Various Strategic Models and Measures in Steel Industries

A strategy measures involves a sequence of steps starting from finding the right strategy, business models and strategy directions. After the financial crisis, the market growth of steel was shrinking in both domestic and global level except for China. Steel industries adapted or may adapt different strategies and strategy measures which are going to be discussed further.

For example Competitive strategy must be aligned with how a company achieves a competitive advantage in its field of activity. Steel companies should adapt cost leadership strategy to increase their global economic value.

Costs leadership strategy means being the lowest-cost company in the business sector. Steel manufacturers can adapt this strategy by reducing the cost to increase the market share. For example, Nucor, an US based steel company have adapted cost leader through improving their technology in manufacturing using innovation to overcome Chinese steel companies. Reducing input costs, increasing economies of scale, gaining experience, effective product design plays a vital role for an industry to effectively adapt cost leader. Tata steel adapted cost leader by having its own raw material plant and strengthening its logistics added value to it. Parity enables the producers to have same prices as the competitors with converting its cost advantage to profit. With its cheap sources of iron ore, Brazilian steel producer CSN is in a position to charge the average price for its steel and to make the cost difference more profitable.

“A business model describes the business logic of an enterprise including the domains of value creation, value configuration and value capture”. Tata steels and JSW (an Indian steel company) achieved these values by supplying high quality supply to their customers, creating sustainable products, thereby increasing the value of their stake holders.

The concept of Strategy directions can be best explained by adapting Ansoff’s product/market growth matrix which is a corporate strategy to generate directions for organizational growth. Market penetration and related diversification best suits for the steel companies to grow its customer base and economies of scale.

The role of Market penetration can be described as the best strategic option to increase current market shares with existing products. Steel industries can engage in invading into the existing customer markets. For example, Chinese steel companies increased most of its sale in the domestic market thereby increasing the exports and becoming the worlds’ largest steel exporter in 2011.

the process of Related diversification involves expanding products or services which have relationships with the existing business. Steel companies in India started expanding their products to automotive industries and constructions were the large selling market for the steel industries in the US. Tata steels managed to offer diversified products in different industries to achieve market share. Some steel producers have been pursuing high-value niche markets with value-added products through investment in quality, efficiency and customer care.

Mergers and Acquisition or M&A is another famous strategy where a company merges with another company or acquire a share or entire company to increase its financial performance with reduced risk. By acquiring loss making steel companies in the Europe like Accelor, Mittal became the worlds’ largest steel producer as of 2019. Tata steel acquired Corus and Bhushan steel to increase its market shares.

To conclude this topic, Steel industry is constantly experiencing uncertainty after the financial crisis. Many steel manufacturers have adapted different strategies to improve their market share and economies of scale. Issues related to supply chain, raw material, manufacturing that occurred out of COVID-19 are the major factors affecting the steel industries. Steel industries should be flexible and apply new innovations in the product market to enter into niche markets to attain market value.