Introduction
I would be reporting on a MNC company called BlueScope Steel Limited, Australia. BlueScope Steel is a flat product steel producer with operations in Australia, New Zealand, Asia, the Pacific and North America. It was created from BHP Billiton in 2002 as BHP Steel and called BlueScope Steel on 17november 2003.
BlueScope Steel the only flat steel products maker and the largest steel producer in Australia. Flat steel products include slab, hot rolled coil, cold rolled coil and plate, as well as coated and painted steel products such as COLORBOND steel and ZINCALUME steel, and downstream steel building products, such as steel roofing, fencing, walling, decking and rainwater harvesting solutions.
BlueScope Steel has three primary steelmaking plants (one each in Australia, New Zealand and the United States) as well as approximately 200 downstream plants of various sizes in 17countries. BlueScope Steel's largest manufacturing plant is the Port Kembla Steelworks located in the Illawarra region of New South Wales. The Port Kembla Steelworks directly employs approximately 3800 people and provides work for approximately 2800 on-site contractors. It is one the largest employers in the Illawarra region. In Australia as a whole, BlueScope Steel directly employs approximately 8,400 people. Approximately half of BlueScope Steel's Australia is exported, while the other half is sold to domestic manufacturing customer or further processed through BlueScope Steel's downstream manufacturing operations throughout Australia.
Macro environment
Political - Impact of liberalization. The economic reforms iniated by the government in 1991 have added new dimensions to the industrial growth in general, and steel industry in particular. Licensing requirement for capacity creation has been abolished.
Economical - Due to the subprime crisis in USA an subsequent tremor all along the world, especially in the developed market in Western Europe make the vulnerable position of BlueScope even more riskier.
Technology - It affects the way the company competes. The better technology will help the company to reduce the payment for employees and operations. It will extremely help to increase the productivity of the company.
Social - BlueScope Steel Ltd has been awarded the Golden Peacock Global Award for Corporate Social Responsibility
(CSR) for the year 2009. The award looks for continual commitment by business to ethical behaviour, to economic development and to improving the quality of life of employees and their families, as well as to engagement with local communities and society at large.
Environment - Meeting the changing environmental expectations of our communities is one of the major challenges the steel industry is facing. In Australia and New Zealand, climate change has become an issue of greater public concern and the governments of both countries are engaged in the development of emissions trading schemes for greenhouse gases. Subsequent to the close of the financial year, the Australian government released a Green Paper calling for public consultation on the design of a national emissions trading scheme. a technological breakthrough in the fundamental iron and steel making process is required if steel producers are to achieve reductions in carbon emissions beyond current limits. BlueScope Steel is involved in the International Iron and Steel Institute's CO2 Breakthrough Project, which is researching lower emission steelmaking technologies.
Social issues and the natural environment - Need to understand the changes in lifestyle e.g. People need to consume better made products like better cars and better houses with steel framing resulting in less air loss around windows and doors as well as foundation and roofing connections. Need to understand consumer's choice: strong, versatile, recyclable and affordable steel.
Competitive environment
New entrants - High. Capital Requirement: steel industry is a capital intensive business. It is estimated that to set up 1 mtpa capacity of integrated steel plan it requires between Rs25bn to Rs30bn depending upon the location of the plant and technology used.
Buyers - Mixed bargaining power. Some of the major steel consumption sectors like automobiles, oil & gas, shipping, consumer durables and power generation enjoy high bargaining power and get favourable deals. However, small and retail consumer who are scattered and consume a significant part do not enjoy these benefits.
Suppliers - The bargaining power of suppliers is low for the fully integrated steel plants as they have their own mines of key raw materials like iron core for example BlueScope Steel.
Competitors - Competition is high. The 4major domestic rivals are SAIL, JSW, ISPAT & ESSAR STEEL. Rest are all smallish mills which together accounts for 30%) of the total market share. The steel industry is truly global in terms of competition with large producing countries like China significantly influencing global prices through aggressive exports. Steel, being a commodity it is, branding is not common and there is little differentiation between competing products.
STRENGTH
- Largest steel producer in Australia
-Very advanced R&D in the areas of raw material, blast furnace productivity.
- Worldwide operation
- Service department located nearby
- World patent adds value
- Long history
- Relatively experience in steel industry
- Contributing to local economy, creating employment
- Steel plants located near good ports
- Ready labour market
- Cost advantage in raw material
WEAKNESS
- Foreign competition
- Limiting investment in new production technology
- Introverted and aggressive management style
- Cost pressure
- Pressure to satisfy shareholders investment in Newcastle not growing
- Change to the work force
- Slump in domestic economy
-Return on investment does not match other corporate divisions.
OPPORTUNITY
- Government plans
- Network worldwide
- Opportunity in new production techniques
- Opportunity in new emerging countries (Burma, Yugoslavia, Africa etc)
- Worldwide patens adds value
-It is estimated that world steel consumption will double in the next 25years.
SO STRATEGIES
- Capitalise on Zincalume and Colorbond
- Create new market
- Ability to expand and increase market share
- Ability to counteract competition (well established company with long history)
-Good relations with government and customers
WO STRATEGIES
- Source for new markets
- Employ more quality staff and invest in R&D
- Keep abreast of technology
- Product, technology and process innovation
- Develop long-term relationships with customers
THREATS
- Slump in domestic country
- Minimills enter market easily
- Domestic market getting hostile
- Intense foreign competition
- Militant unionism
- Inefficient labour usage
- Hostile unionism
- Fluctuating demand
- Backward integration
- Need for social responsibility
- Cost pressure from cheap imports
- High import penetration
- Minimill not enough stock feed uncertainly or demand.
- In the developed world, industries have been facing rising environmental costs due to the increased concerns on Global Warming. It is, therefore, a challenge and responsibility the Steel Industry to be the trustee in conservation of nature for future generations.
ST STRATEGIES
- Focus on goodwill and reputation to maintain rapport with government and buyers
- Quick response to changing global markets conditions
- Operation of minimill
- Produce low-cost output
- Improve quality and delivery
- Able to complete against competitors
- Availability of skills to counteract new entries
- Compete against newcomers
WT STRATEGIES
- Provide formal and comprehensive training to employees
- Restructuring -- proper and stricter control
- Diversity into different products lines for new market
- Conduct regular meetings and interactive communication between various departments within and beyond Australia
- Proper and careful forecast and control of the future plans
Conclusion
BlueScope still could set future goals to a clear vision for the future, they could provide high-quality, value-added products to a wide array of customers, lead the world in innovation and technology in the production of steel, produce steel in safe and environmentally friendly manner and to increase Australia's global competitiveness. BlueScope Steel could create synergistic strategic alliances with other steel companies to create joint research and manufacturing facilities so as to acquire commercially useful economies of scope without incurring the costs of acquisitions (as in the case of Sony sharing its know-how with multiple small firms) (U.Gupta, 1991, Sony adopts strategy to broaden ties with small firms, Wall Street Journal, February 28, B2). Strategic alliances can also be used to hedge against risk and uncertainty.
BlueScope Steel should work towards achieving ISO 9000. In the global economy, ISO 9000 standards are rapidly becoming important in establishing the quality level as a basic requirement of effective competition in worldwide markets. (F. Havard, 1994, BS ISO 9000 certification, in D.Lock (ed.). Handbook of Quality Management,(Brookfield. VT.: Gower))
There is still a wide market for steel. Steel has been part of some of the greatest achievements in history: it was the "iron horse" and rails that help create a nation out of frontiers; it's the backbone of bridges, the skeleton of skyscrapers, the framework of our automobiles and appliances. It's the high-strength, lighter-than-plastic frames for eyeglasses; it's the stronger, more affordable, more-resilient-than-wood frame in new housing; it's the high-tech alloy used in the Space Shuttle's solid fuel rocket motor cases; and it's the coated, precision surgical instrument used in hospital operating rooms around the world.
By working towards creating value-adding products to its customers, by investing in R&D, upgrading technology, production processes and work forces and by cutting down unnecessary costs, BlueScope Steel would be able to achieve sustainable competitive advantages, thus producing quality products for its customers. By working with customers and industry organizations, BlueScope Steel should continue to develop new and better uses for steel-safe, durable, affordable steel products that will serve consumers for decades to come.
In keeping up with the challenge of global competition, BlueScope Steel should re-engineered its plants so that our air and water are returned to the environmental cleaner, and harnessed the explosive potential of high technology to advance and streamline the steelmaking process from start to finish.
