Before entering Chinese market, GreenWood Resources Inc. came up with two projects, Luxi and Dongji, however could not decide on which one. Thus, this required to conduct analysis of their differences from the following aspects: economic, social and environmental.
According to Exhibit 7, the initial Investment in Existing Plantation Assets of Luxi and Dongji were 296,565,711 RMB and 100,298,995 RMB respectively. Obviously, concerning expenses Dongji project was much more attractive than Luxi. However, it could considerably change the decisions in terms of profitability of each project.
For the first year, planting expenses of Luxi was 632RMB/mu while Donji was 255 RMB/mu. The variable cost of Luxi project was 367+110=477 RMB/mu/year, while Dongji project cost 87+45=132 RMB/mu/year. Consequently, including first year expenditure, Luxi totally costs 3,971 RMB/mu for 7 years, whereas ...view middle of the document...
In terms of firm strategy, structure and rivalry, GreenWood was planning to establish a wholly-owned enterprise and launch a seven-year rotation strategy. However, even after building guanxi with local government there were some contradictions in negotiations between GreenWood and Luxi Forestry Bureau due to the scale and complexities of this project. Regarding factor conditions, Luxi County had not only highly favorable natural conditions, such as fertile soil and gentle slopes, but also possessed sophisticated river and water irrigation networks. Moreover, GreenWood was able to acquire 100,000 mu of poplar tree plantation in this county. In spite of contradictions, Luxi Forestry Bureau could provide GreenWood with crop care activities at low labor cost and help to support local relationships. Mentioning the aspect of local demand, GreenWood informed Luxi Forestry Bureau that evaluated annual timber demand might reach 2.2 million m³, which exceeded considerably the current market supply of just 1 million m³. Apart from that, local consumers were looking for new ways of foreign timber supply because of increasingly high taxes and transportation cost of imported logs from abroad. In terms of related and supporting industries aspect, GreenWood target was a nearby timber processing hub and wood market, called Linyi, with about 2,600 mills and the biggest 200 mills with the demand of 15,000 m³ of timber per annum. Viewing extra aspects of diamond framework, in favor of negotiation progress Luxi Forest Bureau asked GreenWood to set up a mill, which should be able not only to support their forestry business but also to provide employment opportunities to local citizens. From the government aspect, Luxi project could receive fully support with government by partnering with government agency. Meanwhile, GreenWood was in the opportunity that Luxi government had been making great effort in a forestation and sustainable economic development since 2002.