LEADERSHIP IN THE UNITED STATES STEEL INDUSTRY

Leadership in the United States Steel Industry

Leadership in the United States Steel Industry

U.S. steel industry changes

A. What causes the changes in the steel market?

B. How is the existing companies surviving?

There have been two major factors influencing the steel industry- globalization and consolidation. Furthermore, there are ongoing revolutionary changes in the global steel scene due to fierce competitive pressures on performance, productivity, price reduction and customer satisfaction. National boundaries have melted to encompass an ever increasing world market.

Since, the beginning of the 21st century, the industry has been hovering around 75% capacity utilization, a level too low for many companies, thus, forcing them to globally consolidate. Examples of these consolidations are the three European who companies who merged to form the world's largest steel producer and the two Japanese companies who did the same to form the second-largest steel producer. More recently, opening a new chapter for the industry's consolidation was the announcement from London's Mittal family that it was merging its Ispat International NV with LNM Group and ISG to create the new world's largest steel maker. Then in 2005, Mittal announced plans to buy 37% of China's Hunan Valin Iron and Steel Co (Barnes, Frank and Beverly Tyler, 2005).

While some of these substitutes may seem promising, they are hardly 'drop-in replacements'. Hence, using them would require substantial changes in the way products were designed and made. “It is likely that certain kinds of large buildings or civil engineering projects would become very difficult to construct without using materials such as reinforced concrete, which gains its structural strength from steel. Thus, although the price of the alternatives may be favorable in some market conditions, switching costs are likely to be very high” (DATAMONITOR - Steel Industry Profile: Global, 2007). Overall, the threat from substitutes is weak.

Organizational Structure changes

A.What has upper management done to plan for the future?

B.What is forecasting and how is it done

Success in today's highly distorted world steel market often depends on trade policies of foreign governments. “The combined result of the numerous steel industrial policies is that the world has tremendous excess production capacity in steel. In such a situation, the high-fixed cost structure of the steel industry encourages fierce price competition during downturns” (Szamosszegi and Mastel, 1999). Dumping, which is sales in export markets below cost or sales below the price in the home market, is the frequent result.

The United States has frequently used antidumping laws, which counter dumping with offsetting duties, and countervailing duty laws, which counter unfair subsidies, to level the international playing field in steel.

The industry has become attractive for new entrants from the international arena since these companies are not necessarily burdened by union contracts and since governments may provide special incentives in order to help companies establish a customer base in steel, which can help form an important part of a nation's economic infrastructure. Although the U.S is already dumped with outsider steel products, it is still considered to be a reliable ...