Marketing Assignment Help On Plantation Industry: Gunns Limited / Target market / SWOT analysis

a. The constantly changing process of the business environment in which the company operates and decisions about how to change the marketing mix in order to succeed and reflect new strategies suitable for the changing environment.

b. Ways to strengthen the competitive position of the company and discuss ways to satisfy customers and achieve performance targets according to its resources and abilities.

c. Formulation of segmentation, targeting and positioning (STP) strategies of the company.

d. Decision-making about production and operations, finance, human resource management and other business issues in a complex situation.

Solution for the question frame is::

Executive summary

The current market study represents the case of Gunns Limited, Australia. The company is among the largest private players in Australian plantation industry specializing in timber industry. Timber wood industry in Australia is dominated by regional government institutions which focus on specific territories. However, in recent past the government has disinvested itself and has invited private players. The increasing private player participation has posed a huge competition for Gunns Limited. It has also been under various social controversies for its latest pulp mill project. The situation got worse post recent global financial meltdown, leaving the company under huge debt.

A marketing strategy framework is created for Gunns Limited that will help the company to understand the changing customer needs and defining its product mix, distribution channels as well as promotional strategy to counter its competitors. It is advised that company must take advantage of its glorious history in the market and a long established distribution network and client base. The market segments identified for the company on which it can focus are- indoor building companies and customers; outdoor building construction companies; pulp and paper based industries and consumers; furniture companies and end customers.

A very well laid marketing mix has been suggested for each segment and the target set. Based on certain assumptions, the revenue forecast and break-even analysis suggest that the marketing strategy is commercially viable. It is emphasized that proper implementation of the marketing strategy should be supported by continuous market research and the success must be measured by factors such as market share, revenue line, and customer line and customer feedback. The company must tune its strategy based on monitoring results from time to time.
Situation analysis

The current market strategy case is for the company called Gunns Limited, which runs its business in different segments of plantation industry Australia. The company has wide range of businesses as- Forest products; plantation woodlots and walnut orchards; timber and pulp. The current study highlights the dynamic strategies that a company must adopt to set its tune with the changing market conditions.

Market summary

The plantation industry consists of very wide variety of product segments. Ranging from products made from various types of woods, there are export quality products like rubber, tea and coffee. For the current study, Australian plantation industry is the key focus area. There are varieties of plantation based on the climatic conditions in different parts of the country. Different products are manufactured from different varieties of plantations.

Timber wood plantation industry

Considering the timber wood products, following geographical representation classifies the products in a particular region:

• Tropical regions with medium to high rainfall are suitable for the growth of species like mangium and different types of gums. These species are used in the manufacture of paper products.
• Tropical regions with very heavy rainfall are conducive for growth of mahogany and teak plantation which is used in furniture products.
• Sub-tropical regions with medium rainfall provide atmosphere for growth of pines which can be used in making furniture.
• Low rainfall regions provide maritime pine for manufacturing and construction industry.

In Australia, government own the majority of plantation industries in both softwood and hardwood categories. The total area of publicly owned plantations is approximately 40% (Department of agriculture, fisheries and forestry, Australia). However, private player participation has seen an upward trend over the years and lot of investments have come especially in the timber wood plantation industry.

SWOT analysis

Company profile (Gunns Homepage, 2012)

The company has glorious history of more than 100 years as established in 1875. The company is among the largest integrated hardwood and softwood forest Products Company. It has three main divisions:

• Forest products: Responsible for management of natural forests and plantations for fibre production.
• Gunns Plantations Limited: Responsible for bringing in the investments in plantation of woodlots and walnut orchards.
• Gunns Timber Products: Responsible for manufacturing of value-added hardwood and softwood products for construction industry with species like Radiata Pine, Jarrah, Tasmania Oak etc.

Apart from these businesses, the company is also running the Bell Bay Pulp Mill project to utilize its fibre resources into higher value-added paper based products.

The company has consistently shown a growth in the business by expanding hectares of plantation land under its name. At present, the company has around 200,000 hectare of plantation estate (http://www.gunns.com.au/).

The company has the reputation of being a socially responsible organization. It engages in various corporate social responsible activities in the fields of community development and environment management. It has set high standards in health and safety.

SWOT analysis

The company has built its reputation in the market over the years. Based on the company profile and its operational performance, the following is the SWOT analysis (Kotler & Kelly, 2008) for the company:

Strengths:

The glorious past is its biggest strengths. Since the company has been into the business of plantation for more than hundred years, it has gathered a comprehensive technological knowledge. The company has expanded its business in various segments and hence the technical know-how is very exhaustive. It can overtake its competitors by utilizing its technology by bringing in efficiency in value chain and bringing innovative offerings from time to time.

The company’s market knowledge and its established network of distributors and retailers is again a result of its longer duration of stay in the market. The company can set its competitors off by creating entry barriers in various markets in co-ordination with its distributors and retailers. The market data available from these distributors may also help in gauging the competition that is coming into the market. Company can think of integrating its business with distribution if required as it has good financials.

Company has solid balance sheet and hence can expand its business in other business segments. The solid financials may also augment its inorganic growth when it goes for acquisitions among small competitors. The inorganic growth will also bring new technical and market knowledge.

The company’s reputation as a socially responsible organization enhances its brand reputation and hence augments its marketing efforts.

Weaknesses:

The company’s marketing efforts have not been very effective and the company always wants to play in the market on the basis of its products only. The less marketing over the years by the company and on the other hand, an aggressive marketing by its competitors has been a letdown. The marketing efforts, as well as pricing face a tough competition in current dynamic market conditions. The company has been in the news for some controversies in the recent past for its environmental degradation; hence the brand reputation has taken a hit. Since, the policy makers influence the industry most; the company has not been able to influence the policy makers and hence the less political influence is another weakness.

Opportunities:

(Wood, Stephens et al., 2001)

There are immense opportunities for the company in the market. The market size has been considerably increasing over past years. The private players have given a tough competition to the government entities running their businesses in the industry. The GDP for the Australia is growing constantly (has grown by 1.3 per cent in first quarter in 2012 as per The Australian). The share of plantation industry in GDP has seen an upward trend. Combined with the overall growth of construction and manufacturing sector, the demand for plantation products is only going to increase. As the company is present in diversified businesses, it can grow in all segments by consolidating its position in all of them. A strategic approach towards expansion and bringing new products should be augmented by proper marketing strategy to avail all the opportunities presented by the market.

As discussed above, the strong financials of the company can help them in inorganic growth and also in raising money for its expansion plans. In fact, the Government has also come up with the opportunities to privatise the sector. All these opportunities lie ahead for the company.

Threats:

The changing political environment in the country poses major threat to the company’s growth plans. The Government has introduced stringent laws for environmental protection which have hit the plantation industry expansion in the country. The financial planning has gone for a toss and raising money for the company has become difficult.

The community pressure is yet another threat. The recent paper mills project has come under scanner of Regional Planning and Development Commission (RPDC), for not adopting the best practices in terms of economic, social and environmental impacts. Various social groups have raised concerns over the environmental impacts of the operations of Gunns Limited.

The other threat comes from various competitors which are growing in different regions. These players play on price points and hence if the company has to match their prices, the profitability of the company will be hit badly. Hence, the company must take steps to mitigate these threats and move ahead with its growth plan.

 Competition

The plantation industry consists of very wide variety of product segments. Ranging from softwood, hardwood and pulp industries, there are majority of government enterprises in this sector. However, over the years some private players have come into picture and they are growing their share in the market. A brief overview of probabilistic competitors is given below:

1. Government enterprises:

1. Forests NSW (Forest, NSW department of Primary industries, 2012)

It is a public trading enterprise within NSW Department of Primary industries, which is the largest manager of native and plantation forests. It is mainly into pulp business and timber wood plantation. It has around 2 million hectares of land under its plantation.

2. Forestry SA (Forestry SA, Home, 2012)

It manages South Australia’s state owned plantations. It has total of 84,000 hectares of plantations and it caters to the construction industry. It has portfolio of blue gums and pulp from its hardwood business.

3. Forestry Tasmania (Homepage, Forestry Tasmania, 2012)

It is mainly operating in Tasmania and has 1.5 million hectares of state forest land. Its products portfolio consists of eucalyptus for saw-milling industry which caters to construction sector; special species timbers such as Blackwood, Myrtle, and Sassafras which cater to furniture industry; and pulpwood for high-valued paper products industry.

1. Private enterprises:

1. Green Triangle Forest Products(Green Triangle Forest Products, 2012)

With around 22,000 net hectares of land under its plantations, the company is growing mostly in South Australia and South Western Victoria. It is known for its long term relationships with customers and the distributors.

2. Willmott Forests Ltd (Willmott Forests ltd. , 2012)

It plants, manages, harvests and supplies the softwood. Being a vertically integrated company, it has businesses in Forest products and Timber products along with its network of suppliers. It manages 53,000 hectares of plantation land.

Above mentioned players are among the major players in both Government and Private sector. Apart from these, there are number of small players who focus on specific regions rather than the whole country.

As seen above, the sector is dominated by the government enterprises. Among the private players, Gunns Limited has the largest plantation land. It can emerge as a market leader as government is slowly disinvesting its stake in various enterprises. However, the other players give a tough competition.

The strength of Government enterprises lies in the fact that they have say in the government policies that change from time to time. The various amendments in environmental laws have cause several financial implications for the industry in terms of penalties and restrictions. The government enterprises can influence the policies in their favour.

The competition from private players comes in the form of up-to-date technology and R&D facilities by which they can cut the cost of production without hitting their margins. The regional players may emerge as market leaders in their regions as they have focussed approach in contrast with Gunns Limited which focuses on multiple regions. The recent financial meltdown has slowed down the industrial demand and also affected the banking industry which lends to this sector.

The key strategy of Gunns Limited should address the competition which may eat its market share in the near future.

Product offering

Gunns Limited has following product offering for the consumers (Gunns Homepage, 2012):

1. Indoor building products:

From the plantation of pine trees, the company provides indoor building products such as frames, decorative boards, flooring and lining.

1. Outdoor building products:

For outdoor building products, the company offers outdoor structures, sleepers, fencing products, stockyards and gates.

1. Paper products:

For paper industry, the company provides pulp from its plantations. The wooden logs also support the industry for production activities. The residues from the manufacturing of building products also provide the raw materials to the industry.

1. Furniture:

The wood from various plantation converted into high valued furniture cater to the interior decoration industry. There are different varieties of wood and hence there can be multiple offerings for furniture ranging from teak wood to plywood.

Distribution

The company has various distribution channels for different categories of customers. For B2B selling to the other industries, it has contracts with transporters and distributors. For B2C market, the company has established a network or retailers and wholesalers. The distribution network of the company is expanding with its growth rate. The company has such a strong network of distributors that it can create entry barriers for smaller players to enter into the market. However, regional players focusing on their territories have established small distribution channels and are posing threat to the company’s market share in those regions. The company must focus on all the geographical regions within the country and must explore all transportation options as rail, road etc. to reach the industries situated in the far-off regions which may give bulk orders to it.

Marketing Strategy

As seen above, the company has sufficient capability to expand its business and products offering. Any expansion in its product line or even its current product portfolio needs to be backed up by a proper marketing strategy. Following points highlight the marketing strategies that company can adopt in the present turbulent time to establish its supremacy over its competitors.

Mission

(Kerin & Peterson, 2008)

The mission of the company should incorporate its commitment towards making sincere efforts to innovate with time and emerge as market leader at least in private sector. The company as known for being socially responsible organization should upheld the same image.

Based on above points, the mission statement that will guide the company in its marketing strategy can be summed up as-“To continuously evolve with the changing business times and emerge as a socially responsible market leader in the plantation industry in all regions of Australia.”

Objectives

The mission of the company can set the following objectives to the marketing strategy that will be prepared:

1. Establish a strong brand presence across all the regions by creating publicity for its glorious history over the years.
2. Take on the competition with an aggressive marketing strategy to gain the market share across all product segments that Gunns Limited offers.
3. Go ahead with the acquisitions for inorganic growth and for adding intellectual capability in the organization.
4. Ramp up the research and development activities to bring in more efficiency in the value chain and the products offering.
5. Highlight the socially responsible activities that Gunns limited undertakes which its competitors cannot take over the years.
6. Increase its say in the policies being made by the government for the sector by establishing contacts among the political class.

Target markets

At present, the company has segmented market as- Indoor building companies/ customers, Outdoor building construction companies, pulp and paper companies/ customers and furniture companies/ customers.

Such market segmentation is appropriate and the company should target specific customers within these segments. Following is the detailed segmentation and targeting for the company (National Association of Forest Industries, 2006):

1. Indoor building companies/ customers:

Within this segment, the company should target the following:

1. Manufacturing companies for supply of timber wood
2. Interior decorators for supply of high value added finished products such as frames
3. End consumers who will by the finished products according to their specific requirements

The marketing strategy for each target set will be different. The manufacturing companies will value personal attention and the long term relationship with the firm. The price may be negotiated on that basis only. The interior decorators and end consumers should be approached by direct marketing and PR activities. Since they are purchasing high value finished products, the company can charge them premium prices.

2. Outdoor building construction companies:

The company has to reach everyone in the value chain of building industry. Following target sets can be defined in this segment:

1. Contractors who undertake turn-key projects for the builders can be the probable influencers to make the products of company used in the buildings
2. Architects who prepare the design and material specifications for building components can be convinced to advocate the products to contractors and the builders
3.  Builders who undertake the construction projects and invest in them can be influenced to purchase bulk orders from the company

Each of this target set can has to be given personal attention and a consultative marketing should be the right way to influence them. They can give the repeat business to the company and hence relationships with them should be given utmost importance.

3. Pulp and paper industries/ customers:

The company provides raw material to paper based companies. The company can define following target sets within this segment:

1. Pulp based companies can be targeted to provide quality pulp for the manufacturing process
2. End consumers can be targeted for finished paper products and decorative items

For pulp industries the marketing strategies should focus on building relationships even if prices have to be compromised to a certain extent. The competition will be immense in this set and hence the company should focus to bring competitive advantage. The end consumers can be targeted by direct marketing and advertising to sell high valued finished paper products and decorative items.

4. Furniture companies and customers:

Within this segment, the target sets would be:

1. Furniture companies for which the company can provide raw materials such as teak wood and pine wood, the company should target bulk orders
2. End users who are willing to buy high quality furniture should be targeted by mass advertising

Apart from above segments and target groups, company can expand its product portfolio in near future by organic and inorganic growth. The current marketing strategy should incorporate company’s future plans as well.

Marketing mix

(Kotler & Armstrong, 2007)

The marketing mix to be adopted by the company is briefly described below:

1. Product mix:

For the segments indoor and outdoor building companies as well as furniture and paper industries, the product mix will be the different varieties for wood as the raw materials. For interior decorators, the company can manufacture finished floorings, frames etc. For end consumers, the company can offer finished furniture goods in form of different varieties such as plywood furniture, teak wood furniture etc. The consumers can be sold decorative paper products.

2. Distribution mix:

Since different distribution channels should be there for different target sets of customers, the company should conduct proper research to optimise its distribution network. For all segments where the target is the company consuming raw materials instead of end consumer who consume value added finished products, there should be proper contract with the transporters and major distributors across the country. The company should use both road as well as rail transport to reach out to maximum manufacturing industries within its segments. Most of the manufacturing plants must be located in far off areas and hence the transportation routes must be optimised.

For industries which consume finish goods such as interior decorators and builders, the company should provide products at the construction sites. Again, the transportation companies would be the best medium as the sites of buildings would be mainly in the city locations.

For reaching out to end consumers, the company should target wholesalers and retailers who are present in the market. The company should set margins for retailers as well as wholesalers so that they remain loyal to the company and not to their competitors. The company should also train them to maintain good relationships with them.

Marketing research

(Doyle, 2007)

The market research study is very significant to understand the changing customers’ requirements. The research may start with the exploratory research to zero in on the factors that may significantly affect the customer needs. Once the factors have been identified, the primary research must be carried out and the existing clients of the company must be asked various questions to understand their perception about Gunns limited and its products. They should be asked to rate the products of Gunns relative to the competitive products in the markets. The pricing behaviour must also be studied among different segments so that product offerings must be designed according to the clients’ preferences. The marketing mix must be twisted according to the responses of the customers. The product offerings and any new products that may be launched by the company will be heavily based on the results of market research.

The result of market research study will be helpful in designing the marketing strategy. The elements of marketing strategy like promotional media and message, distribution mix and price mix should be based on the results of market research study for effective outcomes.

Moreover, post implementation the market research study will be helpful in monitoring the success of the strategy and will suggest the changes that need to be done from time to time.

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