JK & Sirpur Paper: Expanding in a Declining Industry

In August 2018, JK Paper Ltd., a market leader in India’s paper manufacturing industry, acquired the ailing Sirpur Paper Mills Limited, an 80-year-old company that had been declared insolvent. By September 2022, Sirpur Paper Mills Limited was reporting profit margins that were on par with its parent company. The management team was requesting approval from the parent company to double capacity in the writing and printing paper segment, with a proposed investment of US$125–130 million. The company has overcome several key challenges and had achieved some considerable operational improvements. However, the proposed investment would be a long-term commitment in a cyclical industry. There were also some difficulties in attracting and retaining talent in the industry and establishing relationships with key external stakeholders. JK Paper Ltd. had to decide whether to approve a strategic plan to expand and double the capacities of its new business unit in India’s paper manufacturing industry.

The case was written for courses in microeconomics, managerial economics, and strategic management at the postgraduate management level. It can also be used for courses that discuss related topics including how companies develop effective strategies in monopolistic competition, demand supply dynamics, pricing power, impact of scale, industry supply curves, concentration indices, and learning curves. After completion of this case, students will have the opportunity to:<ul><li>Identify the strategic choices available in a competitive industry and how to choose between key strategies such as economies of scale, product differentiation, and cost competitiveness.</li><li>Discuss how industry structure affects pricing power and how individual business units that lack pricing power can become profitable.</li><li>Plot an industry supply curve and assess a company’s relative competitiveness to determine its profitability and survival in a cyclical industry.</li><li>Discuss how a company can attract and retain talent with high potential by using credible psychological contracts for employees.</li><li>Identify which competitive moves in an industry need to be continuously monitored, and how to interpret key signals for an evolving strategy.</li></ul>

• Market structure
• Competition
• Economies of Scale
• Talent Management
• Strategic Management