Evaluation of Global Competitiveness in Wood-based Industries. Economic and Environmental Aspects

1. Evaluation of Global Competitiveness in Wood-based Industries. Economic and Environmental Aspects Research proposal for Visby Program Grant, sponsored by Swedish Institute Conducted at Swedish University of Agricultural Science, Department of Forest Products

2. Structure of presentation • Formal part • Some personal information (who am I , where I come from) • Background and achievements • Previous studies, research and projects • General presentation of current project • Focus on questionnaire development as integral part of current research • Expected outcomes of the project • Feedback, comments and suggestions • Informal part

3. FORMAL PART

4. Some personal information (who am I , where I come from)

5. Olena Maksymets, PhD in EconomicsAssociate Professor Department of International Economic Activity Management National Forestry University of Ukraine, Lviv, Ukraine

6. More detailed information can be found: https://sites.google.com/site/olenamaksymets/home

7. Ukraine within Europe

8. Map of Ukraine

9. Background and achievements

10. Education • 2001-2005 – Doctoral studies, National Forestry University of Ukraine, Lviv,PhD in Economics (Environmental Economics) (2005) • 1999–2000 – Ukrainian State University of Forestry and Wood Technology, Lviv, Specialist Diploma in International economic activity management, with distinction (2000) • 1995–1999 – Ukrainian State University of Forestry and Wood Technology, Lviv, Bachelor Degree Diploma in Management, with distinction (1999)

11. Professional Training • 09.2012-02.2012 – Visiting scholar, Sveriges lantbruksuniversitet -  Swedish University of Agricultural Sciences (Uppsala, Sweden) • 01.2011 – 05.2011 – Visiting Scholar, the Pennsylvania State University (University Park, PA) • 09.2007-03.2008 – Fulbright Senior Scholar, Washington University (Seattle, USA) • 03.2000-05.2000 – Internship, Ministry of Economy of Ukraine (Supervisor – Chief of Furniture and wood-processing industry Department O. Varenytsya) • 07.1998-10.1998 – Research study on Wood-processing industry products markets in Western Europe, University of Padua (Italy) (Supervisor Prof. Davide Pettenella)

12. Previous studies, research and projects

13. Major direction of research • Competitiveness of forest-related products • Trade flows in forest and wood-working industry products • Wood products’ markets research • Analysis of TOP100 forest companies’ results over last 5 years • Sustainability and trade flows in forest products • International marketing in forest-related industries • Eco-effeciency of international trade of Ukrainian state forest enterprises

14. Courses taught • Marketing in forest-related industries, • International marketing, • International economic activity analysis, • Economics and finances of the enterprise, • International management, • International investment and innovation management

15. General presentation of current project

16. 1. Why it is important to consider both economic and environmental aspects • wood is not only economically efficient product, but also as environmentally friendly renewable resource, is suitable for the a great variety of applications. • evaluation of competitiveness should encompass these two categories. The one couldn’t exist without another, and to achieve considerable and mutually beneficial results these two aspects must be studied as interrelated

17. 2. Why it’s important to consider global aspects of the issue • Globalization and international competition are impacting the way forest products companies operate. New opportunities and challenges arise that allow investments, capital and technology to move easily into those world regions where manufacturing and trade give competitive advantage • “Today forest company might have its headquarters in the USA, build a processing mill in Central America (where trees grow to commercial maturity in less than 10 years), manufacture in China and sell to markets all over the world” (Alvarez, 2007)

18. Some facts about wood-based industry and it’s role for Europe • Wood-based industry is a major employer in many of the Member States of the European Union and features among the top 3 industries in Sweden, Austria, Finland and Portugal (European Commission, 2010). A provider of welfare in Europe the woodworking industry employs more than 2,7 million people in the EU 25. In common with all traditional industries, it plays an important part in achieving the Lisbon goal of becoming the world’s most competitive region. • The industry is a significant contributor to rural development in all European countries as well as it generates opportunities for cross-border entrepreneurship. Firms are often located in remote, less industrialized or developed areas, making an important contribution to the rural economy. This all is of great concern of the EU Eastern Partnership plan. • In Sweden, the forest-products industry accounts for 15 to 20 percent of the total industrial investments. Together with indirect employment in sectors that supply it with goods and services, it employs around 180,000 people over the entire country, more than a quarter of total industrial employment (Swedish Forest Industries Federation, 2008). • It should be added that the industry covers a wide range of activities, from sawmilling, planting to the production of wood-based panels, veneers and boards; from construction products to joinery; from pallets and packaging to furniture; from bio energy incentives to wooden pellets and briquettes production.

19. THUS…..

20. The wood-based industry has potential to contribute much not only to a single country’s sustainable development and economic growth, but also to European region

21. And that is why • The assessment of competitiveness and competitive advantage is vital taking into the account tough conditions. • Enterprises are nowadays fighting for financial resources and raw materials. So revealing competitive advantages and disadvantages on the industrial level is of increasing interest not only to the industry itself, but also to potential investors. • So far least examined and developed are different evaluation aspects of the industry competitiveness taking into account globalization processes. • Also environmental aspects are not widely considered in assessment of wood-based industries competitiveness.

22. The aim of the research is to develop the methodology (aggregated index) enabling to evaluate wood-based industry competitiveness taking into account globalization and environmental concerns

23. In this regardCompetitiveness of wood-based industries in Sweden, USA and Ukraine will be evaluated using the aggregated index

24. Research tasks • examine the peculiarities of measuring competitiveness on different levels (global, national, industrial, company) as well as in forest and wood-based industries; • identify factors of competitiveness in forest and wood-based industries and their changes in new conditions; • study methodical approaches to evaluate competitiveness in forest and wood-based industries (National and Global competitiveness indexes); • survey business representatives’ and academicians’ attitudes towards factors that determine competitiveness in different sectors of wood-based industry; • determine the role of clusters in wood-based industries development and their influence on industries’ competitiveness; • develop an aggregate index enabling to evaluate competitiveness of wood-based industries.

25. In this context the research • seeks to benchmark the global wood-based industries according to their competitiveness • aimed to highlight the strengths and weaknesses of the business environment of the participants for selected sectors of the wood-based industries • will provide a basis for a debate and, and support in the identification of scope and direction for profitable policy intervention and investment flows.

26. The research will be both qualitative and quantitative, so the following methods will be used

27. Quantitative Methods • methodology of computing Competitiveness index based on Porter’s diamond of each sector (but sustainability factors in the competitiveness should be emphasized instead of price factor); • methodology of computing Forest Investment Attractiveness Index; • factor analysis – to extract the unobservable dimensions which include many variables; • econometric methods (regression and correlation analysis); • methods of economic statistic; • Cost-Benefit Analysis.

28. Qualitative Methods • desk research, • stakeholder meetings, • questionnaires, field research, interviews (in-depth, informal), • causal chain analysis (CCA), • benchmarking.

29. The research will be conducted in two stages • First stage – development of the questionnaire to interview business representatives, experts and scholars on the importance and relevance of different indicators that will be a part of aggregated index. • Second stage - empirical testing of the index. Quantitative data can be obtained from statistical databases. Qualitative data will be gathered via questionnaires (different from the first one) sent to business representatives.

30. Core elements of competitiveness index for wood-based industry • Country-related factors (25%) – X1 • Business environment related factors (40%) – X2 • Enterprise-related factors (35%) – X3

31. Country and business environment related factors are the preconditions for industry competitiveness - they reflect what already exists and what company deals with • Enterprise-related factors are the reflection of the way company reacts on the competitive environment it works in

32. Country-related factors • Can be described with the help of World Economic Forum’s GCI (based on Porter’s methodology)

33. Business environment related factors • Resources cost and condition • Processing development • Market development • Sustainability and environmental concerns • Government incentives and industry related policy

34. Business environment related factors • Resources cost and condition • Timber availability • Timber cost • Contribution of domestic forest ownership and timber supply organization to efficiency • Technical manpower availability • Technical manpower cost • Energy availability • Energy cost • Transport infrastructure adequacy • Transport cost • Capital accessibility • Capital cost • Processing development • Market development • Sustainability and environmental concerns • Government incentives and industry related policy

35. Business environment related factors • Resources cost and condition • Processing development • Public technology R & D infrastructure quality • Industry process technology quality • Industry patents filed / purchased • Machinery and equipment market quality • Development of supportive value-added industries • Market development • Sustainability and environmental concerns • Government incentives and industry related policy

36. Business environment related factors • Resources cost and condition • Processing development • Market development • Domestic market growth rate • Domestic customer quality consciousness • Export market growth rate • Export market customer quality consciousness • Trade disputes and barriers • Growth rate and developments in supportive branches • Importance of marketing measures • Public image of wood-based industries • Sustainability and environmental concerns • Government incentives and industry related policy

37. Business environment related factors • Resources cost and condition • Processing development • Market development • Sustainability and environmental concerns • Importance of sustainable activity for the industry • The state and level of customers’ and clients’ environmental concerns • Adoption of forest certification schemes • Adoption of chain-of custody schemes • Adoption of product quality standards • Ability to get price premium for environmentally sound products • Quality of environmental legislation • Quality of forest management • Incentives and related procurement policies • Government incentives and industry related policy

38. Business environment related factors • Resources cost and condition • Processing development • Market development • Sustainability and environmental concerns • Government incentives and industry related policy • National forest policy support • Taxation incentives for investments • Maturity of competition policy • Conflicts with traditional forest dependent communities • Private investment in timber production • Policy on FDI into industry

39. Enterprise-related factors • Management system • Technology adoption, level of R&D investments • Sustainability reporting and level of response to environmental concerns

40. Enterprise-related factors • Management system • Managerial manpower availability and cost • Management system quality • Investment in management innovation • Investment in service innovation • Investment in management training • Technology adoption, level of R&D investments • Sustainability reporting and level of response to environmental concerns

41. Enterprise-related factors • Management system • Technology adoption, level of R&D investments • Collaboration with R&D services and universities / clusters development and importance • Process innovation investment • Product innovation investment • Technology training investment • Sustainability reporting and level of response to environmental concerns

42. Enterprise-related factors • Management system • Technology adoption, level of R&D investments • Sustainability reporting and level of response to environmental concerns • Incorporating sustainability aspects into companies’ strategy • Reporting using GRI method or sustainability reports • Adoption of environmental standards

43. Focus on questionnaire development as integral part of current research

44. Some hypotheses • There is difference in competitiveness in the industry depending on production orientation, scale of production, as well as geographical presence in terms of manufacturing and trade and this should be reflected in the methodology of Competitiveness Index for wood-based industry • Sustainability issues have great impact competitiveness of the industry through entire supply chain

45. Focus groups • Selected business representatives • Associations • Academicians • Government institution representatives

46. Procedure of data collection – questionnaire survey, interviews and focus groups discussions

47. Selection procedure • For each country representatives in such branches should be questioned/interviewed • Forestry/sawmills • Wood-based panels and flooring • Furniture and furniture parts • Pulp, paper and packaging • Wood energy • Enterprises of different size and with different geography of operational activity should be considered

48. Sampling (draft goal) • Sweden: • 5-10% of all SME’s in the industry • around 50% of large-scale enterprises and TNCs in the industry • USA (PA state): • 20% of SME’s in the industry • 50%-60% of large-scale enterprises • Ukraine: • 5% of all SME’s in the industry • 70% of large-scale and TNCs in the industry

49. Draft of the questionnaire (distributed)

50. Expected outcomes