Management Strategy and Decision Making - Case Study Example

Gunns and the Australian Pulp and Paper Manufacturing Industry - Case Gunns and the Australian Pulp and Paper Manufacturing Industry - Case1. What "industry" are we analysing? (Explain why)We are analysing the pulp and paper manufacturing industry. The Gunns Ltd, deals in both soft and hardwood forest products, plantations and others (construction activities in Tasmania). They have been the exporters of hardwood chips, especially sending their goods to Japan. The typical industry model was to produce pulp from woodchips but the company directly exports woodchips for paper manufacturing. 2. What are the key drivers of growth in the industry and what is the expected future industry growth level?

The expected future industry growth seems to be in perils. The pulp and paper manufacturing industry on the whole is not doing good and it will continue to deteriorate as it had in the past. The decline in consumption of manufactured products is the biggest reason. Paper is being replaced by electronic impressions. The majority of tasks performed in schools and offices have shifted towards soft copies instead of solid paper. Moreover, environmentalists have seized this opportunity by promoting electronic formats of books.

So people don’t need to cut trees for paper. High Australian dollar, labour rate, and different regulations in other countries have made it hard for Australian manufacturers to keep up with the international competition. 3. What are the key drivers of profitability in the industry and what is the expected future profitability level?The pulp and paper industry is highly competitive. Developing, selecting and retaining organizational routines, is a comprehensive strategy for winning. The key drivers of profitability in the pulp and paper manufacturing industry include environmental, competition, market share, export legislation, environmental laws, recycling laws and export prices.

The case states that over the past years Australian exports declined by $128 million due to falling export prices. There will be a very narrow margin for profitability in the future. 4. How do you expect this industry to evolve over the next 5 years? Why?The pulp and paper industry will face difficult time in the next five years. Increased environmental protection legislation will make it difficult for them to operate profitably. Only environmental hazard is not the only threat, people find it more convenient to have smart phone or tablet in their hand that can store thousands of books and documents, instead of carrying kilograms of paper.

Pulp and paper manufacturers of Australia face even harsher challenges as increased competition from around world drives their profits down and captures their market share, while the Australian manufacturers are restricted due to strict legislations. 5. Should Gunns enter this industry? If so, how and on what basis?Gunns should only enter this industry if they can ensure significant investment in technology to come up with cleaner and safer operations processes. The company should have a concrete plan (preferably the company should make it public) to come up with innovative recycling processes.

People will object less on the company as its processes will fall under the law. And by advertising their cleaner safer recycling measures they can have a safe public image. Gunns will have a tough time in this industry as Australia is not even in the first ten countries listed in distribution of pulp production. Gunns’ decision also depends upon their vision; what the firm wants to become. The decision to enter an industry also depends on the global economy. Gunns can only enter this industry if they can follow some conditions.

The CSM model (environmental performance, economic performance and social performance) can be helpful in formulating a winning strategy for the company.