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Georgia-Pacific Corporation - 1996Strategic Plan: 

Georgia-Pacific Corporation - 1996 Strategic Plan Presented by: Chad Sherwood Mark Cooney Gerry Beltran Dwayne Arruza

Georgia Pacific Corporation History: 

Georgia Pacific Corporation History Georgia Hardwood Lumber Company, was incorporated in Georgia on September 26, 1927 The Great Depression of 1929 turned into opportunities due to innovation. On April 2, 1951, the company name was changed to Georgia Pacific Plywood Company. By 1966 Georgia Pacific completed construction of its fourth and fifth plywood plants and entered into Latin America.

Georgia-Pacific 1996: 

Georgia-Pacific 1996 Georgia-Pacific employs approximately 47,000 people, most of whom are members of unions. Net Sales of $14.3 billion in 1995. 221 manufacturing facilities in the US 1 recycled-paper mill in Canada 2 wood-molding manufacturing facilities in Mexico.

Global 500 RankingForest and Paper Products Source: Fortune Magazine Online: 

Global 500 Ranking Forest and Paper Products Source: Fortune Magazine Online

Georgia-PacificTwo Major Operating Divisions: 

Georgia-Pacific Two Major Operating Divisions Building Products Division (60% of Sales in 1994) Wood Panels (25%) Lumber (21%) Gypsum (3%) Chemicals (3%) Roofing (1%) Forest Resources & Others (7%) Pulp and Paper Division (40% of Sales in 1994) Container board and Packaging (17%) Communication Papers (10%) Market Pulp (6%) Tissue (6%) Other (1%)

Percent of Net SalesBuilding Products v.s. Pulp and Paper: 

Percent of Net Sales Building Products v.s. Pulp and Paper

Georgia Pacific Financial Ratios : 

Georgia Pacific Financial Ratios

Operating Profits for Each Division($ in Millions): 

Operating Profits for Each Division ($ in Millions)

Slide9: 

Strategic Issues Mark Cooney

Building Product Division’s falling performance : 

Building Product Division’s falling performance Sluggishness in housing construction-driven by the economy Tight availability of timber supply caused by logging restrictions Lower prices being paid for lumber, plywood and other commodities sold by GP Operating in a mature product environment Sales levels have been increasing

Net Sales 1991-1994: 

Net Sales 1991-1994

Union Contracts: 

Union Contracts 47,000 workers encompassing 73 labor contracts up for renewal in 1995 5 labor contracts at large paper facilities 3 different countries and cultures, Mexico, United States & Canada Major cost expense to operating expense

Unprofitable from 1990-1993: 

Unprofitable from 1990-1993 Negative publicity image Internal inadequacies displayed Market position and product questioned Unhappy stockholders, pressure on board of directors 1994 profitable, fluke or fixed 1995 2nd qtr operating income down 27% versus 1994

Decentralized Company : 

Decentralized Company 224 production facilities in Canada, Mexico and United States Each Independently responsible for R&D of Forest Research, new wood and paper products, conservation Limited Communication, cost and production efficiencies across similar job functions Sales offices located globally

Environmental Concerns: 

Environmental Concerns Shrinking availability of timber Raw timber costs risen by 30% squeezing margins Capital tied up in timberland, awaiting growth of replanting. Endangered animals inhibiting purchased woodlands Special interest groups and protesters

Building Product Division: 

Building Product Division Wood Panel - 1st largest producer, 20% domestic capacity Lumber - 2nd largest producer, 5% domestic capacity Gypsum - 3rd largest producer, 10 plants Chemical - 1st largest supplier, 16 plants

Strategic Issues Facing Georgia Pacific: 

Strategic Issues Facing Georgia Pacific Building product division’s decreasing 1995 performance. 73 Union contracts up for renewal in 1995 Unprofitable from 1990-1993 Decentralized company structure Environmental timber concerns

Main Strategic Issue: 

Main Strategic Issue Georgia Pacific in 1994 returned to profitability for the first time since 1990, earning $310 million on sales of $12.7 billion. Georgia Pacific’s paper business is surging. The company has been benefiting form tightening supply/demand balances in commodity paper grades since the middle of 1994. Georgia Pacific’s building products segment is holding back the advance. The biggest problem is sluggishness in housing construction, which has resulted in lower prices for lumber, plywood, and other commodities. In mature industries, Georgia Pacific needs a strategic plan to maintain profitability.

Slide19: 

Strategies Gerry Beltran

Strategies: 

Strategies First Address functional areas Need to consolidate within the company (i.e. RETRENCHMENT) Efficiency Better utilization of economies of scale Improve profitability Consolidate existing domestic manufacturing plants Reduce domestic staff through attrition and layoffs Centralize

Strategies: 

Strategies Second Obtain larger market share in mature market Consolidate within industries Acquire or merge with another paper/lumber company Acquire recycle fiber facilities Obtain larger market share in new markets Expand internationally Expand in existing markets with high growth product line--chemicals Continued expansion/focus in chemicals

Slide22: 

Case Update Dwayne Arruza

Georgia-Pacific: 

Georgia-Pacific No changes in overall direction and focus Acquisition of CeCorr Divestiture or closure of unprofitable facilities Restructure

Georgia-Pacific: 

Georgia-Pacific

Georgia-Pacific - 1997: 

Georgia-Pacific - 1997

Restructure: 

Restructure

GP Group/The Timber Co.: 

GP Group/The Timber Co. Benefits Enables shareholders to benefit from high profits derived from timber business Concerns Conflict of Interest

Slide28: 

Questions?