Case Analysis-Arauco

Satisfactory Essays
Professor Stinson
Mgt 525: Arauco Case Study
(This case analysis was completed by Lily and Roger)

1. Background

Arauco was formed through a merger between Industrias Arauco and Celulosa Constitución in
1979. After that, the company began its expansion like purchasing land and plantations and installing new technology, purchasing the company Alto Paraná in Argentina in 1996, purchasing its third mill in Chile in 2000, and building new plant which called Valdivia mill in late 2001 and the plant had opened in January 2004. With these expansions, Arauco had become one of the world’s premier forestry enterprises in terms of plantation areas and yields by 2004. The company had three main product segments which include pulp products
…show more content…
These two possibilities will all lead the paper producers to find ways to reduce the cost of the production; and the largest proportion of costs is raw material which mainly from pulp. The paper producers will pay great attention to the sales price of pulp. To some extent, it will affect the pulp prices in the market. For Arauco, as mention in the first point, it should keep lower costs to provide low price and high quality pulp to meet the needs of the paper producers. But in this way, it will transfer part of its profits to the paper producers, its cost advantage had not greatest played.

Third, the threat of substitute products was strong. The main threats in this point came from the strict regulations of governments and greater environmental pressures from the public. Governments had been increasing regulations for pulp and paper companies to avoid clear-cutting forests, to reduce chemical by-products such as chlorine, limit gas emissions from the operation of factories, and increase recycling. The public awareness of environment become more and more strong, they are very concerned about the environmental pollution and destruction industries like the pulp and paper industry. The three “R” slogan which includes reduce, reuse and recycle led to the generation of new alternative industries and increasing capabilities to recycle paper. It was estimated that about 42% of paper was recovered for
Get Access