The global steel industry is characterized by intense competition. This industry seems to have a high concentration ratio, which means that the largest steel companies have the greatest market share of this industry (QuickMBA, 2010). This makes it very difficult for smaller companies like Korean Steel International to increase their market share. There are several strategies that can be used by companies that want to increase their market share: reducing prices, improving product differentiation, efficiently using distribution channels, and improving relationships with suppliers. In the case of KSI, it is obvious that the company cannot significantly reduce the prices of its products. This is because the prices in the steel industry are established by large players and by producers. It is also difficult to improve product differentiation because the types of products commercialized by KSI depend on producers. The company's distribution strategy can be improved. In addition to this, it is recommended that KSI focuses on improving relationships with business partners in order to create competitive advantage.
Business Plan Improvements
The financial performance of the company is reflected by the following indicators:
Net income - $20,000
Cash flow - $120,000
Operating activities - $16,000
Investing activities - $11,000
Income Statement
USD 1,000
Net income
Cost of sales
Gross income
Research and development expenses
Operating income
Cash Flow Analysis
USD 1,000
Cash from operations
Additional cash received
Current borrowing
Cash from receivables
Cash spending
Assets
Usd 1,000
Cash
Accounts receivable
Other current assets
Total current assets
Liabilities
Usd 1,000
Accounts payable
Current borrowing
Other current liabilities
Total liabilities
36,500
53,000
Competitive sustainable advantage
Competition
The global steel industry is characterized by intense competition. This industry seems to have a high concentration ratio, which means that the largest steel companies have the greatest market share of this industry (QuickMBA, 2010). This makes it very difficult for smaller companies like Korean Steel International to increase their market share. There are several strategies that can be used by companies that want to increase their market share: reducing prices, improving product differentiation, efficiently using distribution channels, and improving relationships with suppliers. In the case of KSI, it is obvious that the company cannot significantly reduce the prices of its products. This is because the prices in the steel industry are established by large players and by producers. It is also difficult to improve product differentiation because the types of products commercialized by KSI depend on producers. The company's distribution strategy can be improved. In addition to this, it is recommended that KSI focuses on improving relationships with business partners in order to create competitive advantage.
Threat of substitutes
The steel industry is not significantly affected by the threat of substitutes. In this case, steel is required in most activities. However, specialists in the field try to develop innovative materials with similar characteristics to those of steel, but at very high prices, and with lower usage possibilities.
Buyer power
In the steel industry buyers have a rather moderate power. Buyers are quite fragmented, there are many different buyers with little influence on product price. Another important factor that determines this situation is represented by the fact that steel producers supply significant amounts of steel purchased by buyers in this industry. In addition to this, companies that purchase certain types of steel products from certain producers build their product strategy on those types of steel products, becoming somewhat dependent on them. Therefore, it is difficult for buyers to switch to different sellers.
Supplier power
Suppliers tend to have a moderate power on the steel industry. This situation is mostly determined by the switching costs of firms in the industry. Another factor of influence on this situation is represented by the importance of volume to suppliers.
Entry barriers
It is difficult for companies to enter the steel industry. This is because of the great investments that are required in order to produce steel products or to purchase them. The limited success to distribution is another factor that increases the difficulty of addressing this industry.
3. Market analysis
This industry is characterized by an increasing demand for steel. The business sectors that report such significant demand increase of steel are represented by: the construction, the infrastructure, and automobile sectors. Producers of steel and organizations in the field tend to focus on developing user friendly steel products. This can be achieved by developing light weighted steel products. This is intended to help companies in the steel business develop and implement strategies that support the environment (EconomyWatch, 2010). The most important objective of these strategies refers to reducing the pollution associated with the steel production.
The international steel industry is significantly developing as a result of several factors. The most important factor that influences the development of this industry on international level is represented by the development and implementation of liberalization policies across the world. Another important factor is represented by the development of emerging markets, like Asian countries that have great production potential. The international steel market is dominated by Asian countries.
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