Strategy plan: Strategic assignment on Timber plantation industry

Introduction:

The Timber plantation industry has been in existence since a long time. There has always been unlimited scope for the timber produced but there is very little space where the raw material for the timber, i.e. the trees can grow. Our organization ABC ltd has its task cut out if it wants to increase earnings in the next year, as the industry has a slow rate of growth and can be capital intensive. As per Brent and Mendelsohn (1999) the industry is of environmental importance and also that it has a lot of localized players in the UK and hence to be a real reckoning force we shall have to deal with a lot of localized competition.

Industry dynamics:

To formulate a marketing strategy for the organization we shall have to first look upon the dynamics of the timber plantation industry.

The industry is based upon the most basic resource that we have since the beginning of time, trees. However the utilization and the type of trees that are needed to be grown in the area that have been purchased by us, is something that we need to look into. UK soil supports a variety of tree plantation including various varieties of economically viable trees. The trees that can be grown in the UK weather and soil type include Alders, Ashes, Birches, Beeches, Elms, Hawthorns, Junipers, Maples and Oaks among others. The trees that can grow in UK have had a variety of uses in the past including being used for gunpowder manufacture, furniture, match sticks, oars, paddles, tool shafts and handles, walking sticks, aero planes, cart and carriage wheels. Current uses of the trees have changed with times and there are a lot of other industries where the trees have a potential for growth as a raw material. The organization has to take advantage of those categories of trees that are major requirements in the wood industry and thus have a large scope of growth in the future and can benefit the growth of the organization too in the long run.
The competition in the industry is highly localized and thus there has to be a very conservative approach to growth that needs to be followed. As per Lockie (2002), the timber plantation industry in the UK has a very limited scope of resource growth due to the limited land availability. However with stricter government norms regarding the growth and thinning stage of the plantation industry cycle the organization has to look into these matters with utmost importance. The trees today have become a highly sensitive environmental issue with local and national governments, and thus the organization has to look into the matter of how to continue in the same business with as little interference from the government as possible. This can only be possible with a well planned thinning and growth period for the plantation of the organization as the thinning period is especially the time that governments take a lot of interest in the activities of the plantation industry. For the organization too excessive thinning of the tree cover for wood can result in a longer turnover period for the next batch of wood. In the past 15 years, there has been a major increase in total forest and plantation areas in developed countries including UK, USA and Australia. According to the UK Forestry Commission, the percentage of total land area designated to plantations or forests has increased from 4.9% in 1908 to over 10% in 1998 In the UK. Thus the organization has to balance the present output with the future output capacity as well.
Thirdly the thing that the organization has to be conscious of is that there are a lot of end product uses for the timber that is produced from the plantation. However there are certain end usages that are more beneficial to the organization than others including those that have uses in the furniture industry. There the timber is sold at a higher rate, but there is only a certain category of tree wood that is considered by the furniture industry. And the wood type has to be grown in certain land bases only and this has to be looked upon by the organization. The growth period of the trees that have are being grown in the plantation are another thing that the organization has to be conscious of, trees like oak and beech can take up to a 100 years to grow to a stage where they can be ready for feeling and use in the various industries where there wood is utilized. Thus the plantation that the organization has is to be taken care of very judiciously as the plantations have a very long turnover time and there cannot be a wrong decision taken regarding the same. Thus they shall have to focus on the product that they offer a little more.
The next industry dynamic that the organization has to be conscious of is the amount of technological advancement that has taken place in the last few decades. Earlier there used to be just wood and iron as the primary raw material for a lot of industries. Today there are various different artificial and hybrid raw materials available for the usage in the same industry for the same purpose. Also there has been a shift in the wood type that is being used in such industries. According to Lewis and Ferguson (1993), the next century of the growing of timber will be predominately based on plantation timber, with the predominant species being softwood types. This is already the main form of timber production in the Southern Hemisphere and is gaining hold, as the major plantation source in the Northern Hemisphere. Hence the organization has to have a concrete plan for the future competition from and for these kinds of raw materials. There has to be certain level of understanding regarding the changes that are going to occur in the near future regarding the future of our industry. Any organization which needs to survive in the future needs to focus on its promotion and thus they shall have to promote their products in an effective manner and such that there are still other industries available that can depend heavily on the products that are being offered.
Lastly the pricing of the product is something that the organization has to look into very seriously. As told earlier there are now a lot of other substitutes available in the market but still wood is a very prime resource that is a requirement in various different industries. The pricing that shall be done by the organization should be based upon the current competitive prices in the market and the costs that have been incurred in the maintenance of the plantation that is owned by the organization.

Competitive position:

ABC ltd works in a very limited industry. It is limited in the sense that there are not a lot of avenues for growth in the industry through innovations. There has to be growth through further expansion by capital induction into the organization. According to J P Morgan Investment Analytics and Consulting the industry average for annualized return is 14.6%. And thus we should look to achieve the same if not greater. The investments have to be one in new resources to make sure that the returns keep on coming. Thus there have to be certain steps taken to make sure of the same. These include:

Buy more plantations: The first and foremost step that needs to be taken to increase the market share and benefit the competitive position of the organization is to buy more plantations as soon as possible. According to Kanowski (1997) 90% of forests have been established for industrial purposes, with the remaining 10% for fuel production. Thus this gives a lot of scope to the organization for expansion purposes. The timber plantation industry is such that an organization cannot grow a tree inventory overnight. It is a decade’s long process where the trees are groomed and grown as per the soil and weather. Here also the case is similar; to grow as an organization we shall have to invest in the current available plantation resources including current lands with the required tree varieties. The organization shall be benefiting from two ways if they are planning to buy out other plantation in the industry. They shall be first of all increasing their own share of the resource that is available to them. Secondly they shall be able to cut out the competition from the market for a long period of time as new growth of trees takes years if not decades till they are timber worth. The organization has to make sure that by buying out they are able to make headway in the type of trees whose timber has major demand in the market. Also they have to look out that the plantations that they buy have old trees as well as young trees and thus this allows them to secure their present as well as future position.
Increased thinning: The next step to increase the market position and to grow in the competitive landscape, as per anonymous (2011) is to increase the production of timber that they shall be providing to their customers. Ands to do this without increasing the number of plantations that they hold is to increase the thinning efforts undertaken by the organization. By doing this they shall be able to increase the production and thus shall be able to increase the profits that the organization is generating as of now. However such a scenario maybe good for the short term but for the long term such a strategy can be lethal, as by reducing the number of trees available for future thinning the organization is itself reducing the chances of getting a better return in the coming years and this can be harmful for any firm.
Global diversification: As per Rubens and Webb, 1987 another strategy that can be adopted by the firm is that they can choose to diversify at a global level. The preferred destination of such a strategy can be Africa or Asia. There is a lot of scope for diversification in these continents. Countries like Zaire, Uganda and other African nations have large plantations that can be purchased at much lower rate than those in developed nations. Also in Asia there are countries like Indonesia, Malaysia and Philippines that welcome foreign investments in their lands and thus this can also be utilized by the organization as a golden opportunity to diversify globally and then utilize the plantations owned there to reach out to a whole new market of customers based upon the trees that are grown in the African and Asian nations.

These strategies are the two most practical strategies that our organization ABC ltd can follow. They have to make intensive capital investment in the first option at the current time while in the second option they shall have to invest in the coming period of time due to the limited future viability of the second option. I would recommend the organization to go forward with the first option as that allows us to increase our market share while at the same time it allows us to secure the organization’s future.

Customer satisfaction:

According to K Willis et al. (2000), the organization has to look at both the market and the non market aspects of the industry for customer satisfaction. The next step for the organization after securing the long term strategy shall be to increase the quality of the current batch of timber that the organization is supplying to its customers. Also they shall have to improve the speed of their delivery to satisfy the customers. The various strategies to do the same include:

Improve the quality of soil: The first step the organization needs to take is to improve the soil quality by getting more soil enriching mechanisms in place. As by increasing the quality of the soil one can increase the quality of the tress that grow there. This however is a long term process and can benefit the organization only after a certain number of years.
Increase speed of delivery: The organization should also try to beat the competition based upon the speed at which they can provide the timber to the end users. They shall have to increase the speed of delivery to beat that of the competition and thus enable them to cash in on the improved speed on the competitive landscape.
Provide semi finished wood: Another factor that can help to lure in more customers is that if the organization vertically integrated in the supply chain in the downward direction and then bought a finishing factory for the wood that they send to customers usually as cut down trees. By doing this they can offer a better solution to the clients and can also let go of middlemen who come into the picture to provide finishing to the wood that is supplied by the organization to the customers.
Set a standard for tree delivery: The last step that the organization should take is that they should set up high quality control mechanisms in place. They should take care that the trees that they are providing to the customers are in the best of conditions. They are not rotted or do not have other ailments. The quality check should help the organization to maintain the highest standards for tree delivery. It should make the customers feel satisfied and should garner the trust of the customers. This should be an ongoing process with no let downs at any point of time for the organization.
Make use of the festive season: Each year the time of Christmas is one of celebration and joy. However for an organization like ours this can be time for the potential growth of our business. During Christmas time there is a high increase in the number of trees that are sold directly to the general public. As we are a firm who has majority customers as manufacturers this becomes a time for us to utilize that untapped market segment and sell those trees that are too small for industrial use but can be the perfect Christmas tree. The organization should look to clear out those trees that have served the requirements of the customers. And it is in the festive season that sales can grow phenomenally and help in the overall growth of the organization.

Thus the organization has to follow the above mentioned steps to increase their effectiveness in the market and create a positive brand image in the minds of the consumer and thus enable the organization to achieve a positive growth in the coming years.

Formulation of segmentation, targeting and positioning strategy:

Segmentation:

The organization works in a highly segmented market as there are many alternative users and uses for the timber that is provided by the organization. As per R Daponte. (2004), the end users differ in the form of the furniture industry, the construction industry, the packaging industry, the automotive industry, the rail industry among others. This kind of variety of users is rarely available for a business to choose for and to form a segmentation chart for the same. The organization has to look into the type trees that are there in the plantation and then segment the market according to the requirements of the different users of the timber. For example Oak is tree that grows easily in the UK weather and soil, and if the organization has plantations with the number of oaks available to them then they can segment their market according to the end users for whom oak is an important material and then reach out to those users that can help the organization to achieve higher sales growth and thus a greater profit level. Another tree which has a lot of potential in the timber market is the Chestnut, as per R Daponte. (2004) this tree can be used when it is cut at a young age and used in the construction markets while larger chestnuts can be used for the furniture markets, the flooring industry and for wood turning.

Another form of segmentation can be based upon the geographical position of the customers. There are many trees that can be grown in plantations in the UK and cannot be grown anywhere else. The organization can segment their end markets based upon geographical need as well.

This shows that there are a lot options available with the firm to carefully choose their market segments and then move on to the targeting phase to select the potential target customers for whom there can be scope for the sale our trees and thus help in the growth of the organization.

Targeting:

The next phase is the targeting. The firm has to target the customers based upon the trees that they have growing in the plantation and then concentrate their marketing efforts on the same. They shall have to choose a target market based upon the number of trees available for each category and the overall demand for the same. The good point about such a targeting strategy is that if the number of trees of a certain kind is low in number in the plantations owned by the organization then they can choose to focus on other types and wait for that kind to grow in numbers before the strategy can be c hanged to meet the demands of that kind of timber. Thus the targeting should be a thought out process not entirely on the needs of the customer but also on the availability of the plantation timber.

Positioning:

The last step in the STP cycle is to position the products of the organization in such a manner that they are readily available for the customers. In the festive season such a thing can be done by tying up with departmental stores and large chains so that the products have a high visibility and can have high amount of sales. The other part of the organizations sales efforts are the b2b sales that occur. These from the bulk of the sales of the organization and in such a scenario the organization has to look into the possibility of advertising in trade journals and other business communication channels to reach out to customers globally and at a large scale.

In the end it can be said that there has to be definitive marketing effort by the organization to reach out to various customers as this industry is s8uch that there is not a lot of ready visibility for the products and hence there has to be a definitive plan to reach out to customer on their won through a dedicated sales force and then utilize the same to generate revenues for the organization.

Day to day operations:

Finance:

The financing of the organization has to be long term one. As per Eves, 2001 there cannot be a high requirement of working capital for the organization due to the long turnover cycle, there has to be a set of requirements that have to be managed for the long term capital requirement for investment in new plantation assets. The organization has to look into the matter of funding their long term goals. There ca n be many ways to do the same, one among them being the plough back of the profits into the firm’s capital, however such a strategy has to be looked into only after strong recommendations from the stakeholders in the organization. Another way of creating capital is the investment for already present investors the dilution of current investor control by inducing capital from fresh investors.

According to Washburn and Binkley (1993) the working capital requirement for such an industry is a normal cash flow and can be enough to fund the need as their cannot be a large requirement for the same in the industry the organization functions in.

Human resource:

The plantation industry requires a lot of gardeners and other workers for the maintenance of the plantation and proper grooming of the trees. The requirement is mostly for blue collared workers. As per K Willis et al. (2003) the human resource of the organization is such that there has to be a lot of care taken of the employees as well as the plantation as one gardener can have a different way of grooming the trees while a new one can have a different ay and this can be both good and bad for the plantation. Hence the focus for the human resource strategy should be on employee retention. Also if the organization has to maintain a set of standards regarding there has to be sufficient training provided to the workers to make sure that they are functioning according to the requirements of those standard of the organization.

Thus the human resource strategy should be one that focuses on the growth of the employees inside the organization itself so that employee retention is high and there is also a sense of growth among the employees in the organization

Operations:

The day to day operations of the firm have to be managed by the supervisors in such a manner that they are able to look into the proper maintenance and grooming of the trees as they are the main primary source for the organization. Secondly the gardeners have to be kept in the loop for any changes in the growth requirements of the trees. The thinning patterns have to be planned well in advance to allow the workers to plan the tree growth accordingly. The cutting done or the felling of the trees should also be a planned venture as the cutting down of wrong tree can result in loses for the organization. Lastly the organization should look into the prospect of future tree plantation for the number of trees fell. As this is something that the organization has to look into for their future. Also the governments and other environmental organizations keep a track of the number of trees that have been fell and the number of trees that have been planted at their place. If the organization has to function properly they shall have to look into the same on a daily basis and thus this should be a part of their day to day strategy.

Thus these are the basics of the day to day strategy that the organization has to look into judiciously. Other than these there are matters of creating a technology based plantation industry where the software’s can help the organization to ascertain the exact age and quality of the trees that are growing on the plantation and this can save a lot for the organization. However such a thing shall take a lot of investment and should be focused upon only after the basic requirement of the organization i.e. having 100% growth in the coming year is met.

Conclusion:

Our organization ABC ltd has a lot of scope of growth in the coming year. To grow we shall have to look into the matters of the increasing globalization, the localization of the resources and the competition that exists in the markets that we serve. The strategies that have been defined in this report have taken into consideration the fact that there not a very clear picture regarding the type of trees that are growing in our plantations. However the strategies themselves are sound and flexible. The organization can choose to either purchase, cut down or diversify globally to suit their long term strategy. They can then choose between a number of options to increase customer satisfaction and increase the number of the consumer base. They can also go ahead with the strategies for the segmentation, the targeting and the positioning of the timber products of the organization. Also there have been strategies defined for the day to day functioning of the organization whose ultimate goal is to increase the profits of the organization. The industry in which we serve has a major effect on the environment and thus there also has to be a sense of responsibility. Thus it can be said that if is it possible to turn a piece of land into a thriving forestry plantation, and from there into valuable timber the answer for our organization has to Yes.

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