Mactara Case Summary

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MacTara Limited and the Wood Products Industry in Nova Scotia Alternatives: 1. Status Quo – MacTara’s functions remain the same, no changes. 2. Industry Consolidation – MacTara takes over other lumber producers. 3. Become an energy producer to the Nova Scotian provincial energy grid. 4. Close the lumber and saw mill. 5. Expand product line (add value-added products, as well as differentiated sizes) Recommendation: MacTara Limited should develop a value-added product line in order to maximise capacity utilisation and profitability. * Rationale: 1. Remaining at status quo is not an attractive alternative for many reasons. The American housing and construction market is uncertain, mainly due to the foreclosures…show more content…
In order for this to occur, MacTara would be required to end a number of contracts. Also, if one of the mills were closed, the value-chain would be disrupted. MacTara is a vertically integrated company and they take advantage of the waste that is produced from their lumber. Therefore, if the lumber mill was closed, there would be no waste produced, and effectively, there would be no use for any of the other mills. Further, if the lumber mill was closed, it would add additional power to suppliers, who would be supplying 100% of the bark, instead of their current supply of approximately 50%. If the saw mill was closed, then the whole tree would not be used, therefore going against MacTara’s Corporate Social Responsibility strategy. 5. MacTara should expand their product line to reduce reliance on local sale of lumber and volatile commodity prices . They already have the necessary equipment in order to accomplish this task and there is a demand for value-added products in both Canadian and British market. MacTara could begin by focusing the production of value-added products to decking and fencing, both of which there is a growing market for. They should remain a lumber producer, as the waste from the lumber will be needed in order to increase the production of…show more content…
Demand for pellets is steadily increasing and is an emerging market; especially in the European market, where pellets are used as an alternative source of energy. There is a general trend towards being efficient and finding other sources to create energy; pellets are an energy source that is environmentally friendly. There is an increase demand in the pellet industry, due to the fact that energy prices are rising. There is a push towards finding other sources of energy. Currently, substitutes to pellet fuel include fossil fuels, wind power, and solar power. All three types are expensive. Fossil fuels are diminishing in availability, and wind/solar power is reliant on the weather which is uncertain. MacTara is one of the first to own a pellet mill in the world, which makes them an important supplier of pellets. There are no evident barriers to entry into the pellet industry because pellets are an undifferentiated product; however, the cost to build a pellet mill is very

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