Woodstrat: a Support System for Strategic Management

Today, Finland has more forests than it has had for the last several hundred years. This is due to the ecological concept of sustainable development, in which a considerable part of the forest’s natural growth remains unexploited. Although Finnish pine and spruce forests are only about 1 percent of the total resources in the world, Finland has been able to build a leading position among the forest industry nations. Metsä-Serla is a Finnish forest products group with 1993 net sales of FIM 8,239 million (U.S. $881 million). It is the fourth-largest forest products company in Finland; its operating profit was FIM 964 million (U.S. $220 million) and the consolidated financial result was over FIM 550 million (U.S. $126 million) better than in 1992. This shows an impressive recovery from a severe recession in the Finnish forest industry. The year 1993 will be remembered “as one in which, in real terms, prices for several forest products on world markets fell to their lowest level in 20 years’’ (Timo Poranen, president and CEO of MetsäSerla). In its eight divisions, which operate rather independently, MetsäSerla processes wood raw material into paper and paperboard, corrugated board, and tissue as well as sawn goods, pulp, and chemicals. It has production and marketing operations in Europe and sells its products worldwide; exports from Finland and sales through foreign subsidiaries together contribute 84 percent of net sales. Metsä-Serla’s basic strategy is to expand and strengthen its market positions in carefully selected core businesses (Metsä-Serla, Annual Report 1993). In 1993, the number of employees was approximately 8,700, of whom almost 30 percent worked outside Finland. Metsä-Serla has undertaken a rapid and thorough adaptation to the emerging characteristics of its European markets. It was one of the first companies in Finland to adopt modern environmental values and has actively developed proenvironmental technology and products. “We see it as a trend that we should be directly involved in, right from the start,’’ says Timo Poranen. “We are concentrating on manufacturing the type of products that best bring out the excellent properties of primary fiber; an additional factor is that products should be well suited to recycling and processes should consume as little energy as possible.’’ Strategic thinking has a long history in the corporation and new ideas have, on many occasions, been very successfully implemented. In the corporation, strategic planning used to be rather a formal exercise. This is the case in most forest industry corporations, where the pressures of rapidly changing markets and strong competition quickly make most strategic plans obsolete. Ossi Kokkonen, a senior vice president, did not feel very happy with the way things were done. He heads a division with nine small business units (SBUs) representing sawn goods, pulp, and building materials. These SBUs operate with multiple products in different markets and market segments. Softwood and hardwood pulps are mainly sold to Metsä-Serla’s other mills, and fluff pulp (a speciality that is used as raw material for hygiene products) is marketed mainly to European and North American manufacturers. Important segments for the sawn goods are joinery, planing mill, furniture, packaging, and construction industry. Sawn goods are marketed through the division’s own sales offices in Denmark, the United Kingdom, France, and Switzerland; in the other markets, sales are taken care of by local agents. Building materials—windows, doors, log houses, and saunas—are distributed to European markets, but also remote markets such as the Japanese have been attractive for log houses. Ossi Kokkonen’s view on traditional strategic planning is that the process offers very little substance to its participants. He elaborates as follows: