| Summary: | 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. === Forestry, Faculty of === Graduate
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