Subject: Strategic Management
Code: MGT 4802
Term Paper on The Steel Industry in Bangladesh:
A Strategic Management Coliseum
Submitted By
Group E
Yeahyea Khan (B1506024)
Fuhad Ahmed (B1506025)
Sajeed Mahmud Mahee (B1506045)
Izbath Tarik (B1506061)
Abdul Gaffar Sadi (B1506148)
Submitted To
Major General (Retired) Prof. Alauddin M A Wadud, BP
Date of Submission: 21 October, 2018
Letter of Transmittal
21 October 2018
Major General (Retired) Prof. Alauddin M A Wadud, BP
Bangladesh University of Professionals
Subject: Submission of term paper on “The Steel Industry in Bangladesh: A Strategic Management
Coliseum”
Dear Sir,
Here is the term paper that we, Group E of BUP Inc., are assigned on the topic as per your request. The
assignment has been completed by the knowledge that we have gathered from the course “Strategic
Management”
We have tried our level best to complete this report meaningfully and correctly, as much as possible. We would be
happy if you read the report carefully and we will be trying to answer all the questions that you have about the report.
If you need any assistance in interpreting this term paper, please contact us without any kind of hesitation.
Thanking you.
Yours obediently,
Yeahyea Khan (B1506024)
Fuhad Ahmed (B1506025)
Sajeed Mahmud Mahee (B1506045)
Izbath Tarik (B1506061)
Abdul Gaffar Sadi (B1506148)
i|Page
Abstract
The purpose of this report is to justify the effectiveness of strategies of a successful firm in Bangladesh’s
steel industry based on respective industry analysis and evaluation of own and competitors’ strategies. To
major developed nations, the steel industry is often considered as an indicator of economic progress,
because of the critical role played by steel in infrastructural and overall economic development. The steel
industry in Bangladesh is currently experiencing an upsurge in demand due to spending on infrastructure
projects. But steel industry of Bangladesh is becoming increasingly more monopolistic as among over 400
active firms in the industry, 5 companies serve more than half of the demand. Driving forces of this
industry are Bangladesh's dense population, enhancing life expectancy rate, rapid construction of
economic zones, large investments in infrastructures, booming agriculture, thriving garment sector, and
increase in energy supply with the import of liquefied natural gas. For case study of a successful firm in
steel industry of Bangladesh, Bangladesh Steel Re-Rolling Mills Ltd. (BSRM) has been chosen mainly
because it is the market leader with great competitive skills. For strategy evaluation, required tools have
been used such as: environment review, SWOT Analysis, analyzing distribution, pricing and marketing
techniques, value chain analysis, firm’s strategy to fit specific industry and company situations etc. After
evaluating BSRM’s and its main competitors’ strategies, it is found that competitors cannot take over
BSRM because it is superior to them in many key aspects. The recommendation part provides several
suggestions for mitigating threat of competitors and terminating current strategic issues based on SWOT
analysis of BSRM.
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Acknowledgements
We would like to extend thanks to the many people whose generous contribution is present in this report.
Special mention goes to our enthusiastic faculty, Major General (Retired) Professor. Alauddin M A
Wadud, BP. Our class taken by him has been an amazing experience and we thank him wholeheartedly,
not only for his tremendous academic support, but also for giving us so many wonderful opportunities for
enhancing expertise on real world scenario.
Special mention goes to the authors of books related to steel industry and BSRM. I am also hugely
appreciative to reporters and columnists of leading newspapers whose hard work has been a great
instructor for us.
Finally, but by no means least, thanks go to our family for almost unbelievable support. They are the most
important people in our world and we dedicate this study to them.
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Table of Contents
No
TOPIC
Page
1.0 Overview of Steel Industry: Global Perspective
01
1.1 Overview of Industry
01
1.2 Current Scenario
01
1.3 Global Steel Industry in Figures
02
2.0 Analysis of Steel Industry in Bangladesh
05
2.1 Steel Industry’s Dominant Economic Features
05
2.2 Competitiveness in Industry and Strength of Each
08
Competitive Forces
2.3 Driving Forces of Steel Industry
09
2.4 Competitive Position of Major Companies
10
2.5 Key Success Factors of Steel Industry
11
3.0 Strategy Evaluation of a Successful Firm in the Industry
11
3.1 Selected Firm for Strategy Evaluation
11
3.2 Company Overview
13
3.3 Environment Review
15
3.4 SWOT Analysis
16
3.5 Strategy to Achieve Objective
18
3.6 Distribution and Pricing Strategy
20
3.7 Marketing Strategy
21
3.8 Value Chain
25
3.9 Strategy to Fit Specific Industry and Company Situations
28
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4.0 Strategy Evaluation of Competitors
31
4.1 Biggest Competitors of BSRM
31
4.2 Strategy of AKSL
31
4.3 Strategy of KSRM
32
5.0 Why Rivals Have Been Unable to Duplicate BSRM’s Success
33
6.0 Conclusion
35
7.0 Recommendations
36
8.0 Reference
38
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1. Overview of Steel Industry: Global
Perspective
1.1 Overview of Industry
Steel is an alloy of iron and other elements, primarily carbon, that is widely used in construction and other
applications because of its high tensile strength and low cost. The history of the modern steel industry
began in the late 1850s, but since then, steel has been basic to the world's industrial economy.
1.2 Current Scenario
In 2016, the downward trend of the industry in output and consumption that had been continuing from
2015 gave place to a trend featuring greater stability, with industry indicators seeing a change of less than
2 percent:

Steel output grew by 0.6 percent up to 1,630 million tonnes

Steel consumption grew by 1.3 percent up to 1,600 million tonnes
After the industry stabilized in 2016, global output and consumption of steel continued to grow in 2017:

Steel output increased by 5.3 percent at 1,691 million tonnes

Steel consumption increased by 3.6 percent at 1,657 million tonnes
The increase in output was partly due to China increasing production to a higher-than-expected level
during the last six weeks of 2017. However, forecasts for 2018 indicate that global steel output will
increase by a moderate 0.5 percent and global steel consumption will go up 1.3 percent.
1|Page
1.3 Global Steel Industry in Figures
Source: World Steel Association
Source: World Steel Association
2|Page
Source: World Steel Association
3|Page
Source: World Steel Association
4|Page
2. Analysis of Steel Industry in Bangladesh
2.1 Steel Industry’s Dominant Economic Features
Market Size
With an estimated market size of 300 Billion BDT, the steel industry in Bangladesh is currently
experiencing an upsurge in demand. This growth is driven mostly by government spending on
infrastructure projects, which accounts for 40% of steel consumption in Bangladesh.
Scope of Competitive Rivalry
Steel industry of Bangladesh is becoming increasingly more monopolistic. Among over 400 active firms
in the industry, 5 companies serve more than half of the demand.
Market Growth Rate
Steel grew about 15 percent year-on-year in 2017. Domestic steel production, which was almost stagnant
at 25-30 lakh tonnes a year between 2008 and 2014, rose in later years, leading millers to increase
production capacity and go for backward integration. With about 70 lakh tonnes of capacity, the mills
produced 50-55 lakh tonnes of steel in 2017, up from 40-45 lakh tonnes a year ago.
Number of Rivals and Their Relative Sizes
Some of the renowned companies in this sector are:

Bangladesh Steel Re-rolling Mills (BSRM)

KSRM Steel Plant Ltd

GPH Ispat

Baizid Steel Industries Ltd. (BSIL)

Ratanpur Steel Re-rolling Mills Ltd (RSRM)

S Alam Steel Mills

Abul Khair Steel Ltd. (AKSL)

Anwar Ispat
5|Page

HKG Steel Mills Ltd

Rahim Steel Mills Ltd

Seema Steel Re-rolling Mills Ltd

Alam Cold Rolled Steel Ltd.

Confidence Steel Ltd.

Islam Steel Mills Ltd.

Meghna Group of Industries

Bashundhara Steels
Market Share (%) in Steel Industry
26%
35%
20%
3%
3%
4%
BSRM
AKSL
KSRM
GPH Ispat
9%
Apollo Ispat
RSRM
Rest of the Companies
Figure: Market Share of Firms in Steel Industry
BSRM, the market leader with 26% market share, currently produces around 0.6 million tonnes of steel
per year, with plans to scale up production capacity by 0.3-0.4 million tonnes a year. As BSRM and other
top firms such as AKS, GPH and Apollo expand their capacity and improve their technological
capabilities, the industry is becoming increasingly more monopolistic.
6|Page
Number of Buyers and Their Relative Sizes

Domestic
Customers of steel industry are contractors, property developers, export processing zones, road and bridge
construction companies, Real Estate sector, ship building companies etc. The consumption of seven
million tonnes of steel every year has made Bangladesh a huge potential market for both long and flat
steel products.
Per capita steel consumption in Bangladesh has grown to 45 kg in 2017 from 25 kg in 2012. The amount
of steel consumption is an important ingredient to understanding the economic growth of a country. Per
capita steel consumption is much higher in developed countries: 400 kg in South Korea, 600 kg in the
USA and 1,000 kg in Japan—compared to Bangladesh.

International
As the global steel industry continues to transition to a new phase, the local sector has the prime
opportunity to not only grow to satisfy the domestic demand but also secure position in the emerging
export markets of tomorrow.
Figure: Major Export Destinations for Steel Industry
Currently, Bangladesh exports 57.9 Million USD worth of iron and steel products and raw materials. For
exporting iron and steel products, Bangladesh’s main destination is Mali. For raw iron and steel, our main
destination is Saint Barthelemy.
7|Page
Impact of Economies of Scale
Benefits of economies of scale are derived in the form of lower costs, Research & Development expenses
and better bargaining power while sourcing raw materials. It may be noted that those steel companies,
which are integrated, have their own mines for key raw materials such as iron ore and coal and this protects
them for the potential threat for new entrants to a significant extent.
2.2 Competitiveness in Industry and Strength of Each Competitive
Forces
Porter’s five forces model is used for examining steel industry and strategic position of companies within
the industry.
Threat of New Entrants
Threat of new entrants is medium due to

High capital requirement

High scale economies

Favorable government policy
 Low product differentiation as it does not fall into the magnificence or specialty goods
Bargaining Power of Suppliers
The bargaining power of suppliers is low due to

Low cost of switching suppliers

Firm’s effort to produce raw materials by their own
Bargaining Power of Buyers
The bargaining power of buyers is moderate due to

The products are used in the wide range of industries such as gas, oil and automobile, shipping,
consumer power and durables etc. But the number of reliable sellers is comparatively low
8|Page

The products are more or less standardized hence the prices are competitive
Availability of Substitutes
It is medium to low. Due to

Although usage of aluminium has been rising continuously in the automobile and consumer durables
sectors, it still does not pose any significant threat to steel as the latter cannot be replaced completely
and the cost differential is also very high
Competitive Rivalry
Competitive rivalry is low due to

Among over 400 active firms in the industry, the top 5 companies serve more than half of the demand
2.3 Driving Forces of Steel Industry
Many events affect steel industry powerfully enough to qualify as driving forces:

Bangladesh's dense population

Enhancing life expectancy rate

Rapid construction of economic zones

Large investments in infrastructures

Booming agriculture

Thriving garment sector

Increase in energy supply with the import of liquefied natural gas
9|Page
2.4 Competitive Position of Major Companies
Strategic group maps assess competitive positions of rival firms. A strategic group consists of those rival
firms with similar competitive approaches and positions in the market.
Strategic Group Map in Steel Industry
Figure: Strategic Group Map in Steel Industry
The strategic group map is formed by considering market share of firms in Bangladesh and earning from
export as two variables. Different steel producing companies are placed here according to these two
variables.
Both BSRM (Bangladesh Steel Re-rolling Mills) and AKSL (Abul Khair Steel Ltd.) dominate both
domestic and international market among Bangladeshi steel producers. KSRM (Kabir Steel Re-rolling
Mills) and GPH Ispat Ltd. have decent domestic market share but in terms of export, they are behind the
major players. On the other hand companies like Apollo, S Alam and RSRM (Ratanpur Steel Re-rolling
Mills Ltd.) are behind GPH Ispat and KSRM in terms of domestic market. But they are doing better in
international market. Rest of the companies are way behind in terms of both domestic market share and
domestic earnings.
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2.5 Key Success Factors of Steel Industry
An industry’s key success factors (KSFs) are those things that most affect industry members’ ability to
prosper in the market place. In case of steel industry of Bangladesh, such factors are following:

Access to raw materials at low costs

Proximity to inputs and market

Financial structure

Diverse product mix and proportion of value-added products

Ability to export
3. Strategy Evaluation of a Successful Firm
in the Industry
3.1 Selected Firm for Strategy Evaluation
Among all steel producers in Bangladesh, BSRM (Bangladesh Steel Re-rolling Mills) has been selected
for strategy evaluation. The evidence that this company has been outstandingly successful is stated below:
Strategic Performance Indicator
Indicator
Sales Growth
BSRM
AKSL
GPH
Apollo KSRM
19.65% 20.54% 13.16%
5.35%
18.29%
Net Profit Margin
6.44%
5.58%
5.01%
Return on Equity
25.63% 20.83% 21.49% 16.10% 18.70%
5.73%
5.97%
*For Financial Year 2016-17
*Highest value for each indicator is highlighted with yellow color
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BSRM is leading in terms of net profit margin and return on equity among the big players of steel industry.
In terms of sales growth, it is just behind Abul Khair Steel by narrow margin.
Market Leader with Great Competitive Skills
BSRM is the market leader in the steel Market of Bangladesh. It occupies 26% of the total steel market of
the country. It has been working consistently in steel production sector. Therefore, it has achieved great
competitive skills to face strong competition.
Efficient Project Implementation
The Company has a proven track record in implementing significant projects, with cost reduction plans
and the expansion of its major production facilities, on schedule and within budget. A large number of
mega projects, both in private and public sectors were constructed by using MS (Mild Steel) Rods
produced by Bangladesh Steel Re-Rolling Mills Limited. A few of those are as follows:

Meghna Bridge

Dhaka City Storm Water Drainage Project

Shah Amanat International Airport, Chittagong

Apollo Hospital Complex

North-South University

Saidabad Water Treatment Plant of Dhaka WASA

Army Heavy Workshop Complex in Rajendrapur Cantonment

Barapukuria Coal Mine Project in Dinajpur

Karnafully Fertilizer Factory Co. Ltd. (KAFCO)

Lafarge-Surma Cement Factory in Sylhet
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3.2 Company Overview
Bangladesh Steel Re-Rolling Mills Ltd. (BSRM), a unit of well-known H. AKBERALI Group of
Industries, having more than 60 years’ experience exclusively in steel production, is fully automatic steel
re-rolling mill in the Bangladesh. The mill was imported from U.K. and commissioned at the sea port of
Chittagong. The initiator of the group was late Mr. Akberali A. Africawala and is now managed by his
sons & nephews.
History
 1952: The BSRM saga began with the first steel re-rolling mills to emerge in the then East Bengal

1984: Introduced high strength cold twisted steel bars to the construction industry

1987: Introduced high strength deformed reinforcing steel bars conforming to ASTM 615 Grade 60
for the construction industry

1996: Commissioned the then largest billet making plant in the country – Meghna Engineering Works
Limited, now known as Steel Melting Works (SMW) unit of Bangladesh Steel Re-rolling Mills Ltd

2008: BSRM Steels Limited commenced production of internationally recognized Grade 500 steel
bars branded as “Xtreme500W” conforming to ISO 6935-2

2010: BSRM Iron and Steel Co. Ltd., largest billet making plant in the country, started commercial
production on June 1

2015: Enhanced capacity of BSRM Steels Limited from 600,000 MT to 700,000 MT per annum

2016: Launch of BSRM Ultima, the steel for Special Moment Resisting Frames (SMRF) conforming
to BDS ISO 6935-2 Grade 420DWR of 2016, ASTM A 706-15 Grade 60 and BSRM Centura, Fusion
Bonded Epoxy Coated (FBEC) rebar conforms to ASTM A 775 which resists chloride induced
corrosion and prevents rusting
Current State of Operation
Company slogan is “Be Safe”. The production capacity is 20 metric ton per hour. The utilization rate is
near about 75%. Machineries have been imported from England. BSRM is going to set up a different steel
factory at Fouzdarhat in Chittagong to meet the increasing demand. The brand name of their products is
BSRM. It is an ISO certified manufacturing concern. Their annual promotional budget is Tk 15000000.
The prices range between Tk 37500 to TK 39500. The margin per MT is Tk 2300. The revenue is Tk
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11000000 per year. They are planning to set up a coal based 150 MW merchant power plant to meet the
internal demand as well as to supply to the national grid.
Vision
Vision of BSRM is to:

Maintain leadership position in the steel industry by producing the best quality steel products and
continuously enhancing customer satisfaction

Be an employer of choice, on focus on nursery and talent and developing future leaders of the
organization

Protect the interest of their shareholders throw sustainable growth and value correction

Preserve the trust of all of their stakeholders by adopting ethical business practices
Mission
The Mission of the Company is to make life of the people secured and safe by providing quality products
at a reasonable price and to be a partner in the nation building activities
Objectives

To delight external and internal customers at every stage of interaction with them by really
understanding their needs, offering them own most excellent products and services

To ensure steady improvement in the quality of products and services, efficiency of processes and
profitability of business

To set benchmarks through their products, processes and people
Shared Values
 Sustainable Growth: Steady improvement in every aspect of business through innovation and
adopting best practices

Quality: Creating products and services valued by the customers by investing in technologies and
developing highly capable workforce

Reliability: Be the preferred business associate of customers and suppliers by offering quality
products
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
Leadership: Constantly moving ahead of competition by differentiating products and innovating new
processes
Major Products
BSRM is country’s first producer of 500 MPa yield strength re-bar, branded and marketed as Xtreme
500W, proving BSRM’s quest for continuous innovation as nation building partner. Beside re-bar
production, BSRM rolls and markets sectional steels such as angles and channels and ribbed wire which
are manufactured in separate plants of BSRM. The bars, specially Xtreme 500 W and sectional products
ranging in various sizes conforming to ISO 6935-2:2015 and ISO 630-3:2012(E) respectively which are
the lawful standard of the country. Major products are:

Xtreme

Maxima

Ultrima

Xtrong

Centura
3.3 Environment Review
External or Macro-environment

Steel business is an investment precise business sector. Already BSRM has invested large amount of
capital in steel sector

Steel has very small barriers in terms of product differentiation as it does not fall into the magnificence
or specialty goods and thus does not have any bulky price variation. However, BSRM still enjoys a
premium for their products because of its quality and its brand value

All the major domestic competitors like Abul Khair, KSRM, Rahim Steel Ltd., Apollo Ispat have
announced massive expansion plans recently

As the global steel industry continues to transition to a new phase, the local sector has the prime
opportunity to not only grow to satisfy the domestic demand but also secure position in the emerging
export markets of tomorrow
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
Steel has been replaced in some applications: large diameter water pipes (RCC pipes), railway sleepers
(RCC sleepers), small diameter pipes (PVC pipes), and domestic water tanks (PVC tanks)
Internal or Micro-environment

BSRM management is the most experienced and capable management in the steel industry sector

BSRM has well established brand name and brand value in Bangladeshi market. They have strong
media and communication division which uses effective and strong advertising techniques to reach to
the people

Delivery and distribution is one of the most important factors to win and retain customer confidence.
For smooth and prompt delivery, BSRM has already engaged several hundred dealers all over the
country. It has sales and delivery depots in Dhaka, Sylhet, Bogra, Khulna, Moulvibazar and Comilla

BSRM provides best quality products like Deformed Bar “Xtreme 500W” Yield Strength 72,500 psi
(min), Grade-75 Wires, Angles, Channels, Spring Steel Flats, Low Carbon Wire Rods, etc. Company
also provides good services for his customers such as free product delivery service

In recognition of the recent rapid growth of the company, the present IT facilities are in the process of
modification to meet the requirements of all the operating units and functional departments of the
company.
3.4 SWOT Analysis
Figure: SWOT Analysis of BSRM
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Strength

Market Leader of a Monopolistic Industry: BSRM is the number one steel brand in Bangladesh.
They hold 26% of market share of the total steel market in Bangladesh. Among over 400 active firms
in the industry, 5 companies own more than fifty percent market share. BSRM owns highest market
share among those 5 companies

Highly Skilled Employees: The employees and labors of BSRM are highly skilled

Widespread Distribution Network: Distribution of BSRM is very strong. They have 600 dealers and
11 offices all over Bangladesh

Successful Implementation of Government Project: Successfully implementing government
projects boosts BSRM’s credibility and image
Weakness

High Price: Price asked by BSRM for its products are higher than that of other steel companies of
Bangladesh

Dependency on Supplier: Though BSRM has own sources of materials, BSRM is still dependent on
suppliers for some raw materials.

Strict Working Condition of Ship Breaking Yards: Scrap, which is a raw material of steel, is
collected through the process of ship breaking. Workers employed by BSRM for ship breaking are not
happy with the salary, toxic working environment and working hours. This issue has built negative
perception for the brand
Opportunity

Huge Scope to Increase Market Share Through Acquisition: BSRM can acquire struggling small
manufacturers to serve the growing demand

New Types of Steel Products: Due to its overall capability, BSRM has great potential to introduce
new steel products

International Scope: As BSRM is internationally renowned company. so it has a strong possibility
to export steel products in India, Nepal, Myanmar, South Korea, Vietnam, japan etc.

Booming Bangladeshi Economy: Booming economy of Bangladesh is an opportunity for BSRM as
it is increasing the number of construction projects
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Threat

New competitors: In recent days there are some new companies have started their steel production,
and they are becoming stronger. For example: AKS steels, KSRM etc. are doing well in steel industry
and planning to expand capacity

Probability to Lose Skilled Employees: The competitors are trying to take away all the skilled
employees from BSRM

High Commissions Given by Competitors: The competitors are giving more commissions to the
dealers and suppliers

Power Crisis: Electricity and gas are significant inputs and considered as lifeline for the steel industry.
But currently Bangladesh is facing severe power crisis
3.5 Strategy to Achieve Objective
BSRM has developed its strategy for the future growth of the company. By applying the market oriented
strategy BSRM tries to attract more customers. At present, BSRM is continuously launching new products
in the market. The company already booked many construction material supply orders from the corporate
customers. The company has already appointed more than 100 dealers and agents all over the country to
supply their products and services to their customers. By providing high quality products and customer
services BSRM try to increase their sales and profits. This is the current business strategy of BSRM.
Corporate Strategy
In terms of corporate level strategic choices, BSRM continues being only in the steel industry as there is
still strong scope for rising demand. In terms of value creation activities, the company is trying to increase
their product portfolio for construction steel. In addition certain steel products such as span, guarder, etc.
are being imported from China and other countries, so BSRM is planning to venture into producing such
products as well.
To strengthen the competitive advantage of the company and to minimize the dependency on obtaining
raw materials, BSRM Group has taken initiative to establish the largest billet making plant in Bangladesh
under the name of BSRM Iron & Steel Co Ltd (BISCO). BSRM decided to take over the ownership of
BISCO through acquisition of 95% of its entire share holdings from their existing shareholders.
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Business Strategy
In terms of business level strategy, BSRM Steel Ltd. is following broad differentiation strategy with
standardization in market segmentation. BSRM, being a market leader, always tries to focus on quality
features of the steel and steel bar products only. Currently, they are charging relatively higher prices. This
has been as a result of better brand image and reliability for best quality.
BSRM is also focusing on innovating the process and products to best serve their customers. The major
portion of the customer base prefers BSRM over other manufacturer due to perception of quality and
reliability. To add more products to their portfolio, they are investing more in proper market research and
Research and Development.
Functional Strategy
BSRM to trying to be more efficient as it produces similar products just like their competitor and being
able to lower cost structure shall effect their efficiency immensely. BSRM is working on the following
value creation functions in order to improve efficiency:

Infrastructure

Production

Material Management

Information System

Human Resources
Operational Strategy
Production plant managers, lower level supervisors craft operating strategies based on their operating
objectives. This strategies are applicable for day-to-day activities. BSRM has recently appointed world
famous consulting firm ‘Price Waterhouse Coopers’ to evaluate and reorganize its managerial &
organizational setup. Thus as the senior managers are professionals having relevant job and academic
background and associated by the reorganization made by ‘Price Water house Coopers’, operational
strategies are carefully chosen and implemented.
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3.6 Distribution and Pricing Strategy
Distribution Strategy
BSRM has its own distribution channel all over the country. Moreover, it is continuously expanding its
distribution network. It has around 449 authorized dealers to sell its products to the end-users. Apart from
this, they have own sales and customer service offices in 8 districts including Dhaka, Comilla, Sylhet,
Bogra, Khulna, Barishal, Rangpur and Rajshahi to ensure prompt supply of its products to the customers
along with dedicated & quality services. Since it is spread out in so many areas, there are special
geographical advantages. It can reach out to potential customers all over the country, thus increasing
chances of sales compared to its competitors, who have not managed to reach out their services in the
similar way. Same channel is used for all BSRM products. Following figure shown the process of sales &
Distribution of BSRM products:
Figure: Process of Sales & Distribution of BSRM Products
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Pricing Strategy
BSRM uses the strategy of price skimming: setting a higher price than competitors’. They are successful
in this strategy because customers find their products reliable for best quality. Besides, they have strong
brand value to justify this strategy.
3.7 Marketing Strategy
BSRM has well established brand name and brand value in Bangladeshi market. They have strong media
and communication division which uses effective and strong advertising techniques to reach to the people.
Segmentation


Age
Criterion
Age
Youth
Younger than 18
Getting Started
18-35
Builders
35-50
Accumulators
50-60
Preservers
Over 60
Income (BDT)
Criterion
Below 25000
25000-40000
40000-60000
60000-80000
80000-100000
Above 100000
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
Occupation
Criterion
Students
Service Holders
Housewives
Engineers
Developers
Architects
Retired Personnels

Geography
Criterion
Dhaka
Khulna
Chittagong
Sylhet
Barisal
Rajshahi
Rangpur
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Target Market


Age
Criterion
Age
Builders
35-50
Accumulators
50-60
Income (BDT)
Criterion
80000-100000
Above 100000

Occupation
Criterion
Service Holders
Engineers
Developers
Architects
Retired Personnels

Geography
Criterion
Dhaka
Khulna
Chittagong
Sylhet
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Differentiation
Steel has very small barriers in terms of product differentiation as it does not fall into the magnificence or
specialty goods and thus does not have any bulky price variation. For the next 5 years, BSRM is focusing
on broad differentiation strategy improving their products in terms of quality.
Promotion
Steel has very small BSRM has equal concentration on their promotional campaign as well. They ensure
proper communication by creating the market and their media of advertisement.
The market is created by:

Providing advertisement

Providing agentship

Giving dealership

Through the wholesalers and retailers of the product
Media for advertisement:

Publication

Satellite channels

Neon signboard

Billboard

Newspaper ads
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3.8 Value Chain
Figure: Value Chain of BSRM
Primary Activities
Primary activities of BSRM are those activities, directly involved in the conversion process of basic raw
materials into final output/products including the receipt of basic raw materials from suppliers and
marketing of output/ products to customers. They are grouped into two types of activities related to product
and market. Product related activities are the activities, performed by the organization to add value to the
product and services itself. Market related activities are the activities, performed by the organization to
transfer the finished product or services to the customers.
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
Inbound Logistics: These include receiving the basic raw materials required for the steel making
process, stacking and reclaiming the materials, and distribution of materials to various departments
etc.

Operations/Production Management: These include raw material handling and processing
(receiving and handling of major raw materials like coking coal, iron ore, fluxes, boiler coal etc.,
crushing, lump ore crushing and screening), making of coke, sinter, lime and calcined dolomite, pitch
bonded magnesia bricks, production of iron, steel, wire rods, TMT bars, rounds, squares, structurals
(angles, channels and beams), blooms, billets etc. and preparation and repair of rolls.
 Outbound Logistics: These include planning and despatch, distribution management, transportation,
warehousing, and order fulfilment.

Marketing and Sales: These include product management, price management, placement
(distribution) management, promotion management, domestic sales (project sales, actual user sales,
retail sales), export sales, sale of special steels, by products sales, planning and despatch, pricing and
policy, contracts, customer relations management etc.

Service after Sales: These include commercial terms, quality aspects, delivery aspects, pre/post sales
contact, and complaint settlement procedure.
Support Activities
Support activities are those activities, not directly involved in the conversion process but support the
primary activities in their functions. These activities are classified as:

Materials Management: It includes vendor development, purchase management, logistics
management and store management.

Technology Development: These include quality assurance and technology development (QA&TD),
research and development (R&D), processes automation etc.

Human Resource Management: These include corporate coordination (manpower planning,
recruitment, executive establishment, rules & policies, welfare, parliament cell), Human resources non works (human resource development, non works personnel, mines, industrial relations, SC&ST
cell, sports), Human resources - plant (plant personnel), Management services (quality circles,
suggestion schemes, awards, incentive schemes), Corporate social responsibility, Medical, Town
administration, Administration (general administration, law, hospitality, RTI, Liaison Office, Agro
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Forestry), Human Resources Development (training, management development, Hindi cell, HR
information systems).

Services Management: These include corporate offices (CMD and Directors’ offices), corporate
strategic management, corporate communications, company affairs, information technology (process
control, materials management system, marketing system, payroll system and financial accounting
system).

Finance Management: These include treasury management, budgeting, costing, corporate accounts,
raw material accounts, sales finance, operations & general accounts and works accounts, central excise
and insurance, pay sections (payments to present employees i.e. employees on rolls and payments to
retired and expired employees), stores accounts, purchase bills (payments to indigenous and imported
materials), project accounts, mines accounts, internal audit and stock verification.

Projects Management: These include the activities of Design & Engineering for the existing plant
and the activities of Design & Engineering, Project Contracts, Construction and Project Monitoring
for plant expansion.
Margin
BSRM incurs certain costs for creating value for its final products/services. The margin is the difference
between the sum of all the values created at the activities in the value chain and the total cost incurred by
the organization to create such values. BSRM adds required markup to the cost to implement its price
skimming strategy: setting a higher price than competitors’.
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3.9 Strategy to Fit Specific Industry and Company Situations
Emergence of Competitors
Recently, many companies started production of high grade MS (Mild Steel) Rod & other MS products
and selling thereof. Among them 2/3 companies are emerging as giant in respect of investment in this
sector and others are in the process to increase their production capacity. Expected high competition in
the markets where BSRM sells its products may erode its market share and may result in reduced prices
and thereby may negatively affect BSRM’s revenues and profitability.

Strategy: BSRM is clearly aware of this risk and pays careful attention to manage this risk. It has been
working consistently in steel sector since 1952 and gained very high skills. It has the ability to face
strong competition by ensuring their marketing in the right track and strong supply chain relationships
for competitive input costs. Moreover, to strengthen the competitive advantage, the company has
undertaken the expansion of its capacity from 180,000 MT to 450,000 MT.
Decrease in Demand
Decrease in demand of the products would harm the performance of the company. Like other companies,
BSRM may face strong competition which might take place even after taking the best quality control
measures.

Strategy: BSRM is the strongest brand and market leader in the local industry. Present market share
of the company in quality steel production is around 26%. There is a good possibility that BSRM
group can retain its dominating position in the market. Due to its strong branding and rapidly
increasing demand in the country, where industrial development, living standard and rate of
infrastructural development increased over the period, there would always be a high demand for
quality steel products. BSRM has always been aware of the competitive situation in the market and
accordingly has developed a sound and effective marketing policy to share knowledge about their
products with design engineers, thus creating more awareness in the minds of the customers.
Moreover, with expanded capacity of the company along with the increased production of billet by
the new plant, they will be able to enhance their market share and grip the control of this sector for
long time to come.
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Potential Change in Global or National Policies
Changes in the existing global or national policies can have either positive or negative impacts on the
Company. Any scarcity or price hike of raw materials due to changes in policy in the international market
might hamper the production and profitability. Furthermore, the performance of the company may also be
hampered due to unavoidable circumstances like political turmoil both in Bangladesh and worldwide.

Strategy: Any change in the global and national policy will affect the industry as a whole. Financial
and operational strength of the Company have reached a very high level by now and the company is
capable of handling reasonable threats. Moreover, the Company has adequate system and procedures
in place to take care of any of such events.
Supply of Raw Materials
The main raw material is billet for manufacturing MS (Mild Steel) products while Scrap is the basic raw
materials for billets. There is shortage of billets and scrap in the local market and large quantity of raw
materials is being imported every year to meet the industrial demand. High cost of imported billets and
unavailability due to protection by exporting countries may cause increase in billet price. Volatility in the
prices of raw materials, including limitations on or disruptions in the supply of raw materials, could
adversely affect BSRM’s profitability.

Strategy: Presently BSRM’s billet requirement largely comes from its own backward linked
billet-making unit. BSRM is always focused on seeking proprietary access to raw materials in order
to optimize its costs and to achieve a higher level of self-sufficiency in raw materials, which would
enable it to better respond to cyclical fluctuations in demand and reduce volatility in production costs.
Therefore, the group had taken initiative for setting up a new billet plant for reducing production costs
and import dependency in addition to the reliable backward integration within the Group concerns.
Besides, the substantially large difference between the scrap prices and billet price creates a situation
where locally manufactured billet is much cheaper than the landed cost of imported billet. With the
establishment of the new billet making plant, BSRM Group is able to attain efficiency in terms of time
and cost, assured quality of raw materials, strengthened backward integration and less dependency on
import. Therefore, risk attached to import of raw materials will be minimum.
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Non-Availability of Electricity and Gas Supply
Energy is a significant input and considered as lifeline for the steel industry. Bangladesh is facing severe
power crisis. Presently BSRM Group is one of the leading power consumers of the country, which will
increase significantly after implementation of the ongoing expansion of BSRM and new billet plant. In
the past the group did not face any severe crisis of power, but government may fail to supply necessary
power and gas which will disrupt the production.

Strategy: Bangladesh Power Development Board (BPDB) provides power supply for BSRM group.
Currently total connected load for BSRM group is 60 MW from which four group concerns including
BSRM is receiving power. A 132/33 KV substation was installed by BSRM at Kulshi Sub Station,
Chittagong for power supply to its four sister concerns through 33 KV transmission line. This
substation is providing power by one dedicated uninterrupted power through an 11 KV transmission
line from its Melting unit. After BMRE a 33 KV transmission line for the new machineries will be
taken and will be step down as 33/11 KVA transformer by BSRM. Therefore, demand of power for
the ongoing expansion will be met.
In addition to the above, BSRM Group has plan to establish a coal-based merchant power plant to
generate 150MW power and a company namely Chittagong Power Company Limited (CPCL) has
been incorporated. EOI has been submitted to BPDB and approval for setting up such a power project
has also been obtained. The entire generated power will be initially transmitted to National Grid and
in return all the projects of BSRM Group will get uninterrupted power.
Existing connected load of gas for the mill is adequate for present operation. For the proposed
expansion the company has already applied for 1,898,832 m3/month load of gas. Notable strength for
the new project is the dual fired furnace. HSFO (High Sulfur Furnace Oil)/ Light Diesel Oil can be
used for new machineries in case of gas crisis.
Unfavorable Fluctuation in Exchange Rate
The company always faces high degree of foreign exchange rate fluctuation risk as the company imports
machineries, raw materials and other spares against payment of foreign currency. Unfavorable volatility
in exchange rates may affect the profitability of the company.
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
Strategy: The Management of the company is very much aware of the risk and it has policy for
continuous monitoring of the fluctuations on day to day basis so as to seize the opportunity from any
favorable movement in the currencies (normally US Dollars and BDT) whilst avoiding any unexpected
movements in those currencies. However to reduce the effect due to the rate fluctuation, BSRM has
already taken steps to increase their billet (raw material ) production capacity, which will help them
to significantly reduce their dependency on foreign currency as well as imports.
4. Strategy Evaluation of Competitors
4.1 Biggest Competitors of BSRM
After BSRM (26%), Abul Khair Steel Ltd. has highest market share (20%). Among the rest of the
companies, KSRM is the only company with more than 10% market share. Besides, it is working on its
capacity expansion. So AKSL and KSRM poses great threat for BSRM.
4.2 Strategy of AKSL

The Company has successfully accessed the market till date and is working on offering new and better
quality products at competitive terms. Moreover the group’s track record for operating in the low profit
and highly market sensitive environment establishes its capability

The company is aware of technological changes and has adopted new technology according to its
needs. Furthermore, routine and proper maintenance of the equipment carried out by the company
ensures longer service life for the existing equipment and facilities

The company is equipped with power backup and security system, which reduce operational risk.
Besides, the equipment has insurance coverage in order to get reasonable compensation for any
damages. Apart from these, routine security check and proper maintenance of the equipment also
reduce the operational risk

AKSL has strong presence all over the country. Experience of more than two decades in this sector is
considered the key of its marketing and distribution network
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
AKSL maintains good atmosphere at the work place and provides all sort of facilities to the workers
as per law of Bangladesh. The company has healthy remuneration and welfare policies for its human
resources, which reduces the risk of labor unrest. Again, to meet unique situations, company has
alternative ways to overcome such critical circumstances
4.3 Strategy of KSRM

KSRM has strong presence both in rural and urban areas, especially in the north zone of Bangladesh.
The company has strong distribution network in a well-planned manner

The
company owns
modern
technology
with
R&D infrastructure is able to adapt to any
new inventions with moderate investments. The company has access to international/multinational
companies for supplying appropriate technology and technical management support for the operation
of new projects. The selected/installed plant and machinery have been manufactured by reputed
manufacturer with proper warranty to take care of any defects or confirmation of supplying of
adequate spare parts. A significant portion of the entire production process is accomplished through
contract
manufacturing.
This arrangement provides the company with greater leadway to adjust
with any changed technological atmosphere

The management of the company is always concerned about the prevailing and future changes
in the global and national policy and responds appropriately and timely to safeguard its interest.
KSRM’s brand image and wide distribution network amongst its customer group will always enable
it to withstand any such potential threats. The company’s supply chain is robust in accommodating
a large number of suppliers with a proper contingency plan in place. The company can prosper even
in situations of political stability and a congenial business environment.

KSRM is highly conscious about the environment. It uses Acid Regeneration Plant and ETP-Effluent
Treatment Plant- a water treatment- with a view to prevent water pollution. Moreover, KSRM
workers are provided with hand gloves, masks and safety boots, as per normal precautionary
measures. Exhaust fans have been installed in the factories for better and adequate ventilation
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5. Why Rivals Have Been Unable to
Duplicate BSRM’s Success
Competitors cannot take over BSRM because BSRM is superior to them in the following aspects:
Experienced Management Team
The company’s senior management team comprises members with extensive experience and professional
qualifications in the steel industry. Their rich experience and understanding of the company have been
instrumental in building a sustainable business and supporting the company’s operations. Moreover
BSRM has experience in this field for more than 60 years and hence customers trust them for being so
long in this business. It employs senior experienced management staff in its organization.
Modern Equipment & Technology
The group uses the most technologically advanced machineries from reputable suppliers. Thereby it keeps
operational failure is minimal. In addition, the group regularly trains their human resources to maintain
updated work knowledge and efficiency
Effective Strategy to Fit Specific Industry and Company Situations
BSRM always implements effective strategies to face situations like: emergence of competitors, decrease
in demand, potential change in global or national policies, supply of raw materials, non-availability of
electricity and gas supply, unfavorable fluctuation in exchange rate etc.
Strong Products Distribution Lineup
BSRM has appointed more than 449 dealers all over the country so that people can get BSRM products
within a reasonable time. Besides, they have sales and supply depots/ office in Dhaka, Comilla, Bogra,
Sylhet, Rajshahi, Barishal, Rangpur, and Khulna. Since it is spread out in so many areas, it enjoys special
geographical advantages. It can reach out to potential customers all over the country, thus increasing
chances of sales compared to its competitors, who have not managed to reach out their services in the
similar way.
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Backward-linkage Industry
To strengthen the competitive advantage of the company and to minimize the dependency on import of
raw materials, BSRM is continuously expanding the capacity its billet making plant.
Quality Maintenance
BSRM has always maintained a strict adherence to quality control standards in their factories. The
products of BSRM conform to all international quality standards.
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6. Conclusion
As the global steel industry continues to transition to a new phase, the local sector has the prime
opportunity to not only grow to satisfy the domestic demand but also secure position in the emerging
export markets of tomorrow. Currently, Bangladesh exports 57.9 Million USD worth of iron and steel
products and raw materials. For exporting iron and steel products, Bangladesh’s main destination is Mali.
For raw iron and steel, our main destination is Saint Barthelemy.
BSRM has well established brand name and brand value in Bangladeshi market. The management of it is
the most experienced and capable management in the steel industry sector. BSRM continues being only
in the steel industry as there is still strong scope for rising demand. In terms of value creation activities,
the company is trying to increase their product portfolio for construction steel. Being a market leader, it
always tries to focus on quality features of the steel and steel bar products only. Currently, they are
charging relatively higher prices. This has been as a result of better brand image and reliability for best
quality. In order to improve overall efficiency, BSRM is working on its infrastructure, production, material
management, information system, human resources. Appointing world famous consulting firm ‘Price
Waterhouse Coopers’, now it is more effective to evaluate and reorganize its managerial & organizational
setup. As the senior managers are professionals having relevant job and academic background and
associated by the reorganization made by ‘Price Water house Coopers’, operational strategies are carefully
chosen and implemented. BSRM has strong media and communication division which uses effective and
strong advertising techniques to reach to the people. The competitors of BSRM are also continuously
improving their strategy. To terminate current strategic issues and mitigate threat of competitors, BSRM
should follow our proposed recommendations.
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7. Recommendations
Following recommendations are given for BSRM based on SWOT analysis of the firm:
Utilize the Strength of Being the Market Leader
BSRM is the leader in their industry with maximum market share amongst peers and possesses best brand
recognition. In regard to the macroeconomic environment as the economy of Bangladesh grows at a rate
above 7% (7.3% GDP growth in Bangladesh, 2016), there would be significant growth of real estate sector.
This in turn will increase demand of construction steel. Therefore, BSRM should continue investment in
extending their production capacity so that they are able to fulfil the market demand. The process of
increasing capacity is time consuming and capital intensive so if BSRM does not continue the process
according to requirement, it may get blindsided in future.
Acquire Small Steel Producers and Take Advantage of Strong Distribution Network
There are only 5 key construction steel manufacturers in Bangladesh, but there are various small
manufacturers who are in most cases struggling as economies of scale is an important factor. BSRM can
acquire these small manufacturers, use their resources and capabilities to serve the growing demand.
Enhance Involvement in Government Projects
Government projects will continue demanding a significant proportion of the industry’s sales. BSRM’s
products have been being used for giant government projects for a long time. But recently, government is
preferring other firms for some of the new large projects. Such as: steel for metro rail project in Dhaka is
supplied by Abul Khair Steel. In this regard, BSRM should employ seasoned professionals who are
experienced in dealing with such matter or have long relationships with appropriate government bodies.
Because being able to supply in government projects will boost BSRM’s credibility and image.
Improve Working Conditions of Ship Breaking Yards
The issue regarding strict working conditions of ship breaking yards builds negative perception for the
brand. In addition, as BSRM plans on expanding internationally, this issues may create barriers in terms
of regulations and brand image. So it is high time BSRM recognized this issue.
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Take Advantage of Booming Bangladeshi Economy
Booming economy of Bangladesh is an opportunity for BSRM. They can capitalize on the increasing
demand from both government and private construction projects. As they enhance their economies of
scale by increasing production due to rising demand, profitability is increased and they can make it even
more difficult for their competitors to be in the market.
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Reference

Alam, M. (2018) ‘Mega projects lift demand for steel’, The Daily Star, 6 September, p.3.

Annual Report of KSRM from the Year 2015-2017

Annual Reports of AKSL from the Year 2015-2017

Annual Reports of BSRM from the Year 2015-2017

Das, S. (2018) ‘Abul Khair to supply steel for metro rail’, The Daily Star, 28 July, p.3.

Kirnsten, G. (2018) ‘Steel industry’, The Guardian, 17 April, p.7.

Patwary, S. (2018) ‘Steel makers contemplating fresh investment’, The Daily Sun, 9 January, p.3.

Rahman,
M.
(2017)
Bangladesh
steel
industry
review-2016
Available
at:
https://www.scribd.com/document/340818130/Bangladesh-Steel-Industry-Review-2016

Rahman, R. (2017) The steel iIndustry analysis and the supply chain management of BSRM Available
at: https://www.scribd.com/document/337607006/Steel-Industry-Analysis-of-Bangladesh

Rahman, S. (2018) ‘Steelmakers flexing muscles’, The Daily Star, 28 August, p.3.

Shahriar, S. (2016) ‘BSRM Steels to set up fourth melting plant’, The Daily Star, 10 October, p.3.
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