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The Effects of Value-adding Strategy and Cost Levels on Financial Performance of Finnish Sawmills

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Title: The Effects of Value-adding Strategy and Cost Levels on Financial Performance of Finnish Sawmills
Author(s): Ito, Hiroki
Contributor: University of Helsinki, Faculty of Agriculture and Forestry, Department of Forest Sciences
Discipline: Forest economics and marketing (Forest products marketing and management)
Language: English
Acceptance year: 2013
The Finnish sawmill industry has been placed in a predicament due to changes in the business environment since the 1990s. Along the predicament, the industry has shifted its focus on customer-oriented products from production-oriented products. This can be a manifestation of a surge of value-adding strategy which aims to add premium value on products and has been emphasized in academia. Studies on the effects of value-adding strategy on financial performances are very few and no studies have taken into account the existence of strategic groups in the industry. This study scrutinizes the effects of value-adding strategy as well as cost levels of Finnish sawmills on their financial performances with information of strategic groups. The study employs multiple linear regression analysis and cluster analysis to analyze financial performance and of 180 Finnish sawmills from 2002 to 2011, although not all the data was utilized due to lack of certain information. The study found that value-adding activity positively impacts the performance, especially in the longer term. In addition, investment in the previous year as a mean to implement value-adding strategy can enhance the performance of a firm. As for the costs side, higher material cost and salary generally hamper the performance in the short term. However, the study found the positive effect of salary that improves the performance when the information of strategic groups is taken into account. Although it is impossible to tell which components of salary contribute performance due to the nature of the data that the study used, the importance of investing in human resource should be acknowledged.
Keyword(s): value-added value-adding cost-efficiency strategy sawmill financial performance

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