The International Paper Company SWOT & PESTLE Analysis

Strength

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Weakness

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Opportunity

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Threat

1. Competition and Costs: The core competitors of International Paper are Caraustar Industries, Mondi, and WestRock. These mostly deal with recycled papers and corrugated packaging boxes. International Paper believes that Job Act and Tax cuts will create a level playing field for it and its competitors. Thus, the company will gain advantage from reduced corporate tax. The company must innovate and reduce its operational costs by optimizing the asset base to dominate in the competition.

2. Material disruptions at manufacturing facility: International Paper has various operational facilities and these have various tools and equipment. These facilities can cease to work under unfavorable conditions of fire, earthquakes or any kind of catastrophes. Changing international and domestic laws will also incur costs and impact the working of these facilities. Any kind of disruption will cause downtime and will stop the company from meeting the production goals.

3. Fading demand for physical paper due to digitization: The digital revolution poses a fundamental challenge to the graphic paper industry. International Paper sales are likely to be affected by the falling demand for physical paper seen in the US. The idea of the 'paperless office' is slowly becoming a reality with the help of computers and digital media. New markets are moreover likely to directly go digital and skip paper completely. Thus, while International paper is working towards transforming its business, almost 19% of FY18 sales were still gained from physical paper sales. The dropping demand in this sector is thus likely to affect the company significantly.

Political

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Economic

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Social

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Technological

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Legal

1. Government regulations and legal proceedings: International Paper’s operations go through various regulations which comes under US federal and state and US laws and other laws relating to health, environment. Thus, changing regulations affect the way, Company functions. They incur costs because of changing laws and aligning with them. They incorporate various labor and employment regulations which increases operating expenses and decrease their flexibility in operation. For example, in May 2018, adoption of EU of General Data Protection Regulation, changed the privacy rights and thus, caused the company to incur more costs in handling the data. In case of failure in obliging the GDPR will incur fines up to 20 million Euros.

2. Environmental regulations for cleaning hazardous waste: International Paper has been environmentally responsible and thus, it is named as Potentially Responsible Party (PRP). They take actions under state and federal laws. This also include Comprehensive Environmental Response, Compensation and Liability Act. These laws make the company responsible for cleaning the hazardous waste and such costs are reflected on the balance sheet. The company has calculated liability costs of around $128 million as of 2017. There have been few cases like Cass Lake wood treating facility which costs around $46 million to the Company. Post the Paris Agreement in 2016, the commitment of reducing GHGs to 7 percent below than 2005 GHG emissions mostly by 2020, has incurred extra expenses to the company in setting up standard obliged facilities.

Environmental

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