Internationalization of Stora Enso Analysis based on Luostarinen’s model 1998  2015 Maikki and Mika Is Stora Enso’s internationalization an architype of Luostarinen’s model?

Story of Stora Enso Some background Some operations milestones Stora Enso was formed in 1998 through the merger of the Finnish company Enso Oyj and the Swedish company Stora Kopparbergs Bergslags Aktiebolag (Stora). Stora Enso inherited Stora’s European operations. The merger made Stora Enso top-5 forest industry and top-3 paper industry company. After succeeding in Europe as separate companies, for the merged company the target was set to gain the leading position world-wide; to U.S. (mature) for the biggest market and to growing (emerging) markets Brazil and China. Some operations milestones 1998 Holzindustrie Schweighofer 1997 Veracel, Brazil start of operations with land purchase and tree plantation 1998 Suzhou Papyrus Paper Co. Ltd 2000 Huge investment to US markets with 5 B$ (4,9M€) acquisition of Consolidated Papers in spring 2000. (7 paper production sites in US and 1 in Canada). (divested in 2007 1,8M€) 2002 investent to land and tree plantation in Beihai, Guangxi, China. integrated board and pulp mill 2005 the world’s biggest pulp mill opened in Brazil 2006 Stora Enso Arapoti, Brazil, acquisition in 2006 (divested in 2015) 2009 investment into land and forest growing company in Uruguay. Montes Del Plata 2010 joint enterprise with China State owned Guangxi Forestry Group to develop 2014 the world’s biggest pulp mill started operating in Uruguay. 2016 the new carton mill Guangxi to start operations, China.

Push and pull factors Finland as typical SMOPEC Scale of economics  Entry to the U.S Americas Global alternatives  Resources: Land and fast growing tree (Eucalyptus) in Latin America  (employee costs are not remarkable in paper industry) Integration  logistics to get closer to the major markets Other types of pulp (e.g. Eucalyptus) Small size of home market Greater market size outside Finland History of nation building through major companies, closed Legal, taxes, employees Finland far away, isolated by sea Constant change of this dynamism: Growth was not expected in Europe or in U.S. rather in emerging markets (e.g. BRIC)  Reason for US divestment  re-entering to US with Biomaterials research Willigness to grow, find new markets, investment availability

P O M POM Pattern 1998-2015 RESTRICTED PRODUCT STRATEGY Goods, a bit of know-how. O OPERATION STRATEGY High focus on Direct investment, focus on bringing production global. M MARKET STRATEGY First HOT. Could the challenges be because from HOT they have gone to COLD directly? U.S - long physical distance, strong economic, short(?) cultural distance. Latin America and China - long physical distance, ‘low economics’, long cultural distance.

Our case covers growth stage and mature state Investments to 3 different market areas within 3 years (North America, Latin America and China) After merger there was capital to invest, tendency for higher taking Long physical/cultural/economical distance compared to familiar Euromarkets. Have some divestments and challenges occured due to lack of expertise on the overseas markets (vs. gradual internationalisation)? Function to be internationalized Production TOO COLD? FDI flows? YES Function to be internationalized Production FDI flows? YES

Food for thought II 2000 2007 2015 8 swedes/ Finns 3 from elsewehere RESTRICTED Food for thought II Luostarinen: ”Naturally this does not mean that there are no other dimensions for internationalization.” (p.12) 2000 2007 2015 SALES BY DESTINATION (’15 & ’00) / REVENUE BY MARKET (’07) Europe Europe Europe NA NA Asia APAC APAC South America SA North America Other Other BOARD 8 swedes/ Finns 3 from elsewehere 7 swedes/ Finns 2 from elsewehere 8 swedes/ Finns 2 from elsewehere SHAREHOLDERS Solidium/ Finnish state FAM AB 22,4% Finnish institutions 46,7% Swedish institutions Swedish private shareholders 46,1% Finnish private shareholders ADR holders ​ Source: Company presentations

Food for thought II Some additional history Stora AB was there in 1288 and first operated a copper mine that produced 2/3 of Europe’s copper needs. Enso was founded in 1872 in Finland by Hans Gutzeit from Norway.  What is the base point for internationalization process?

Food for thought II Why conflicts follow Stora Enso? Internationalization as a dynamic and gradual process, same mistakes on each step? Case Guanxi