Challenges Faced by Gunns Limited - Case Study Example

Case Study Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Name Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Course Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Lecture Xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 19th September, 2012. Synopsis The pulp and paper industry in Australia is a significant contributor to the Australian economy and consists of more than 400 enterprises hence employing a significant number of people in the rural and also the regional areas where paper and pulp industries are located. The industry in terms of contributing to the Australian economy earns the country approximately $ 12.6 billion in the domestic demand sector, contributes around more than $ 1 billion through the exports and also contributes in terms of imports of approximately $ 3.5 billion. However, all is not well in the Australian paper and pulp industry as a result of such factors as the decrease in exports, the move towards a paperless world, the challenges with investments in the paper and pulp industry in Australia among others and hence the need to take a keen interest at the Australian paper and pulp industry through analysis of Gunn’s Limited, which is among the enterprises making the Australian paper and pulp industry. With this regards, the case study concentrates more on the Australian paper and pulp industry while utilizing Gunns Limited as a going concern. Background Information about Gunns Limited Gunns Limited is a listed company and a major enterprise operating in Tasmania Australia. The company employs approximately 1200 people and is considered as the major land owner in Tasmania (Forestry Tasmania 2008). The business of Gunns is to make use of the natural resources, and is therefore involved in the business of growing and harvesting of forest plantations but on a sustainable basis. Among the ways through which the company ensures that there is sustainability is through its commitment towards the community by continuously striving to hit the balance between providing the community in regards to its economic viability and also socially contributing to environmental sustainability and responsibility through the company’s dedication of planting trees. The company therefore deals with both soft and hard woods products. Its core business involves managing plantations, conducting forestry activities, developing of wood products, milling, processing and also the merchandising of wood products in addition to exporting them. The company also processes, manufactures and also sells timber and timber products and veneer with the help of its company subsidiaries. Other activities that the company engages in together with its subsidiaries includes; management of vineyard and production of wine among others. With these activities, the company operates along the segments of timber, forest products and other activities (Gunns Limited Website 2012). Therefore, Gunns Limited Vision of; having growth for its employees, outcomes which are environmentally responsible and sustainable benefits or profitable outcomes in the communities that the company and its subsidiaries operates is clearly stated and implemented in the company’s activities. On this note too, the mission statement of the company is clearly stated and emphasizes the reason for existence of Gunns Limited and which is incongruence with most of the enterprises in the Australian paper and pulp industry (Gunns Limited Website 2012). Challenges faced by Gunns Limited In light of the challenges faced by other enterprises in the Australian paper and pulp industry, one of the challenges that Gunns is facing is a dramatic decrease in revenues over the years. For instance, Gunns Limited posted a net loss after tax of about $903.9 million at the close of its financial books in June 2012. The company had also posted a net loss of $355.5 million in year 2011, which is an indication of the representative picture of other enterprises in the paper and pulp industry in Australia. These losses which continue to be posted by Gunns Limited are as a result of the decreases in demand of the company’s and to the larger extent the industry products which can also be attributed to global financial crisis in 2008 and 2009 (Gunns Limited Website 2012). Other contributing factors to the losses in the enterprises in the Australian paper and pulp industry are the increases in competition from digitized products, where the society is more bent on paperless offices and digital communications posing a threat to Gunns Limited Company and to a greater extent the larger Australian paper and pulp industry (Gunns Limited Website 2012). Projected shortages in regard to wood availability and plantations for timber, high costs of the company’s inputs for instance electricity are also among the many challenges faced by the company. In addition, investments into the paper and pulp industry are low coupled with less R&D in industry and this slows down the rate at which the company and the industry at large transforms itself in light of the changing times and technologies so as to fully maximize the opportunities presented by the new technologies. Climate change effects to the environment have not only affected the paper and pulp industry but all the industries in Australia and thus contribute significantly to the factors that are affecting industries in Australia. A significant instance to note is when the society surrounding the Tamar Pulp Mill caused artificial fog formation leading to accidents along the roads (Hawke 2009). These are some of the challenges that the company faces and all the enterprises in the Australian paper and pulp industry. Among the key drivers that make Gunns Limited a success, is its investments in land, making it the biggest private land owner in Tasmania (Forestry Tasmania 2008) and therefore can have plantations of trees for the sustainability of its paper and pulp activities. Roads and standing timber are also among the assets that are highly valued at Gunns Limited with the valuation in 2011 being $52 million and $ 27 million respectively and which contribute to the success of the company. Discussion In light of these findings, Gunns Limited has therefore transformed itself from a company that practices woodchipping from the native forest to a company that owns plantations and therefore has its own plantation managers, processor and marketers (Pulp & Paper Strategic Review 2009). As previously discussed that climate change is among the factors that are affecting the Australian paper and pulp industry, Gunns Limited attempts to solve the conflict through planting their own forests plantations and hence decrease the overdependence of the company on native forests. By plating its own plantations, the company not only ensures that there is sustainability and growth of its business but also silences the watchful eyes of environment activists groups and the community which becomes concerned when there is harvesting of trees in the forests (Majewski 2007). Gunns Limited is also geared towards the strategy of sustainability whereby the growth of the company continues to contribute to economic, social and environmentally to the community (Hawke 2009). In this regards, the company is geared towards making the business and its core values sustainable while at the same time establishing harmony with the community. In line with the strategy of Gunns Limited is the strategy of the Australian paper and pulp industry whereby the industry aims to develop uniquely into a profitable, sustainable and also innovation and become international competitive. Therefore Gunns Limited has established its sustainability plans and goals to rally with the goals of the overall Australian paper and pulp industry. Conclusion The Australian paper and pulp industry faces tough competition from Canada, China, Asia and USA. The competition in the globalised world is set to increase while at the same time the costs of production of the enterprises products like Gunns Limited continue to increase. However, in light of the strengths and the many opportunities analyzed through the SWOT analysis, companies in the Australian paper and pulp industry has an opportunity to continue being in business and post profits. Therefore, Gunns Limited needs to take advantage of the strengths and the opportunities at its dispose to avert the situation where the company has continued to make losses for 2 consecutive financial periods. Recommendations Develop innovations that are to keep the paper and pulp industry up to date with the latest developments. Acquire more land for forests plantations to take care of any looming shortages in future. Continuously reestablish its commitment to sustainability to reaffirm the community and environmental stakeholders of the company’s commitment towards environment sustainability. Avail more funds to R&D so that there can be establishment of more strategies underlying continuous growth of the company and the industry at large. References Forestry Tasmania (2008), Annual Report 2008, p. 93. Gunns Website, Retrieved from http://www.gunns.com.au/community-sustainability/, Retrieved on 19th September, 2012. Hawke, A. 2009 Report of the Independent Review of the Environment Protection and Biodiversity Conservation Act 1999, October, paras. 157-161. http://www.environment.gov.au/epbc/review/publications/pubs/final-report.pdf Majewski, U. 2007 “The Regional Forest Agreement and the use of publicly owned native forests in Tasmania: an investigation into key decision making processes, policies, outcomes and opportunities,” M.A. thesis, School of Geography and Environmental Studies, University of Tasmania, pp. 43-44. Pulp & Paper Strategic Review 2009, Industry Edge. Appendices Gunns Limited Swot Analysis Strengths A large pool of labor force, for instance, Gunns Limited being the largest private land owner in Tasmania, offers the people in the surrounding community employment opportunities. Australia offers attractive and competitive business opportunities Growing populations offers the company an increase in demand for its products Well established markets Weaknesses Low investments into R&D of the industry Low investments in additional forest plantations and hence the threat of future supply of raw materials High electricity costs impacting negatively on the profits of the company and which can be inferred from the losses that the company is making. Opportunities Positive credentials from environmentalists following the sustainability plans of the company More skilled laborers especially from colleges and universities Threats Competition from other companies for example the United States paper and pulp industry and the Canada industries which have heavy incentives from the government and hence able to offer low prices for their products. Inputs costs are very high Read More