1.0 IntroductionGunns ltd is the largest incorporated softwood and hardwood company in Australia. The company was established in 1975 and it has been able to continuously expand its business. The company contains three divisions which include Gunns plantations and forest products and others. According to Mallin (2009, p. 148) Gunns Ltd operations are crucial to the economic development of Australia. The company favors to export its products in Asia due to the transport cost advantage. The company is committed towards maximizing the value of its shareholders, contributing to the society and ensuring economic growth in the country.
The growth in world paper consumption has assured the company of its continued growth. This report aims at identifying the company’s strategy after analyzing both the internal and the external environments. This will help in understanding how the strategy has helped the company to gain competitive advantage. Finally, the report will try to determine the feasibility of the strategy and determine whether the company has the competence to maintain and implement the strategy. 2.0 Forest Products AnalysisThe forest division in Gann Ltd is concerned with the production of hardwoods and softwoods through its operating sawmills.
According to Daft and Lane (2009, p. 65) the companies environment contains two layers which include the task and the general environment. The general environment affects the organization indirectly and includes economic, social, cultural, technological, international and natural factors. On the other hand, the task environment includes all the sectors that affect the day to day operations and transactions in the organization. This analysis will help to understand the forest products division general environment. 2.1 Economical EnvironmentLimited financing alternatives since the withdrawal of ANZ funding in may 2006 due to public pressure.
Griffin (2012, p. 134) states that limited funding makes it impossible for the division to effectively finance its activities and operations. This has in turn made it difficult for the division to maximize its revenues due to cancellation of many projects. Global financial crisis has made it difficult for the division to access and obtain funds from investors. Global financial crises squeezes credit lines and this reduces the flow of finances to the division (Malik at el 2009, p. 89). Stringent environmental requirements from potential investment partners have prevented the division from obtaining financial support.
The environmental requirements are difficult to meet and this means it has become impossible for the division to obtain much needed funds. The increase in the value of Australian dollar has greatly reduced the prices of products produced by the division and this has led to the closure of some divisions manufacturing facilities in Australia. This is because most of the division’s products were mostly meant for export. Increased cost of paper making machineries requires the division to come up with large amount of capital.
This has in turn made it difficult for the division to conduct its operations. The green energy scheme has enabled the division to reduce its energy costs and improve on its efficiency in utilizing energy. Green energy enables firms to reduce their energy bills hence this leads to an increase in their profits (Barysch at el 2011, p. 54). Increased costs associated with transporting raw materials to the division saw mills and the high cost of transporting paper plants to the final customers has significantly increased the division’s operating costs.
This has in turn reduced the division’s profits. 2.2 Social factorsThe Australian communities have always resisted the divisions operations on environmental terms basis. The Australian society views the division’s activities of cutting trees as a way of polluting the environment. Overcoming the increased society resistance towards the divisions operations is a big challenge. The process of breaching wood pulps is considered to contribute to environmental pollution and this has made the society to object the division’s operations. Change in culture of the society towards preferring to purchase books online and this has a direct negative consequence on the division’s products.
Currently the society prefers to purchase online books and this has led to a reduction in demand of papers and this has reduced the division’s profits.