Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e
Back Matter Video Cases © The McGraw−Hill
Companies, 2002Despite some recent success, there is still a vital need for
more U.S. suppliers to adopt the marketing concept, especially
in targeting the export marketplace. Currently, international
buyers are focusing most of their attention on the higher-grade
hardwood products. But growth of sales and profits from ex-
porting will depend on the U.S. industry’s ability to find
markets for more of their available product inventory—in-
cluding lower grades and species of hardwood. In fact, finding
markets for value-added products may be the best way to im-
prove sales of the lower grades and species. This would not
only result in more efficient and profitable use of hardwood re-
sources, but it could also reduce costs by improving economies
of scale in production.
However, the question that should be uppermost in mar-
keters’ minds is: What do these customers want in the way of
hardwood products? To answer this question, one must first de-
termine the needs of these international buyers. In the case of
U.S. hardwood suppliers, Canadian buyers are currently the
largest market for these products.
Most of the Canadian firms that import U.S. hardwood to
Canada are concentrated in a few geographic areas: over
75 percent are located in either Ontario or Quebec. Much of
the imported lumber is purchased by Canadian manufacturers
who use it to produce their own products—including furni-
ture, cabinets, hardwood flooring, and molding and millwork
for the construction industry. However, these customers ac-
count for only about 31 percent of U.S. imports. Canadian
wholesalers—especially brokers and agents—account for
more than half of the Canadian hardwood lumber purchased
from U.S. sources. Many of these middlemen specialize in in-
ternational sales. In fact, nearly 20 percent of all U.S.
hardwood lumber imported by Canada is subsequently resold
and exported to Europe—usually after some value-adding ac-
tivities such as grading, sorting, repackaging, or additional
product processing.
Red oak, hard maple, and white oak are the principal hard-
wood species that Canadian customers import from the United
States. However, there are also markets for some species of
lesser value—including soft maple and yellow poplar.
All types of lumber are graded according to quality, and this
grading is important to Canadian buyers who have different
hardwood needs. About 70 percent of the total volume of
hardwood lumber purchased by Canadian firms is the higher-
quality Number 1 Common grade or better. The other 30
percent of lumber imported is graded as Number 2 Common or
lower. Firms that purchase the lower grades of lumber are
mostly flooring manufacturers, furniture manufacturers, and
brokers.
Marketing research studies indicate that Canadian hard-
wood lumber buyers are relatively satisfied with the quality of
products and services now being provided by U.S. suppliers.
However, the research reveals that suppliers could enhance
customer satisfaction and their competitive advantage by im-
proving their product quality through more accurate grading
and reporting of moisture content as well as by providing
cleaner and straighter lumber. Buyers would also like to see
better distribution customer service from U.S. suppliers. This
includes improving the reliability of lumber supplies and re-
ducing order cycle time—that is, the time from when a
customer orders lumber until it is delivered. And of course,organizational buyers are always interested in competitive
pricing.
Importantly, the research also shows that over one-third
of the firms that import hardwood lumber from the United
States are potentially interested in purchasing finished hard-
wood parts from U.S. suppliers. Examples in the area of
finished hardwood parts include parts for making furniture,
doors, stairways, and railings. Organizations showing an in-
terest in these finished products include importers, export
brokers, and manufacturers of various hardwood products.
These results indicate that there may be a good opportunity
for U.S. suppliers of hardwood products to custom produce
such parts for specific customers. Yet it is still unknown how
substantial this opportunity might be, how eager Canadian
buyers might be to purchase value-added finished hardwood
products, and at what prices. To begin to answer these ques-
tions, U.S. suppliers need to determine the types and
specifications of the finished hardwood products desired by
individual buyers. That will require that supplier firms do
more marketing research or have more direct personal selling
contact with buyers for specific firms than has been typical in
the past. Alternatively, working with these customers may
require closer relationships—partnerships—with middle-
men who can help producers with some of the required
marketing functions.
It appears that U.S. hardwood firms face a variety of possi-
ble opportunities to expand sales and improve profits. Export
markets, including Canada, appear to offer greater potential
than has been captured. Further, some of the opportunities are
ones that focus on the value-added products that have the po-
tential to foster economic development in rural areas of the
U.S. where such activities have in the past been limited. How-
ever, just having access to hardwood forests alone isn’t enough
to turn these opportunities into profitable business. Develop-
ing international markets for value-added hardwood products
requires that individual supplier firms adapt their marketing
strategies to marketplace needs. Producers need to identify
specific target markets and understand the unique needs and
buying behavior of these markets. They also need to get be-
yond production-oriented thinking and develop whole
marketing mixes to serve their target customers. That means
figuring out what type of products and services to offer. It also
means making decisions about how to price specific
offerings—because firms that are doing something unique for
their customers won’t just face perfect competition and a price
that is set by the market. A firm that does a good job with this
marketing strategy planning has the potential to satisfy some
target customers very well and in the process gain a sustainable
competitive advantage. And, of course, as more firms do that
they will not only make better profits, but also contribute to
the economic development of the areas in which they operate.- Why is it important for firms that produce and supply
hardwood to adopt the marketing concept? - What are some of the ways hardwood products can be
adapted to meet value-added market needs? - In what ways is the marketing strategy different for hard-
wood suppliers who focus on a specific target market than
for firms that just sell roughsawn logs or green lumber in
the commodity market?
Video Cases 699