International Strategy in The World Pulp and Paper Industry Essay

International Strategy in The World Pulp and Paper Industry - Essay Example Considering the significance of global expansion we will analyze the benefits and costs of these strategies in paper and pulp industry. The global strategy allows companies to derive substantial profits in several ways. Firstly, companies which possess an undeniable advantage over their competitors can easily rivet the attention of the prospective customers and make them a part of their company. For instance, International paper’s possesses a competitive advantage in the domain of uncoated papers, therefore, it can easily target a group of people at any location of the world. There are several places in the world where the demand is not met by any local source in the paper and pulp sector therefore many companies have expanded internationally and have properly responded to that demand and are now enjoying the benefits. In contrast to that, stiff competition in the local industry has also reduced the local demand. It is estimated that United States demand for uncoated freesheet will reduce by 2.2% in the year 2008 (Cook at al 2008). As a consequence of this many companies have planned to invest in foreign markets to diversify their risks. Companies which expand globally reap the benefits of location economies. Firstly, there can be an availability of cheap labor and lower raw material costs in that region which can reduce the total costs by a substantial amount. For instance, companies in Canadian markets have recognized that pulp capacity will be going down which will increase the production costs for pulps, therefore, some of the Canadian companies have planned to make investment in locations where there is a lower cost of pulps with an adequate supply which will be able to fulfil their demand (Cook at al 2008). Secondly, the strategic location also provides transport economies by linking the establishments adjacent to one another (e.g. a  pulp plant supplying raw material to an adjacent paper plant) (Diamond, Chappelle & Edwards 1999).