CASE STUDY

eBusiness in the U.S Hardwood lumber industry

Richard P. Vlosky
Timothy M. Smith

EXEVUTIVE SUMMARY
The basis of foundation of the economy, roots back and is determined by innovative
activities such as developing new products and processes, the entrepreneurial
venture which consist of converting innovation into an economic activity, and
industrial clusters such as networks supporting markets, services and skilled labour.
Rural displaced industries such as hardwood lumber industries in the United Stated
are at a competitive disadvantage in the new economy not only because they lack
the diverse opportunity and local products and more so, in customers. Because
primarily, their location is isolated whereas those of industries that play part in the
metropolitan areas where business and transactions are abundant.
According to the article, eBusiness is a fundamental step and is a necessity to be
adapted in order for businesses like hardwood lumber industries where negative
factors such as isolated locations, poor business-to-business transactions, and even
minimal business-to-customer relations will be eliminated. The data then analysed
that was sent to all 1,700 members of the National Hardwood Lumber Association
sought that eBusiness implementation strategies, success, benefits and
impediments specific to the hardwood industry, explore the concept of eBusiness
adaption within the framework of technology cluster. The results shows that more
than half of the respondents were using the internet for business purposes, with
corporate strategy listed as the most influential reason for adoption. Moreover, the
respondents were also found to adapt, and/or plan to adapt certain eBusiness
technologies together, specifically for communication and order support capabilities.
This study examines current and potential use of Internet-based technologies to
conduct business by hardwood lumber manufacturers in the United States. Internet-
based technologies were studied in the context of implementation strategies.
Respondents were asked to discuss a number of questions regarding Internet-based
strategies, value received from engaging in eBusiness, concerns about using the
Internet, and potential use of Internet-facilitated marketplace exchanges. Specific
objectives of the study were to: 1) examine the current and potential uses of the
Internet in the solid wood products industry in the United States; 2) discern the
general readiness of the industry to do business through Internet-based technology:
3) identify criteria for participation in Internet-facilitated exchanges and applications;
and 4) identify concerns with regard to participation in Internet-facilitated business
practices.
THE HISTORY, DEVELOPMENT, AND GROWTH
It was not until the 1980s that hardwood lumber companies began to seek out
software for "doing business." Today, Internet technology is making some inroads
into the hardwood lumber industry. But like most forest sectors, the Internet has not
caught up with back-office applications, and integration into business software has
yet to be seen (Anonymous 2001).
In addition, many company owners inherit hardwood lumber businesses from their
ancestors, and with that they inherit business processes, operating procedures, and
culture. As a result, owners of hardwood lumber businesses are often slow to
embrace change and adopt new ways of doing business (Anonymous 2001).
It might most probably take a little few more years in order for hardwood lumber
companies to adapt into using the many edges of the internet, but a certain thing is
for sure, that the internet is an unstoppable force and sooner or later, it will take up
the whole world, even in hardwood lumber companies.
Charting the critical events that hardwood companies would have done differently if
given the chance to go back to the beginning of their internet development process,
starts with a simple: “creating a website sooner”. Then it was followed with
development of a comprehensive and practical intranet, developing a more long-term
strategy, developing a dedicated in-house skill, and the likes. Then lastly, there was
a wait for a technology generation change.
All in all, nonetheless the stages of ventures that the hardwood lumber companies
went through, there certainly were growth, as a constant thing to do.

COMPANY’S INTERNAL STRENGTHS AND WEAKNESSES

The United States hardwood lumber industry boasts several internal strengths that
contribute to its competitiveness and resilience. These strengths include:
1.) Abundant Resource Base: the U.S. has extensive forest resources, providing a
steady and sustainable supply of hardwood timber. This abundance ensures a
consistent raw material feed for the industry. 2.) Diverse Hardwood Species: The
U.S. is home to a wide variety of hardwood species, each with unique characteristics
and applications. This diversity allows the industry to cater to a broad range of
customer needs and preferences. 3.) Technological Advancements: The industry
has embraced technological innovations in harvesting, processing, and
manufacturing. This includes advanced machinery for cutting, drying, and finishing
hardwood lumber, leading to increased efficiency and product quality. 4.) Quality and
Reputation: U.S. hardwood lumber is often associated with high quality and
durability. The industry has a strong reputation for producing lumber that meets or
exceeds international standards, making it a preferred choice for many customers
globally. 5.) Research and Development: Ongoing research and development efforts
contribute to the improvement of harvesting techniques, processing methods, and
product innovation. This commitment to continuous improvement helps the industry
stay competitive and adapt to changing market demands. 6.) Sustainable Practices:
Many U.S. hardwood lumber companies adhere to sustainable forestry practices,
ensuring responsible management of forest resources. This commitment to
sustainability is increasingly important in the global market, where environmentally
conscious consumers and businesses seek responsibly sourced products. 7.) Market
Access and Global Reach: The industry benefits from established trade relationships
and access to global markets. The U.S. hardwood lumber sector is well-connected
internationally, allowing for the export of products to various regions around the
world. 8.) Skilled Workforce: The industry benefits from a skilled and knowledgeable
workforce involved in various stages of the production process. Skilled workers
contribute to the efficiency and quality of the products, maintaining the industry's
competitive edge. 9.) Industry Associations and Collaboration: The presence of
industry associations and collaborative efforts among stakeholders foster information
exchange, best practices, and collective problem-solving. These networks contribute
to the overall strength and resilience of the industry. 10.) Adaptability and Innovation:
The U.S. hardwood lumber industry has demonstrated adaptability to market trends
and consumer preferences. Companies within the industry are often quick to
embrace new technologies and innovations, ensuring relevance in an ever-changing
market.
By leveraging these internal strengths, the U.S. hardwood lumber industry remains a
robust player in the global market, providing high-quality products and contributing to
the economic well-being of the country.
While the United States hardwood lumber industry has many strengths, it also faces
certain weaknesses and challenges. Some of these include:
1.) Market Vulnerability: 2.) Competition from Alternatives: 3.) Environmental
Concerns: 4.) Transportation Costs: 5.) Regulatory Compliance: 6.) Dependency on
Global Markets: 7.) Aging Forests and Long Harvest Cycles: 8.) High Initial Capital
Costs: 9.) Dependence on Specific End-Use Markets: 10.) Labor Shortages
Addressing these weaknesses requires strategic planning, investment in technology
and innovation, adherence to sustainable practices, and proactive engagement with
regulatory and market challenges. Industry stakeholders need to be adaptive to
changes in the economic and environmental landscape to ensure long-term
sustainability and competitiveness.

NATURE OF THE EXTERNAL ENVIRONMENT SURROUNDING THE COMAPNY

The demand for hardwood lumber is closely tied to the overall economic health.
Economic growth, construction activity, and consumer spending can impact the
demand for hardwood products. The housing market significantly influences the
hardwood lumber industry. Trends in housing starts, remodelling activities, and real
estate development can impact the demand for hardwood products. The hardwood
lumber industry is affected by international trade dynamics. Export and import
policies, tariffs, and global demand for wood products can influence the
competitiveness of the U.S. hardwood lumber industry. Environmental regulations,
logging restrictions, and forestry management policies affect the availability of
hardwood resources. Compliance with sustainability standards and certifications may
also impact market access. Technological innovations in logging, milling, and
processing can influence the efficiency and competitiveness of the hardwood lumber
industry. Automation and digital technologies may impact production processes.
Growing concerns about environmental sustainability and deforestation may
influence consumer preferences and industry practices. Certification programs such
as the Forest Stewardship Council (FSC) play a role in promoting sustainable
forestry. Changes in climate patterns can affect the growth and health of hardwood
forests. This may impact the long-term availability and quality of hardwood
resources. Shifting consumer preferences towards sustainable and eco-friendly
products can influence purchasing decisions in the hardwood lumber industry.
Awareness of the environmental impact of wood products is increasing. The
hardwood lumber industry is part of a broader supply chain. Factors such as
transportation costs, logistics, and supply chain disruptions can impact the
availability and pricing of hardwood products. Political stability both domestically and
in key trading partners can affect the overall business environment, including the
hardwood lumber industry.
It's important to note that the hardwood lumber industry is diverse, serving various
sectors such as construction, furniture manufacturing, and flooring. Changes in any
of these external factors can have cascading effects on the industry.

SWOT ANALYSIS

Strengths:

 Abundant and Diverse Forest Resources:

o The United States is home to extensive hardwood forests, providing a
consistent and diverse supply of raw materials for the industry.
 Technological Advancements:
o Adoption of advanced technologies in logging, milling, and processing
improves efficiency, reduces waste, and enhances overall productivity.
 Established Infrastructure:
o The industry benefits from a well-established infrastructure, including
transportation networks and processing facilities, facilitating the
movement of raw materials and finished products.
 Versatility of Hardwood:
o Hardwood lumber is versatile and can be used in various applications
such as construction, furniture, flooring, and cabinetry, providing
multiple revenue streams for the industry.

Weaknesses:

 Environmental Concerns:
 o The industry may face scrutiny due to concerns about deforestation,
habitat destruction, and the environmental impact of logging practices.
 Cyclical Nature:
o The industry is sensitive to economic cycles, particularly fluctuations in
the housing and construction markets, which can lead to periods of
oversupply and reduced demand.
 Dependency on Global Markets:
o Reliance on international markets exposes the industry to fluctuations
in global demand, trade tensions, and changes in export/import
regulations.
 Supply Chain Vulnerabilities:
o Disruptions in the supply chain, whether due to natural disasters,
transportation issues, or other unforeseen events, can impact the
industry's ability to meet demand.

Opportunities:

 Growing Sustainable Practices:

o Increasing demand for sustainably sourced hardwood provides an
opportunity for the industry to adopt and promote environmentally
friendly practices, meeting consumer preferences.
 Innovation in Product Development:
o Research and development efforts can lead to the creation of new
hardwood products or improved processing methods, opening new
markets and revenue streams.
 International Expansion:
o Exploring and expanding into emerging markets can diversify the
customer base and reduce dependency on any single market.
 E-commerce and Online Marketing:
o Embracing online platforms for sales and marketing can help the
industry reach a broader consumer base and adapt to changing retail
trends.

Threats:

 Market Competition:
o Intense competition within the industry, both domestically and
internationally, can lead to price wars and reduced profit margins.
 Regulatory Challenges:
o Stringent environmental regulations and changes in forestry
management policies may impact the industry's ability to access and
harvest timber.
 Economic Downturns:
o Economic recessions or downturns can result in decreased
construction activity and lower demand for hardwood products.
  Climate Change Impact:
o Changes in climate patterns can affect forest health, potentially leading
to disruptions in the supply of quality hardwood timber.

THE KIND OF CORPORATE-LEVEL STRATEGY PURSUED BY THE COMPANY

The corporate level strategy pursued by the United States hardwood lumber industry
can vary among companies based on their specific goals, resources, and market
conditions. Corporate level strategy refers to the overall plan that a company uses to
manage its business units and achieve its objectives. It's important to note that
individual companies within the hardwood lumber industry may adopt a combination
of these strategies or may shift their strategies based on changing market conditions.
The choice of strategy depends on factors such as the company's competitive
position, resources, market trends, and long-term objectives.

THE NATURE OF COMPANY’S BUSINESS-LEVEL STRATEGY

The business-level strategy adopted by individual companies within the United
States hardwood lumber industry can vary based on their specific goals, competitive
environment, and market positioning. Business-level strategy refers to how a
company competes in a particular market or industry. Below are business-level
strategies being pursued:

 Cost Leadership:
o Some companies may focus on becoming a low-cost producer within
the hardwood lumber industry. This strategy involves optimizing
production processes, achieving economies of scale, and efficiently
managing the supply chain to offer hardwood products at competitive
prices.
 Product Differentiation:
o Companies may differentiate their hardwood products based on quality,
features, or brand image. This strategy involves investing in research
and development, producing high-quality lumber, and creating a strong
brand identity to justify premium pricing.
 Focus on Niche Markets:
o Instead of targeting the broad market, some companies may adopt a
niche strategy by focusing on specific customer segments or
specialized hardwood products. This allows them to tailor their
offerings to the unique needs of a particular market segment.
 Sustainable Practices:
o Emphasizing sustainability can be a business-level strategy, especially
given the increasing importance of environmentally friendly practices.
Companies may differentiate themselves by obtaining certifications for
sustainable forestry, promoting responsible harvesting, and marketing
eco-friendly hardwood products.
 Innovation and Technology Leadership:
 o Companies may differentiate themselves through innovation and
technology. This could involve adopting advanced technologies in
logging, milling, and processing, as well as developing new products or
processes that set them apart from competitors.
 Vertical Integration:
o Some companies in the hardwood lumber industry may pursue vertical
integration as a business-level strategy. This involves owning and
controlling various stages of the supply chain, from forestry operations
to lumber processing, to ensure a stable supply of raw materials and
improve operational efficiency.
 Customer Relationship Focus:
o Building strong relationships with customers can be a key strategy.
This involves understanding customer needs, providing excellent
customer service, and potentially offering customized hardwood
solutions to meet specific requirements.
 International Expansion:
o Companies looking to expand their business may pursue an
internationalization strategy, targeting markets outside the United
States. This could involve exporting hardwood products or establishing
production facilities in other countries.
 Collaboration and Partnerships:
o Collaboration with other companies in the industry or related sectors
can be a strategy to share resources, reduce costs, and explore new
opportunities. This could involve forming partnerships with forestry
management companies or downstream manufacturers.

THE COMPANY’S STRUCTURE AND CONTROL SYSTEMS AND HOW THEY

MATCH ITS STRATEGY

The structure and control systems of the United States hardwood lumber industry, as
well as their alignment with the industry's strategies, can be examined through
various dimensions. When speaking for the company’s structure, the hardwood
lumber industry in the United States is often characterized by fragmentation.
Numerous small to medium-sized companies operate in this sector, contributing to a
diverse competitive landscape. The industry involves various stages, including
forestry, logging, milling, and processing. Some companies may operate across
multiple stages, practicing vertical integration to secure a stable supply of raw
materials or enhance operational efficiency. The industry serves various market
segments, such as construction, furniture manufacturing, and flooring. Different
companies may specialize in catering to specific segments based on their expertise
and capabilities.
On the other hand, control systems like quality control, sustainability standards, cost
control, technology integration, market research and customer feedback give the
importance of producing high-quality hardwood products, control systems in the
industry often focus on ensuring consistent quality. This involves monitoring and
maintaining standards throughout the production process. Control systems related to
sustainable forestry practices and certifications are increasingly important.
Companies may adhere to industry-recognized standards. Cost control is crucial,
especially for companies adopting a cost leadership strategy. Efficient supply chain
management, production processes, and resource utilization are monitored to
maintain competitiveness. Control systems related to technology use and integration
play a role in ensuring that companies stay competitive. This includes adopting
advanced technologies in logging, milling, and processing to enhance efficiency.
Control systems that gather market data and customer feedback help companies
stay attuned to changing preferences and market dynamics. This information is
valuable for adjusting strategies and offerings.

In summary, the structure and control systems in the U.S. hardwood lumber industry
are shaped by its fragmented nature, diverse market segments, and the importance
of sustainable practices. The alignment of control systems with business strategies is
crucial for companies to effectively compete and thrive in this industry.