Student ID: AGMPBL0921064

Name: Mitesh Gulati

Course Title: Competitive Strategies for Growth

Question 1. Do industry analysis of steel industry and conclude the analysis.

Present Industry Overview

 Market size - 90 Mn Ton of Steel

 Demand Reduced due to Steel intensive industry particularly Auto use steel more efficiently and
usage of substitutes Aluminum, Plastics, and advanced composites.
 The market would not decline further.
 Flat sheet accounted for 50% of the US demand.
 Top Demand industries – Service centers, Distributors, Auto, Construction, Appliances and
Equipment industries. OF which Auto, Appliances and Equipment constituted 50% demand
of overall steel and 75% of Flat steel. 10% was construction for overall and flat steel.
 Buying Considerations – Price, Quality and Dependability of delivery.
 US Steel was more expensive than imported steel and hence lost market share.
 US Steel makers reducing production
 Market shrunk from 145 Mn Tons 1979 to 107 Mn Tons 1986 employment reduced from 450k to
175k and Compensation also reduced.
 ISP Labor Cost high compared to minimills and international competitors

The industry is segregated based on scale of operations into ISP and Steel Mills by applying Porter’s Five
forces to evaluate dynamics in the industry.

Integrated Steel Plants Minimills

Threat of HIGH – Although the market is HIGH – Total of 31 companies control 56

Rivals dominated by 3 major players in the ISP
domain. The inability to keep up with
tech advancements and rising costs,
made them lose market share to exports
Threat of Moderate - Oligopoly with 3 players
Buyers dominating the market. Preferred quality
sensitive customers which are large
players in their particular industry.
Threat of Very HIGH – high labor cost due to
Suppliers unionized labors and fall in the available
workforce
Threat of LOW- As the building up an integrated
New plant requires massive CAPEX and OPEX.
Entrants R&D as well is expensive. With low
growth in the recent years, not a
mills across the country with 43% market
controlled by Top 5 companies. The
capacity across the top 5 is also within
the same range of 1.5-2.5 MT/yr
HIGH- High expectation on the quality pf
the product with price sensitivity makes
this a challenging for mini-mills. Product
range expectation and customization
provide bargaining power to the
customer
HIGH - Increasing labor cost. High
dependency on the electricity cost.
Variable scrap pricing with limited
available dealers in the market.
Moderate – market is competitive with
lower capex requirement than ISP,
backward integration of supply chain is
challenging with limited suppliers.
 Student ID: AGMPBL0921064
Name: Mitesh Gulati
Course Title: Competitive Strategies for Growth
lucrative industry for new entrants Many mini-mills filed for bankruptcy and
were shut recently.
Threat of HIGH- demand is on the downtrend as Moderate – As minimills delas in the
Substitutes many steel reliant industries are low-end and low quality needs for the
switching to various alternative such as market, they are somewhat shielded
aluminum, composites and plastic due to from the higher-quality steel imports and
advancement ion material technology can be better priced. However the threat
from aluminum and composites is
applicable for Mini-mills as well. And
shift towards high-end structural product
at low end gets saturated.

Nucor has always leveraged its core competencies to succeed where the industry is facing down trend.
The organizational structure and culture of the company are few of the reasons why the company has
functioned so. Their expertise in operating efficiently and employing economies of scale have benefited
their industry position. Reviewing the Mini-mills sub-industry and Nucor’s orientation towards
technology driven implementation and deploying cost effective measures has given them competitive
advantage over other players in the market domain. The key decision points for Nucor is to de-risk
themselves for their Capex investment by leveraging the market position and making their strengths as
the differentiator to enter in the flat -sheet market. With saturation of the current market in the low-
end market segments it makes prudent sense to move with experience in the new flat-sheet market.
This will allow them to de-risk their current reliance on the low-end market.