EXECUTIVE SUMMARY

Gunns Limited is the largest paper manufacturing company in Australia. It has the largest hardwood and softwood forests products in Australia. The company was established in 1875 and has three divisions, which are forests products, Gunns Plantations Limited and other businesses such as Pulp Mill Project and Gunns Timber Products of the company (Hubbard & Beamish 2010). Gunns Company is expanding rapidly since its inception. The company is laid on an over two hundred thousand-hectare plantation estate and it is still expanding by acquiring other small businesses dealing with pulp and paper manufacturing. This provides high rate of growth opportunities for manufacturing activities and forestry groups. On early 2010, the company announced that a Bell Bay Pulp Mill project in Tamar Valley, Tasmania would be using plantation timber only for its operations (Gunns Limited 2006). This project will add key value to the business by seeking ways to enhance sustainable and renewable forest estate.
1.2 AIM
The aim of this report is to analysis external and internal environment of Gunns and the Australian pulp industry.
1.3 SCOPE
The resources and information that was used for this assignment were from e-journals, websites, and text book.
2.0 THE BUSINESS OF GUNNS
Gunns Limited is the largest paper manufacturing company in Australia. It has the largest hardwood and softwood forests products in Australia (Hubbard & Beamish 2010). The company was established in 1875 and has three divisions, which are forests products, Gunns Plantations Limited and other businesses such as Pulp Mill Project and Gunns Timber Products of the company (Hubbard & Beamish 2010). Gunns Company is expanding rapidly since its inception. The company is laid on an over two hundred thousand-hectare plantation estate and it is still expanding by acquiring other small businesses dealing with pulp and paper manufacturing. This provides high rate of growth opportunities for manufacturing activities and forestry groups. On early 2010, the company announced that a Bell Bay Pulp Mill project in Tamar Valley, Tasmania would be using plantation timber only for its operations (Gunns Limited 2006). This project will add key value to the business by seeking ways to enhance sustainable and renewable forest estate.
The vision statement of the company is to deliver growth to their employees, provide an environmental result in timber and deliver everlasting benefits to society. The company’s vision is the driving key towards its achievements (Mallin 2009). The mission statement consists of teamwork to create continuous working environment, seek integrity always, search for new techniques and knowledge to improve the business, formation of an industry producing sustainable timber and facilitate in the successfulness of the company. The mission statement of the company is effective according to the achievements it has and plans that the company has laid to fulfill its mission. The success of the company, which is mentioned in its mission statement, can be seen from the profit it makes and the high rate at which it is expanding.
From the inception of Gunns Limited, the company has been involved in various businesses and sectors of the economy. The company is involved in production of raw materials, provision of services to other consumers and other producers, manufacturing and in wholesale services (Robertson 2012). The various divisions of the company offer all these services. Gunns Timber Products is one of the divisions of the company, which consists of skilled workers who understands the capabilities and strengths of the business (Hubbard & Beamish 2010). This enhances the customer relationship on the available opportunities in the market and promotes growth of the business in a profitable way. Gunns Timber Products has more than four wholesale and distribution services. It also has two softwood plantations, which have milling sites across Australia (Hubbard & Beamish 2010). This division provides services to other producers and consumer. It is also involved in wholesale services. It is also a raw material producer since it has softwood plantations.
3.0 THE BUSINESS STRATEGY
The company has the plantation division, which is involved in production of wood and walnut lots. These plantations offer guaranteed provision of raw materials to the company and other businesses. The mission of Gunns Plantations is to utilize the best use of natural resources by growing and harvesting forest in a sustainable way. The growing and harvesting of trees of the company does not affect the environment (Hubbard & Beamish 2010). Forests Products is another division of Gunns Limited, which plays a crucial role of managing plantations for production of fiber, manage natural forests and implement conservation values. It is involved in timber harvesting, processing of pulpwood, construction and maintenance of roads and market products to external markets. It is also in general management of forests.
The division of Forest Products is involved in production of timber, which is the raw material, manufacturing of pulpwood from timber and sell the pulpwood and timber to consumers and other producers (Hubbard & Beamish 2010). The Gunns Limited Company is intending to set up a pulp mill in Bell Bay in Tasmania, which will increase the company’s production of pulp, increase its exports to other continents and eventually increase its profits (Kari &Gunns Limited 2007). This mill is proposed to be fed by 100% plantation timber from its start because is located adjacent to an existing wood production of the company.
Gunns Limited is an old and rapid growing pulp and paper producing company in Australia. The company’s strategic divisions make it be a producer, manufacturer, wholesaler and retailer. This shows that the company is a complete industry on its own. The vision and mission statements of the company give it a path to follow and achieve its goals. The use of natural resource is sustainable because the resource is renewable, environmental friendly and a sustainable and natural building product in the world (Mallin 2009). The Gunns Company has a challenge to produce and offer sustainable markets for softwood in Australia and foreign markets (Robertson 2012). It can achieve this through consistency production of quality products, service reliability and trustworthy relationships between consumers and employees. The company’s stability and expansion are indications of more production of wood, increased exports and increased reliability and satisfactory services to the community.
The Gunns is the largest integrated hardwood and softwood forest products company in Australia. It focuses on forest products such as wood fiber exports and timber products, plantations includes 14 managed investment schemes with over $550 million in funds under management and other products like Tamar Ridge winery, construction activities in Tasmania and a network of Mitre 10 retail hardware outlets.
Because of the development of countries, the requirement of wooden products has been raised up. There are more than 23% of virgin pulp fiber and over 30% of all paper produced was traded on world markets and prices fluctuated based on relative movements in demand growth and increase in supply capacity. For Australia, it focuses on the wooden products’ exporting. Because of that, the main customers of Gunns not just include the domestic market, but also remains the countries that has strong needs of wooden products.
4.0WHAT MAKES COMPANY SUCCESSFUL
Gunns is a company which produces papers. Papers are coming from the woods and people would all know that lumbering could destroy large area of forest and it has harmful effects to the environment. Gunns has made this view become hard to imaging. Plantation estate is one of the strategic that Gunns hold the line (Gunns Limited 2012). Currently, to have the suitable and renewable sources to the market is what Gunns required. Gunns have made good environmental control so that when they lumbering the forests, it won’t bring to much negative affects to the environment. Gunns manages more than 275,000 hectares of freehold land and those have about 200,000 hectares of plantation (Gunns Limited 2012). To keep the environment without been destroyed during the lumbering, Gunns has did lots of work on it. This is also one of the reasons that Gunns are so successful. The employment of Gunns is to hire foresters, agricultural scientists, environmental scientists, engineers and accountants. The people that Gunns employ are all professionals, and those employees are profession on each areas, market control, environmental protection, renewable sources and so on (Gunns Limited 2012). So that Gunns can keep the position that in the market by all those professional employees. Gunns also values the balance between economic, social and environment responsibility and to achieving the goals without breaking those values (Gunns Limited 2012).
5.0 THE STAKEHOLDERS AND DECISION MAKING
Populus has stated that there are five key stakeholders for Gunns, the environment, the government, employees, markets, and the public (2011). Firstly, the primary material for Gunns’ products is from lumbering, this could bring harmful damage to the environment. The holding capacity of environment from lumbering is limited. Secondly, the policies that government institute is directly affects business of Gunns. Thirdly, professional workers are the kernel to Gunns. Fourthly, the strategies that Gunns made, the goals that Gunns would to achieve are all based on the market requirements, to success in the market are required to have the suitable strategies and suitable goals. Fifthly, public is important to an organisation which could bring damage to the environment, the forces of public is unimaginable. Too much harmful damage to the environment might elicit the resentful of the public.
6.0EXTERNAL ENVIRONMENT
6.1PEST ANALYSIS
Australian government has stated (National Forest Policy 1992) that the native forests have to be preserved. Because of that, most wooden products companies have shut down sawmills in domestic area. Instead of that, they focus on the paper recycling. As most of individuals have the awareness that the resource of their country has being run off, they have become more favorable to the company that is environmental friendly. This policy has been almost existed in most countries, and it leads the increase and development of the technology of paper recycling. For the Australian, it collected and recycled a higher proportion of the newsprint and packaging paper and board consumed than that in most countries—64% (77% for newspapers) compared with 50% globally. This has to thanks to the well education that Australian government offered to individuals.
For the entire world market point of view, due to the solid demand from China and India, the global consumption has increased rapidly. It was expected that demand would rise at a faster pace that supply due to further investment in recycled-based paper and packaging paper capacity in the developing world and a modest increase in the usage rate of recycled paper in the develop world.
6.2POTTER’S FIVE-FORCES ANALYSIS
6.2.1RIVALS AMONGST EXISTING COMPETITORS
The forest products, which include the softwood and hardwood productions, sawmills and fiber facilities, is the major part of Gunns’ activities. Regard to this, this company has a large number of competitors. Just take the communicating paper for example, the traditional paper production needs longer process and costs more that the modern one in developing area such as China, India and Brazil. This countries has sufficient resources and cheaper labor for production, what is more, the factories and labors are larger than Australian, which can reduce the cost, that make Gunns stay in an adverse position in pricing competition.
Gunns also has 8 sawmills. According to the National Forest Policy, the conservation of the forest has been concentrated by the local government. After that, most sawmills have been shut down. And companies have put sawmills to other developing countries such as India and Brazil. Due to the immigration of sawmills and the national policy, the ones that settled in other countries would take the place of the traditional ones.
6.2.2TREAT OF SUBSTITUTES
For the softwood products, it is major focus on the newspapers or magazines. Take newspapers for example, the major income of it would be the advertising fee, and it does provide considerable income. However, as the appearance of Internet, more marketers transferred their money to the Internet market. The shift consumer and audience lead the immigration of the advertisement (Web Ad. Vantage 2007). As the reduced requirement of newspapers and its income, the softwood products have to face the crisis that is the replace of the Internet. This substitute would be the main competitor for Gunns, and it would last for next hundred years.
6.2.3BARGAINING POWER OF SUPPLIERS
In the past time, the bargaining power of the suppliers is very low due to Gunns has sawmills and other factories that can offer raw materials by itself. However, after 1992, when the National Forest Policy has been announced, most domestic sawmills have been shut down so that they can preserve the native forest. Because of that, wooden products companies have to accumulate raw materials from the imports. Countries like India and Brazil are the main suppliers. In addition, to preserving forest, the paper recycling companies also become the supplier. These two suppliers always influence the price of the wooden products, and the bargaining power of supplier would increase.
6.2.4BARGAINING POWER OF BUYER
Except of the domestic market, Gunns also has oversea markets. It exports hardwood and softwood products to other countries that have solid demand such as China. China, as the Australia’s largest market for recovered paper, has a decreasing demand in recent decades. It cause the price of the export products has been reduced. The bargaining power of buyer has being raised up.
6.2.5TREAT OF NEW ENTRIES
After the risen up of China, India and Brazil, the market share that Australia has got has been shaken. Developing countries has lower price of raw materials and labors that can reduce the sales price. Traditional plantation process like Australia has would be defeated by the newly efficient one.
7.0 GUNNS AND THE AUSTRALIAN PULP AND PAPER MANUFACTURING INDUSTRY
7.1ANALYSIS OF THE INTERNAL ENVIRONMENT
Gunns limited is Australia’s largest integrated softwood and hard wood forest Products Company. By the beginning of 2010, the company acquired the assets of the Great Southern Limited. The company was established 1875, and was listed with three divisions namely: Forest products wh8ich focuses on the forest plantations, and wood fiber exports; plantations which includes managed investment schemes for wood lots and walnuts, with fourteen managed investment schemes with over$550 million in funds under management, and management of plantations that guarantees supply of raw materials to Gunns and other business operations; and the other divisions including Tamar Ridge Winery, construction of activities in Tasmania, and a network of Mitre 10 retail hardware outlets.
7.2KEY COMPETENCIES
According to Ogle (2005) the core competencies of Gunn Limited are those characteristics that make the organization standout such as meeting new demands, exploiting new opportunities, and improving performance, when faced with any kind of situation in the business and marketing landscape. Therefore, the desirable characteristics of Gunns limited include: they have a high degree of control and coordination of marketing plans into the overseas markets such as China; the dissemination risk is another core competency such as being cost effective, that is mainly based on their rich forestry resource, and the standardized hardwood flooring requires little technical knowhow thus requires low risk dissemination; resource commitment is a concentration strategy that is based on the long term view opportunities, such as the heavy resources are made to seize the market potential, with the heavy investments involving considerable risk, thus resulting into greater profits; flexibility is yet another core competency, since Gunn is able to operate in diverse political and economic environments; and ownership , which implies that the high degree of control on coordination and production requires a great deal of equity participation (Walker, 2011).
Some of the core competencies and resources that distinguish them from the completion include the hard wood floorings that are produced with very high quality with a competitive price, and thus the competition strategies focuses on quality, stability of raw material supply, service, and price.
7.3THE CHALLENGES THAT THE COMPANY HAS IDENTIFIED
Gunn’s business strategy is to focus on refining, as well as, growing its core competencies within the forestry establishment, management and downstream timber processing and sales. The future of the pulp and paper industry is in some kind of a crisis, with major challenges coming with employment, investment, and falling exports (Woodchips, 2005). Therefore, if policy settings are corrected by the authorities and the competitive advantages are maintained in the pulp and paper manufacturing, as well as, supported by the commitment of innovation, sustainability, and productivity within the industry.
Denholm, (2011) argues that Since Australia is close to the growing Asian market, there are significant opportunities for import substitution, as well as, for the exports of the pulp and paper products. The current sustainable fiber resources, competitively price energy, and skilled labor force provides great opportunities for industry to grow and prosper.
Gunn limited need to readjust their strategy , so that they will be able to cope with the current volatile economic conditions, by increasing product innovation and diversification, increase import substitution and export. Otherwise, if Gunn Limited that not seize into action, the competitive advantages enjoyed by Gunn limited will be lost, or under invested, thus will lead to declines in profitability and further loss of employment opportunities in the future.]
7.4THE EFFECT OF CARBON TAX ON THE CURRENT STRATEGY OF THE COMPANY
The current marketing strategic plans of Gunn limited will have to be changed, so that they will be able to cope with the effects of the introduction of the carbon tax in Australia. The rising carbon dioxide levels within the atmosphere are a big issue related to the disadvantages of global warming (Lyons, 1998, pp. 100)
Trees or the forests, which is the main resource of Gunn Limited, have evolved over millions of years to become the most incredible , and powerful at withdrawing the carbon elements from the atmosphere. The introduction of the carbon tax will greatly affect Gunn Limited, as it is one of the companies will always pay a fixed rate, and they deal with trees, which highly influences a clean and safe environment. Therefore, they will have to come up with more innovative, as well as, have product diversification in place to enable them cope with the introduction of the carbon tax (Denholm, 2011).
In the global perspective, pulp and paper industry is the fifth largest energy consumer, which accounts for about four percent of the world’s energy use, and the pulp and paper industry also uses more water to produce a ton of product than any other industry. The introduction of the carbon tax will give Gunn Limited the opportunity convert the waste to syngas, that is used to generate power and heat, therefore, Gunn Limited will have to undertake innovation and diversification into energy production, and other chemical from biofuels for other businesses and for its own use.

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