On the transformation processes of the global pulp and paper industry and their implications for corporate strategies a European perspective

摘要

Pulp and paper industry has suffered from persistent low profitability in North America and Europe for many consecutive years now. Companies have been forced to close down excess capacity, reduce costs and divest non-core assets, and the whole industry is considered to be in crisis and in need of transformation in the developed countries. The main objective of this study is the analysis of the key structural and fundamental changes underway in the global paper industry and to find out their drivers and implications to companies' business strategies from the European perspective. More specifically, the study aims to provide answers to the following research questions: why is industry transformation necessary, what are the key drivers of the transformation process, what role do cost efficiency, value chain positioning, consolidation, R & D and emerging markets play in the transformation and what are the implications for the corporate strategies of individual companies. Research methodology consisted of both positivistic and phenomenological methods: use of quantitative analysis of financial results and value chains and in-depth interviews of industry's senior managers regarding industry future and turnaround management. Key theoretical concepts and previous research and literature were first reviewed. The main findings of the study are, that industry transformation and strategy renewal are needed in order for the industry to return to healthy profitability. The main drivers of the transformation process were found to be high capital intensiveness, maturing or even declining phase of the product life-cycle, cost and availability of fiber and different global phases of the industry, substitution by electronic media, low value creation in the total value chain to consumers and low global level of consolidation - leading to supply and demand imbalances and low profitability. According to the study, the different strategic responses of the industry to adapt consist of improving cost efficiency and turnaround management, increased consolidation, investments in emerging markets, efforts to increase value-creation and enhanced R & D. Cost reductions and closures of overcapacity will need to be continued, but on their own they will not be enough - most turnaround cases studied in this research failed to deliver sustained profitability improvement. Companies need to develop entirely new products or reengineer their business models to radically reduce costs in order to avoid further commoditization of their products and services. Although the industry is globally fragmented, within specific products and regions such as LWC in Europe it is highly consolidated. This, however, has not been enough on its own to improve profitability and the evidence regarding the impact of consolidation on for instance pricing remains inconclusive. Most paper and board producers are positioned in the middle of the value chain, and they generate only ca 5 % of the total value creation in the paper value chain - companies need to consider the viability of their current value chain positioning. Emerging markets such as China, Brazil and Russia are growing rapidly and they offer both opportunities and challenges to the Western pulp and paper industry. Western companies have been relatively slow in expanding in these markets, and they should reconsider their current strategies for the emerging markets. R & D efforts have been intensified to find new products and entire new businesses such as biofuels, but the bulk of the industry's revenues will continue to be generated from the traditional pulp, paper and board products for many years to come. None of the above-mentioned strategic responses is likely to be enough on its own to sufficiently improve profitability and they will take a long time to have a full impact. Companies need to develop all or most of them simultaneously. This places an additional management challenge to industry leaders, and it is likely that not even the biggest companies have the financial and managerial resources to develop all of the above at the same pace. This means, that companies have to focus their efforts and make difficult choices - for instance, whether to defend local market position through cost efficiency, strive for added value in the value chain, develop completely new products or invest in emerging markets. It must be noted, that all of the above actions take a long time to have a full impact and until then the industry must ensure the competitiveness of its existing products and services against substitution such as electronic media. Pulp and paper industry will remain a major industry in North America and Europe, and globally the demand for its products is forecasted to grow. A number of companies also in Europe and North America have been profitable even during the current recession, indicating that industry transformation and renewal is possible.