This case report deals with British Steel Plc., its merger with Hoogovens to form Corus andthe subsequent crisis it faced. Corus suffered significant losses after its formation mainly dueto its localized market base, limited product range and limited production activities.The most appropriate course of action would be to diversify its market reach, expand their product and service range and focus on increased productivity and efficiency.Traditionally, Steel has been one of the world¶s major industries. Initially, most countrieshad produced for home consumption and levels of imports and exports were low betweencountries that had their own industry. However, there were exports to countries without asteel making capability.But this pattern changed in last quarter of 20
century. In 1970 UK consumption of steelwas 20 million tons, 95% sourced from the UK. As this demand dropped to 13.9 million tons by 2000, imports had also increased to 6.6 million tons. In turn the UK producers wereexporting more than half their production.Around the world, production capacity exceeded demand by more than one-third,creating downward pressure on prices for commodity bulk steel products. This situationforced steel makers in developed countries to press harder for cost reductions and productivity improvements, which averaged 4-5 percent per annum in the 1990s.Also thedemand for steel was fluctuating. The requirement of steel in automobile sector wasdecreasing, whereas it showed an upward trend in construction sector. Thus the major problem gripping the steel manufacturing sector was of overproduction, fluctuating demandand the compulsion to reduce manufacturing costs to continuing lower level.
The case in consideration in the context of the world steel industry is that of British SteelCompany (BSC). This company was an ailing nationalized company before its privatizationin 1989 to become British Steel Plc. BSC was in a bad shape and it had incurred losses of some £7 billion between 1975 and 1984. However its profits soared to 733
M in 1989-90after its privatization. They claimed it was due to increased investment, changes inmanagement structures (reducing overheads and devolving decision making) and, arevolution in working practices. The company had gained competitive advantages by both product development and the management of logistics of the supply and distribution chains.