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In this paper we will describe the Swedish Paper and Pulp industry and its future challenges.

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Friday 14.9.2012 Martin Aschmoneit 840413-9019 Jérôme Fernandez 900406-P611 Mattias Forssell 8610060413 Riina Kettunen 860318-3602 Caroline Leuhusen 890205-0163 The Swedish Paper Industry Case Strategy – Classic and Contemporary views ________________ THE SWEDISH PAPER INDUSTRY In this paper we will describe the Swedish Paper and Pulp industry and its future challenges. We base our assumption on three main competitors in the industry, SCA, Stora Enso and Holmen. Competition amongst firms The industry exists of three major actors. As today, these three competitors have similar features regarding size, production equipment and competitive advantage such as economies of scale. However, their product offer differs in some ways. For example Holmen and Stora Enso are large producers of printing paper while SCA focus more on personal hygiene products. Capital is of main concern to compete in the paper and pulp industry. The capital is needed to increase capacity in plants and to invest in forest and land. The capacity of output has increased since 1980 with 300%. However, the number of mills has been reduced with about 30%. Capital is also regarded as a core feature when investing in energy generating equipment. (SFIF, 2010) Energy is one of the bi-products from paper production which in a later stage can finance the actual paper production when selling the electricity. Since the industry is capital intense and dependent on high capacity plants, technological knowledge and investments in R&D is a force driving the industry. ...read more.


The company has a valuable know-how: the knowledge of local market conditions and its global experience. Although SCA maintain a close relation to its consumers, the company first has to face the retailers. Their size is a key parameter, and they are integrating horizontally. The ability of SCA of making profit is linked to its relation with the retailers. To face future, the company is implementing its strategic priorities which are capital efficiency and growth. Capital efficiency is realized through cost effectiveness and improving the cash flow. Last year, 2011, the operating cash flow generated was 8575 million SEK. Growth rests on the aim of the company of being the leader in its products and on the consistent work of research and development. Big is not a synonym of success and in the future the forest product division of SCA will face big challenges such as changing markets and changes in consumer behavior. Its profitability will depend on its ability to move with the demand and continue developing its resources. Stora Enso Stora Enso emphasizes strongly that renewable materials are in the focus of their future operations. Since wood is and will be the most important raw material Stora Enso tries to ensure that keeping this material by improving economically, socially and environmentally sustainable and tree plantation management practices. The aim is to meet the needs of their customers and at the same time cope with the challenges of today?s global raw material challenges. ...read more.


As the pace of deforestation is increasing, the access of forest is decreasing and hence provoking price increases. However, this obstacle can also give rise to opportunities in product development of ecological or ?green? products. As the technology is moving forward and more people use electronic equipment instead of printed paper (e-mails instead of letters and bills, online newspapers etc.) the demand of paper is declining. In emerging markets this demand might rise in the future. However, the future development of economies like Africa and India might even skip the phase of a ?paper industry? and consumers start immediately using electronic equipment. By putting the three Swedish companies in comparison we find that SCA is the most promising company to respond to the future challenges in the industry. Firstly, they are the largest owners of forest in Sweden, giving them an advantage in continuous flow of input factors in the production. SCA is geographically wide spread meaning that despite decrease in demand in the European market, SCA can profit from increase in demand in emerging countries. SCA?s diversified product supply corresponds well to products that are demanded in both the Occidental world and in Emerging markets. SCA has an advantage in market leadership in personal hygiene products, as well as in cost leadership. Our findings are being supported when we look at the Return of Capital employed figure: Compared to Holmen (7.6%) and Stora Enso (8.7%) SCA has 9.4% which indicates how efficient and profitable SCA is working with the total capital employed. ...read more.

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