ATLANTIC CORPORATION ABRIDGED Harvard Case Solution & Analysis

ATLANTIC CORPORATION ABRIDGED Case Solution

Appraisal of Atlantic Corporation

Atlantic Corporation is looking to acquire Royal Paper and looking at the industry analysis performed in the next section, it seems that the acquisition of Royal Liner board Mill and Box Plants is a good strategic move for the company. The current net buyer position of Atlantic Corporation in the market further pushes us to favor the acquisition of Royal Paper. This acquisition would protect the company from the increases in the prices of the liner board.

Atlantic Corporation is performing well in the overall market and this acquisition would help the company to acquire a competitive advantage in the market, as the shipping costs are also high in the industry and the box plants can then be planted near the customers. By looking at the current trends in the industry, the market outlook, and the position of the company, if the company decides to set up its own linerboard mill, then this will not only take a lot of time but will also require a high level of the in-built fixed costs for supporting the operations of the mill.

On the other hand, the approximate construction cost for a linerboard mill is $ 750 million whereas the company can easily acquire the best mill with a cheap initial cost of $ 319 million. The forest product industry of Atlantic is also very much tied to the overall economy and it is tied especially to the interest rate changes. Therefore, the company now needs to expand its business in an area where the interest rates do not play a critical role. The linerboard industry is the one where the changes in the rates of interests do not cause adverse impact on the prices.

The current production of Atlantic Corporation day is only 780 tons of liner board and this only represents 1.8% of the total national liner board capacity and is also less than the 150,000 ton purchases of the company from its competitors. Therefore, the current linerboard capacity of Atlantic Corporation is weak, something needs to be done in order to strengthen this capacity and the only best option currently seems to be the acquisition of Royal Paper Mill and Boxes (Jarrell, 2009).

Industry & Competitive Analysis

The industry and competitive analysis would provide us with a detailed set of qualitative factors through which we would be able to support the decision of whether or not Atlantic Corporation should acquire Royal Paper Mill and Boxes or not. First of all, we analyze the industry of Linerboard products and the attractiveness of industry.

Analysis of Linerboard Industry

If we look at the outlook of the box and the liner board industry, it promises a stable and a healthy economic recovery. First of all, the demand of the box and the liner board industry has been predicted to increase by 7 % per year. Along with this, there might be only 1% to 2% of the new capacity, which would be available in the market until the end of the year 1986. This is going to result in the capacity utilization of 100%.

High profitable sales have also been indicated for the liner board products and this is evident by the high price for liner board, which is $ 410 in the year 1987. The industry outlook clearly shows that all those companies, which are pursuing to increase their liner board production; this would be considered as a good strategic move. This is also considered as an intelligent move especially due to the capacity for the missing production for the liner boards regarding the need, which purchasing project asks for, so that the company does not lose any customers to its competitors (Barney, 2006)..........................

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