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In this presentation, the focus is prevalent on the most dominating force among the five forces pertaining to a positive impact.
The acquisition strategies of the three prominent steel manufacturers are discussed in this presentation.
Moreover, the future prospects of this particular industry are analysed.
The analysis is a key determinant factor for establishing the prospects of the steel industry being at par with the changing times. It puts emphasis on how reformation can be made to increase the industry's profit turnover.
Analysis of the five forces as positive or negative
New entrants
The emergence of new players in the market has diversified the entire reach of the steel industry.
In the duration of five years, Russia secured the second position with the highest amount of steel exported.
China directed its sales by six times and manifold more than almost half of the entire domestic market shares (Mele and Magazzino, 2020).
These rapid manifold action might be alarming for fellow competitors, but overall it keeps the interest of this industry alive. With the involvement of such major forces as Russia and China, the steel industry gained a position as one of the pioneers in driving the nation's economy.
Substitutes
A pattern is determined for curating alternatives of steel with lesser manufacturing costs and hassle and with better durability.
Aluminium, ceramics, and highly advanced technologies in applications seemed to have lessened the craze about steel.
The more industries indulge in the absolution of steel, the rise of substitutes for eradicating the revenue yielded by the steel industry increases.
This entire industry runs on the demand for manufactured steel and its related components. The arrival of more advanced options sees no need for prolonging the elaborate manufacturing of steel. Thus, it can be concluded that in the last five years, the threat from substitutes has pertained to an overall negative impact (An et al., 2018).
Buyer Power
The primary dominant buyer of the steel industries can be determined to be the major automobile industries.
Other prominent buyers are the industries requiring metal packaging for their products.
The increased concern about the climate has led industries to commemorate advanced eco-friendly materials (Das et al., 2018).
For example, with the increasing price of fuels and its subsidiary concerns, the automobile industries have shifted to mostly electric cars. These cars are comparatively light-weighted and do not necessarily require heavy support from steel equipment. Thus, in the five years, alternative sources of buyer power have negatively affected the revenue of the steel industry.
Supplier power
The solid raw material for the production of steel is iron ore.
The supplier of iron ore can be determined to be Vale and BHP, with more than 70% of the total market share.
The monopoly supply lessens the hassle required for the acquisition of raw materials (Vögele et al., 2020).
The expansion of these major suppliers has been twice in the last five years. It can be determined that with such multiplied expansion, there is no shortage of raw materials. Thus, the expansion of supplier power has had a positive impact on the productivity of the steel industry.
Competitive rivalry
The advancement of decades has seen the thorough expansion of the steel industry.
Formally, steel industries were only limited to Germany and other European countries.
But with the stabilisation of the economy in India, companies such as Mittal and Tata acquired ownerships of weaker foreign steel plants to dominate their market share (arcelormittal, 2022).
The establishment of several steel plants might have crowded the market share in a particular region. But, for the greater picture, the industry acquired higher profit margins. Thus, the emergence of new players has a positive influence on the productivity of the steel industry.
Acquisition strategies of players
Mittal
The steel companies are in constant need of acquiring capital for investment opportunities.
Mittal is no exception, and for stabilising its capital, it depended on a ber cash flow.
Mittal showed exceptional rationale by gaining ownership of Arcelor for further strengthening of their capitals (arcelormittal, 2022).
After acquiring the ownership, the company focused on developing advanced programs such as knowledge integration for greater assessment of the acquired collaboration. The company has also been able to determine the effective causes of implementation of different corporate cultures on the desired productivity.
Continued
Mittal company was established on a compulsory basis to present instructions in a condensed form for precise implementation.
The secondary acquisition strategies of Mittal comprise the effective supply of best-quality steel products for steel producers (arcelormittal, 2022).
The company is renowned for implementing selective expansion or debottlenecking approaches for the effective usage of crucial assets.
The prominent driving force behind Mittal's acquisition strategies involves the significant need for a reformation. The decline in the demand for steel products has questioned the steady cash flow required by such steel industries. Thus, Mittal had to acquire a secondary source of steady cash flow to utilise it in the capital for steel production (Goyal et al., 2018).
Tata
Initially, the acquisition procedures for Tata involved winning the auction for acquiring ownership of Corus (Services, H., 2022. Tata Steel) .
The company believed that it would derive high-yielding deals from such collaboration.
This merger was established as the largest privately funded transaction of an Indian company in the global retrospective.
This lucrative merger company at one time became the fifth-largest revenue-yielding industry in the world. The acquisition, through to price, gave an opportunity for further research and innovation for the host company. The revenue yielded also gave the financial backup required for expansion, keeping the global market map at vision (Schwabe, 2020).
Continued
The company further went and acquired NINL with the vision of multiplying the production from 1 million tonnes per annum to about 5 million per annum.
This yield-based acquisition has aimed to manifold the stagnant turnover ratio.
It was also aimed at establishing the company at the forefront of India's leading steel industry in the global retrospective (Services, H., 2022. Tata Steel).
The company has always aimed to increase not only its brand equity but also its physical expansion. The series of acquisition agendas are proof of their primary goal. The name that the company has made is enough to provide varied financial support to fund its diversified ventures.
Nucor
Nucor has been a believer in five-prolonged profit deriving propelling strategies.
It is a follower of long-term engagements with maintaining a low-cost production.
The company's acquisition strategy is focused on leading the market position in every concerned product line (nucor, 2022).
Nucor has upscaled its margin by focusing on diligently scaling up in the value chain position. The company believes in depending on the production of high-margin products to equate the profit turnover. Thus, the acquisition strategies of Nucor are discussed in detail.
Changes for the future
Scope of increased demand
The steel industry is known to have amazing prospects in projects involving the construction of smart cities.
The modernisation of airports, subsidiary engineering projects, bridges, flyovers, and other heavy-duty construction would always require steel and its components as the foundation.
The demand for steel products in the modernised world would not lessen but might reform in the ways it is traditionally utilised (Giri and Dey, 2019).
The utilisation of the everlasting demand can be met for future needs. The quality of steel and its ability to tarnish can be controlled by introducing secondary coating or introducing new and better quality ore as the raw material. Thus, the scope of increased demands and the necessary reformation for its feasibility are discussed in this section.
Foreign trade demands
India has always maintained a fascinating position in the steel industry due to dominating companies like Tata and Mittal.
These companies are aware of the lower domestic demands compared to their production scale.
The Indian government supports such causes by signing multiple trading contracts with countries such as South Korea, UAE, and Japan (Gielen et al., 2020).
The facilities that this nation derives from such export is the heavy-duty export charges and making up of aimed profit margins despite the domestic lagging. Thus, such nations can continue these strategies in the future by expanding foreign relationships.
Continued
The previous section took facts about the existence of foreign trading strategies.
It has to be noted that in order to continue with such trading relationships, the concerned countries have to abstain from war and tension situations.
It has to maintain a diplomatic relationship in world politics to secure good relationships (Pattanaik et al., 2021).
The country has to look after the sustainability of these situations by looking to expand trading rights with promising countries. The companies, on the other hand, have to take into account the particular region in which steel and its materials have a promising market. It can then influence the government to make favourable decisions for utilising surplus steel with utmost profit.
Influence of government
The government has the sole authority to curate better export orientations and policies to support the interests of the steel industry.
They can ensure improved domestic utilisation through feasible regulations and better resourcing policies.
These policies would provide the economic stability that the steel industries require for future opportunities (Kannan et al., 2020).
These factors are important for having a solid base for further expansion. The demand for steel in a particular region depends on the quality of production. Thus, the crucial influence of government is analysed in this particular section.
Liabilities of the companies
It is in the hands of dominant players to establish discipline while involving capital investments.
They have to be insightful while selecting investment opportunities in only those technologies that would serve the requirements of the future.
Companies have to curate sustainable goals and look for plans that serve longevity (Dong and Liu, 2022).
The major companies can serve the maximum agenda by employing experienced people to predict the patterns of demand in the future. They can implement a single strategy that might be multipurpose, serving present and future interests. Thus, the liabilities of the companies in making the steel industry attractive for the future are highlighted.
Conclusion
The presentation performs a precise analysis of all factors involving the future of the steel industry.
It takes account of the direction in which the forces would shape the prospects of this industry.
Moreover, it also suggests mitigatory actions that must be implemented to positively influence the steel industry.
Thus, it can be concluded that in this presentation, all the aspects involved in the long-term goal of the steel industry are studied. It takes into consideration the possible changes that might occur in this sector. It prepares systematic solutions to counterbalance each one of them.
Reference
arcelormittal, (2022). About | ArcelorMittal. [online] Corporate.arcelormittal.com. Available at: <https://corporate.arcelormittal.com/about> [Accessed 10 June 2022].
Services, H., (2022). Tata Steel | Company Profile & Details. [online] Tatasteel.com. Available at: <https://www.tatasteel.com/corporate/our-organisation/company-profile/#:~:text=Tata%20Steel%20was%20established%20in,the%20leading%20global%20steel%20companies.> [Accessed 10 June 2022].
nucor, (2022). Nucor Corporation - Who We Are. [online] Nucor.com. Available at: <https://www.nucor.com/who-we-are/> [Accessed 10 June 2022].
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