Boise Cascade LLC External Environment - Case Study Example

External Environment Assessment Boise Cascade LLC produces is a multi-dimensional organization offering both the wood as well as the paper productsmostly in North American region. It is also the 13th largest company in the world in this segment and therefore is one of the most important industry players for IE to acquire. However, before making the decision, it is critical to first understand the external environment being faced by the Boise Cascade in its major market. The Demographics The United States of America is considered as the most powerful country in the world having largest economy and military power. Almost 80% of the population of US is White with English being the main language of communication in the country. The current population of the country is over 300 million out of which 40% of the population is in the age bracket of 25-54 years whereas 14% of the population is in the age range of 15 to 24 years. It is critical to note that US is an urbanized country with over 82% of its population residing in urban areas. 1 The overall demographics of the country suggest that the company has a large market to serve as the wood products demand increase as the overall need for housing increases. Since 14% of the population is in the early teens which will be requiring new homes once they marry and raise family therefore demographics may offer an strategic advantage to the company to focus on delivering its products while keeping in view the future demand trends. Socio-cultural factors Consumers in North America tend to prefer individual lifestyle and also are independent in nature. People tend to live alone and with easy mortgage availability in the market, it is relatively easier to buy your own home in North American market. As such, with these trends, it is clear that the demand for the wood will increase as first time home buyers in the country increase also. It is also critical to note that with the increase in level of income, people prefer to have larger homes however, these trends are on the decline specially after the financial crisis (Benfield, 2012). Such cultural emphasis on having large homes therefore may result into an increase in the demand for wood products and thus can help increase the overall revenue of the firm in future. It can therefore be easily suggested that the socio-cultural factors support the business dynamics of the company. Political and Legal Environment Generally, the political environment is in favor of businesses as North America is a capitalist economy. Government supports the private enterprise and property and laws are being made in order to facilitate the businesses. Further, tax laws are simplified with corporate taxes is being paid at flat rates. It is also however, important to note that there are certain environment protection laws which may have an impact on the business of the firm. There are increasing numbers of groups which are advocating for sustainability of the environment. Laws such as environmental protection and biodiversity conservation act 1999 can have significant impact on the business of the firm. The technological segment The computer supported manufacturing processes are now part of the engineered wood and building materials industry. Existing players are extensively using computerized processes to improve their efficiency while at the same time reduce the wastage of the wood and other raw materials. There have been technological changes in the drying and pressing of the wood also along with the fact that technological innovation is also being made in the glue and packing material segment of the industry also. However, the biggest threat from the technological segment seems to be the development of technology to produce wood alternatives. Increasingly, builders are using material instead of wood as the same is relatively cheaper and can easily be available in the market. The availability of the substitutes developed through technological development may therefore pose greater threat to the firm. Economic segment US economy is facing strong recession since 2007 and as a result of this the overall consumer demand and sentiments are still suppressed. One of the worst affected industries during the crisis was the housing industry which witnessed a drastic reduction in the demand while at the same time financing to purchase new homes reduced too. The banks are still reluctant to lend to the first time home owners due to employment uncertainties and other issues. As a result of this, the overall demand for the housing and building materials may remain suppressed for near future. However, as the economy picks up the demand may increase. The global segment China has emerged as the fastest growing economy during the recent past as its exports are increasing fast. Its overall trade with North America is on the rise and as such Chinese exports are dominating the market. China is exporting virtually everything at relatively cheaper prices and as such may pose greater threat to the local players in the market. Globally, US dollar has also weakened against major currencies of the world also putting extra pressures on the overall demand for the North American products. External Competition A closer analysis of the wood industry would suggest that the industry is at its maturity stage as there is relatively no or very insignificant growth in the industry in its existing markets. This is also due to the fact that wood alternatives are becoming common due to technological innovation and are also available at relatively cheaper prices. To determine the overall boundaries of the industry as well as the firm, it is critical to understand that the industry is dominated by few large players in the market. The presence of large players in the market suggests that the overall output is being controlled by very limited number of large firms. The overall industry market capitalization is approximately $16 Billion out of which major market capitalization is with Weyerhaeuser Co. as the industry leader. Boise Cascade is third largest firm in the industry in terms of the overall market capitalization. The industry is dominated by the low cost of entry and requires relatively low level of capital to enter into the market. However, the economies of scale can allow existing players in the market to offer them an advantage over others. Though the threat of new and smaller entrants may be high however, existing players can capitalize on their size and market power to restrict the entry of new entrants into the market in order to limit the overall level of competition in the market. This industry is based upon industrial buyers therefore the overall nature of demand is derived demand. As a result of the derived demand, the buyers i.e. the industrial buyers may have relatively higher buying bargaining as compared to the consumers. As such Boise Cascade may have to diversify its customer base in order to overcome the pressures from its buyers. Having major concentration in the industrial buyers make it relatively tough for the firms in the industry to generate consistently higher margins based upon the pricing only. The overall technological development in the industry may suggest a rapid development of the alternative products. The overall threat of substitutes is therefore relatively higher as the cost to enter the market is relatively low and switching cost is also low too. Due to low switching costs, customers can easily choose for the alternatives thus putting Boise at relative disadvantage especially against those competitors which are diversifying their business by producing alternative substitutes of the wood and lumber in the market. Boise has to therefore look for the improvement in technology if it has to actually capture the market or prevent losing it to the competition. It is also critical to understand that emergence of new technologies such as 3-D printing is making it lot easier for the innovative firms to actually design and develop innovative and aesthetically beautiful designs and products. 3-D printing may be the future for wood and lumber industry as the industry may have to go towards developing customized wood products which suit the overall needs of the customers. Major firms in the industry such as Weyerhaeuser Co are incorporating leadership changes to realign themselves with the changing business conditions. These leadership changes suggest that the firms may be looking forward towards the change in terms of bringing in new and fresh ideas to actually deal with the changing competitive forces in the market. The overall extent of the rivalry in the industry therefore may suggest that the firms have to deal with increasing pressures from smaller but technologically more advanced firms operating to offer relatively cheaper alternatives to the consumers. Further, a lot of success in the market largely depends upon how the other related sectors of the economy perform. As soon as lending to the housing sector improves, it may relatively become easier for the firms to actually increase the sales and become more active in the market. However, if banks and financial institutions are slow in responding to the needs of first home buyers, it may become possible that the overall market may slow down. Works Cited Benfield, K. (2012). Whats going on with new home sizes - is the madness finally over? Retrieved fromhttp://switchboard.nrdc.org/blogs/kbenfield/us_home_size_preferences_final.html Read More