A scenario-based modelling approach to identify robust transformation strategies for pulp and paper companies

Canadian pulp and paper companies have been experiencing hard times during the last decade. The rising Canadian dollar, low-cost competition and the decline in number of conventional markets have led to several restructuring projects and shutdowns among pulp and paper mills. Setting up a transformation strategy is considered vital for those companies to overcome the crisis and achieve a sustainable competitive advantage. Several transformation pathways could be undertaken, ranging from process modernisation to product portfolio and market diversification. The increasingly volatile business environment makes strategic decisions a tough task. Our objective is then to help decision makers, within the pulp and paper industry, identify profitable transformation strategies that would resist the major driving forces affecting the companies’ competitiveness. A scenario-based modelling approach is presented to evaluate a set of transformation strategies under different trend-based future scenarios and to identify the most robust strategic options, allowing a given pulp and paper company to meet the future challenges. A mathematical model is developed to evaluate the profitability of each transformation strategy under different plausible future scenarios. Investing in high-value bioproducts such as Bioethanol is suggested as a viable transformation pathway. Opting for innovative pulp and paper products such moulded fibre packaging would be a promising strategy to consider within a multi-product diversification pathway. Mixed strategies are also evaluated and it is found that investing in bioethanol while modernising the P&P assets would be the most profitable and the less risky strategy, but with the highest investment cost among all strategies.