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Three Lessons from Structural Panels on Strategy and Substitution

The structural panel industry is heavily consolidated with a small number of key firms in each sector and geographic region. Adding capacity requires significant capital investments and the adoption of new technologies. What do we observe from firms seeking to maximize these investments and protect them from the threat of substitute products?

For executives and investors in the forest industry, here are three lessons from Forisk studies to clarify risks and opportunities from product substitution.

  • Control costs to defend against the threat of substitute products. Anything that reduces per unit manufacturing or transportation costs strengthens the relative competitiveness of the firm and industry.
  • Invest in technology to sustain margins and continually lower production costs. Technological obsolescence undermines any long-term commitment to a low-cost strategy. In addition, technological advances provide a way for substitute products to “fight back” and regain relevance in the market.
  • Remain vigilant on standards to retain market access. Low costs and high quality become irrelevant without a seat at the table.


The lessons reinforce classic business strategies for tracking and mitigating the threat of substitutes. And substitution cuts both ways. The forest industry has tremendous points of leverage with respect to dealing with threats from outside of the industry. In fact, forest products have a growth story. Renewable paper bags for plastic bags. Wood pellets for coal. CLT and mass timber for energy-intensive steel or concrete. While key threats for substitutes arise within the forest industry, climate change and consumer preferences speak to the advantages and resilience of wood and other “grown” products.

Click here to read and download the complete Q2 2019 Forisk Strategy Note on this research.

Note: these topics and others will be covered at Forisk’s annual Wood Flows & Cash Flows conference on December 5thin Atlanta.

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