Essay: POSCO and NIPPON

Comparison of Global Strategies in the Steel Industry: The case of Nippon and POSCO
Steel is hard and strong element used as a structural and fabricating material. It is important to the global development due to its several uses. It is use in development of infrastructures such as roads and buildings and transportations such as cars and other vehicles. It is also used for housing, food and water supply, production of energy, tools and healthcare.(World Steel Association 2015) The demand of the element is said to be continuous. According to the World Steel Association, the demand will increase as developing countries are in need of infrastructures. As for the developing countries, consumer goods such as washing machine and refrigerators increases too. (IBID) Steel will be in demand now and in the future to come. The Steel Industry is as complex as it gets. The need for the element is high and the access of iron ore and coal is relatively diminishing at a point, in which steel companies are in need of strategies relating to sustainability and productivity. Companies must allocate resources and relocate for the effectivity and efficiency of their funds in order to maximize their profit. It is why business strategies are significant to attain the company’s goals. The focus of this paper is on two steel giants from East Asia. This paper will examine strategies of steel companies specifically: Nippon steel of Japan and POSCO of South Korea. The comparison of which is base on the comprehensive model of Entrepreneurship, which includes industry, resource, and institution based considerations.
NIPPON STEEL
Nippon Steel & Sumitomo Metals Corporation (NSSMC) is the second largest steelmaker in the world, producing ~50 million tonnes of steel in 2013. Its a Japanese Steel Manufacturing segment engages in the manufacture and sale of steel bars, pipes and secondary steel products.(Kotas 2015) ItThe company dates back in the 1990’s when it started venturing in the steel industry and underwent series of merges. Sumitomo Metal Corporation was absorb by Nippon steel to build a new company. (NSSCMC 2015) Established in October 2012 by the merger of Nippon Steel Corporation and Sumitomo Metal Industries, Nippon Steel & Sumitomo Metal Corporation (NSSMC) is the world-leading integrated steel producer. The company emphasizes three business fields as key strategic areas: high-grade steel products for automobiles, resources and energy, and civil engineering, construction, and railways.(NSSCMC 2015) NSSMC is a holding company for five businesses: steelmaking, engineering, chemicals, new materials, and system solutions.(IBID) Their companies philosophy is to pursue world-leading technologies and manufacturing capabilities, and contribute to society by providing excellent products and services. The company is striving to have the best high class steel producer in the global market and as early as the 20th century, It has acquired several joint ventures in other countries such as Brazil.(Bebenroth 2015)
NIPPON STRATEGY
POSCO
POSCO also known as Pohang Iron and Steel Company is one of the most competitive steelmakers in the world. Established in the year 1968, POSCO was the first steel maker in South Korea and was subsidized by the government. In POSCO became the world’s leading steel company in 1998 based on crude steel production through continuous efforts to increase facility efficiency and productivity, and established an integrated digital system through a business transformation in 1999 reorganizing all work processes from purchase, production to sales.(POSCO 2015) In 2000, the company was successfully privatized. (POSCO 2015) In 2010 World Steel Dynamics (WSD), an organization which evaluates the production scale, profitability, and technology of steel companies, has crowned POSCO number one in the field.(WSO 2010) The company started from zero but was able to make its way up together with the South Korean growth economy. POSCO mainly produces Steel, flat steel, long steel, wire products and plates and other steel products that are mainy use for general infrastuctures and automotive products.
POSCO STRATEGY
ANALYSIS BASED ON STRATEGY TRIPOD : INDUSTRY BASED, INSTITUTION BASED and RESOURCE BASE
INDUSTRY BASED ANALYSIS
Industry based analysis considers the 5 forces frame works which includes the following: rivalry among competitors, threat of entrants, threat of substitutes, bargaining power of buyers and suppliers.The steel industy basic need is the iron ore which is the element needed in making steel. Figure 1. Shows a chart where iron ore are abundant. CHina and Australia holds the most iron ore in the world and are considered countries with most production of iron ore.
Figure 1
(US 2015)
The scarce resource paves way to the rivalry between competitors. Both Nippon and POSCO comes from a country will limited natural resources thus there is a need for export of the element. The production of the iron ore is manage by 3 big giants namely Vale, BHP and Rio Tinto.(Brown 2015) They are considered to have an oligopoly in the iron market which gives both POSCO and Nippon an increasing cost for raw materials. For producers, the increasing cost would lead companies in search for substitutes. Substitutes are little or impossible since steel is as said earlier significant for the development of the world. In turn, the bargaining power of suppliers are very high in terms of the cost of iron ore. The steel industry as mentioned is very complex, not to mention the high cost of the industry itself. Therefore, threat to new entries is rare. As seen in figure 1, China has the most iron ore reserves which it is why China could have an great comparative advantage against other steel producers. Baosteel is one of the few new competitors in the steel industry for both Nippon and POSCO. Baosteel could easily gain the advantage in the steel industry. (Baosteel Co.Ltd 2015) Nippon, POSCO and Baosteel are just some of the top steel producers worldwide. Their greatest rival in producing steel is ArcelorMittal in Luxembourg which ranks first among the steel producers. Nippon, Baosteel and Posco follows the rank respectively. The industry has several other companies which produces a greater bargaining of buyers for its price. Afterall, profit maximization is just one of companies goal in producing products.