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Gunns Australia Business Report

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Introduction

Executive Summary Gunns Limited are a forestry enterprise based in Tasmania, with market capitalization of $204 million. Gunns undertook a pronounced change of strategic direction in 2010, attempting to revitalize itself and ensure future success after poor recent social and financial performance. This strategic direction was not allayed into financial success in the following year, 2011, with a loss reported of $355.5m. The purpose of this report is to examine the external business environment and its subsequent impact on the future performance of Gunns Limited through an analysis of each of the elements of the PEST model (political/ regulatory, economic, sociocultural and technological). Furthermore, this report will attempt to outline how Gunns Limited can use corporate social responsibility policies to increase the attractiveness of investment in the company. The overall conclusion is that though past environmental factors have weakened the performance of Gunns, the moves to address these issues through a strategic rework are a positive step towards improved performance in the future. Some limitations of the report include: - Quality of sources. - Historical data limitations. - The inherent inaccuracy when predicting future performance. Economic The weakened financial performance recorded by Gunns in the past two years has been heavily predicated by the difficult economic conditions in which the business has been operating. The global financial crisis (GFC), coupled with an appreciating Australian dollar and the March Japanese earthquake, have all negatively impacted on the competitive position of Gunns, reflected in the $355.5m loss recorded in the 2011 financial year (Gunns Limited 2011a). The growth of globalisation has the entry into foreign markets by transnational corporations has been allayed into a greater risk factor come times of financial crisis (Lynch, Johnston and Ker 2011). The GFC softened demand throughout world markets, hurting export-based industries (Forestry Tasmania 2011, Gunns Limited 2010). Furthermore, the collapse of the demand for managed investment products as a realist of the GFC caused the divestment of the initiative by the same name directed by Gunns, spurring further financial losses (Gunns Limited 2010, Gunns Limited 2011a). ...read more.

Middle

Mill, were well within the planned Commonwealth permit conditions to be placed upon the Bell Bay Pulp Mill (HCG Environment 2004, International Finance Corporation 2010). The benefits of implementing an environmentally-sound technology are two fold. As will be discussed in the Corporate Social Responsibility section of this report, companies that adhere to social environmental expectations can increase social capital with their stakeholders (Savitz 2006, Vogel 2005). Furthermore, compliance to government regulation will always hold positive benefits for a company in the form of greater governmental favour towards the company (Moon 2004, Siebert 2008). Other technological advancements within the forestry industry applicable to Gunns are also aimed at increasing the level of environmental responsibility and performance within the industry. Forestry Tasmania funds a division dedicated to the research and development of technology and processes that will allow for a more efficient, more environmentally responsible harvesting and regeneration of forests (Forestry Tasmania 2011), whilst the Victorian government also identifies investment into technological advancements within the forestry industry as having a high rate of return (Department of Primary Industries 2011). A further technology set to aid in increasing the global competitiveness of Australian forestry companies, Gunns included, is the advent of a 3D technology that allows for the virtual presentation of forests and will allow for strategic planning and scenario plotting to be more effective and realistic ('3D Forests Show the Way for Sustainable Future' 2011). Thus it can be seen that the advent of new technological processes funded by both governments and companies within the industry presents major opportunities for Gunns to capitalise on, therefore accentuating the attractiveness of investment in Gunns Limited. Corporate Social Responsibility Modern societal trends gravitating towards greater awareness of the need for social responsibility has predicated the growing importance of corporate social responsibility (CSR) to a business (Moir 2001, Orlitzky et. al 2003). Examining CSR policies and how they influence each area of the PEST environment is useful to determine the ability of Gunns to influence its external operating environment and thus provide a clear determination of the viability of Gunns as an investment opportunity. ...read more.

Conclusion

Pax Populus. 2011, Stakeholder attitudes to the Bell Bay pulp mill and recommendations for future engagement, Melbourne. Piggott, L. 2011, The Political Environment, ECOF1004, University of Sydney, Sydney, 21st August. Plourde, J. 2011, 'RISI Publishes Latest Ranking of Global Pulp and Paper Companies in Its Annual PPI Top 100 Report', PR Newswire United Business Media, 7 September, viewed 29 September, <http://www.prnewswire.com/news-releases/risi-publishes-latest-ranking-of-global-pulp-and-paper-companies-in-its-annual-ppi-top-100-report-129408823.html> Preston, L. E. 1978, �Analyzing corporate social performance: Methods and results�, Journal of Contemporary Business, vol. 7:1, pp. 135-149. Ramsey Rule, International Tax and Public Finance, vol. 9:3, pp. 295-316. Savitz, A. 2006, The triple bottom line, Jossey-Bass, San Francisco, CA, United States. Shrivastava, P., Scott, H. "Corporate self-greenewal: Strategic responses to environmentalism" Business Strategy and the Environment, vol. 1, no. 3, p 9-21. Siebert, H. 2008, Economics of the environment: theory and policy, Springer, England. Socio-economic Study of the Impacts of Botnia S.A. Pulp Mill Project in Uruguay, 2004, HCG Environment, Uruguay, viewed 20 October 2011, <http://www.upm-kymmene.com/downloads/energy_and_pulp/economic_study_on_the_impacs_of_the_mill.pdf> Spicer, B. H. 1978, �Investors, corporate social performance and information disclosure: An empirical study, The Accounting Review, vol. 53:1, pp. 94-111. Strack, R., Baier, J., Fahlander, A. 2008, 'Managing Demographic Risk' Harvard Business Review, vol. 86, no.2, pp. 119-128. Sturdivant, F. D. and Ginter, J. L. 1977, �Corporate social responsiveness: Management attitudes and economic performance, California Management Review, vol. 19:3, pp. 30-39. The economic setback after the Japanese earthquake disaster, Timber Community, Boston, viewed 2 October 2011, <http://www.timbercommunity.com/content/economic-setback-after-japanese-earthquake-disaster> Tobey, J. 1990, �The effects of domestic environmental policies on patterns of world trade: an empirical test�, Kyklos, vol. 43:1, pp. 191-209. Tobey, J. 1993, �The impact of domestic environmental policy on international trade�,in Economic Progress and Environmental Concerns, ed. H Giersch, Springer-Verlag, Berlin, Germany, pp. 89-111. Trading Economics, 2011, Australia Consumer Confidence, New York, <http://www.tradingeconomics.com/ > Vogel, D. 2005, The market for virtue: The potential and limits of corporate social responsibility, Brookings Institution Press, Washington DC. Appendix A: Powerpoint Presentation to Directors Ben Fitzpatrick, Omer Konacki, 9am Friday 311242847 Ben Fitzpatrick, Omer Konacki, 9am Friday 311242847 ...read more.

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