Pekka Mäkinen
Finnish Forest Research Institute, Vantaa, Finland
Abstract
The purpose of the study was to determine the competitive strategies of the most successful forest machine contractors. Porter's strategy of focus was applied. Forest contracting businesses were assumed to have three alternative focus strategies, of which two, customer focus and geographic focus, were operationalized and measured. The success of the businesses was measured by financial results and strategic position.
A total of 27 entrepreneurs were personally interviewed. The average age of the entrepreneurs was 46 years, and the length of time as an entrepreneur, 19.5 years. The businesses employed an average of 5.1 permanent staff, and owned an average of 3.9 machines, about 40% of which were harvesters. The profitability of even the best businesses was excellent only during two of five years. Larger companies were in the top 50% of income generators, while smaller businesses were in both the upper and the lower halves.
The businesses in the most successful group had only one customer each, with whom the business was able to achieve a sufficiently high rate of capacity utilization and the operating radius did not grow to be too large. The competitive strategy for the group was customer focus. The question of sufficient solidity would be the criticism levelled at the most successful group. The capital costs were in excess of 30% and indebtedness was more than 50% of turnover. The strategic position for the best business group is judged to be fairly good.
