Vertical Integration (CONT’D FROM PAGE 20)
as dominant through consolidation, etc. and thus, chances are that an integration of a takeover might not play out to the mill’s management commitment. Predictable responses to the use of mill power are con- trolled pricing, trades, and financial submission. These are vertical integrating forces of traditional tools for profit from bureaucratic layers of management that are in search of its Holy Grail. Indeed, there is a veritable cookbook of legal ways to execute planning and accounting of restructuring integration. Says David Elliot former Manager, VISY Pulp & Paper, Australia, “For us, integration made sense because we wanted a stronger supportive centralized structure, which would enable us to grow, both in our core legacy technol- ogy and in opening up new markets.” Abandoning part of the mainframe model of vertical in- tegration, some integrated mills have been shedding non- core assets to free up capital or reduce risk. Their strategy implementation considers technological “evolution” as op- posed to technological “revolution” with its higher costs. The more you dislike unpredictability, the more you want price and job protection for the status quo. Even with the best-laid plans, integration can fail without the right tal- ent, that is, the appropriate leaders and influencers. Ulti- mately, it comes down to the human element. Tom Peters, the author of “Thriving on Chaos,” says, “In achieving extraordinary responsiveness, a change in
man/technology collaboration binds all corporate facets to plan, develop, buy, make, sell, and move or liquidate risky inefficient capacity. Paradoxically, we train people to act more like machines to understand logical reasoning and their related collaboration. In the integrated activities of work, collaboration is king. Yet, it is more difficult to ef- fectively communicate in integrated businesses. Lack of teamwork and their “message” will probably not come through loud, clear, and not be repeated more times and in more places. Will Integration Yield Power? Done right, integration unlocks more equity value by limiting import exposure created by leveraging the exist- ing critical competitive advantages. Conversely, mills in the past had exported about 10 percent of their capacity to keep their U.S. prices high. This changed a bit as more foreign paper mills were built. The new solution? Expand the U.S. market by buying independents with corrugators. My former partner and I followed the trend in 2016 by selling Action Box Co. in Houston to an integrated mill. The more accustomed mills are at being their own customers in this age of fast chang- es, the harder it is to get out of vertical integrations, fixed routines, and rigid bureaucracy. Serious questions lurk when executives covet a higher percentage rate of integration. They desire market share
CONTINUED ON PAGE 24
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April 8, 2024
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