A Study on the Industry Structure and Firm Strategies of China’s Steel Industry
Date Issued
2014
Date
2014
Author(s)
Yu, Ke-Yih
Abstract
Steel Industry is a fundamental industry in every country. China steel and its related industries collectively represent 10% of GDP and have replaced Japan as the largest crude steel production country worldwide since 1996, and 46.3% of worldwide crude steel production in 2012. However, its industry average profit was only 0.04% in 2012 due to slow demand growth and excess capacity. The global steel industry therefore faced declined demands, excess capacity, and trade barriers.
This study reviews the developmental history and identifies key factors to the explosive development in 2000s, including (1) the pre-industrialization helps the continuously fast growth, (2) strong demands gave excesses profits, (3) the local government’s strong encouragement due to promotion system. When the demand-growth is slow down, the oversupply leads to poor profitability.
Based on the S-C-P paradigm and Five-Forces Model, the study found that the industry is unfavorable to creating positive profitability. We also concludes the KSFs, including: (1) strategic M&A (2) reduce the ore dependency. (3) develop differentiation and vertical integration (4) leverage brand and (5) develop relevant diversification strategy to reduce the systematic risks.
We then take Baosteel Group as a case study and found that its core competences incldue (1) differentiation preposition, (2) the integration of customer needs, (3) continuously R&D, (4) strong brand, which are all related to the KSF of the industry. We therefore provide several suggestions to the case company, including: in case of initiating M&A, negotiating with the local government to maximize the firm’s benefits despite the issues of tax, economic growth and domination, diversifying to other businesses in order to reduce to overall risk while maintaining exit mechanism, growing up talents with both international operation capabilities and fitting Baosteel cultures.
Subjects
鋼鐵產業
產業結構分析
競爭策略
中國寶鋼集團
SDGs
Type
thesis
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