Industry Analysis Case Study

POSCO in 2004 – The World’s Most Profitable Steel Maker

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Abstract:
The case is set in the year 2004 and talks about POSCO, the South Korean steel maker that was the leading steel company in terms of profitability. The case starts with the evolution of the world steel industry, the major technology shift (Basic Oxygen Method to Electric Arc Furnace (EAF) Method) that changed the industry economics, and talks briefly about the evolving demand-supply conditions. By 2004, steel industry was considered old economy and steel was commoditised. The increasing competition from mini-mills (companies using the EAF technology to produce steel) left some of the major steel producers’ operations unprofitable. As a result steel producers were resorting to various strategies, including consolidation, to sustain in the industry. The case describes how POSCO sustained and grew in such conditions, achieved its position of leadership and the strategies it adopted on its way. Specifically, the case talks about POSCO’s product-market choices, technology initiatives, joint ventures, and its organisational structure. The case also briefly touches upon the challenges faced by POSCO in sustaining its position.

Pedagogical Objectives:

• Discuss POSCO’s advantages and disadvantages based on key success factors in steel industry in 2004
• Analyse POSCO’s position vis-à-vis the other players in the industry
• Discuss if POSCO’s strategies are replicable by other players in the industry
• Discuss the strategies for sustaining and improving POSCO’s position in the industry
• Building competitive advantage in a commoditised industry such as steel.

Keywords : Steel Industry; Mini-mills; Steel marketing technology; Finex technology; Technology innovations; Mass production; Industry Analysis Case Study; Location; advantage; Joint ventures and strategic partnerships; value added products; Centralised management; Steel consumers; Steel production; Raw material sources of steel; Iron ore; Scrap steel