Steel Industry

Using the information contained in the case, conduct a five-forces analysis of the U.S. Steel industry. What conclusion can you draw from this?

Degree of Rivalry: Mini mills were being used by the foreign competition which mean they were able to produce steel at less expensive rates passing that on ot their customers.

Barriers to entry: Starting in the 1970's since there were no trade barriers companies overseas were able to manufacture and sell steel for a much lower price here in the United States therefore affecting companies domestically.

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Supplier power: Once steel became needed again suppliers were able to multiply what they charged consumers and were able to produce large qantities at a time in order to stay up with demand.

Buyer power: Since there were so many steel companies in competition consumers knew they had the upper hand and were able to get the lowest prices on the metal leaving companies with extremely low profits.

Threat of substitute: Demand had significantly lowered which affected the steel industry.

To add to this many people were now switching over to even more less expensive substitutes such as aluminum, plastics and composites. The conclusion I come to from this is that in an industry there is always going to be competition and in order to have some sort of profit and stay up with everyone else there need to be plans that will need to be put in place so that when there is another decrease in demand companies will still be able to stay afloat somehow. Finding new ways of producing the product without having to pay so much would be the best option for such an industry. The steel company is rising again and staying in business should not be that difficult again.

Do you think there are any strategic groups in the U.S. Steel industry? What might they be? How might the nature of competition vary from group to group? Yes, I do believe there are strategic groups in the U.S. Steel industry. One of those groups would be the mini mills. Mini mills are able to produce steel at a lower cost and with this advantage they are trying to dominate the steel industry. The level of the competition does vary thuogh because mini mills are able to produce steel less expensively yet they are not able to produce in large quantities as the bigger established steel companies. Each company needs to look at how they can improve within themselves, the economy and against the competition.

Given the nature of competition in the U.S. steel industry, what must a steel maker focus on in order to be proftable? The U.S. steel industry would have to focus on technology. It should also focus on the larger global scale in order to stay up with competition domestically and internationally. If this does not happen then the United States will not be able to stay ahead of the competition and many companies will once again go bankrupt.

How is the competitive strategy of the steel industry currently being affected by the seven macro-environmental forces? It is currently being affected economically, technologically and legally. With the economy being as low as it has and going through a recession many industries have not been able to stay open. They have needed to cut back on expenses such as supplies and employee costs. With new laws constantly passing they need to make sure they are up to date with minimum wage and tax laws. It all factors in to whether or not a business can stay open and make a profit at the same time.

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