A Shift in the Landscape: A Comparison of Third-party Intermediary Portals to Industry-backed Portals in the Global Forest and Paper Industry

This analysis of the impact of third-part intermediary and industry-backed portals in the global forest and paper industry was commissioned by Industry Canada, and prepared by PricewaterhouseCoopers.

Although intermediary-backed portals create a market and channel to connect buyers and sellers, procure supplies and bypass traditional wholesalers, forest product companies remain subject to a third party. The present industry structure, competitive forces and rivalry within the global forest and paper industry suggest that intermediaries are unlikely to provide a sustainable
strategic advantage to forest and paper companies. Intermediaries will seek to capture the majority of the added value they provide, distributing the remaining benefits of e-business to buyers. Countering this trend is the recent joint announcement by International Paper, Georgia-Pacific Corp. and Weyerhaeuser Co. of their intent to develop a global, industry-backed business-
to-business vertical portal (vortal) to provide procurement and sales functions to the forest and paper industry.

A co-operative industry-backed, vortal initiated by three of the worlds largest forest and paper
companies will: 

1. establish a critical mass of suppliers and buyers as $45.6 Billion (USF) in product and established buying relationships are enabled and leveraged by e-business;
2. provide forest and paper companies with the opportunity to leapfrog intermediary first movers, exceeding the network benefits of these established portals and becoming an ever-growing attraction to their customers;
3. encourage late adopters of e-business to forego short-term benefits of an existing intermediary-backed portal in favour of waiting for greater certainty and the long-term benefits associated with an all-inclusive, standardized industry-backed model;
4. consolidate market power of forest and paper companies via strategic partnerships, threatening intermediaries with redundancy as forest and paper companies assume the function of existing internet-based intermediaries;
5. increase the likelihood of establishing industry standards for the co-ordination of strategic information;
6. reduce the threat to forest product companies of being further distanced from customers, providing industry producers with the ability to control and retain ownership of customer relationship and market transaction data; and
7. enable forest and paper companies to share in the benefits of e-business via equity-based ownership of an industry-wide vortal.