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This paper is dedicated Porter’s five forces analysis developed for Gunns Ltd. The company is the largest Australia’s manufacturer of integrated hardwood and softwood forest products.
In order to estimate an environment of any organization, five forces have to be assessed.
The first force I’d like to analyze is the rivalry among present competitors. How could the rivalry be measured? It is measured by the concentration of competitors in the industry. (Porter, 1998)
The power of existing rivals
It is known that the competition in the pulp and paper industry is really strong. I would estimate the threat of existing rivals as high.
The companies compete on the global scale, they compete internationally. Although Australia is not on the list of the top countries-manufacturers, it still has secured strong position in this industry.
The competition on the domestic market is huge. The small size of Australian pulp and paper industry, the high level of capital investment, and the need to compete with the other countries which industries are heavily subsidized are the reasons why the threat of existing rivals are so high.
The power of new rivals
The threat of new rivals is high as well. A tendency shows that existing plants are replaced by newer plants in developing countries. It’s a crucial factor, as one of these developing countries is China.
At the same time, the major export market for Gunns Ltd is Japan; the smaller ones are Korea and China. These territories are easily reached from China; transportation to Japan doesn’t cause problems for Chinese companies.
Bargaining power of suppliers
The power of suppliers doesn’t make any substantial influence on Gunns Ltd, as the company manages the forest plantations itself. I would say that it’s low.
But the power of suppliers is an important factor for this industry overall. In Australia, the wood is sourced from the native forests or from managed plantations. Not so long ago, plantations had been established with private capital through managed investment schemes with favourable tax treatment. This practice has caused the increasing in the number of plantations.

Bargaining power of buyers
The power of buyers for Gunns Ltd is rather moderate. There are four buyers segments for paper products:
Packaging and paperboard;
Printing;
Newsprint;
Tissue.
Australian paper industry shows a tendency of real price of paper declining. As for the opportunities for paper products demand increase, it is expected that paper consumption will slowly increase in the next years.
Bargaining power of substitute goods
In my opinion, the power of substitutes for the pulp and paper industry is moderate. There is a global trend of electronic devices usage and these devices have started the process of substitution of newspapers, magazines and books. Also, I need to mention that the new technologies of pulp manufacturing have appeared on the market. They suggest using alternative raw materials to wood, such as jute, hemp and cotton, for pulp manufacture.
To sum up, among the five forces, the power of rivalry and the power of buyers have the most significant influence on the industry’s environment.
As for the power of buyers, I can conclude that it is moderate. The demand for paper will increase slowly in accordance with population growth and economic conditions improvement.
The power of substitutes for Gunns Ltd is moderate as well.
Finally, the power of suppliers is quite insignificant for Gunns Ltd, as the company manages the forest plantations itself.
References
Porter, M., 1998, Competitive Strategy: Techniques for Analyzing Industries and Competitors. Free Press.