OLYMPIC STEEL (ZEUS)
Joseph Bentzen
Rachel Barrows
Kenneth Walters
Olympic Steel is a very large company with locations in over 15 states and also
one international location which is in Mexico. While for some organizations expansion can be a
very beneficial tactic, this has not been the case for Olympic Steel. The company is not in a great
financial position, which is seen by its low stock price of $21.89 at the close of April 12, 2013,
according to Yahoo Finance and the low year-end P/E ratio of 24.04 found in Appendix B of this
document (Yahoo Finance, 2013.c, ¶ 1). Another example of the company’s poor financial
standing is a strong recommendation to sell Olympic Steel’s stock according to NASDAQ’s
Website (Nasdaq, 2013, ¶ 1). Reasons listed by NASDAQ for investors to sell Olympic Steel’s
stock include a decline in demand for steel and also a lowering of prices (Nasdaq, 2013, ¶ 2). As
shown in Appendix B, the company’s profit margin is a low of 0.16% and the company also
experienced an 11.9% loss in 2012 revenue compared to 2011 revenue (Nasdaq, 2013, ¶ 3). All
of these statistics may lead you to believe that the industry as a whole is just not worth much,
however that is false. Of all the competitors Yahoo Finance has listed for Olympic Steel,
Olympic Steel has the lowest price of stock (Yahoo Finance, 2013.b, ¶ 1).
As a result of the company’s poor financial position, a large problem that Olympic Steel
must address is that it must become more profitable. After all, most companies’ first and
foremost concern should be to make a profit, however Olympic Steel is not doing a good job at
this task since the company’s sales for 2012 was 1.4 billion but net income was only 2.2 million.
We believe that this is a result of the company trying to become a major competitor in the steel
industry through the use of expansion. The problem with this is that the steel industry already has
several companies with a strong financial lead in place such as Caterpillar Inc., United
Technologies Corp., and Deere & Company. Olympic Steel’s plan to compete with these
companies on a national basis has failed and as a solution, a more profitable method would be to
become more centralized with its basis being in the Northern Central states of the country
including: Illinois, Minnesota, Wisconsin, Indianapolis, Ohio and Iowa. This part of the United
States would be a good choice for Olympic Steel to stay located because it already has many of
its facilities planted in this area (Olympic Steel, Inc., 2013.b, ¶ 1).
Centralizing the company into this one part of the country would be beneficial to
Olympic Steel for several reasons. The first reason would be that the company could form a
niche in this part of the country and would therefore be able to focus all of its efforts into gaining
a large market share in these states. Another reason it would be beneficial is because of the fact
that there are already clear leaders in the industry and the intensity of rivalry among the
competitors in the steel industry is very high. The intensity of rival competitors is further
examined in Appendix C. Since Olympic Steel is not much of a competitor in the industry it is
clear that a change must be made, and by focusing all of its efforts into one part of the country
could be extremely profitable for the company.
According to Olympic Steel’s website “a significant portion of Olympic Steel's business
comes from established customers; Customers that know and trust us for service, quality and
comprehensive solutions” (Olympic Steel, Inc., 2013.a, ¶ 1). Olympic Steel was founded in
1954 in Cleveland, Ohio. Olympic Steel does a great deal of its business with companies in the
Midwest, including the car manufacturers in Detroit, Michigan. Olympic Steel has long lasting
relationships with many of these companies located in the Midwest. These relationships and
customer loyalty in this area are two firm resources of Olympic Steel and should be exploited to
increase profits. According to the textbook a firm resource is a capability of the firm that is rare,
valuable, costly to imitate and costly to substitute (Dess, Lumpkin, Elsner & McNamara, 2012.
Pg 104 ¶ 4). It is very costly for companies to obtain new customers and much cheaper to do
repeat business with existing clients. It is for this reason that Olympic Steel should downsize the
firm and focus on its original customer base in the Midwest of the United States instead of
unnecessary expansion throughout North America. Olympic Steel should be able to increase
profits by exploiting its reputation for quality products and service with these Midwest
companies including the car manufacturers in Detroit, Michigan.
APPENDIX A

Financial Ratio Analysis – A technique for measuring the performance of a firm
according to its balance sheet, income statement, and market valuation (Dess, Lumpkin,
Elsner & McNamara, 2012. Pg 104 ¶ 7).

Five Forces Model – A tool for examining the industry-level competitive environment,
especially the ability of firm in that industry to set prices and minimize costs. The five
forces include: the threat to new entrants, the bargaining power of buyers, the bargaining
power of suppliers, the threat to substitute products and services, and the intensity of
rivalry among competitors in an industry (Dess, Lumpkin, Elsner & McNamara, 2012.
Pg 55 ¶ 5).

Strategic Resource (book definition) – Firms’ capabilities that are valuable, rare, costly,
to imitate, and costly to substitute (Dess, Lumpkin, Elsner & McNamara, 2012. Pg 104 ¶
4).

Strategic Resource (class definition) –
(Sanford, 2013.)
APPENDIX B
Financial Ratios (As of December 30, 2012)
I.
Short-term Solvency, Liquidity Ratios
Quick Ratio =
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠−𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠
422,377,000−290,023,000
138,102,000
= 0.96
705,994,000−289,857,000
705,994,000
= 0.59
(Yahoo Finance, 2013.a, ¶ 1)
II.
Long-term Solvency, Financial Leverage Ratios
Total Debt Ratio =
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠−𝑇𝑜𝑡𝑎𝑙 𝐸𝑞𝑢𝑖𝑡𝑦
𝑇𝑜𝑡𝑎𝑙 𝐴𝑠𝑠𝑒𝑡𝑠
(Yahoo Finance, 2013.a, ¶ 1)
III.
Asset Utilization, Turnover Ratios
Inventory Turnover =
𝐶𝑜𝑠𝑡 𝑜𝑓 𝐺𝑜𝑜𝑑𝑠 𝑆𝑜𝑙𝑑
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
1,122,523,000
290,023,000
= 3.87
(Yahoo Finance, 2013.a, ¶ 1) (Yahoo Finance, 2013.d, ¶ 1)
IV.
Profitability Ratios
Profit Margin =
𝑁𝑒𝑡 𝐼𝑛𝑐𝑜𝑚𝑒
𝑆𝑎𝑙𝑒𝑠
2,277,000
1,383,701,000
= 0.0016 or 0.16% (Most Accurate
Measure?)
(Yahoo Finance, 2013.a, ¶ 1) (Yahoo Finance, 2013.d, ¶ 1)
V.
Market Value Ratios
𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑆ℎ𝑎𝑟𝑒
Price to Earnings Ratio = 𝐸𝑎𝑟𝑛𝑖𝑛𝑔𝑠 𝑝𝑒𝑟 𝑆ℎ𝑎𝑟𝑒
22.12
0.92
= 24.04
(Yahoo Finance, 2013.a, ¶ 1) (Yahoo Finance, 2013.d, ¶ 1)
APPENDIX C
Five Forces Model
After examining the steel industry, we decided that the intensity of rivalry
among competitors in the steel industry is Olympic Steel’s strongest threat.
Olympic Steel is a large company but when compared against it’s competitors
(Caterpillar, Deere etc.), it is relatively small. Our group believes that Olympic
Steel’s biggest problem is that it tries to compete with these bigger companies but
doesn’t have the firm resources to make this capable therefore Olympic Steel is
experiencing very low profits. One solution to this problem would be for the
company to downsize and focus on building customer loyalty in a smaller area
before expanding and trying to compete with bigger steel companies.
REFERENCES
Dess, G., Lumpkin, G., Elsner, A., & McNamara, G. 2012. Strategic management. (6th ed., p.
55,95,104). New York, NY: McGraw-Hill/Irwin.
Nasdaq. 2013, Olympic steel down to strong sell. Retrieved April 13, 2013 from
http://www.nasdaq.com/article/olympic-steel-down-to-strong-sell-analyst-blogcm226807#ixzz2QhjXy5Ch
Olympic Steel, Inc., 2013.a, About Us. Retrieved April 15, 2013 from
http://www.olysteel.com/about-us.aspx
Olympic Steel, Inc., 2013.b, Locations. Retrieved April 15, 2013 from
http://www.olysteel.com/locations.aspx
Sanford, D. 2013. Strategic Management Class. Lecture on Date
Yahoo Finance, 2013.a, Olympic Steel, Inc. – Balance Sheet. Retrieved April 15, 2013, from
http://finance.yahoo.com/q/bs?s=ZEUS+Balance+Sheet&annual
Yahoo Finance, 2013.b, Olympic Steel, Inc. – Competitors. Retrieved April 15, 2013, from
http://finance.yahoo.com/q/co?s=ZEUS+Competitors
Yahoo Finance, 2013.c, Olympic Steel, Inc. – Historical Prices. Retrieved April 13, 2013, from
http://finance.yahoo.com/q/hp?s=ZEUS+Historical+Prices
Yahoo Finance, 2013.d, Olympic Steel, Inc. – Income Statement. Retrieved April 15, 2013, from
http://finance.yahoo.com/q/is?s=ZEUS+Income+Statement&annual