Bob Gordon

Abstract: Eu Jai Li is eucalypt structural veneer from forests managed by Forestry Tasmania, in Australia.Forestry Tasmania is an Australian land manager, managing about 1.5 million hectares of forest.Sustainable forest management is used to produce Eu Jai Li. Forestry Tasmania’s certification for its sustainable forest management is recognised by the Programme for the Endorsement of ForestCertification (PEFC). Forestry Tasmania produces about 3 – 3.5 million tonnes of logs per year, including sliced veneer logs, sawlogs, rotary peeled veneer logs, pulpwood and roundwood. Forestry Tasmania has been developing specialised markets in the Chinese forest products sector for the last ten years. The new product, Eu Jai Li, was developed specifically for this market, to supply rotary peeled veneer logs for products that require strength, stiffness and hardness. It has become the preferred material for core veneer for shipping container floors. The properties of Eu Jai Li, that make it suitable for these products, and the strategy to successfully establish the new product in the Chinese market is described. The future opportunities with Eu Jai Li and other forest products from Tasmania are introduced.

INTRODUCTION

Forestry Tasmania (FT) has been exploring the Chinese forestry sector markets for the last 17 years, the first ten years was multi-faceted with contact being made at different levels in the Chinese government and business. The initial approach at a technical services level, based on scientific exchanges, where FT provided training on a fee-for-service basis. Information and personal exchange was also a feature of this period. The foundation for this strategy is Tasmania’s long-term relationship with Fujian Province (Tasmania's Sister State since 1981).

The initial contact was with Madam Jiang, head of the Chinese Academy of Forestry and sister of the President of China. This contact facilitated introductions to the next level of officials, and resulted in the Tasmanian Wood Design Collection (TWDC) being invited to tour China. Strong business and personal relationships have grown from this.

However, approximately seven years ago, these relationships made possible the development of commercial activity in eucalypt logs to deliver specific values to Chinese timber manufacturing in rotary veneered products.

This was seen to advantage development in Australian and Chinese production processes.

Based on the above and considering the terms of reference from Forestry Tasmania, the Managing Director, Mr. Bob Gordon; General Manager (Operations & Sales), Mr. Kim Creak; and the Export Manager, Mr Sandy Chen conducted reviews and evaluated FT’s early strategies for strengthening ties with China. A new alternative Market Development Strategy was developed and implemented which lead to finding strong niche market opportunities for Eucalyptus veneer in the container floor industry.

The results of this new strategy for FT are being successfully achieved. Led by the FT brand name Eu Jai Li, which has achieved the strongest market position in the container floor industry. FT is the world’s largest single supplier of eucalypt hardwood veneer to the container floor industry. A new veneer-processing mill has been built up by FT’s partner, Ta Ann Group in Tasmania for the export market, and FT is one of the most recognised and respected forestry companies in the world regarding this niche market in China.

DEVELOPING THE MARKETING PLAN

A successful Market Development Program can be viewed from three main levels:

the creation of the company’s competitive position;
the establishment of a core strategy; and implementation of the strategy (See figure 1).  

The focus of subsequent discussion, based on this model, is the three core functions. This is the lens through which the review and evaluation of FT’s previous strategies was conducted and provides suggestions for revising the ongoing plan.

Finding the competition position：The competitive positioning of the company is a statement of market targets, i.e. where and how the company will compete, and what the differential advantages are. FT’s previous review of the China market strategy did not clearly identify this important point. Therefore, FT started to conduct business research to find the competition position in the following areas.

Defining the business purpose：FT has one primary business aim in this area - the company is in the business of providing native hardwood forestry and plantation resource. This includes the existing development in technical services and plantation establishment, the initial processing of logs in green-sawn timber, chips, rotary veneer, and secondary processing in kilndried timber, plywood / LVL, pulp and the operation of export business. For the China market, the Mission Statement was to attract a Chinese buyer or investor in veneer production processes and the export of veneer-relative product to China.

This was an unambiguous definition. FT proceeded to follow this up by designing short and long-term strategies. Each of these strategies was supported by equally strategic objectives to be achieved through the projects. In this way, incremental achievement of objectives has supported the Mission Statement.

Market Analysis：FT undertook a market analysis of the China plywood industry and its market in plywood products.

Industry Analysis：This showed China currently has a total plywood production capacity of approximately 15 –16 million m3 per annum. However, the industry appeared fragmented (which has proven to be true). The top 10 largest producers accounted for only about 10-15% of the total capacity in the country.

Small players have the cost competitive advantages such as lower investment and lower labour costs and they are much more flexible in a dynamic market. Whereas, the larger producers have to compete with higher fixed costs and produce higher cost end-products, and operate in export markets.

We found the large-scale plywood manufacturers in China are mainly located in Beijing,
Shanghai and Guangdong areas. They aim to produce high quality or specific products, such as thick plywood for container floor, and target export markets in Japan, USA and Europe. Raw material (peeling logs) are mainly imported from Australia (Eucalypt), PNG/Solomon Islands, Southeast Asia, Africa (tropical hardwood species), and Russia (hardwood and softwood).

Medium-size plywood producers were located in Jiangsu, Shandong, Zhejian and Guangdong Provinces. The major applications of their plywood products are concrete formwork, furniture and interior decoration. The key species of this group of producers are Radiata pine (imported form New Zealand), as well as tropical hardwood from PNG and Southeast Asia.

Small and family scale plywood manufacturers are spread out in three regions of China, they were found to produce commodity plywood products, mainly for the local markets.

Zongzhou area in Fujian Province, using local mansion pine and started to use Radiata pine pulp logs five years ago.

Linyi area in Shandong Province, using local poplar and some Radiate pine pulp logs

Zuogezhuong in Heibe Province, using local poplar, birch, etc.

FT chose to look at the large-scale plywood manufacturers, mainly located in the Beijing,
Shanghai and Guangdong areas. Their aim to produce high quality or specific products, and the veneers from imported sources matched the FT resource availability.

Products Analysis：The plywood products in the China market were well past the emergent stage and there was an over-supply in the domestic market. FT recognised that some manufactured products were at the mature stage and aimed strategies better suited to the high value end of the mature market. Market strategies were designed with this knowledge in mind.

An indication of change of one of the hardwood core veneers for container floors in the plywood product, was a move from Indonesian species – Koreem - to other hardwood species to produce the same quality as Koreem, which required high strength veneer. The underlying reason was that there was a very limited (high strength) resources from sustainable supplies. In the meantime, the container industry (main FT focus) was developing very quickly along with the globalization of this market - 90% of international container board veneer is produced in China. The demand therefore, for high strength hardwood veneer was going to significantly increase. This was a great opportunity for Forestry Tasmania to enter the Chinese market.

Early discussions with potential customers clearly showed that the initial products FT expected to export should be ideal for veneer into container floors.

Company and competitor’s analysis： With the knowledge captured from looking at FT’s competitive position and the market analysis. FT reviewed via S.W.O.T. (Strengths, Weaknesses, Opportunities and Threats). The results of such an analysis were used to understand and describe the company capabilities and strengths. This provided a platform to assess a competitor’s objectives, current strategy and resources.

Table 1 displays the results of a brief analysis of competitors’ key success factors. As can be seen, FT has sustainable forestry resource with unique species that deliver strength to the product. However, FT needed to build a strong brand, good market service with R & D power, and a strong shipping position, which would enable FT to build strong partnerships with customers in the China market, if it were to compete successfully.

To summarise the above analysis, FT has found there was the niche market to target and understood how to adopt and build up the differential advantage of its product. This was done as follows:

Market targets
The results of market analysis identified the economic region where FT should launch its products - Shanghai, Beijing and Guangdong areas; the customer targets are large plywood companies with good financial ability. These customers included leading companies in the plywood industry; the product to be targeted was core veneer for container floors, and the veneer to become initially a substitute of Kroeem veneer.

Differential Competition Advantage
The company and competitors’ analysis has identified the differential advantages that enable FT to compete within the Chinese market.

FT owned a competitive world-class resource, which was able to consistently supply hardwood veneer of the unique Eucalypt species - the product had sustainable forestry management certification - PEFC. However, this attribute needed to blend with a differential branding of the product; marketing services that are different to other species, the understanding of product processing requirements in R&D terms; and a strong shipping export function. Therefore, the new product culture with a differential competition advantage can be introduced to the marketplace and occupy a strong position.

This required considerable investment in –
. understanding brand culture in China;
. testing of eucalypt in the manufactured products to satisfy both FT and the customers (R&D is expensive);
. proving up knowledge of supply logistics from Tasmania to China and particularly domestically within China to witness; and
. time with potential buyers.

Design Core strategy
The core strategy is both a statement of the company’s business purpose and the broad strategies it will use to achieve them. Based on the results of defining the business purpose, the analysis of the market, and the analysis of the company and competitors, FT has designed the effective longterm and short-term strategy as shown in Figure 3.

To conduct R & D to service customers on how to process Eucalypt veneer, particularly in the peeler and veneer areas
To set up a partnership with a shipping company – COSCO, and ANL to combine both bulk and container shipments
To launch the Chinese name brand - Eu Jai Li ( ) to position the product in the market
To build up a differential competition advantage by marketing to a mix of company resources.

These short-term strategies were successfully achieved.

Implementation
To successfully achieve the strategy an implementation program was developed. FT has
designed the plan around what it termed the ‘5Ps’ - People, Product, Price, Place and Promotion. The ‘5P’s’ have been designed to collectively add up to achieve the positioning required and translate the strategy from statement of intent to effort in the market place. This process has proven successful.

To explain the 5P approach, there are:-

People: People are the key resources for the company, FT has identified requirements of
the following resources and experiences: China marketing experience in forestry products; strong networking in the market place; bi-cultural language skills; and bi-cultural business knowledge, products and processing knowledge, logistical (shipping) management experience. FT has got the right people to achieve this.

Products: A strategy to focus on supply to key customers. The products are the peeler logs for the core veneer of container floors competing with Indonesian Koreem veneer.
Target FT product to key customer requirements.

Place: The products should be introduced to the economic regions according to the earlier industry analysis. Veneer has targetted key plywood areas such as Beijing,
Shanghai and the Guangdong areas.

Price: A strategy of strongly competitive pricing to enter the markets to share entry risks
with customers/partners. When the products were established in the markets, FT has taken advantage of the eucalypt special qualities and supplier power to optimise pricing.

Promotion: Targeted trade shows and the selection of industry leading companies to
demonstrate the superior qualities of eucalypt.

These steps have made sure FT successfully achieved the core strategy.

CONCLUSION

Forestry Tasmania has been successful through an effective process and a core strategy to define its place in the niche veneer market in China – veneer for container floors. The short-term strategy is to continue R & D research, service customers, create strong branding, build strong partnerships with customers’ shipping companies, and create a differential competition advantage through marketing by creating a mix of company resources. Based on achievement of the shortterm strategies, the long-term strategy is to attract buyers or investors into processing facilities in Tasmania for exporting product. The implementation of the five P’s steps has made sure FT successfully carries on the strategy, the outcomes to FT are now:

Eucalypt veneer is recognised as the best veneer for container floors;
Forestry Tasmania’s brand name Eu Jai Li has achieved a strong market position in the container floor industry;
FT’s supply represents about 10% of the China container floor market;
FT is the world’s largest single supplier of hardwood veneer to the container floor industry;
FT is the world’s only supplier of eucalypt veneer for container floors;
The new veneer processing mill has been invested in by FT’s partner Ta Ann Group in
Tasmania for the export market; and FT is one of the best forestry companies in the world regarding the niche market in China.

Brife information to the speaker: Bob Gordon, Forestry Tasmania, Hobart, Australia

From < the Third International Symposium on Veneer Processing and Products >

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