Domtar Corporation Strategic Initiatives - Research Paper Example

? Domtar Corporation Strategic Initiatives 25th, September, Strategic Initiatives Taken By Domtar Corporation to Adapt To Changing Markets  Introduction The last two decades have been characterized by serious economic crisis that have threatened many companies. The crisis has destabilized the capital market leading to reduced shareholders value. Like other companies, Domtar has had to face the economic crisis though it has done so successfully and retained its position as the second best performing Paper Company in the world. The market prices for paper and other wood products have been fluctuating with the ever-changing supply. To be able to succeed under the stressful market conditions, Domtar Corporation has had to set its goals clearly and come up with strategies of achieving these goals. This paper discusses how the recent economic trends have influenced Domtar business, the strategies that Domtar management has used as well as those it can use to adapt to the changing market. Additionally, the paper will focus on the tactics that Domtar has implemented and others that it can implement to adjust to the changing market in addition to the role that the Domtar Corporation human resource department has played in enabling Domtar adapt. How Recent Economic Trends Are Influencing Domtar Business Like any other industry, the paper industry has also been gravely affected by the recent frequent economic crisis that has hit the global economy. One of the direct effects of the global economic crisis has been a considerable decline in the price of Domtar shares. The economic crisis has affected the market prices of not just the paper but also the cost of obtaining machineries and fuels to run Domtar’s factories. Additionally, factor such as global warming that have become a great concern have affected Domtar due to its reliance on forest for raw materials. The need to sustain the environment has led to limitation on the tree harvesting making the raw material expensive and less available. Additionally, forest products tend to be seasonal which might not coincidence with high market prices. What is more, forest products, inclusive of the paper and pulp are global and tend to be affected by fluctuations in the value of United States dollar. Over the last few years, the dollar has been depreciating greatly which has negatively affected the Domtar earnings. The fluctuations have affected even the prices of raw materials hence affecting Domtar’s operating margins negatively. Another factor that has changed in the paper market is the decline in the demand for paper products as well as pulp (Domtar, 2011; Clancy, 2004). Other factors have affected the Domtar market for its products include, poor conditions in the credit market in its core operational area which are Canada and U.S. Likewise, the frequent windstorm and hurricanes slow down the shipment of Domtar paper and other products. Additionally, there have been increased taxes particularly in United States, which is also one of the major markets of Domtar. The increased taxes have negatively affected the Domtar income earnings. The increasing costs of fuels such as petroleum and coal have increased the transport costs. Additionally, Domtar is frequently affected by the ever-changing currency exchanges, especially those involving the Canadian Dollar and the U.S. dollar (Domtar, 2011). Strategies That Domtar Has Used to Adapt to Changing Market Over the last two decades, more paper companies have started competing with Domtar for market in the North America where it had previously enjoyed little competition. To curb competition, Domtar mainly relies on producing highly specialized, quality, and customized products that enables it to thrive in the competitive market. Additionally, Domtar relies on its wide market as compared to other paper companies. Domtar’s paper products are competitively priced. Additionally, they keep analyzing the changing market requirements that characterize the paper industry through their website. After analyzing the changing needs of their clients, Domtar increasingly modifies its products, which enables them, retain their clients, and get more. To adapt to the declining demand for paper products, Domtar should focus on other non-paper businesses such as potentially tissue to supplement its income (Clancy, 2004). Continued reliance on white paper could continue affecting the Domtar market since the process of digitization is expected to continue. It is thus advisable that Domtar considers in other areas such as personal care where opportunities such as manufacture of tissue papers and other personal effects exists. The demand for personal care products is quite stable hence less affected by fluctuation in economy. Furthermore, Domtar can enter into agreements with its retailers, wholesalers as well as other clients to ensure its shipments remain stable with changing markets. Another strategy that Domtar has come up with to counteract the economic crisis is use of foreign exchange currency to offset the costs of foreign currency translation. Therefore, this helps Domtar withstand economic exposures, which are associated with investing in foreign countries (Domtar, 2011). Domtar has come up with a strategy to ensure that they manufacture quality products that are in line with the needs of their customers. This has been possible through frequent gathering of customer’s opinions as well as by monitoring the paper products that are being used. Collecting such data enables Domtar to develop it objectives appropriately and develop new products. As such, they ensure that their products are environmentally friendly which enables them remain popular in the contemporary society that is focused on improving the environment. A good example of such product is Domtar EarthChoice paper product (Domtar, 2011). Tactics That Domtar Has Implemented and Could Implement To Achieve Its Goal Like other companies in the paper market, Domtar is under pressure to succeed irrespective of the volatility of the global economy. The costs for law materials are increasing while the demand for paper and pulp products is decreasing. It is thus inevitable that Domtar should come up with tactics to face the challenges facing it. Domtar’s main mission is to meet the needs of their customer, which keep changing. To be able to do this, Domtar has come up with different tactics. One of the tactics is frequent training of its employees to ensure that they are conversant with their roles. This has enabled Domtar to identify and address the needs of its customers adequately. To avoid criticism, which affects most paper companies making it hard for them to acquire forest materials, Domtar has enrolled in a sustainable program. By committing itself to sustainable use of forest products, Domtar has managed to access and purchase raw materials irrespective of them being limited. Thus, Domtar has managed to retain the trust of the shareholders by offering attractive returns irrespective of the fact that the fact that Domtar shares are not performing well in the stock market. This has prevented Domtar from loss of shareholders (Clancy, 2004). To ensure that the employees are motivated, Domtar management offer frequent incentives to reward the effort made by the employees. This has enabled Domtar retain its employees hence reducing the hiring and training costs. Ultimately, Domtar has come up with ways of generating its own power to run its operations other than relying on other expensive sources. This has helped reduce the cost of operation thus enabled Domtar to offset the losses resulting from reduce market (Clancy, 2004). To ensure that they continue accessing forest resource, Domtar has committed itself to sustainable use of raw materials. This has been possible through use of appropriate machineries for efficient utilization of the raw materials. Moreover, Domtar participates in programs aimed at improving the environment. This has enabled Domtar gain acceptance in many regions in addition to being able to access low material easily (OECD, 2001). The Role of Human Resource in Helping Domtar Achieve Its Goals Human resource department is one of the most important components of any organization. It is responsible for ensuring that there is apposite communication among the employers, employees and all the other stakeholders. Domtar’s human resource focuses on increasing the employee performance by providing frequent training to equip them with appropriate skills. Additionally, the human resource ensures that all employees are aware of their duties and that they perform them properly and timely. The management has put in place a performance system to ensure that the employee are informed on the effectiveness of their performance in addition to receiving advice on how to improve their career life Event Brief of Q4 2007 Domtar Corp Earnings Conference Call – Final, 2008). Human resource department has also enabled Domtar to remain at the top through efficient hiring process that allows them obtain qualified employees. This ensures that Domtar is able to keep up with technological advances. Besides, Domtar human resource department is dedicated to encouraging career and leadership development among its employees by exposing them to a wide range of experiences in addition to frequent training and career development programs. Ultimately, the human resource ensures that all the stakeholders respect each other. The employees are supposed to treat each other with respect ensuring that they address the complaints as well as the needs of their customers and other stakeholders. Moreover, Domtar human resource is dedicated to ensuring the employees have the appropriate working environment, which is safe and secure. It does so by enhancing a suitable relationship between the management and the employees to enable them identify the need of the employees and address them. Similarly, the human resource has established health and safety management system (Domtar, 2011). Conclusion Domtar, a company that deals with manufacture of paper and pulp is dedicated to sustainable use of forest products. The paper industry has become increasingly competitive with more companies venturing into this industry. Additionally, the raw materials are becoming increasingly reduced hence expensive. It is thus crucial for companies such as Domtar to focus on improving on asset performance in addition to reducing operational cost. Domtar is currently trying to reduce its maintenance costs that are relatively high but at the same time increase the shareholders’ value. Domtar is presently focusing on improving the quality of its products to counteract the increasing competition as well as deal with the decreasing demand for paper and paper products. To ensure that it is in adequate supply of raw materials, Domtar has committed itself to sustainable harvesting of trees. Domtar is advantaged in that it has enough finances to fund its operations in addition to the good relationship with its stakeholders. Domtar’s commitment to engage in sustainable harvesting and use of raw material has helped it gain confidence from environmentalists who are often concerned with operations of paper dealers. To retain the stakeholders support, Domtar has formed partnerships with several organizations, particularly the environmental ones to access advice on proper utilization of raw materials. Therefore, Domtar is dedicated to ensuring that their products meets the needs of their customers by gathering information annually to ensure they make appropriate changes on their products to improve them. Domtar’s human resource department has also helped develop appropriate relationship between all the stakeholders. Domtar is currently performing well as characterized by its financial statements. This is irrespective of the reduced demand for paper products and the high maintenance costs. The improved performance is mainly due to good quality of its products as well as the high market prices. Domtar depends on its high technology to produce high quality products. References Clancy, P. (2004). Micropolitics And Canadian Business: Paper, Steel, And The Airlines. Toronto: University of Toronto Press. Domtar. (2011, Dec 31). Domtar Corporation Annual Report On Form 10-K For The Year Ended December 31, 2011. Retrieved from http://www.domtar.com/files/2011_Domtar_Annual_Report_10_K_ENG.pdf Event Brief of Q4 2007 Domtar Corp Earnings Conference Call - Final. (2008, Feb 15). Fair Disclosure Wire, pp. n/a OECD. (2001). The Application of Biotechnology to Industrial Sustainability. New York: OECD Publishing. Read More