| Forward Integration or Horizontal Expansion?|
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Arauco: Forward Integration or Horizontal Expansion?
Arauco was formed through a merger between Industrias Arauco and Celulosa Constitución in 1979. With the pass of the years the company become one of the largest timber plantation owner in Latin American and Chile`s largest exporter of timber products. It also operates in Brazil, Uruguay and Argentina with a land holding of 1.5 billion hectares. The company has four business segments: pulp, panels, sawn timber and forestry. They produce wood products from six pulp mills, 14 sawmills and 8 fiberboard and plywood mills.
The main points of Arauco´s strategy are:
* Be positioned as one of the most important forestry companies in Latin America. * Achieve economies of scale so as to give reasonable return to its shareholders. * Increase the value of its resources by using the most advanced technologies in genetic improvement, forest management and pest weed and fire protection.
Alejandro Pérez, president and CEO of the Chilean company, gain approval from the board of directors to start the first phase of the project that was called Nueva Aldea. This new project would increase Arauco´s production capacity by 800,000 tons reaching a total of 3.2 million tons, positioning the company as the largest producer of market pulp. The project was divided in two phases. The first phase that included the...