the worlds, produces over 16 million tons per year, invested in 8 pilot plants, owns 36 plants around the globe and annually funds $92 million into innovation. Braskem started producing green PE on commercial scale in September 2010. The market values this product highly because it is obtained from a renewable source while retaining expected performance characteristics of a traditional PE. Apart from using green sources and renewable materials, what ecostore foundeven more attractive, was Braskem's bold attitude distancing itself from land grabbers that force people off their lands and sell sugar cane to corporations. Braskem decisively was looking into ways how to establish confidence into supply chain and they identified a significant amount of peat land that was not useful to grow anything but sugar cane, which grew perfectly there. These factors stood up as positives confirming to ecostore that Braskem was true to its values and has developed a truly responsible supply chain.

Braskem's Green PE has been awarded and recognized worldwide for its highly and very positive environmental balance. It considers the complete supply chain and removes up to 2.15 metric tons of CO2 from the atmosphere for each ton produced4. Moreover, 80% of energy consumed during the production of green plastic comes from renewable resources5. However, some initial research into cooperation with Braskem, ecostore uncovered some major challenges in pursuing the partnership. Braskem did not hold a licence to trade in the Asia/Pacific region and purchases would have to done through an authorised distributor, which escalated the cost to 530% over the traditional HDPE that was sitting at $2.20/kg.

Essentially, despite this significant hurdle, Pat reflects on this situation in the following way:

"If we put the price aside for the moment and we've said we'll either pay that or seek a better price - we'll look at to close the gap on what we are paying and if money was no longer an issue, would that be a good idea? And it was really unanimous and I said wow that would be unbelievable. So, we don't need money as our problem. Let's treat money as just a challenge."

The next company that could possibly supply green plastic for ecostore was Fkur. Fkur is based in Germany and became a significantly interesting prospect for ecostore as it had distribution rights for Europe, North America, and also Canada. Fkur seemed as technically highly competent company that was producing raw materials out of sugar that could be used for ecostore packaging. But unfortunately Fkur was not using the pure sugar PE and was blending it with petrochemical-based plastic in order to achieve technical capabilities. Despite these limitations, ecostore's R&D department decided to work along Fkur in order to learn about the production process and to ensure that ecostore could competently convert towards this new form of packaging. Similarly to Braskem, Fkur did not possess distribution rights within Oceania and Asia Pacific region. It could only operate in Europe. At this time ecostore has been growing globally and was establishing offices in other parts of the world and should Fkur become a possibility to supply for ecostore, the company would have to identify ways around the distribution restraints. As ecostore was planning to establish its branch in Europe, this did not seem an insurmountable problem.

From a cost point of view, ecostore was getting closer to the source and material cost dropped to around 50% of the original indicators yet still had a strong impact on the total cost of the final product. Apart from the financials, ecostore was still confronted with the unresolved problem referring to impure sugar PE produced by Fkur. Should ecostore proceed with Fkur if 100% sugar-based plastic cannot be supplied? How would this reflect on ecostore's values?

ecostore now understands the process, distribution constraints within specific regions such as Europe, South America, and also who handles the Oceania/Asia-Pacific region which brought the company's attention to Toyota Tsusho.

Toyota Tsusho is another significant player in the field of innovation and green plastic production. It is a Japanese trading company positioned in the Toyota Group since 1948 that has grown businesses in fields of infrastructure, chemicals, and food. Toyota Tsusho represents a 63 billion USD company and at the stage of ecostore's investigation, it was creating a strategic partnership with Braskem that involved production of sugarcane based plastic. Braskem and Toyota Tsusho were building in joint venture the twelfth plant for production of green plastic. This fact was another reassuring indication to Pat that ecostore is onto something strategically interesting. If Pat could only make the numbers work, ecostore could cause disrupt to the packaging market at least in Asia/Pacific market. But the question of where the sugar PE should be supplied from was still unanswered. If ecostore could source directly from Braskem, it could potentially cut distribution margins added on by authorised distributors.

Toyota Tsusho has an Australian branch representing an agency with distribution rights in the Oceania region. Pat relying on 40 years of his international experience of restructuringand restarting companies, started to be looking further in the situation around possible supplies from Toyota Tsusho. He found there was 100,000 tonnes of stock sitting in Japan which seemed not to be selling as fast as expected for Toyota Tsusho. Perhaps ecostore could step in and establish strategic partnership between the two companies. But why would such a major player on the market that is worth 63 billion USD be ever interested to talk and negotiate with a small company like ecostore?

Pat reflects on the strength of ecostore's culture that caught Toyota's attention:

"It's like we don't exist on the beach - we're just like one of the grains of sand. But the point is, business people are business people and my conversation internally went along the lines that, as we were going through restructure, and given that as a small and successful company in New Zealand with a reputation for being ethical science based and trusted, then why wouldn't we continue to take up difficult challenges other companies would not have an interest in?

To succeed as a global business, a packaging innovation such as carbon capture pak would create significant attention and most likely deliver a substantial shift in scale for the company. After all the company is financially strong, entrepreneurial and nimble, and most of all brave. And we could do it just for fun if we wished!

Pat convinced the Toyota Tsutsho representatives to meet with ecostore people and the two companies negotiated conditions of possible future partnership. The negotiations resulted in the outcome of 75% price premium attached to sugar PE packaging. This gap was still too high for ecostore to proceed and to fast forward the export of sugar PE. Furthermore, ecostore's demands for supply were only expected to reach 200-300 tons a year in the short term and the cost associated with this volume deemed to be too significant for a company with substantial growth plans.

Question

- Identify a collaboration strategy between ecostore and bioplastic manufacturer(s) to introduce green packing called 'the carbon capture pak', and justify why the specific type of a collaboration with a specific bioplastic manufacturer is important for ecostore's eco-innovation strategy.

- Determine what collaborative strategy ecostore have undertaken

- How is this collaboration important strategic innovation?