UPM-Kymmene Corporation (UPM) is the leading manufacturer of paper and other forest products. The company operates commonly in European and Asian countries. UPM has about 100 production amenities and more than 170 sales and distribution networks (Walter 2017). The company’s operations are founded on contingency principle thus enabling it to react quickly to business environment factors. UPM’s major strengths are sustainable, affordable raw materials and competent workforce. However, its key weaknesses are low demand and weak price for graphic paper and poor engaging with stakeholder engagement. Moreover, its opportunities are the rising demand for wood-based panels and pulp.
UPM’s strengths are strong Innovativeness and Sustainability together with Skilled Workforce and good Management Systems. Through the theory of sustainable forest management, UPM is exhausting its certified chain of custody management systems and tracing systems to guarantee itself constant supply of raw materials (Laskin 2018). Moreover, UPM’s strength is high self-sufficiency level through innovations in production and recycling of raw materials. The company has skilled labor force. However, the company’s weaknesses are declining newspaper market is drastically weakening its paper division which is the largest revenue contributor to the company (Toppinen, Pätäri, Tuppura & Jantunen, 2017). Also, UPM has weak stakeholder engagement which will likely affect the sustainability of raw material (Panwar, Kozak & Hansen, 2015). Furthermore, UPM’s is faced with the threat of high costs of production in the high capital intensive Europe market compounded with high competition from Eastern Asia and Latin America companies who are not affected by high cost of production in their respective regions. Another threat is consistent fragmentation of the forest market thus increasing competition (Toppinen, Pätäri, Tuppura & Jantunen, 2017). However, UPM is faced with two strong opportunities like the significant rising demand for pulp and the continuous growth of housing project which is creating demand for the wood-based panel.
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The concept of Corporate Social Responsibility forces any company to always act outside its legal responsibility by integrating, environmental, social and ethical concerns during its operations. Therefore, to guarantee the sustainability of raw materials, and maintain its position as the leader in the forest industry, UPM must insist on engaging its competitors who are also a threat to the utilization of forests (Panwar, Kozak & Hansen, 2015). Moreover, due to the consistent decline in the demand of graphic papers, it is imperative for UPM to employ the business model of diversity by ensuring that its pulp business in supplemented with better and quicker customer services (Walter 2017). Moreover, with the demand for pulp reaching 4 million tons annually, UPM must upgrade its production facilities at Fray Bentos, Kymi, Kauka and Pietarsaari mills to their maximum capacity. The approach will enable the company to increase its pulp production from mere 500,000 tonnes yearly (Upm.com 2018).
Moreover, with the projected high demand for wood-based panels, it is critical for UPM to increase its supply to meet the consumer demand (IndexBox 2018). Therefore, UPM must invest in high capacity and modern machines at Otepaa, Jyväskylä, and Joensuu facilities to raise the supply for plywood (Upm.com 2018). The concept of supply and demand triggers such approach. For instance, with the retail chain aligning towards online shopping, UPM will have to adopt the internet to speed up the supply of packaging materials to its customers. Finally, with the increasing segmentation, UPM must employ the social media to interact with customers and understand their needs (IndexBox 2018).
In conclusion, UPM’s strengths are strong managerial strategy and high levels of self-sufficiency from sustainable raw materials. UPM’s weaknesses are the decline in the demand for graphic papers and weak stakeholder engagement. On the contrary, UPM’s main threats are high investment and production costs in Europe together with the drastic fragmentation of the forest industry. However, industry opportunities are the rising consumer demand for wood-based panels and pulp. Finally, UPM can only exploit the opportunities if it invests in modern technology to increase its production capacity and the social media to increase marketing, supply and interaction with clients.
Global Wood Based Panel Market to Benefit from Increasing Demand in Asia and the U.S. – IndexBox. (2018). Indexbox.co.uk. Retrieved 7 February 2018, from http://www.indexbox.co.uk/blog/global-wood-based-panel-market-to-benefit-from-increasing-demand-in-asia-and-the-us/
Laskin, A. V. (2018). The handbook of financial communication and investor relations.
Panwar, R., Kozak, R., & Hansen, E. (Eds.). (2015). Forests, Business, and Sustainability. Routledge.
Toppinen, A., Pätäri, S., Tuppura, A., & Jantunen, A. (2017). The European pulp and paper industry in transition to a bio-economy: A Delphi study. Futures, 88, 1-14.
Upm.com, (2018). UPM Paper ENA plans to reduce graphic paper capacity and optimize operations to increase competitiveness. Retrieved from http://www.upm.com/About-us/Newsroom/Releases/Pages/UPM-Paper-ENA-plans-to-reduce-graphic-paper-capacity-and-optimize-operations-to–001-Tue-24-Oct-2017-16-03.aspx
Walter, C. (2017). Business process improvement through change management: a case study.