redo celbi

CELBI’s competitiveness in the industry.

Lakshay Jain

Isp

Introduction.

The Cellulose Beira Industrial, also shortened as CELBI is a firm operating in the production of paper in the paper and pulp manufacturing industry. The paper manufacturing industry has several firms specializing in the same line of production in various countries globally. To ensure a favorable competitive advantage over other firms operating in the same industry of paper production, several strategies have to be drawn and implemented by the managers running CELBI.

Such strategies that could affect the production and other key operation parameters such as employment depend on other factors present in the countries where such firms exist. There are differences in political, social, cultural, and economic dynamics that consequently affect the competitiveness of the firms in this noble industry. The big question is, therefore; how do the differences that exist in various countries affect the competitive abilities of these firms in the paper making industry? With an annual production of about 310,000 tons of bleached eucalyptus sulphate pulp, the non-integrated producer of pulp products manages to sell all its production to the market characterized by fervent competition from other companies like the Cauma Industrial De Cellulose, SA, celtejo among many others. Major competitors of this firm are located in Brazil, a country whose political organization, economic behavior; social and cultural aspects are different from those of Portugal, the locality of the CELBI firm. The focus of this paper is, therefore, to explore how these differences of the two countries impact on the two firms that are, the CELBI and the CAIMA Cellulose SA competitive advantage.

The last two decades has characterized Portuguese economy with two major changes that are; the sharp increase in the degree of economic integration and the rapid financial integration that took place in the early 90s. The participation of the Portugal country in the European Economic Community intensified its global competition ability and thus, firms had to lay strategies geared towards enhancing their global standard competition. On the other hand, the possibilities of external funding enhanced by the rapid financial integration and the diversification of financial asset portfolios gave the firms like CELBI an upper hand to expand their production strategies to meet the global standards of paper that are desired in the market. Consequently, they were able to compete with their counterpart firms in Brazil that specialize in the same line of production. Fortunately, the Brazilian government and economic spheres do not provide for such economic climate with diversified financial aids and the increased degree of economic integration.

Monetary unification present in the country of Portugal has also promoted the regime, that is characterized by the lower and less volatile rates of interests. As such, the rates of inflation are also low (Kaufman ., 2014). With the low rates of inflation, CELBI firm has a market advantage of selling its products in a market that is free of threats that could alter its profit margins. The case is not true for the Brazilian firms that don’t have such economic conditions. The overall performance results are therefore, and increased competitive advantage for the Portugal-based firms such as the CELBI and, therefore, counteracting the impacts of competitors does not appear to be a big deal.

The cyclical terms of the Portuguese economy have in the recent past revealed a high correlation with the cycle of business in the euro zone: the absolute result is the increase in the level of per capita income. With this increase in the level of per capita income, the market demand is pushed forward, and consumers utilize the entire resulting paper pulp product from the CELBI firm in this market. The resulting advantage in the high market demand is absolute illusionment in the Brazilian markets as the comparative per capita income is relatively low. Therefore, the CELBI products likely have more demand that results in making their profit margins. As a result, it remains far much more ahead of its competitors when it comes to issues relating to production as well as counteracting its competition in the highly competitive industry. Through increased structural employment as well as ensuring the stability of the industry employability of the locals in the Portugal, both the public and the private investors have been boosted, and the overall result is the increase in per capita income. Also, the private sector indebtedness has significantly increased (Mankiw., 2009) which has sustained the gap that existed between the domestic demand and supply in the pulp industry in the country. As a result, the share of the services and the total aggregate employment, as well as the production, increased substantially.

The outcome of this revolution does not only sum up to the better market or economically conducive environment but also to the increased competitive advantages to firms in the same industry such as the CELBI. These privileges, as well as well-established economic structure, are not duly implemented in the Brazilian economy where the Caima operates.

The indebtedness of the private sector and its related observations follows inter alia. The indebted population of the Portugal pulp industry has a high propensity to consume. As a result, the widespread indexation of the rates of interests on loans and money markets have increased. The overall performance of the paper industry firms in the country was certainly increased, and the scale of operation followed in handy. Such a great revolution in the subsidy of financial boosts for firms has not been duly effected in the Brazilian market despite the fact that the two countries are all in the euro zone.

The context of the government fiscal policies has also reviewed the fiscal multipliers. Through this step, different empirical schemes have been modeled to cater for diverse implications that can affect different industries such as the paper and pulp industry in Portugal. The Ricardian equivalence principle, which states that a tax cut financed by public debt does not stimulate private spending, as agents incorporate their intertemporal budget constraint the future tax hike to finance that debt. (Mankiw., 2009). Nevertheless, the Portuguese government through the central bank has relaxed this condition to protect and increase funding for its key industries such as the paper and the pulp industries. As a consequence, firms such as the CELBI has had overriding advantages to help them interact favorably in the globe market dynamics as well as the in the entire euro area paper industry.

Social dynamics in Portugal has also given the firms in the paper industry a competitive advantage over their counterparts in other countries. With the accession to the European Economic Community, the relative endowment factors between the country of Portugal and its European fellows increased substantially(Ívar ., 2015). The low endowment associated with human capital as well as the physical capital per worker came in handy. The lowest level of education for the working age was to stand at four years minimum, and this has revolutionized the level of expertise in the production of the pulp and the paper in most firms in the Portugal industry such as the paper industry, CELBI not being, an exception.

The huge difference in the endowment of resources about other countries in the euro area implies that there are strong potential gains from the sales of paper products from the trade. It is therefore not a surprise to see the proper exploitation of these comparative advantages of the economy of Portugal. The degree of economic openness is already significantly achieved, and the overall performance of all firms in the paper production industry is highly elevated. By attracting investors in the same industry through such economic openness, the level of technology is also increased due to desire to improve the quality of the paper and the pulp products in general. Thus, it is evident that through increased competition internally, the internal market, there is increased demand and consequently supply of the paper products (Ívar ., 2015). These may not be present in the European counterpart firms such as the Caima in Brazil. As such, the CELBI still turns out to compete favorably compared to these firms in the same industry but in different geographical settings. Any effort aimed at reducing or doing away with this diverse range of differences that enhance unequal relative competitive advantage will result in an economic system that favors all the firms in this industry irrespective of the country in which the firm is located.

References.

Mankiw, N. G. (2016). Macroeconomics.

In Kaufman, B. E. (2014). The development of human resource management across nations:

Unity and diversity.

Ívar, J. (2015). The political economy of innovation and entrepreneurship: From theories to

practice.