The two growth options that Arauco face have an added advantage of the market share and the economies of scale. However, considering the. Should the company go with an horizontal expansion and invest US$1 in pulp production by forward integrating into paper manufacturing?. This is a Spanish version. Celulosa Arauco is a major Chilean producer of market pulp and wood products. Owning over million hectares of forest in Chile.

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Arauco has a leading business position in the volatile market pulp industry due to its low- cost production capabilities. By continuing to use our site you consent to the use of cookies as described in our privacy policy unless you have disabled them. Mikko Tahvanainen, of the Finnish Forestry Industries Federation, explained the reason for the change: Paper and paperboard in packaging was widespread and used across most consumer and industrial applications.

Originally founded in when 18 companies combined forces, International Paper was in the process of consolidating its paper operations and selling off operations deemed to be outside of its vast core business. Exhibit 2d Arauco—Sales by Product Type Sales all values in thousands Woodpulp Adt 1, 1, 1, 1, 1, 1, Unbleached Adt Bleached Adt 1, 1, 1, 1, Wood Products 3 1, 1, 1, Logs m 3 1, 1, 1, 1, 1, Saw Timber m 3 68 1, Panels m Total Timberlands Owned h.

Arauco (A): Forward Integration or Horizontal Expansion?

Nevertheless, like all producers of market pulp, Arauco is not able to escape the impact of pricing integrafion on its financial performance. With advances in genetics and pest controls, Arauco was constantly seeking to improve the quality of its plantations. The slow inventory production and turnover could cause significant problems for Celulosa-Arauco. Arauco exported its goods through three ports: HBS cases are developed solely as the basis for class discussion.


The company owned over 2.

Arauco(a): Forward Integration or Horizontal Expansion. Essay Example | Graduateway

Production of Market Pulp Pulp mills were highly capital intensive. We will write a custom essay sample on. Finance General Management Marketing. Sorry, but copying text is forbidden on this website.

Exhibit 11 shows the worldwide consumption of paper. The asset beta of pulp production and sales was 0.

Arauco(a): Forward Integration or Horizontal Expansion. Essay

After a log was cut, it was automatically grouped and then sent to horizontsl of three destinations: Among other techniques to exterminate parasites, the company used natural predators biologically designed and reproduced in its own labs. It also made specialty wood products for the flooring and furniture markets. The company sold approximately 2. Like its forest operations, Arauco employed independent contractors to operate all of the sawmills and remanufacturing facilities. Chile35 The Republic of Chile spannedsquare kilometers and bordered the South Pacific Ocean to the west, Argentina, and Bolivia to the east, and Peru to the north.

Panels—Paneles Arauco was formed in and was devoted to the manufacture of semi-finished wood products such as plywood and other panels used mainly for construction. Forestry operations, although still a sustainable market, is undergoing greater scrutiny due to raising environmental concerns. As of earlyArauco is the third largest producer of market pulp pulp sold on the open market and is considering increasing its capacity, tying it with Brazilian competitor Aracruz as the world’s largest producer.

It was estimated that the following firms would require approximately 50, tons of market pulp each. Several of the larger companies were considered to be fully integrated with the ownership and operation of forests, pulp mills, paper factories, distribution, and converting facilities.

Both companies had been created 20 years earlier horizkntal the Chilean government to develop forest resources, improve soil quality, and promote employment. Radiata pine in Chile arauoc a high yield per hectare due to the quality of soil, making it possible to plant a larger number of pines by hectare.


The company also researched soil fertility and insects aiming to develop strategies for plague control. Most of its sales for paper were generated within Latin America. Weyerhaeser was the largest market pulp producer, with a capacity of 2.

Celulosa Arauco, Form F, December 31, Thus, CEO Carsten Koerl believed the company needed to branch into sports media, not just supplying data to companies, but finding ways to tell stories about that data.

While a weaker U. Other import partners included the U.

Pulp and paper prices fluctuated as producers lowered prices in times of soft demand, and moved to increase supply by building more capacity when demand was predicted to increase.

The acquisition included a pulp mill and plantations. To maximise their effectiveness, colour items should be printed in colour. Perez is debating whether the company and its shareholders would be better served by a forward integration into the paper business instead of increasing the company’s capacity in market pulp.

The sawn timber was used for packaging, pallets, construction, and decorative products for the furniture and design industries. Paper products ranged from uncoated free sheets such as regular writing paper to coated free sheets, lntegration, newsprint, and coated and uncoated groundwood. Celulosa-Arauco would not be able to sustain success if they continue to just suspend or close saw mills as that results in loss of profits and investment.