Esc Rennes | | Forward Integration or Horizontal Expansion? | | Costa Agustina | 31/03/2011 |
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Arauco: Forward Integration or Horizontal Expansion?
Introduction:
Arauco was formed through a merger between Industrias Arauco and Celulosa Constitución in 1979. With the pass of the years the company become one of the largest timber plantation owner in Latin American and Chile`s largest exporter of timber
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The second phase of the project includes constructing a pulp mill and will cost US$1 billion.
Today (2004) Pérez main problem is that he has to decide whether the company should go through a horizontal expansion or a forward integration. In others words, if the company should continue with the second phase of The Nueva Aldea project becoming the largest market pulp producer in the world and having the possibility of foregoing other large projects in the next decade or to take advantage of their low costs in pulp production by forward integrating into paper manufacturing.
Evaluation of the two alternatives:
As regards the horizontal expansion, there are several points that must be taken into account as they demonstrate that this option will be the correct one: * This expansion will grow the company market share because they have a cost advantage. * For a company is better and easier to grow in a sector that they are presently functioning. * The market seems to be moving in favor. * As a result of a horizontal expansion the company can achieve economies of scale and reduce significantly their costs. * Pulp is Arauco´s main industrial activity, generating up 52% of EBITDA * Pulp production is the core competency of Arauco. * Becoming the market leader will allow them to control supply and demand of the market of pulp. * They have young forests. * Arauco is one of the world´s premier forestry enterprises
• The company has the opportunity to grow in various markets and aquire new customers such as malls, hotels, offices, and motels not only in Canada but as well as the United States.
This strategy will lead you to a next platform and increase the growth. It is
Depending on the execution and implementation of an expansion and its success rates, shares could go up or down in value accordingly, which then effects the companies’ shareholders.
Should La Casa de Las Botas embrace expansion or maintain the status? Which segment Jorge should focus on if he plans to expand the markets?
My recommendation is for the company to stay focused on its main competitive advantage of supplying a
This report is going to describe three basic different proceedings on how he can increase his production. Take over the old machines from the factories in Guarulhos, invest in new machines from Pan-Orient or come up with new ideas how the current
The company can afford to invest more fixed costs and variable costs (shifting assets from “A” to “C”) for additional “C” capacity thereby maximizing capacity utilization.
On the other hand, the company’s products would be more seen by consumers, which means the demand for their products probably increase.
* A broader capital base gives the company more access to credit which gives the company an option to venture into new business opportunities
* Although not as profitable, this positioning strategy will still make a profit and build brand equity.
In recent years, the company experienced a rapid growth and expects a substantial increase in sales in the spring of
We can already see that with their current expansion into the food delivery business. Instead of partnering with an already existing food delivery service, they are entering that market.
The purpose of this report is to assess the viability of the acquisition of Royal Paper Corporation’s (Royal) Monticello mill and box plants by Atlantic Corporation (Atlantic). This will be conducted through the evaluation and analysis of whether this project is profitable and also if this is a sound strategic move.
Analyzing the trends and consumer behavior indicates that horizontal expansion will be necessary to capture the full and growing target market. Horizontal expansion can be
In the future, licensing will keep increasing and its percentage of revenue will grow, especially if the management adopts a strategy of capitalizing on it.