Marketing Oriented Strand Board in Japan: an investigation of Japanese requirements
Creators: name: Ainsworth, David Michael
Publisher: name: University of British Columbia
Year: 2009

description: Oriented Strand Board (OSB) is a commodity wood based structural panel that is well established in North American forest products markets. OSB is subject to the cyclical nature of commodity forest products and at the time this research was initiated structural panel markets were oversupplied and operating margins were poor. Although OSB is a direct substitute for plywood in home construction, OSB does not have the same degree of geographic or end-use diversification as plywood. At the time this research project was undertaken in 1990-91, there were growing concerns about the long-term availability of tropical hardwoods from Pacific Rim countries, that supply the Japanese panel market. Japan consumes nearly 10 million cubic metres of finished structural panel products per year for use primarily in concrete forming, packaging and crating, and home construction. Two million cubic metres of finished panels are imported annually from other Pacific Rim countries and the remaining 8 million cubic metres is produced domestically. Almost all domestic Japanese structural panel production is produced with imported logs. The vast majority of the panels consumed in Japan are 3 foot wide by 6 or 8 foot long. This is in contrast to the typical 4 foot wide by 8 foot long panel used in North America. Consequently, North American plywood mills with four foot wide panel production systems are not equipped to meet the marketing challenge in Japan. However, the potential for 9 foot and 12 foot wide press and forming lines in the OSB industry provides a unique opportunity to make significant inroads into the Japanese market. Since 1990-91, the OSB industry has nearly completed an entire economic cycle. For the years 1993 through 1995, the industry has recorded exceptionally high industry operating rates and profitability. This has attracted massive investment that will result in unprecedented capacity additions with the potential to create tremendous fallout in the North American panel production industry. Substantial competitive advantages permit OSB producers to provide a comparable product for approximately 60 percent of the cost of plywood and, consequently, most of the fallout will occur in the plywood producing sector. Nonetheless, prices will be under prolonged pressure and OSB producers are well aware of the benefits that come with product and market diversification. For these reasons, the need for market research in Japan is as pertinent today as it was in 1990-91. This research is qualitative in nature insofar as it outlines a methodology for quantifying the determinance of product attributes. Product attributes - such as price, colour, or size - are considered to be determinant to the purchasing decision if they are both important to the purchaser and discriminate between alternative products. It is posited that determinant product attributes are those that are used in the evaluation process of a purchasing decision. When determinant attributes are combined with customer perceptions of how an individual product performs on the determinant attributes, one is able to make predictions regarding purchasing predispositions. One means of combining determinance and perception is through the use of a model that helps market researchers assess a product's strengths and weaknesses on selected attributes and formulate appropriate responses in the market place. A simple linear summative multi-attribute model was used that combined the importance weight given to the product attributes with the purchaser's belief as to the extent to which the determinant attributes are offered by each product. The respondents for this project were Japanese companies actively involved in the import, wholesale and retail distribution, and end-use of structural panels in Japan. Interviewing a large number of respondents in this highly concentrated, industrial market would have been financially prohibitive and the alternative was to interview a representative cross-section of firms in the industry. To compensate for the inter-company size discrepancies (i.e., volume of panels handled), a useful data treatment called post-hoc probability proportional to size (PPS) sampling was employed in order to provide unbiased weights for subsequent data analysis. The three panel products chosen for comparison in this study were Lauan plywood, North American softwood plywood, and OSB. The following ten salient panel product attributes were chosen: 1) Competitive Price 6) Long-term Supply 2) Thickness Swell 7) Manufacturer's Reputation 3) Linear Expansion 8) Physical Appearance 4) Physical Strength 9) Nail Holding Strength 5) Panel Size 10) Overall Quality A comparison of the original sample and the PPS sample served to highlight a difference between the small firms and the large firms in the study. Specifically, the determinant attributes identified for the smaller firms in the study were panel size, price, and thickness swell (in decreasing order of determinance). On the other hand, the determinant attributes identified for the larger firms were panel size, thickness swell, and overall quality. The linear summative multi-attribute model was used to predict purchasing preferences for the three panel products chosen for comparison. Using the PPS sample population, Lauan was the preferred choice, softwood plywood the second choice, and OSB was the third choice panel. When the model was run on a subset of the original sample population that included only the small firms in the study, OSB became the preferred choice, Lauan was the second choice, and softwood plywood was the third choice. This further highlighted the difference between the small and large firms in the study. This observation suggests that a logical entry strategy into the Japanese market would to bypass the large trading houses and market OSB either to the smaller firms or to the firms further down the distribution chain that tend to be smaller in size. Lastly, the diagnostic features of the model were used to conduct sensitivity analyses designed to predict the impact on purchasing preferences with changes in the perception of OSB performance on the determinant attributes. The results of these analyses showed that when the OSB perception score for panel size was increased, or if perception scores for both thickness swell and overall quality were increased, then OSB replaced softwood plywood as the second choice product. Lauan plywood remained the preferred product in all cases for the PPS sample population.