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                From Weakn...
From Weakness to Strength: The
Baoshan Iron & Steel Value Chain




             Ex.1 – Distribution (Anderson/Bailey)



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      As witnessed by steelmaker Baoshan Iron & Steel Co, the ability of a company t...
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                       Ex. 3 – The Missing Link (CartoonStock.com)




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Baosteel still has to rely abroad when it comes to purchasing essential heavy
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     The Chinese steel industry’s competitive advantage will dissipate as their country
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CartoonStock.com. Unique Channel. CartoonStock.com, 2005

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NASA. Strategic Management Process. NASA...
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Mgt599 mod2case

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Edgardo Donovan (a.k.a. Eddie Donovan) is a CIO for the Department of Defense. Previously, Edgardo was the Director of Web Marketing/Design in Dublin, Ireland for the financial services division of First-e Group PLC one of Europe's largest e-Banks valued at 1.6 billion euros at the time.

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Mgt599 mod2case

  1. 1. . . . . . . . . . . From Weakness to Strength: The Baoshan Iron & Steel Value Chain . . . . . . . . . . Edgardo Donovan Touro University International MKT 599 – Strategic Management Dr. Charul Shah Module 2 – Case Analysis Monday, February 6, 2006
  2. 2. From Weakness to Strength: The Baoshan Iron & Steel Value Chain Ex.1 – Distribution (Anderson/Bailey) 2
  3. 3. . . . . . . . . . As witnessed by steelmaker Baoshan Iron & Steel Co, the ability of a company to organize itself so that it can benefit from logistical economies of scale deriving from an efficient supply chain strategy can be a chief cause for success or failure. Steelmaker Baoshan Iron & Steel Co, steel-only-focus contributed greatly to its success over other international steel producers in achieving top market share during the 1990s. This occurrence represents a massive shift in the way the global steel industry is organized. Massive growth as witnessed by companies such as Baoshan Iron & Steel Co will undoubtedly continue to hurt other global steel companies. However, as a result of this industry reorganization relying heavily on mature value chains in emerging low production cost nations greater savings will be passed down to the consumer. Ex.2 – Distribution Wave (CartoonStock.com) 3
  4. 4. "The management of logistics activities, also referred to as supply chain management, (i.e., product availability), has tremendous impact on sales and corporate efficiency as well. The importance of logistics to corporate strategy is not a new idea (Heskett 1977). However, with electronic commerce and information technologies, logistics management is now changing the very way modern organizations are doing business (Greis and Kasarda 1997). Logistics involves both supply and demand chain management. These changes have been so profound that they are forcing mainstream marketing, i.e., post 60s marketing, to take a back seat (Doyle 1996).” (Tamlia) The rise of the Chinese steel industry along with Baoshan Iron & Steel Co is a recent phenomenon which mirrors the rise of the US and German steel industries during the 1800’s whereby success was predicated in fine tuning a sophisticated supply chain within a vertical industry in order to gain maximum competitive advantage. The Krupp and Carnegie Steel company not only consolidated the major steel producing competitors of their day but also drew upon a variety of synergistic economies of scale by controlling all related supply-chain processes related to the manufacturing of steel. This strategy had a dual purpose of creating insurmountable barriers to entry to new competitors. Although Baoshan does not seem to nurture monopolistic ambitions vis-à-vis their domestic steel market similarly to Krupp and Carnegie during the 1800s, all of these companies are similar in that they achieved success through building an effective supply chain 4
  5. 5. . . . . . . . . . Ex. 3 – The Missing Link (CartoonStock.com) “The survey, which compares manufacturing metrics between the two countries, found that Chinese manufacturers' on-time delivery rate is 99%, compared with 96% for U.S. manufacturers. The survey said 98% of Chinese manufacturers' products meet specifications on the first try, compared with 97% for U.S manufacturers. Also, 53% of China's manufacturers are offering more than 20 hours of training to workers, compared with 35% of U.S. ones." (Fong) Baosteel is far from having built a production facility comparable to the Ford River Rouge plant in Detroit in terms of size and the number if distinct related supply chain processes happening in a single area.. However, their ability to bring together a wide variety of processes related to steel manufacturing under one roof is remarkable According to the production flow, Baosteel's production facilities include systems of sintering, iron-making, steel-making and steel-rolling. Baosteel has its own power plant, which provides all the electricity for its production. 5
  6. 6. Baosteel still has to rely abroad when it comes to purchasing essential heavy machinery components of the manufacturing process. Almost all the equipment in their production facility was manufactured by Japanese and German leading companies. However, it is not unreasonable to assume that with the millions of engineers the Chinese graduate every year that they will not be able to start closing the gap progressively over time. US steel companies along with many other international steel producers impacted by the rise of the Chinese steel industry will have to adapt to the new economic environment. Although they can compete with China when it comes to quality and out-compete them in terms of having the technical know how to build the infrastructure needed for production, their biggest disadvantage is their inability to keep production costs down. Wages for unskilled factory workers and qualified engineers in China are a fraction of what they are in developed countries. This leads to huge incentives on the part of the international consumer to buy from or to invest in production facilities in China. Ex. 4 – Unique Channel (CartoonStock.com) 6
  7. 7. . . . . . . . . . The Chinese steel industry’s competitive advantage will dissipate as their country becomes more developed and cost of life increases. In order to attempt to maintain the same competitive edge the Chinese will need to maximize their ability for research, development, and production rather than rely on foreign producers of heavy industry equipment and infrastructure. Ex. 5 – Ubiquitous Distribution (CartoonStock.com) 7
  8. 8. “Baosteel possesses tremendous D & R strength. It has made great efforts in developing new technology, new products and new equipment, and has accumulated vigorous driving force for company's further development." (BaoSteel.com) As witnessed by steelmaker Baoshan Iron & Steel Co, the ability of a company to organize itself so that it can benefit from logistical economies of scale deriving from an efficient supply chain strategy can be a chief cause for success or failure. Steelmaker Baoshan Iron & Steel Co, steel-only-focus contributed greatly to its success over other international steel producers in achieving top market share during the 1990s. This occurrence represents a massive shift in the way the global steel industry is organized. Massive growth as witnessed by companies such as Baoshan Iron & Steel Co will undoubtedly continue to hurt other global steel companies. However, as a result of this industry reorganization relying heavily on mature value chains in emerging low production cost nations greater savings will be passed down to the consumer. 8
  9. 9. . . . . . . . . . BIBLIOGRAPHY Works Cited Fong, Mei. Chinese Manufacturers Are Closing Quality Gap. Wall Street Journal, 2004. Baoshan Iron & Steel Co. About Us. Baosteel.com, 2006. Tamlia, Robert. Marketing and Logistics. Tamilia Logistics, 2005. CartoonStock.com. Distribution CartoonStock.com, 2005 CartoonStock.com. Distribution Wave. CartoonStock.com, 2005 CartoonStock.com. The Missing Link. CartoonStock.com, 2005 CartoonStock.com. Unique Channel. CartoonStock.com, 2005 CartoonStock.com. Ubiquitous Distribution CartoonStock.com, 2005 II. Works Consulted Fong, Mei. Chinese Manufacturers Are Closing Quality Gap. Wall Street Journal, 2004. Baoshan Iron & Steel Co. About Us. Baosteel.com, 2006. Tamlia, Robert. Marketing and Logistics. Tamilia Logistics, 2005 Brown, Eryn. Imagining Toyland Without One of Its Giants. New York Times, 2004. Forelle, Charles. Energizer Deal Perplexes Some --- Planned Schick Acquisition Draws Mixed Reactions. Wall Street Journal, 2003. Foust, Dean. Things Go Better With...Juice; Coke's new CEO will have to move quickly to catch up in noncarbonated drinks. Business Week, 2004. Brady, Diane. A Thousand And One Noshes; How Pepsi deftly adapts products to changing consumer tastes. Business Week, 2004. Anderson, Douglas – Bailey, Bruce. Product Management. Madaille College, 1998 Gates, Bill - Donovan, Eddie. Launch of Business at the Speed of Thought. Microsoft.com, 1999. CartoonStock.com. Distribution CartoonStock.com, 2005 CartoonStock.com. Distribution Wave. CartoonStock.com, 2005 CartoonStock.com. The Missing Link. CartoonStock.com, 2005 9
  10. 10. CartoonStock.com. Unique Channel. CartoonStock.com, 2005 CartoonStock.com. Ubiquitous Distribution CartoonStock.com, 2005 Bianco, Anthony - Lowry, Tom - Berner, Robert - Arndt, Michael. The Vanishing Mass Market. Business Week, 2004. Allen, Gemmy. Introduction to Marketing. Mountain View College, 2005 Gladwell, Malcolm. The Science of the Sleeper: How the Information Age could blow away the blockbuster. The New Yorker, 1999 Grove, Andy. Only the Paranoid Survive. Simon and Schuster, 1995 Gates, Bill. Business at the Speed ot Thought. Warner Books, 1999 Ries, Al – Trout, Jack. Marketing Warfare. Bantam Books, 1978 Kotelnikov, Vadim. Ten Major Strategic Management Schools: A Comparative Analysis. 1000ventures.com, 2006. Grant, Lorrie. Wal-Mart doesn't plan to toy much with prices ; Last year's cuts hurt other retailers and left giant thinking it slashed too much. USA Today, 2004. Foust, Dean. Things Go Better With...Juice; Coke's new CEO will have to move quickly to catch up in noncarbonated drinks. Business Week, 2004. Brady, Diane. A Thousand And One Noshes; How Pepsi deftly adapts products to changing consumer tastes. Business Week, 2004. CartoonStock.com. Strategic Planning. CartoonStock.com, 2006 CartoonStock.com. Differing Strategic Objectives. CartoonStock.com, 2006 NASA. Logo NASA.gov, 2006 Schurz Communications. Logo Schurz.com, 2006 Sloan, Alfred. My Years at General Motors. Doubleday, 1963 Grove, Andy. Only the Paranoid Survive. Simon and Schuster, 1995 Gates, Bill. Business at the Speed ot Thought. Warner Books, 1999 Wallace, James – Erickson, Jim. Hard Drive – Bill Gates and the Making of the Microsoft Empire. Harper Collins, 1993 Cobbold, Ian – Lawrie, Gavin – Issa, Khalil. Designing a strategic management system using the third-generation balanced scorecard: A case study. International Journal of Productivity and Performance Management, 2004 Rangan, Kasturi. Lofty Missions, Down-to-Earth Plans. Harvard Business Review, 2004 Mintzberg, Henry. The fall and rise of strategic planning. Harvard Business Review, 1994 Dess, Gregory. Strategic Management . McGraw-Hill, 2005 10
  11. 11. . . . . . . . . . NASA. Strategic Management Process. NASA.gov, 2006 Schurz Publications. Strategic Goals. Schurz.com, 2006 Ries, Al – Trout, Jack. Marketing Warfare. Bantam Books, 1978 NASA. Dryden's Mission Statement. NASA.gov, 2006 Rangan, Kasturi. Case Study of Writing Business Objectives: Wiping Up the Credit. Harvard Business Review, 2004 Birnbaum, Bill. Mission Statement Fundamentals. BirnbaumAssociates.com, 2006 Donovan, Edgardo. Full-Life-Cycle Web Presence Management. EddieDonovan.com, 2006 Donovan, Edgardo. Front End Web Development Process. EddieDonovan.com, 2006 Dell, Michael. Direct from Dell. Harper Business, 1999 11

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