ARAUCO A FORWARD INTEGRATION OR HORIZONTAL EXPANSION PDF

LinkedIn Forward Integration or Horizontal Expansion In the current scenario, Arauco has two options available for expanding via integrations pertaining to forward and horizontal expansion; these options are entering into paper market and constructing a new pulp mill of the new Valdivia plant. Arauco should be looking forward for the horizontal expansion in its business operation by investing into the new pulp mill that was a part Nueva Aldea project. This is because Arauco has been operating in the pulp market since a long time and it is already aware of the market of pulp in US. It should refrain from forward integration in paper manufacturing industry as the environmental regulations have restricted the deforestation and all forms of paper manufacturing.

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LinkedIn Forward Integration or Horizontal Expansion In the current scenario, Arauco has two options available for expanding via integrations pertaining to forward and horizontal expansion; these options are entering into paper market and constructing a new pulp mill of the new Valdivia plant. Arauco should be looking forward for the horizontal expansion in its business operation by investing into the new pulp mill that was a part Nueva Aldea project.

This is because Arauco has been operating in the pulp market since a long time and it is already aware of the market of pulp in US. It should refrain from forward integration in paper manufacturing industry as the environmental regulations have restricted the deforestation and all forms of paper manufacturing.

The competitive advantage of Arauco is evident in the US market in contrast to its competition. Arauco is leading the pulp industry in northern America due to its low cost production capabilities. This had led Arauco to gain positive cash flows throughout the pulp cycle. Arauco has been able to effectively export the pulp all over the world. The new plant will add , million tons capacity that is equivalent to metric tons. The production capacity of new plant is The discount rate using the equity beta method was derived to be The market value of equity is , Problems in Forward Integration The global paper manufacturing market was experiencing a very soft demand since past three years.

There had been no real growth in monetary terms since the year The United States currency is the investment setter in the paper manufacturing market. The foreseeable future of paper manufacturing market does not seem to be bright at all. This is because European papers prices have lowered down significantly, hence, deteriorating the US export market of paper significantly. There are severe environmental issues prevailing in the paper manufacturing market. There have been extreme environmental pressures to restrict the manufacturing of paper in the light of concepts such as reducing, reusing, and recycling.

This had pushed the government to intervene and regularize the production and manufacturing of paper. The government has levied strict regulations to restrict forest cuttings along with reduction in chemical usage of by-products. This has significantly deteriorated the supply of paper as the operations of paper factories have been restricted. The restrictions in gas emissions and the increasing use of recycled paper have confined the production of papers to limited supply.

The major disadvantage to this approach was that its yield was quite less……………… This is just a sample partial work. Please place the order on the website to get your own originally done case solution. Related Case Solutions:.

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Arauco (A): Forward Integration or Horizontal Expansion?

Conclusion There is an obvious need for transformation in this company to protect its debt holders, shareholders, and employees. Eventually there will be restrictions placed on these companies causing them to rely solely on their plantations. The slow inventory production and turnover could cause significant problems for Celulosa-Arauco. Celulosa-Arauco should seek to limit risks that they have incurred by operating in a better planned and more organized manner. This is evident from the increase in educational spending but lack of functional computer software for students. The immense amount of Chinese characters creates great constraints on using non-paper educational tools. The fact that Chinese characters are not standardized across the different provinces should also add to a long-term consumption of paper.

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Arauco A Forward Integration or Horizontal Expansion Case Study Solution & Analysis

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