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EPILOGUE
In July 2010, GreenWood’s senior management submitted the final investment report for
the Luxi project to the investment committee for approval. The committee rejected the
Although GreenWood worked out a payment agreement with the Luxi Forestry Bureau so
that only half of the annual land lease expenses would have to be paid upfront (and the
Jeff voted in favor of the project but he said he understood the concerns expressed by the
Brian believed that the decision reflected Oriental’s lack of familiarity with the Chinese
market. A key consequence of this decision was that GreenWood completely dropped
Shortly afterwards, the investment committee also accepted GreenWood’s senior
management’s recommendation not to pursue the Dongji project because of the potential
reputation risk. As described in the case, Wanli Afforestation Group and Yilin Wood
With both the Luxi and Dongji projects out of consideration, a potential project in Jiangxi
province which was initially not a priority (but still being considered) came into the
Brian explained that the reason this project moved so fast was partly due to the
experiences resulting from the Luxi and Dongji projects and partly due to the Chinese
The tree assets acquired, however, were mainly pine and fir trees whose rotation is about
20-25 years, which appeared to be inconsistent with GreenWood’s expertise and strategic
focus. Brian explained that GreenWood updated its strategy to capture and expand its
References
Porter, M., & Kramer, M. 2006. “Strategy and Society: The Link between Competitive
Hennart, J. F. 2009. “Down with MNE-centric theories! Market entry and expansion as
Appendices
EXHIBIT IM-1: GREENWOOD’S RESOURCES AND CAPABILITIES PRIOR TO
INTERNATIONAL EXPANSION IN 2005
GreenWood’s
Tangible Resources
Physical Resources • Small tree plantations, nurseries, and office facilities in Oregon, U.S.
Financial Resources • Fees from managing the tree plantation assets.
Human Resources • Strategic staff (in research) acquired.
Organizational Resources • Certain cultivation methods (mechanical and chemical methods of
• Elite plant materials.
GreenWood’s Intangible
Resources and Capabilities
Qualities of Human
Resources • Accumulated knowledge of the Chinese market and culture.
• Experience in plantation management and scientific development.
Organizational capabilities • Ability to envision the future of tree plantation and its role as a
• Research capabilities for developing elite plant materials
continuously.
•Expertise in poplar hybridization and genetic improvement.
•Some experience in adapting elite plant materials to the
•Integrated silvicultural management including land preparation, spacing
• Social networking:
•Jeff Nuss’s professional networking capabilities.
•Dr. Stanton’s relationship with the WorldBank and various
•GreenWood’s relationship development with the practitioners
EXHIBIT IM-2: COMPARISON OF ALTERNATIVE ENTRY MODES
Advantages Disadvantages
Licensing or selling plant materials No need to get directly involved in
Earning licensing fees or sales
Lack of control and global
Developing potential competitors.
High transaction costs due to
Joint Venture Risk sharing with local partners.
Getting access to the resources and
Circumventing institutional and
Possible benefits due to local
Potential dilution of ownership
advantages.
Difficult to achieve global
Acquisition Rapid market entry.
Ownership of local facilities and
Likely pay a premium.
Difficult post-acquisition integration
Greenfield Full control of know-how and
Global coordination and knowledge
Potential high costs and risks due to
EXHIBIT IM-3: POTENTIAL BENEFITS AND RISKS IN PARTNERING
Benefits Risks
Luxi Forestry Bureau Provision of access to
Possible dilution of some ownership
land
Provision of crop care labor forces.
Assistance in overcoming cultural
and institutional distances due to its
Unpredictable change of leadership.
Dongji Lideng Forestry
Provision of access to
Provision of crop care labor forces.
Contributing plant materials
Assisting in circumventing
Becoming a potential competitor in
Reputation risks due to its close
collaboration with two large private
EXHIBIT IM-4: COMPARISON OF ECONOMIC IMPLICATIONS: LUXI VERSUS DONGJI
Luxi Dongji
Pros ●Favorable natural conditions
●Luxi’s estimated annual tree growth
rate will increase from 1.2 m3/mu
(e.g., 2600 mills in Linyi —huge
●Accessible to the export markets.
●It is cheap to acquire tree
●The land lease rate is low.
●Lideng has patented deep
●Lideng has government approval
to establish an additional 300,000
●Local demand in Dongji far
Cons ●The upfront investment in the
●It can be difficult and risky to work
with the government agencies. For
●The environmental conditions are
●Not readily accessible to the
Conclusion Both projects seem to be economically attractive; the economic risks appear to
EXHIBIT IM-5: IRR AND NPV ESTIMATES (PER MU): LUXI VERSUS DONGJI
Luxi Dongji
Senario 1 Senario 2 Senario 3 Senario 4 Senario 1 Senario 2 Senario 3 Senario 4
Luxi (1.8) Luxi (1.5) Luxi (1.5) Luxi (1.5) Dongji
(0.9)
Dongji
(0.7)
Dongji
(0.7)
Dongji
(0.7)
NPV ¥1,473.10 ¥237.06 ¥260.14 ¥220.22 ¥815.90 ¥257.66 ¥275.98 ¥242.50
IRR 16.2% 11.1% 11.3% 11.1% 17.0% 12.5% 12.7% 12.5%
year 1 -1109 -1109 -1109 -1109 -387 -387 -387 -387
year 2 -477 -477 -477 -477 -132 -132 -132 -132
year 3 -477 -477 -477 -477 -132 -132 -132 -132
year 4 -477 -477 -477 -477 -132 -132 -132 -132
year 5 -477 -477 -477 -477 -132 -132 -132 -132
year 6 -477 -477 -477 -477 -132 -132 -132 -132
year 7 6566 5392.5 5392.5 5392.5 -132 -132 -132 -132
year 8 -1109 -1109 -1109 -1109 -132 -132 -132 -132
year 9 -477 -477 -477 -477 -132 -132 -132 -132
year 10 -477 -477 -477 -477 3873 2983 2983 2983
year 25 -477 -477 -477 -477 -132 -132 -132 -132
year 26 -477 -477 -477 -477 -132 -132 -132 -132
year 27 -477 -477 -477 -477 -132 -132 -132 -132
year 28 6566 5392.5 5392.5 5392.5 -132 -132 -132 -132
year 29 -1109 -1109 633.25 0 -132 -132 -132 -132
year 30 -477 -477 3873 2983 2983 2983
year 31 -477 -477 -387 -387 642.5 0
year 32 -477 -477 -132 -132
year 33 -477 -477 -132 -132
year 34 -477 -477 -132 -132
year 35 6566 5392.5 -132 -132
year 36 -1109 -1109 -132 -132
year 37 -477 -477 -132 -132
year 38 -477 -477 -132 -132
year 39 -477 -477 -132 -132
year 40 -477 -477 3873 2983
year 41 -477 -477 -387 -387
year 42 6566 5392.5 -132 -132
year 43 -1109 -1109 -132 -132
year 44 -477 -477 -132 -132
year 45 -477 -477 -132 -132
year 46 -477 -477 -132 -132
EXHIBIT IM-6: SOCIAL AND ENVIRONMENTAL IMPACT ANALYSIS: LUXI VERSUS
DONGJI
Strategic :
long term
competitive
advantages
Luxi
● GreenWood’s investment in tree plantation assets can facilitate local economic development. For
● GreenWood’s advanced silvicultural management (including adopting FSC standards) can generate
●Locally tested, GreenWood’s elite poplar plant materials can enhance tree growth rate and pest
Non-strategic ●GreenWood can help set up a small wood •
GreenWood can help combat
processing mill with an estimated investment desertification in Dongji (1.5
of US$750,000. The mill, associated with million mu is available for poplar
high value-added activities, will provide plantation), which will also help
GreenWood.)
●GreenWood’s investment can help
“clean up” local business practices
Strategic
Importance
Activities
Overall, GreenWood’s long term competitive advantages and positive social impact will be
more mutually reinforcing from the Luxi project than from the Dongji project because
Dongji
●GreenWood’s investment in tree
plantation assets can facilitate
local economic development. For
●GreenWood’s advanced
silvicultural management
