Lenzing Ag Case

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Lenzing AG: Expanding in Indonesia
Case Review


Lenzing AG is one of the worlds largest rayon fiber manufacturers, originating in Lenzing, Austria. In 1938 Lenzing AG was founded, starting pulp and viscose fiber production.

Up until the 1980’s, Lenzing was a company that held its production and management in the same country and town where the company had originated. Until one day , the Chairman of Lenzing had agreed to go into a joint partnership with an international investor. The joint venture was with an Indian entrepreneur by the name of Ashok Birla, who saw opportunity in Indonesia for Lenzing and the rayon industry within. Lenzing viewed this as an opportunity to break out of their domestic Austrian market, and tap
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As a producer of rayon, Lenzing’s most important fundamental constituent is dissolving grade pulp. This is a rather uncommon form of pulp, in which they have been purchasing from Brazil to their production plant in Indonesia. This would be viewed as a weakness, as in Indonesia there are 14 pulp producers, none with the technology to create the dissolving grade pulp, but pulp none the less. I believe that Lenzing has an opportunity to create an agreement with one or more of these local pulp producers, to enable them to produce the necessary grade of pulp.

As rayon requires a large amount of pulp for its production, they have purchased a percentage of a company in Brazil to meet their pulp needs. For Lenzing, this was a valuable purchase and has made it possible for them to continue the production of rayon in Indonesia. Although, I believe that there is an opportunity locally that would satisfy their need for pulp. Indonesia has 14 producers of pulp, none of them with the technology to create the required grade that is needed in the production of rayon. Rather than purchasing a percentage of the pulp company in brazil, and having to ship the pulp time after time internationally, it could have been a more economical transaction with the Indonesian pulp companies. There could have been an opportunity to

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