MA in Management – Strategic Analysis Module

An Introduction to Case Study Analysis

I. SAA Answers
SAA 1 – External Factors

Although not exhaustive, your answer may well include issues like excess capacity in the
industry; cyclical demand for steel products; the effects of fluctuating exchange rates;
reduced “steel intensity” in many products; increasing competition from Eastern Europe; and
privatisation itself.

SAA 2 – Strengths and Weaknesses

As this case study outlines the story of a company turnaround over a 15 – 20 year period, it
is not surprising that the strengths and weaknesses change considerably over the period.

In the early 1980s it was difficult to find many strengths within the organisation, though BSC
was still had a dominant share of the UK market (albeit declining) and was potentially a
major player within Europe. In contrast, the list of weaknesses could seem almost endless –
the poor financial position; overmanning and inefficient work practices; inefficient and ageing
plants; poor customer service; over-reliance on declining markets; over capacity; a limited
presence within the increasingly important steel stockholding sector, were probably the most
significance.

During the 1980s there was a massive improvement in efficiency within British Steel. This
can be seen through the measures of resource utilization such as labour costs (reduced
from 31% of total costs in 1980, to 20% in 1989) and productivity (up to 320 tonnes per man-
year in 1987, compared to 167 tonnes per man-year in 1981). These improvements
continued through the 1990s. However, British Steel was still only the 4th largest world steel
producer in 1994 and, by value, only a quarter of the size of the market leader, Nippon Steel
in 1996.

SAA 3 – British Steel’s Strategy for the Late 1990s

In 1995, Brian Moffat, the chairman, outlined British Steel’s intention to become an
internationally-based steel company by:

 Maintaining their cost-efficient position through continued efficiency gains.

 Meeting market requirements rather than simply increasing capacity and trying to fill it.

 Carefully targeting investment projects and relocating/reusing existing assets.

 Developing globally through joint ventures, overseas transplants and exporting high
value added products.

 Maintaining a strong balance sheet to cope with cyclical demand.

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In addition, the company was investing in new product development and developing its steel
stockholding business by investing in information technology.

SAA 4 – The Turnaround at British Steel from the mid-1980s to the mid-1990s

The £985 m investment programme for modernisation and re-equipment was critical to the
company’s ability to improve efficiency and reduce costs. Although not explicitly mentioned
in the case study, this was accompanied by a massive redundancy programme to reduce the
size of the workforce and the closure of older less efficient plans, this was partly paid for by
European funds to assist in the restructuring of the industry.

The revamp of the management structure both reduced central overheads and encouraged
devolution of responsibility down through the organisation.

The massive improvements in productivity also owed much to the “revolution” in working
practices, such as the introduction of multi-skilled operatives and the increase in
performance-related pay schemes.

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