Competitive Actions and Profitability in the U.S. Forestry Industry
TUOMAINEN, EMMI (2009)
2009
Yrityksen hallinto - Management and Organisation
Kauppa- ja hallintotieteiden tiedekunta - Faculty of Economics and Administration
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Hyväksymispäivämäärä
2009-12-07
Julkaisun pysyvä osoite on
https://urn.fi/urn:nbn:fi:uta-1-20244
https://urn.fi/urn:nbn:fi:uta-1-20244
Tiivistelmä
Profitability is an extremely important issue for every company as it is an essential part of its continuity. Competitive actions taken by a company have an influence on the company’s performance and thus its profitability. It is not, however, clear what kind of actions promote and what kinds of actions, on the contrary, hinder the profitability of a company.
In this study, I made an effort to examine the effect of competitive actions on profitability in the U.S. forestry industry during the period 1998-2005. In particular, it was examined if certain actions or combinations of actions led to exceptionally good or alternatively exceptionally bad profitability. The study was conducted by first examining the literature on competitive actions and forestry industry. The empirical part was conducted by selecting 13 companies with either exceptionally good or exceptionally poor profitability and the actions they had taken were identified mainly from the annual reports of the companies. The actions were then coded according to the following dimensions: capacity growth versus capacity decline, organic growth versus mergers and acquisitions, diversification versus concentration on the core sector, internationalization versus concentration on domestic markets and cooperation versus no cooperation. The analysis of the connection between these dimensions of competitive actions and the company’s profitability was done using fuzzy set method.
The results of the study support earlier studies stating that competitive actions of a company have an effect on its profitability. The findings of the study reveal, that mergers and acquisitions (as opposed to organic growth) seem to be an important part of a profitable strategy. Capacity reductions, on the contrary, seem to have a negative effect on the company’s profitability, except when combined with a high degree of diversification. In this case capacity reductions seem to lead to profitability. Diversification and internationalization, on the other hand, seem to have a slightly negative effect on the profitability. This might, however, be explained by the greater action - profitability lag caused by the time needed to adjust to the new sector or geographical markets. The level of cooperation amongst the companies under scrutiny was low, so no deductions about the relation of cooperation and profitability could be made.
Asiasanat:competitive actions, profitability, forestry industry, fuzzy-set analysis
In this study, I made an effort to examine the effect of competitive actions on profitability in the U.S. forestry industry during the period 1998-2005. In particular, it was examined if certain actions or combinations of actions led to exceptionally good or alternatively exceptionally bad profitability. The study was conducted by first examining the literature on competitive actions and forestry industry. The empirical part was conducted by selecting 13 companies with either exceptionally good or exceptionally poor profitability and the actions they had taken were identified mainly from the annual reports of the companies. The actions were then coded according to the following dimensions: capacity growth versus capacity decline, organic growth versus mergers and acquisitions, diversification versus concentration on the core sector, internationalization versus concentration on domestic markets and cooperation versus no cooperation. The analysis of the connection between these dimensions of competitive actions and the company’s profitability was done using fuzzy set method.
The results of the study support earlier studies stating that competitive actions of a company have an effect on its profitability. The findings of the study reveal, that mergers and acquisitions (as opposed to organic growth) seem to be an important part of a profitable strategy. Capacity reductions, on the contrary, seem to have a negative effect on the company’s profitability, except when combined with a high degree of diversification. In this case capacity reductions seem to lead to profitability. Diversification and internationalization, on the other hand, seem to have a slightly negative effect on the profitability. This might, however, be explained by the greater action - profitability lag caused by the time needed to adjust to the new sector or geographical markets. The level of cooperation amongst the companies under scrutiny was low, so no deductions about the relation of cooperation and profitability could be made.
Asiasanat:competitive actions, profitability, forestry industry, fuzzy-set analysis