British Steel Corporation Case
External Analysis
Environmental Analysis – SEPT Analysis on Global Steel Industry
Social Systems
1. Increased
urbanization
Economic
Situation
Political Stability
1. Fierce
International price 1. Oil crisis
competition
2. Changing usage 2. Production
of steel
Quotas
2. Formation of
EEC
3. Strong recovery
3. 2 bn
of world demand
Privatization
for steel
4. Stock Market
Crash
4. Prominent
political issue of
closure of mills
1
Technology
1. Integrated Steel
producers in
Europe & North
America
2. The advent of
low cost
production in S.K
3. Continuous
casting by French,
Italy & German
industries
4. Reduction in
labor costs in
Japan by
improved
technology
5. Cyclical
fluctuations in
demand
6. Favorable
foreign exchange
2
Internal Analysis
SWOT Analysis on British Steel Corporation
Internal Factor Evaluation Matrix
External Factor Evaluation Matrix
T
T
T
T
Strengths
W R
Weaknesses W R
Opportunities W R
Threats
W R
W
W
W
W
1. Fierce
International
1. The world
1. Over
price
0.
0.
0. 1. Increased
0.
0.
most profitable
4 0.4 complicated
4
2 0.2 competition
4 0.8
1
2
8 urbanization
1
2
steel company
costly plants
from Europe,
NA,SK and
Japan
2. Closure of
2. Reduction in 0.
0.
0. 2. Production 0.
2. Stock
0.
2 0.2 Scotland mills
2
3 0.3
2 0.2
Labor cost
1
1
2 quotas
1
market crash
1
3. Small
3. Continuous 0.
equipment &
4 0.8
casting method 2
higher rail
charges
4.
4. Higher
Rationalization 0.
2 0.2 usage of
of mgmt.
1
energy
Structure
Total
0.
0.
4
1
4
3. Strong
recovery of
world demand
0.
4 0.4 3. Oil crisis
1
0.
4 0.4
1
0.
0.
4
1
4
4. 2bn
privatization
with favorable
exchange rate
4. Prominent
0.
4 0.8 political issue
2
of closures
0.
2 0.2
1
1.
0
3.
4
1.
0
3
3.3
Internal Factor Evaluation Matrix
 Weights are industry based. 0 – 1 : Least important is 0 and most important is 1.
 Rating is company based. Major strength = 4, minor strength = 3, Minor weakness = 2, major
weakness = 1
Comment on total weights of 3.4
- Since total weights are more than average of 2.5). The company is serious about the strength and
weakness, They must concentrate on converting weaknesses into strengths to meet the challenges
of threats
External Factor Evaluation Matrix
- Weights are industry based. 0 – 1 : Least important is 0 and most important is 1.
- Rating is company based. Superior response = 4, above average response = 3, average response = 2, poor response = 1
Comment on total weights of 3.3
- Since total weights are more than average of 2.5. The company is serious about the meeting the challenges of threat and
opportunity.
Diagnosis of the BSC
1. Despite many challenges , BSC continues to be the world’s most profitable integrated steel company. This is due to strong
recovery of world demand coupled with cost reduction in labor.
2. The need for continuous casting method and high value added products require high usage of energy in the context of continued
oil crisis.
3. Increased urbanization and formation of EEC would create more demand for steel in Europe, which may require a rationalized
Management structure to take advantage of privatization.
4. Small equipment and higher rail charges increase cost of production thereby posing a problem to meet the challenges of fierce
international price competition.
4
5. The closure of Scotland mill continues to be the prominent political issue.
6. By the introduction of production quotas to smoothen the cyclical fluctuations and stock market crash, BSC continues face
challenges of environment.
To conclude, BSC lacks in technological front.
Name the reasons for Weaknesses and threats
Weaknesses
1. Over complicated and costly plants
2. Closure of Scotland mills
3. Small equipment & higher rail charges
4. Higher usage of energy
Reasons
Lack of finance and outdated and outmoded machinery
Prominent political issue
Defective plant layout
Outdated, obsolete and outmoded equipments
Threats
Reasons
1. Fierce International price competition from Europe, NA,SK and Japan
Forward looking of competitors
2. Stock market crash
Fluctuations in demand
5
3. Oil crisis
Formation of OPEC
4. Prominent political issue of closures
Powerful political lobby
Vision of BSC
- To become a market leader in European Steel Industry before 2020.
Mission of BSC
- To introduce latest steel technology consistent with customers’ interest in quality and price before 2020.
Corporate objectives
- To increase market share from existing 25% to 35% at the cost of not exceeding 75% as against existing
85% of sales before 2008 consistent with evolving technology and social responsibility.
Analysis of Stakeholders
Name of the stakeholders
Their expectation from the company
6
Power
1. Customer
Quality steel product with reasonable price.
Switching the loyalty to competitor.
2. Shareholders
Profits and appreciation in share price.
Voting rights.
3. Employees
Higher emoluments with better working conditions.
Low productivity.
4. Suppliers of raw material
Timely or prompt payment.
Stoppage of supplies.
5. Financiers
Liquidity and solvency.
Filing of bankruptcy.
6. Government
Tax revenue.
Enforcement.
7. Society
Environmental protection.
Consumer movement.
8. The Board of Director
Growth and development.
Change the top management.
9. CEO
High performance in all level.
Change the objective.
10. Competitors
Low performance.
Intensify the competition to BSC.
TOWS MATRIX
Internal
External
ternal
Strengths
1. The world most profitable steel company
2. Reduction in Labor cost
3. Continuos casting method
4. Rationalization of mgmt. Structure
Weaknesses
1. Over complicated costly plants
2. Closure of Scotland mills
3. Small equipment & higher rail charges
4. Higher usage of energy
7
Opportunities
1.
2.
3.
4.
Increased
urbanization
Production
quotas
Strong recovery
of world
demand
2bn
privatization
with favorable
exchange rate
Strengths and Opportunities (Max-Max)
Strategy
S1, O1 – Increase production of
specific product for
urbanization.
S1, O2 – Enter into new market in
Europe.
Product development
S1, O3 – Enter into new market outside Europe.
Cost leadership
S1, O4 – Implement privatization.
Cost leadership
S2, O1 – Introduce labor saving devices by
automation.
S2, O2 – Introduce well-developed production
plan and schedule to meet production
quotas.
S2, O3 – Identify new market outside Europe.
S2, O4 – Acquire new technology to reduce the
cost of labor.
S3, O1 – Increase capacity of continuous casting
to achieve economic price and
identify market for more value-added
products.
S3, O2 – Identify high value products in Europe.
S3, O3 – Introduce differentiated continuous
casting method to cater world
demand.
S3, O4 – Introduce latest technology for higher
value added products.
S4, O1 – Recruit high skilled labor to innovate
new products.
S4, O2 – Introduce TQM for products of
production Quotas.
S4, O3 – Introduce TQM to meet specific
demand of world.
S4, O4 – Create SBU (Strategic Business Unit)
to focus on privatization.
Weaknesses and Opportunities (Mini-Max)
Strategy
W1, O1 – Restructure the plant to meet the
requirements of world demand.
W1, O2 – Introduce just in time to meet demand of
production quotas.
W1, O3 – Introduce MRP II (manufacturing
resource plan – man, machine, material,
money, method) to operate world
demand.
W1, O4 – introduce hi tech in privatization.
Retrenchment
W2, O1 – Change the product MIX to Scotland
plant.
W2, O2 – Identify other product to meet production
quotas.
W2, O3 – Restructure Scotland mill to meet world
demand.
W2, O4 – Automate Scotland plant in 2bn
privatization.
W3, O1 – Introduce AMT to meet increased
urbanization.
W3, O2 – Identify alternative technology with
outsourcing transportation.
W3, O3 – Introduce logistic model to improve
supply chain.
W3, O4 – Introduce AMT
Product development
Cost leadership
Product development
W4, O1 – Identify production process to reduce the
usage of energy.
W4, O2 – Introduce energy saving device.
Differentiation
W4, O3 – Acquired energy saving device
Cost leadership
Differentiation
W4, O4 – Initial R&D to reduce energy cost
Cost leadership
Market development
Market development
Retrenchment
Market development
Cost leadership
Market development
Product development
Differentiation
Differentiation
Concentric
diversification
8
Cost leadership
Cost leadership
Differentiation
Product development
Retrenchment
Differentiation
Differentiation
Backward integration
Backward integration
Differentiation
Cost leadership
Internal
External
ternal
Threats
1.
2.
3.
4.
Strengths
1. The world most profitable steel company
2. Reduction in Labor cost
3. Continuous casting method
4. Rationalization of mgmt. Structure
Strengths and Threats (Max-Min)
Weaknesses
1. Over complicated costly plants
2. Closure of Scotland mills
3. Small equipment & higher rail charges
4. Higher usage of energy
Strategy
Weaknesses and Threats (Mini-Mini)
Strategy
Fierce
International
price
competition
Stock market
crash
Oil crisis
S1, T1 – Introduce higher value product
Differentiation
W1, T1 – Restructure plant layout with lean org.
Retrenchment
S1, T2 – Buy back the share
Retrenchment
Retrenchment
S1, T3 – To look at alternative source of energy
Backward integration
W1, T2 – Introduce flexible manufacturing system
(FMS) to meet fluctuation demands.
W1, T3 – Minimize wastage by recycling.
S1, T4 – Lobby for more government buying.
Joint venture
Retrenchment
Prominent
political issue
of closures
S1, T1 – Introduce target costing
Cost leadership
S2, T2 – Regulate the production to meet the
fluctuation of demands.
S2, T3 – Double up alternative source.
Retrenchment
W1, T4 – Rationalize production operation with
political support.
W2, T1 – Restructure Scotland plant to produce low
cost products.
W2, T2 – Privatize plant.
Backward integration
W2, T3 – outsource low cost energy.
Cost leadership
S2, T4 – To train the employee to do multiskilled job.
S3, T1 – Introduce innovative pricing or low
cost method.
S3, T2 – Introduce just in time to meet
fluctuation demands.
S3, T3 – To introduce hedging of oil supply.
Retrenchment
W2, T4 – Lobby for government contract for
Scotland plant.
W3, T1 – Introduce AMT (advanced manufacturing
technology) to meet price competition.
W3, T2 – Introduce AMT to meet fluctuation
demands
W3, T3 – Introduce energy saving equipment.
Joint venture
S3, T4 – Lobby with government to sponsor for
R&D project.
S4, T1 – Recruit top mgmt. With international
business background.
S4, T2 – Introduce TQM or diversify the
productions.
S4, T3 – introduce alternative source of energy.
Joint venture
W3, T4 – Introduce transportation and logistics
model with advance political support.
W4, T1 – Optimize usage of energy by introduced
technology to reduce cost.
W4, T2 – Introduce FMS
Backward integration
Backward integration
S4, T4 – lobbying with government.
Joint venture
W4, T3 - Introduce Six Sigma to explore alternative
source
W4, T4 – Lobby for lesser tariff of energy
Market penetration
Backward integration
Backward integration
Retrenchment
Differentiation
Backward integration
9
Cost leadership
Product development
Retrenchment
Differentiation
Differentiation
Cost leadership
Cost leadership
Retrenchment
Cost leadership
Frequency Distribution of Strategy
Strategy
Integration strategies
1. Forward integration
2. Backward integration
3. Horizontal integration
Intensive strategies
1. Market Penetration
2. Market Development
3. Product Development
Diversification Strategies
1. Concentric diversification
2. Conglomerate diversification
3. Horizontal diversification
Defensive Strategies
1. Joint Venture
2. Retrenchment
3. Divestiture
4. Liquidation
Generic Strategies
1. Cost Leadership
2. Differentiation
3. Focus
Frequency
Ranking
9
4
1
4
6
6
5
1
4
13
6
2
15
12
1
3
10
Ranking
1. Cost leadership
15
2. Retrenchment
13
3. Differentiation
12
4. Backward integration
9
5. Product development
6
6. Market development
4
7. Joint Venture
4
Implementing and Evaluating Strategy
Implementation
Strategic Planning does not end choosing a strategy alone. The next inevitable process is implementation.
Steps Implementation Process
1. Communication
Determine strategy and communicate measurable objectives for company as a whole.
2. Allocation
Allocate resources for strategic units and departments.
3. Tasks
Determine key managerial tasks.
4. Restructuring
Assign tasks to various parts of the organisation or restructure if necessary.
5. Delegation
Delegate authority and establish methods of coordination.
6. Policies
State policies or guidelines for action.
7. Goals
Clarify goals of various individual managers.
8. Performance
Operationalise ways to measure performance.
9. MIS
Build MIS to provide adequate and timely data for evaluation.
10. Rewards
Make provision for reward system reinforcing desired behaviour.
11. Styles
Develop managers talent and leadership styles of the organisation.
12. Control
Regularly ascertain the adequacy of control mechanisms.
13. Evaluation
Evaluate results, assess gaps and provide.
14. Information technology/information systems
Change and Resources Allocation
Management of Change
A change of strategy may normally involve allocation of resources to new uses. Every company is likely to face problems in the form of reluctance to change
from their employees. Managing change consists of the following tactical plans.
1. Information
Provide information to convince people of the need for change.
11
2. Reassurance
Reassure insecure groups.
3. Involvement
Widen the involvement of people in strategic choices.
4. Agreement
Implement strategy where there is an agreement.
5. Waiting
Wait until change is politically acceptable.
6. Bargaining
Pay and productive bargaining.
7. Conditions
Improve physical conditions of employment along with change.
8. Career
Introduce management and technical development and career development.
9. Job Specification
Clarify new job specifications by training.
10. Training
Training, retraining and development.
Action plan for strategies
Production
No
1
Cost Leadership Strategy
Acquire new technology to reduce the cost of
labor
Existing
Labor cost
2002
Budget
labor cost
2003
Capital budget
2003
2004
2005
Action plan for other areas
Repeat the above table pertaining to Marketing, Finance, HRD, R&D etc
Evaluation and Control
The evaluation process is closely related to control mechanisms. It consists of the following steps.
1. Establishment
Establish performance targets, standards and tolerance limits for the objectives, strategy and implementation plans.
2. Measurement
Measure the actual performance against the targets or standards.
3. Deviation
Analyse the deviations of actual performance from targets or standard to find out whether deviations are favourable or unfavourable.
4. Correction
Take corrective action for specific deviation and execute modification if any are necessary and / or feasible.
5. Prevention
Take preventive action for the occurrence of (unfavourable deviation) similar cases in the future.
6. Motivation
Motivate the impressive performance by incentives and rewards.
12
Primary response
Production
Manager