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 elected to produce all of their pulp through the kraft process. Recycled fibers could be reused between five to seven times; after seven times, the fibers became too short for papermaking. It had three paper manufacturing facilities which together producedtons of product per year.

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Adapted from Aracruz, presentation to Merrill Lynch dated March 10,www. The slow inventory production and turnover could cause significant problems for Celulosa-Arauco. The remaining wood was purchased from third-party forest owners.

Cutting the current dividend and transforming the company into lean, efficient, well-managed segments with appropriate oversight fprward crucial at this point. By continuing to use our site you consent to the use of cookies as described in our privacy policy unless you have disabled them. How About Make It Original?

In addition to market pulp, the company also operated a real estate division in the U. Like its main rival, International Paper Co, Georgia-Pacific was ofrward vertically integrated competitor in pulp, paper, lumber, plywood, oriented strand board, adhesives, and a number of paper consumer products. HBS cases are developed solely as the basis for class discussion. View our pricing guide or login to see prices.


CMPC was founded in with the sole objective of covering the national demand of paper. The worldwide paper market was estimated to be greater than million tons at the end of No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

It was the leading sawmilling company in the southern hemisphere, with an annual production capacity of 2. As well, investments made to improve our assets, our operational strength, and economic conditions—like the favorable exchange rate for w industries—have all helped to reduce operational costs.

Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Arauco also sold logs and a variety of wood pieces on the open market.

Tax ID No Cite View Details Purchase Related. In addition, major paper companies, the sole buyers of market pulp, were typically backward- integrated into the production of pulp.

The company sold approximately 2. Go to advanced search. Forward Integration or Horizontal Expansion?

While demand is the most important factor behind improving prospects for paper prices, we expect rising cost pressure from higher pulp prices will help turn paper prices. Production of Market Pulp Pulp mills were highly capital intensive.


Arauco (A): Forward Integration or Horizontal Expansion? | The Case Centre

Ledesma manufactured about 85, tons of paper a year, although most of the raw material it needed to produce pulp came from sugar cane. Sometimes, price negotiation escalated to local government as the forestry industry was the lifeblood of the Misiones province. ByCMPC was involved in forestry, pulp, intgeration and cardboards, tissues, and paper products with production facilities in Chile, Argentina and Uruguay. Arauco also tightly controlled its inventories, attempting to sell its bleached and unbleached pulp at favorable market prices.

In Chile, the harvesting of pulp logs could take place 16 to 18 years after planting and high-quality saw logs could be harvested in 25 years. Inthe country experienced a low inflation rate of 1. Ramon Casadesus-Masanell and Neil Campbell. Forestry operations, although still a sustainable arauck, is undergoing greater scrutiny due to raising environmental concerns.

It also made specialty wood products for the flooring and furniture markets. Sorry, but copying text is forbidden on this website. Eric from Graduateway Hi there, would you like to get an essay?