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"I understand your motivation for wanting to source the pulp from Chile, but it is important for the corporation to act as an integrated team on these issues," Bill Ewing, Vice President of International of Northwestern Paper Company, told Arthur Kim, the Director of Northwestern's South Korean subsidiary.
"Maybe you're right," Kim responded, "but I just don't understand why it would make sense to pay $450/ton for pulp when I can get it for $330/ton from Chile. It's tough enough to submit competitive bids to our customers without that kind of markup on raw materials. Besides, our plant is supposed to be a profit center. Shouldn't we be trying to maximize profits?"
"This is a topic that we will be covering in more detail with the finance people at the upcoming International Directors Meeting," Ewing said. "In the meantime, you need to make sure that you meet your pulp allocation from the Everett (Washington state) mill."
COMPANY BACKGROUND
Northwestern Paper Company, a Portland, Oregon-based firm, was founded in 1916. From a single pulp and paper mill at the company's inception, Northwestern had expanded substantially over the years, opening additional pulp and paper mills across the country. By the 1950s, the company was one of the largest U.S. producers of pulp and paper products. During the 1960s and 1970s, the company made a big push toward overseas expansion, particularly into Western Europe, where there was high demand for paper products. As that market had become increasingly competitive, however, expansion focused on Latin America and Asia. By early 1994, the company had mills and/or distribution facilities in 20 countries around the world. It was one of the largest United Statesbased manufacturers of market pulp, paperboard, and uncoated paper with 1993 sales of approximately $5.5 billion.
Market pulp was pulp sold on the open market, rather than being converted into paper at the company's own mills. It was shipped from the mill in bales of dry sheets. Paperboard was used to manufacture folding cartons, milk cartons, disposable cups and plates. Uncoated paper was used in office paper, copier paper, tablets, envelopes, and some printing papers.
The early 1990s had proven difficult for Northwestern and other paper companies in the U.S. and Europe. Many of the industry's problems were...