Subject category:
Strategy and General Management
Published by:
IBS Research Center
Length: 16 pages
Data source: Published sources
Topics:
Steel industry; Mini-mills; Steel making technology; Finex technology; Technology innovations; Mass production; Location advantage; Joint ventures and strategic partnerships; Value added product; Centralised management; Steel consumers; Steel production; Raw material sources of steel; Iron ore; Scrap steel
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Abstract
The case is set in the year 2004 and talks about Pohang Iron and Steel Company Ltd (POSCO), the South Korean steel maker which was the leading steel company in terms of profitability. The case starts with the evolution of the world steel industry, the major technology shift (from basic oxygen method to electric arc furnace (EAF) method) that changed the industry economics, and talks briefly about the evolving demand-supply conditions. By 2004, the steel industry was considered an old economy and steel was commoditised. The increasing competition from mini-mills (companies using the EAF technology to produce steel) left some of the major steel producers'' operations unprofitable. As a result, steel producers were resorting to various strategies, including consolidation, to sustain themselves in the industry. The case describes how POSCO sustained and grew in such conditions, achieved its position of leadership, and the strategies it adopted on its way. Specifically, the case talks about POSCO''s product-market choices, technology initiatives, joint ventures and its organisational structure. The case also briefly touches upon the challenges faced by POSCO in sustaining its position. Students may discuss the following aspects pertaining to the case study: (1) discuss POSCO''s advantages and disadvantages based on key success factors in the steel industry in 2004; (2) analyse POSCO''s position vis-a-vis the other players in the industry; (3) discuss whether POSCO''s strategies are replicable by other players in the industry; (4) discuss the strategies for sustaining and improving POSCO''s position in the industry; and (5) discuss the building of a competitive advantage in a commoditised industry such as steel.
About
Abstract
The case is set in the year 2004 and talks about Pohang Iron and Steel Company Ltd (POSCO), the South Korean steel maker which was the leading steel company in terms of profitability. The case starts with the evolution of the world steel industry, the major technology shift (from basic oxygen method to electric arc furnace (EAF) method) that changed the industry economics, and talks briefly about the evolving demand-supply conditions. By 2004, the steel industry was considered an old economy and steel was commoditised. The increasing competition from mini-mills (companies using the EAF technology to produce steel) left some of the major steel producers'' operations unprofitable. As a result, steel producers were resorting to various strategies, including consolidation, to sustain themselves in the industry. The case describes how POSCO sustained and grew in such conditions, achieved its position of leadership, and the strategies it adopted on its way. Specifically, the case talks about POSCO''s product-market choices, technology initiatives, joint ventures and its organisational structure. The case also briefly touches upon the challenges faced by POSCO in sustaining its position. Students may discuss the following aspects pertaining to the case study: (1) discuss POSCO''s advantages and disadvantages based on key success factors in the steel industry in 2004; (2) analyse POSCO''s position vis-a-vis the other players in the industry; (3) discuss whether POSCO''s strategies are replicable by other players in the industry; (4) discuss the strategies for sustaining and improving POSCO''s position in the industry; and (5) discuss the building of a competitive advantage in a commoditised industry such as steel.