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Value-added strategies and forward integration in the Swedish sawmill industry: positioning and profitability in the high-volume segment

Value-added strategies and forward integration in the Swedish sawmill industry: positioning and... Abstract The changing market conditions for the Swedish sawmill industry place a focus on a better understanding of the pros and cons of value-added and forward integration strategies. The purpose of this article is to describe and explain recent value-added strategies in the Swedish sawmill industry. The study includes strategies from 13 of the 15 largest sawmill companies for the period between 2002 and 2005, describing a differentiation between value added in primary sawmill production and forward integration into secondary production. It also aims to relate some basic conditions, such as company size, company growth and corporate strategy, to value added and forward integration to profitability. The results show strong positive and significant correlations between forward integration, value added in primary production (somewhat weaker) and unit revenue, and profitability measured as return on investment. There were no strong or significant correlations between size and profitability, playing down the importance of economies of scale (among these already large companies). An interesting result is the much higher profitability of the buying sawmill companies compared with the forest corporations, stressing the importance of both a long-term strategy when investing in value-added activities and ultimately the priorities of ownership. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Scandinavian Journal of Forest Research Taylor & Francis

Value-added strategies and forward integration in the Swedish sawmill industry: positioning and profitability in the high-volume segment

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References (38)

Publisher
Taylor & Francis
Copyright
Copyright Taylor & Francis Group, LLC
ISSN
1651-1891
eISSN
0282-7581
DOI
10.1080/02827581.2010.496738
Publisher site
See Article on Publisher Site

Abstract

Abstract The changing market conditions for the Swedish sawmill industry place a focus on a better understanding of the pros and cons of value-added and forward integration strategies. The purpose of this article is to describe and explain recent value-added strategies in the Swedish sawmill industry. The study includes strategies from 13 of the 15 largest sawmill companies for the period between 2002 and 2005, describing a differentiation between value added in primary sawmill production and forward integration into secondary production. It also aims to relate some basic conditions, such as company size, company growth and corporate strategy, to value added and forward integration to profitability. The results show strong positive and significant correlations between forward integration, value added in primary production (somewhat weaker) and unit revenue, and profitability measured as return on investment. There were no strong or significant correlations between size and profitability, playing down the importance of economies of scale (among these already large companies). An interesting result is the much higher profitability of the buying sawmill companies compared with the forest corporations, stressing the importance of both a long-term strategy when investing in value-added activities and ultimately the priorities of ownership.

Journal

Scandinavian Journal of Forest ResearchTaylor & Francis

Published: Oct 1, 2010

Keywords: forward integration; ownership; profitability; sawmill industry; value-added strategy

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