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Marketing Strategy of Ahlstrom

Marketing Strategy of Ahlstrom

Discuss Marketing Strategy of Ahlstrom within the Marketing Management forums, part of the PUBLISH / UPLOAD PROJECT OR DOWNLOAD REFERENCE PROJECT category; Ahlstrom (OMX: AHL1V) is a Finnish wood processing firm and a global manufacturer of specialty papers and nonwoven materials, using ...

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Marketing Strategy of Ahlstrom
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Anjali Khurana
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Marketing Strategy of Ahlstrom - December 9th, 2010

Ahlstrom (OMX: AHL1V) is a Finnish wood processing firm and a global manufacturer of specialty papers and nonwoven materials, using natural and synthetic fibers to produce roll goods for customers who turn them into hundreds of products. Ahlstrom's shares have been traded on the main list of the Helsinki Stock Exchange since March 2006. Registered trademarks include Disruptor nano-fiber based water filter media using electrokinetic absorption and mechanical entrapment; Trinitex activated carbon air and water filter media; Cytosep solid phase blood plasma filer media; and Hydraspun wetlaid, hydroentangled wipes media combining natural and synthetic fibers without latex binders.


Statistics:
Private Company
Incorporated: 1851
Employees: 7,302
Sales: EUR 1.80 billion ($1.88 billion) (2002)
NAIC: 322121 Paper (Except Newsprint) Mills; 322130 Paperboard Mills; 322211 Corrugated and Solid Fiber Box Manufacturing; 322214 Fiber Can, Tube, Drum, and Similar Products Manufacturing; 325221 Cellulosic Manmade Fiber Manufacturing; 325520 Adhesive and Sealant Manufacturing


Company Perspectives:
Ahlstrom's vision is to be the most successful global company in high performance fiber solutions and be at the forefront in leadership quality.


Key Dates:
1851: Antti Ahlstrom begins operating a small business that includes a sawmill and a rag paper mill.
1866: Ahlstrom expands into shipping, which becomes the company's main line of business.
1873: Ahlstrom acquires an ironworks in Kauttua, which becomes the new core business for the company.
1880s:Ahlstrom begins converting his ironworks into paper and pulp production.
1896: Walter Ahlstrom becomes head of the company.
1907: Kauttua works are converted into pulp and paper production.
1915: Mills are acquired in Varkaus and Kahula.
1917: Iittala glassworks is acquired.
1920s:Ahlstrom begins diversifying as an industrial conglomerate, building up a portfolio of 60 businesses.
1963: The company acquires Cartiere Giacomo Bosso SpA, a paper producer based in Turin, Italy; this is one of the first international acquisitions made by a Finnish company.
1976: Kammerer, a specialty paper maker, is acquired.
1980s:The company begins restructuring, shedding the majority of its diversified businesses.
1989: The company purchases Filtration Sciences Inc, based in Chattanoga, Tennessee; Clark and Vicario, based in St. Petersburg, Florida; and Lippke, based in Germany.
2001: Ahlstrom splits into three companies, with Ahlstrom Corporation overseeing industrial activities, and announces its intention to go public as early as 2004.
2002: Papelera del Besos, a filtration and specialty paper maker in Spain, and the specialty filtration operations of the U.S. company FiberMark Inc., are acquired.


Company History:

Ahlstrom Corporation celebrated its 150th anniversary in 2001 by breaking up. Formerly known as the multi-faceted industrial conglomerate A. Ahlstrom Corporation, the company has refocused itself around a single core of specialty paper products, shedding nearly all of its diversified industrial operations. As part of its restructuring, Ahlstrom has regrouped around three key divisions: FiberComposites, which produces a range of nonwoven and filtration technology-based products and accounted for 32 percent of the company's sales in 2001; LabelPack, which produces packaging, labeling, and release papers (that is, the backing for labels) and provided 29 percent of sales in 2001; and Specialties, which includes cores, coreboards, and other products for technical applications and earned 19 percent of sales in 2001. The remaining 20 percent of sales were generated by non-core operations that were slated for disposal throughout 2002. Ahlstrom's focus on niche and specialty products has enabled it to capture world-leading shares in many of its product markets. Based in Finland, Ahlstrom generates only 4 percent of its revenues at home. The United States is the company's single largest market, at 27 percent of total sales. Germany and France are also strong markets for Ahlstrom, representing 14 percent and 10 percent of sales respectively. In all, Ahlstrom operates production and sales facilities in more than 20 countries, including the extension of its manufacturing base into Spain in 2002. A private company still controlled by the founding Ahlstrom family, Ahlstrom has announced its intention to go public by as early as 2004. This transition has been led since 1999 by CEO Juha Rantanen.

Origins in the 19th Century

Farmer's son Antti Ahlström founded what was to grow into one of Finland's largest conglomerates in the middle of the 19th century. In 1851, Ahlstrom took over a business with holdings that included a paper mill, a grain mill, and part of a saw mill. Then just 24 years old, Ahlstrom quickly began seeking new business opportunities, turning toward shipping at the beginning of the 1860s. At first plying ports between the Finnish coast and other ports on the Baltic Sea, Ahlstrom built up one of Finland's largest shipping fleets by the 1890s, with destinations as far away as Singapore.

The strong cash flow generated by his shipping operations enabled Ahlstrom to build up a portfolio of industrial interests back home, including an entry into ironworks, starting with the purchase of the Kauttua ironworks in 1873. Originally constructed in 1689, the Kauttua works was to remain a central facet of the Ahlstrom empire into the 21st century.

Iron quickly became one of the company's largest production areas. Yet Finland's iron industry, which relied heavily on the country's forests for providing needed charcoal, had been overtaking by advancing technology elsewhere in the world. In the 1880s, however, Ahlstrom had recognized that the company's ironworks holdings, which included vast forest holdings, provided a different opportunity. Over the next decade, Ahlstrom began converting his operation to concentrate on forestry products, buying up some 18 sawmills, expanding the company's forestry holdings, and converting most of the company's ironworks to wood and wood products production. By the turn of the century, the Ahlstrom name had become synonymous with its sawmill operations.

Antti Ahlstrom died in 1896, and the company's operations were taken over by his son Walter. The younger generation proved as ambitious as the first. In 1907, Ahlstrom converted the Kauttua ironworks into wood pulp and paper production. Then, as World War I approached, Ahlstrom made two new ambitious expansion moves to step up its pulp and paper and other industrial operations. The first came with the purchase of Varkaus, which the company converted to sulphite pulp and paper production. The second came in 1915, when the company acquired Karhula, which had started out as a wood pulp producer in 1888 before adding board production at the turn of the century. Both purchases placed the company dangerously in debt as its European market bogged down in an protracted war. The company continued to expand, however, adding the Iittala glassworks in 1917.

Finnish Industrial Conglomerate in the 1930s

The soaring inflation rates of the postwar period proved a boon for the company, as it paid off its debts using the inflated currency, securing financial control of its expanding empire. Ahlstrom now turned toward paper production, launching the new operation at the Varkaus mill in 1921 on what was then the largest paper production machine in Europe. The company also converted its Kauttua mill to support its expanding paper interests, switching from low-grade brown papers to higher-grade sulfite papers.

Finland raised protective trade barriers following World War I, sealing off the domestic market from foreign competition. This situation encouraged companies like Ahlstrom to diversify into a variety of other business areas. Starting in the 1920s, Ahlstrom began adding on a number of businesses, including engineering, forest technology equipment, and industrial pumps, as well as glassmaking. At one point the company was internationally known for its art glass production under the Karhula and Iittala names. By the beginning of the 1930s, Ahlstrom had grown into Finland's largest industrial conglomerate.

The outbreak of World War II led the company to convert much of its production to support the Finnish war effort. Following the war, the company played a major role in the country's reconstruction and in its war reparations obligation. Ahlstrom alone accounted for nearly 15 percent of the country's total reparations. The company continued to expand into the 1950s, stepping up its engineering operations while also expanding into chemical wood processing technology.

Ahlstrom continued its diversification through the 1960s and 1970s, building up a portfolio of some 60 different businesses. The company also began making its first moves onto the international scene. In 1963, the company acquired majority control of Cartiere Giacomo Bosso SpA, a paper producer based in Turin, Italy, originally founded in 1841. Under Ahlstrom, Bosso began targeting the specialty papers market, and particularly the market for specialty filter papers, becoming a European leader in that niche market. In 1976, Ahlstrom turned to Germany, where it joined with fellow Finnish company Kemi Oy to acquire Kammerer, another specialty paper maker focused on production of release papers--silicon-based papers used as the backing for adhesive labels and papers. In 1979, Ahlstrom took full control of Kammerer, which by then had a gained a 40 percent share of the European market for release papers.

Restructuring for a New Century

Yet for the most part Ahlstrom remained focused on the Finnish market. And by the early 1980s, Ahlstrom's fortunes had begun to slip. The company's highly diversified nature had also left it highly vulnerable to changes in the international marketplace. The opening of Finland to foreign competition, the emergence of new technologies, and a long decade of economic decline combined to cut deeply into the company's growth. Ahlstrom found itself unable to provide the necessary investments to maintain the competitiveness of its diversified portfolio of companies. At the same time, Ahlstrom's continued commitment to its private, family-owned status meant that the company was unable to call on outside investors to provide backing. Nearly all of the company's businesses were struggling, and a large number had begun to fail.

In 1982, fourth-generation family member Krister Ahlstrom, who had been working for another Finnish conglomerate, Wartsila, was brought in as the company's CEO. Ahlstrom immediately brought in consultants to perform an analysis of the company's operations. The result was disheartening--more than half of the company's businesses were labeled as mediocre, and the company was advised to take immediate steps to divest as many as 15 of its worst performers. Of its existing operations, only three companies were deemed strong enough to bring the company into the future.

Krister Ahlstrom met with a great deal of resistance from other Ahlstrom family owners--which by then numbered nearly 200--as he began to restructure the company's operations. Among the most controversial of the Ahlstrom's moves was the sell-off of its money-losing bulk paper operation--the company's symbolic core. By 1986, however, Krister Ahlstrom had managed to convince a majority of the family that the sell-off was necessary. The company exited other operations as well during this time, including its Varkaus forestry products unit and the company's newsprint production. By the end of the decade, Ahlstrom's operations had come to focus more and more around two new core areas--engineering and specialty papers.

While restructuring its other operations, Ahlstrom continued investing in its specialty papers division. The United States had become a primary focus market for the company as it began building a portfolio of paper products holdings in that country in the late 1980s and early 1990s. Ahlstrom's U.S. acquisitions included Knowlton Brothers and its Mt. Holly Springs, Pennsylvania site, as well as the 1989 purchases of Filtration Sciences Inc, based in Chattanoga, Tennessee, and Clark and Vicario, based in St. Petersburg, Florida. In the early 1990s, the company also added United States-based filter paper manufacturer Taylorville.

While building up its position in the United States, Ahlstrom also continued to build up its European network, including the purchase of Germany's Lippke in 1989. In 1991, Ahlstrom bought another German company, Jagenberg, adding its paper production plant in Altenkirchen. That plant was then converted to focus on production of gasket materials and other specialty paper products. Both the United States and Germany remained major international markets for Ahlstrom, accounting for 27 percent and 14 percent of its total sales, respectively, by the end of the decade. Ahlstrom continued to expand its production facilities, acquiring Swedish packaging specialist Akerlung & Rausing and French specialty paper maker Sibille-Dalle.

By the mid-1990s, Ahlstrom had decided to restructure itself around its core paper and packaging operations. The company began selling off its newly non-core businesses, including Ahlstrom Pyropower and its glassworks, and divested its stake in Lexel, an electrical products business, as well as its various holdings in the Finnish utilities industries.

In 1999, Krister Ahlstrom ceded the CEO position to Juha Rantanen as the fifth generation of the Ahlstrom family emerged as the primary owners of the company. In that year, however, Ahlstrom nearly ended its nearly 150-year history as an independent company when it announced an agreement to merge its operations with the those of the British-Danish group Kvaerner. Yet that merger eventually collapsed following scrutiny by the European Commission's mergers and monopolies body.

Instead, Ahlstrom stepped up its restructuring into the new century, selling off more of its holdings, including its 50 percent share of the Andritz-Ahlstrom paper production systems partnership with Austria's Andritz in 2001, and merging its flexible packaging operations into a new joint-venture company with Danisco and Amcor that same year.

In recognition of its restructuring, Ahlstrom, until then known as the A. Ahlstrom Corporation, split up into three entities: Ahlstrom Corporation, which took over the company's paper production operations; Ahlstrom Capital, which acquired the company's investment-related operations; and A. Ahlstrom Osakeyhtio, which served as a vehicle for the Ahlstrom family's holdings. Ahlstrom Corporation, amidst its 150th anniversary celebrations, then announced its intention to go public as early as 2004.

Ahlstrom meanwhile continued to expand its operations, notably into Spain, in April 2002, when it acquired that country's Papelera del Besos, a filtration and specialty paper maker, and into the United states, when it bought up the specialty filtration operations of FiberMark Inc. in December of that year. With sales of more than EUR 1.7 billion and operations in more than 20 countries, Ahlstrom had successfully completed a transition into one of the world's leading specialty papers manufacturers at the start of the new century.

Principal Subsidiaries: Ahlstrom Finance Canada Inc.; Ahlstrom Holding GmbH (Germany); Ahlstrom Altenkirchen GmbH (Germany); Ahlstrom Cores GmbH (Germany); Ahlstrom Osnabrück GmbH (Germany); Ahlstrom Nümbrecht GmbH & Co. KG (Germany); Ahlstrom Industries SA (France); Ahlstrom Australia Pty Ltd (74.0%); Ahlstrom Benelux S.A. (Belgium); Ahlstrom Brignoud SA (France); Ahlstrom Tampere Oy); Ahlstrom Chantraine (France); Ahlstrom La Gère (France); Ahlstrom Neu-Isenburg GmbH (Germany); Ahlstrom Packaging SA (France); Ahlstrom Dexter Belgium; Ahlstrom Research and Competence Center (France); Ahlstrom Spain SL (Spain); Ahlstrom Specialties SA (France); Ahlstrom United Kingdom Ltd. (75.0%); Ahlstrom Italia S.p.A. (Italy); Ahlstrom Turin S.p.A. (Italy); Ahlstrom Ascoli S.r.l. (Italy); Nordica S.r.l. (Italy, 60.0%); Ahlström Karhulan Palvelut Oy (58.0%); Ahlstrom Kauttua Oy; Ahlstrom Milano S.r.l. (Italy); Ahlstrom Norrköping AB (Sweden); Ahlstrom Finance Ireland; Ahlstrom Paper Group Oy; Ahlstrom Chirnside Limited (United Kingdom); Ahlstrom Cores Oy; Ahlstrom Alcore B.V. (Netherlands); Ahlstrom Asia Holdings Pte Ltd (Singapore, 70.0%); Ahlstrom Paper Korea Co., Ltd (Korea, 56.0%); Ahlstrom Paper Shanghai Co., Ltd (China, 70.0%); PT. Ahlstrom Indonesia (70.0%); Ahlstrom Cores AB (Sweden); Ahlstrom Cores AS (Norway); Ahlstrom Cores Oü (Estonia); Ahlstrom Cores SA (France); Ahlstrom Cores Sp.z.o.o. (Poland); ZAO Ahlstrom Cores (Russia); Ahlstrom Glassfibre Oy; Ahlstrom Korea Co., Ltd (Korea); Ahlstrom Louveira Ltda (Brazil); Ahlstrom Nordic Oy; Ahlstrom South Africa (Pty) Ltd (South Africa, 60.0%); Ahlstrom Ställdalen AB (Sweden); Ahlstrom USA Inc.; Ahlstrom Capital Corporation (United States); Ahlstrom U.S. Industries, Inc. (USA); Ahlstrom Engine Filtration, LLC. (United States); Ahlstrom Mount Holly Springs, LLC. (United States); Ahlstrom Windsor Locks, LLC. (United States); Ahlstrom Tokyo, Inc (Japan); Kamtech, Inc. (United States); Akerlund & Rausing S.p.A. (Italy); Norrmark Insurance Company Limited (Isle of Man); ZAO Akerlund & Rausing Kuban (Russia).

Principal Divisions: FiberComposites; LabelPack; Specialties.

Principal Competitors: Procter and Gamble Co.; International Paper Co.; Kimberly-Clark Corp.; Stora Enso Oyj; Weyerhaeuser Co.; UPM-Kymmene Corp.; Oji Paper Company Ltd.; Svenska Cellulosa AB; Metsaliitto Group; Boise Cascade Corp.; M-real Corp.; Orkla ASA; Eastern Pulp and Paper Corp.; Nippon Unipac Holding; Brascan Corp.; Jefferson Smurfit Group PLC; SAPPI Ltd.; Norske Skogindustrier ASA; Abitibi-Consolidated Inc.; Hitachi Zosen Corp.; Daio Paper Corp.; Domtar Inc.; Tembec Inc.
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