Gunns Case Study

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  • Topic: Forestry, Pulp and paper industry, Government of Australia
  • Pages : 5 (1388 words )
  • Download(s) : 144
  • Published : October 21, 2012
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The PESTEL framework below analyses the environment in which Gunns Ltd. operates by identifying the forces that have the most impact on Gunns performance:

Political factors:

The Commonwealth and state government environmental support for the pulp mill project had been achieved in 2007, despite bitter public opposition. This is a very strong support from the Government in order to utilize Australia’s expanded forest resource, as there is a significant increase in hardwood pulpwood availability projected and Australia’s hardwood pulpwood currently processed onshore less than 7%. “Plantation 2020”, a partnership between the Governments of Australia, was established in 1997, although its Vision 2020 had been established as part of the National Forest Policy Statement in 1992. Vision 2020 aimed to treble the area of tree crops by 2020. The Government also expected continued economic growth, especially in Asia-Pacific region. It is also recommended that Vision 2020 might maximize potential economic and environmental benefits of plantations through market development that would attract more private investment The Australian Government recognized that its proposed Emissions Trading Scheme could lead to a loss of competitiveness for trade-exposed firms. In response, in late 2009, the Australian Government committed $19 million to address four areas of importance to the industry (Creation of ForestWorks as the Forest Industry Skills Council, Development of a forest industry database, addressing climate change impacts on forestry, Assisting industry value-adding)

Economic factors:
Since ANZ had withdrawn funding in May 2008, under public pressure, and the Global Financial Crisis had made investment funds even more difficult to access. In 2008 and 2009, many projects for new capacity were either cancelled or put on hold due to financing difficulties. Since 1997 more than 0.5 million hectares of new MIS plantations had been established. Plantations had largely been established with private capital through managed investment schemes (MIS) encouraged by favorable tax treatment. Whereby investors paid tax on returns when timber was sold and the MIS paid tax on scheme profits. This allows deductions for investments upfront while deferring tax. Australia had developed an Australian Forestry Standard (AFS) to provide consumers with an independent assessment of claims about the sustainability of forest management in Australia. However, there was a strong pressure to adopt AFS as it was more relaxed about the logging of native forests, which was generally not permitted under the Forest Stewardship Council (FSC) Social factors:

The Australian industry had employed over 19000 people in predominantly rural and regional communities, mainly working for seven major domestic and international companies. It was an important customer for the domestic forestry industry. Environmental factors:

While the Australian industry had historically been characterized by ageing equipment and lower than world average capacities, capital investment and product development had enabled productivity gains that supported ongoing competitiveness and a reduction in the industry’s environmental footprint such as: * Greenhouse gas emissions and energy intensity had improved by 22% and 28% respectively since 1990, just under 30% of energy consumption derived from renewable sources * Environmental regulation and market demand for chlorine-free products had driven the industry to find alternatives to chlorine as a bleaching agent such as elemental chlorine-free and totally chlorine-free pulp. * The quantity of water used per unit of output in the worldwide pulp and paper industry had nearly halved from that used in 1990, but the Australian industry savings were even greater * The maximum speed of most paper machines was estimated at 2000 meters per minute in 2005, compared with only 1600 meters per minute in 1995
Legal factors:
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