Case 6-2 Birch Paper
Case 6-2 Birch Paper Company
Internal Environment • Medium sized, partly integrated paper company • Portion of paperboard output was converted into corrugated boxes by the Thompson Division • Four producing divisions and a timberland division to supply part of company’s pulp requirements • Divisions judge independently on basis of profits and return on investments • Decentralization successful, company’s profits and competitive position improved
External Environment
Customer/Supplier Power: N/A
Competition: Level of competition appears high between paper companies. Bids of outside companies similar, low versus internal bid from Thompson Company
Threat of Substitute Products: Threat of substitute product high as product is not specialized and easy to replicate.
Threat of New Entrants: Seemingly low threat of new entrants due to high competition within the industry based on low bids. Also manager, Brunner, is concerned with high overhead costs of the operation. High overhead costs make the industry unattractive to new entrants
Business Strategy Identification Corporate Level
Related Diversified- On spectrum of diversification, most closely linked to a related diversified company. Four divisions each produce different products however share resources within company. However divisions are not dependent on each other as they are allowed to take outside bids from other suppliers and Timber Division only provides some of pulp requirements.
Business Unit Level Strategy
Mission – Hold strategy as management is making continual changes to try and improve profits. Brunner implementing a full-cost bid quotations versus cutting prices. The company seems to be geared to the protection of the business unit’s market share.
Harvest may be possible as the paper company is making full cost bids which may be at the expense of market share overall.
2. Competitive Advantage – Low cost: Although there is concern over full bid costs,
Internal Environment • Medium sized, partly integrated paper company • Portion of paperboard output was converted into corrugated boxes by the Thompson Division • Four producing divisions and a timberland division to supply part of company’s pulp requirements • Divisions judge independently on basis of profits and return on investments • Decentralization successful, company’s profits and competitive position improved
External Environment
Customer/Supplier Power: N/A
Competition: Level of competition appears high between paper companies. Bids of outside companies similar, low versus internal bid from Thompson Company
Threat of Substitute Products: Threat of substitute product high as product is not specialized and easy to replicate.
Threat of New Entrants: Seemingly low threat of new entrants due to high competition within the industry based on low bids. Also manager, Brunner, is concerned with high overhead costs of the operation. High overhead costs make the industry unattractive to new entrants
Business Strategy Identification Corporate Level
Related Diversified- On spectrum of diversification, most closely linked to a related diversified company. Four divisions each produce different products however share resources within company. However divisions are not dependent on each other as they are allowed to take outside bids from other suppliers and Timber Division only provides some of pulp requirements.
Business Unit Level Strategy
Mission – Hold strategy as management is making continual changes to try and improve profits. Brunner implementing a full-cost bid quotations versus cutting prices. The company seems to be geared to the protection of the business unit’s market share.
Harvest may be possible as the paper company is making full cost bids which may be at the expense of market share overall.
2. Competitive Advantage – Low cost: Although there is concern over full bid costs,