Comparison of important competitiveness factors for small- to medium-sized forest enterprises

Comparison of important

competitiveness factors for

small- to medium-sized forest enterprises



Omid Parhizkar

Robert (Bob) L. SmithS

Chad R. Miller









Abstract

Hardwood lumber is one of the most important commodity groups exported, and this exportation has had a significant

impact on the balance of trade in the United States. The production of hardwood lumber, however, has fallen 25 percent (more

than 4 billion board feet per year) since 2000. The loss of employment opportunities throughout the United States from this

sector has caused difficulties for many individuals and their communities. Unfortunatly, this disturbing development has now

combined with the current global financial and economic crisis impacting the wood industry. The majority of U.S. sawmills are

working harder to develop relationships with customers and are being more aggressive in searching for new markets. In this

work, hardwood exporters and other hardwood lumber manufacturers were studied and compared to determine the factors

associated with exporting. It was found that exporters differed significantly in their transportation methods, marketing activ-

ities, and production profiles from those of other hardwood lumber manufacturers. They also were significantly larger in their

total production and employment. As the forest products industry continues to become more global, an analysis of the im-

portance of these factors has suggested how firms can begin exporting or increase sales in international markets.







W hile much has been written regarding the export ac-

tivities of sawmills in the United States, little attention has

Literature review

Hardwood sawmills in the United States, while large in total

been paid to determining the important transportation and production, are comprised of many small facilities, most

competitiveness factors that differ among exporting and other employing less than 50 people. Approximately 25,000 work-

hardwood lumber manufacturers. This study surveyed export- ers are employed by an estimated 3,500 hardwood sawmills

ing and other lumber manufacturers in the United States to in the United States, mostly located in the eastern half of

determine the factors associated with exporting. Analyzing the country (USDC 2005). Hardwood lumber is one of the

the results from this study will help nonexporters understand most important commodity groups exported and has had a sig-

what important transportation and competitiveness factors are nificant impact on the balance of trade in the United States

needed for exporting. (Peck 2002). In 2007, hardwood lumber accounted for 24 per-

Exportation can offer several advantages for small hard- cent of total U.S. wood exports by value, or $1.6 billion. The

wood producing companies. These advantages include the

potential for increased profits, market expansion, and eco-

nomic stability resulting from diversification. Small compa- The authors are, respectively, PhD and Consultant, International

nies may recognize the potential advantages of exporting Finance Corporation, The World Bank Group, Washington, DC

but not enter the market due to perceived barriers such as (oparhizkar@ifc.org); Professor/Associate Dean for Engagement,

College of Natural Resources, Virginia Polytechnic Institute and

unfamiliar procedures and market conditions, inadequate in- State University, Blacksburg, Virginia (rsmith4@vt.edu); and As-

formation, complicated trade regulations, and alternative sistant Professor, The University of Southern Mississippi, Depart-

transportation modes (Parhizkar et al. 2007). Once a company ment of Economic & Workforce Development, Hattiesburg,

decides to begin exporting, its need for information becomes Mississippi (chad.r.miller@usm.edu). This paper was received for

publication in October 2008. Article No. 10540.

more specific. Information concerning marketing, transporta- SForest Products Society Member.

tion, and production are appropriate at this point (Ifju and ÓForest Products Society 2009.

Bush 1994). Forest Prod. J. 59(5):81–86.





FOREST PRODUCTS JOURNAL VOL. 59, NO. 5 81

production of hardwood lumber is, therefore, an integral part 2005). But, it is important to understand what role globaliza-

of the economy of the country. The estimated North American tion plays in a sawmill’s exporting activities in today’s

hardwood lumber production was 10 billion board feet business environment.

(BBF) in 2007 (USCB 2008). The Appalachian region alone

Reliance on trucking, coupled with increasing fuel costs, is

accounts for over 55 percent of the hardwood lumber pro-

reducing its competitiveness in domestic and global markets

duced in the eastern United States. Roughly 50 percent of

(Parhizkar et al. 2007). Intermodal transportation was defined

the hardwood sawn in the United States is red and white

as the successive transportation of a loaded container or trailer

oak. Poplar comprises another 11 percent of the total produc-

from its place of origin to its place of destination by more than

tion. Of the total amount of hardwood lumber production, an

one mode of transp