Case Analysis: Australian Paper Manufactures

(Prateek Awasthi- P16003, Srishty Chakraborty- P16012, Vinay Nair- P16035, Nitin Singh P16035)

5C Analysis:
Company:
Australian paper manufacturers is owned by Amcor Limited which is the Australias
largest forest products & packaging company. APM was Amcors paper division and
manufactured paper packaging paperboard (cardboard consumer packages and
corrugated shipping boxes.)
Clients:
Prior to 1987, APMs customers included businesses requiring cardboard/corrugated
packaging solutions. Post 1987, APM also entered the offset printing, continuous forms,
office copier and recycled fine paper segments of the market.
Competition:
In the uncoated fine paper market, Paper company of Australia dominated the fine paper
market with 80% control of the copier paper market. Before 1986, any demand that PCA
could not satisfy was met through imports.
Collaborators:
Instead of collaboration with merchants as done by PCA, APM has adopted a direct to
customer strategy.
Context:
Continued growth in popularity of recycled paper and promising growth in copier paper
market has pushed McRae to consider the possibility of expansion into fine papers. Also,
there is continuous pressure from environmental organisations to increase waste treatment
from paper mills and change production processes to reduce toxic emissions. Government
has also started implementing stricter regulations for the paper manufacturing industry to
operate.

Decision problem: Australian Paper Manufactures

Protagonist: Ken McRae Group general manager APM
How to utilize $50 million dollars sanctioned by Amcor for short term competitive advantage?
Options:
For Capacity expansion:
1. Expand the capacity of Machine 3 at Maryvale from 70000 to 100000 tonnes.
2. Increase the production of Recycled paper at Fairfield plant from 7000 to 15000 tonnes.
For addressing issue of toxic discharge:
1. Replace chlorine through oxygen pre-bleaching (50% chlorine reduction)
2. Intensify use of oxygen during bleaching. (15% chlorine reduction)
3. Activated sludge treatment.

Environmental implications:
Chemical pulping method used by PCA in its Kayser mill was through adding caustic soda to the
wood however the newer process kraft used sodium sulfate which yielded stronger pulp at a faster
rate. Bleached pulp was also one of the concern that produced organo-chlorine namely dioxin
where Greenpeace reports stated that PCA exceeded the limit of releasing dioxins into seawater
with 11.5 tonnes of discharge exceeding 80% from the permissible limit, posing greater threats to
environment and workers themselves, however APM addressed the dioxin issue through stringent
controls implemented during improvement project. Pressure from environmental groups to
implement sludge treatment plant to eradicate organochlorine issue.

Evaluation of options:
APMs immediate decision will depend on the course of action taken by PCA.
Expected course of action adopted by PCA: Invest in Kraft pulping instead of soda and
reducing/replacing chlorine level to address growing environmental concerns. Rationale for the
same is that current capacity utilization for uncoated fine paper is 77% (1989 production- 108
thousand tonnes, Capacity- 140000 tonnes). Bridport proposal was scrapped because of their
inability to address environmental concerns. Kayser plant faced opposition for Greenpeace
regarding presence of chloroform and organochlorine discharge. Thus addressing environmental
issues is a major concern for PCA.
Previous improvement at APM:
APMs A$163 million improvement program of Maryvale plant included emission and effluent
controls has ensured adherence to Australian governments strict effluent guidelines and a capacity
increase of 140000 tonnes. Current uncoated fine paper capacity of APM is 70000 tonnes and
recycled paper at 7000 tonnes.

SWOT: APM
Strengths
Experts in fine paper manufacturing process in Australia.
Technologically advanced Maryvale plant: Kraft technology
Viewed as environment friendly paper manufacturers (hence able to command a premium
on recycled products)
Weaknesses
Capacity not available for future growth.
Still using the chlorine-bleaching process.

Opportunities (Probability of occurrence, Pay off)

Copier market to grow at 10% annually (Overall market growing at 6.5% annually). (High, High)
Recycled paper products becoming popular. (High, Low)

Threats (Probability of occurrence, Impact severity)

Increasing pressure from environmentalists to reduce emissions. Government also
tightening regulations. (High, Low)
PCA may bounce back with improved technology. (High, High)

Analysis: Inferences First survive, then thrive.

There is increasing pressure from environmentalists to eliminate the use of chlorine
bleaching in paper manufacturing. Hence investment in process for chlorine reduction is
must. For the same we have two options. Oxygen pre-bleaching (A$15 million, 50%
reduction) results in a capacity reduction of 17500 tonnes thus it is not preferred. Also,
second option results in only 15% chlorine reduction.
 Probability of PCA making a comeback with new technological skills is very high (with
the intent to regain lost market share). Hence capacity needs to be increased in order to
counter that threat and a differentiated position needs to be created. Thus, increasing the
capacity for recycled product is recommended as part of short term strategy.
APM are an expert in quality uncoated fine paper manufacturing (Focused on Quality and
Delivery). They are also viewed as an environment friendly company (able to command a
premium on recycled paper).
Technologically advanced plant at Maryvale can be upgraded to address the concerns of
the environmentalists. (Secondary sludge treatment will safeguard from majority of
environmental concerns raised)

Recommendations:
It is recommended to increase the capacity of recycled paper production at Fairfield plant (A$18
million) and invest in sludge treatment plant (A$25 million) to permanently address the
environmental issue. Total Investment: A$ 43 million.
Since PCAs current focus is on addressing environment concerns with its Kaysers plant, thus as
part of long term strategy to capture majority market share it is recommended to invest in the
150000 tonnes capacity paper machine.