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BaoSteel: Hammering out a Greener Reconstruction Plan


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A business case study on BaoSteel Corporation for UBC Sauder School of Business and Shanghai Jiao Tong University Summer Exchange Program. Summer 2010

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BaoSteel: Hammering out a Greener Reconstruction Plan

  1. 1. BAOSTEEL<br />Hammering out a GreenerReconstruction Plan<br />Daniel Kell, Carolyn Khoo, Stella Li, Karl Suen<br />
  2. 2. Agenda<br />
  3. 3. Bao Steel (1978-Present)<br />
  4. 4. Baosteel net profits have decreased by 25.97%<br />The price for steel has decreased by 12% (From 4423 RMB to 3913 RMB per ton) due to global recession<br /> Government is requesting a decrease in steel production to increase the price of steel.<br />Current Crisis<br />
  5. 5. Premium products strategy<br />Innovation concept<br />Develop new steel products<br />Promote research on key technological processes<br />Form and perfect the R&D system<br />Make technology as valuable assets of the Company<br />Educated workers<br /> Construct harmonious labor relationship<br />People-oriented management<br />Chinese Business Environment<br />Corporate Culture<br />
  6. 6. Chinese Business Environment<br />2009 Sustainability Reporting in China’s Largest Coporations<br />
  7. 7. Chinese Business Environment<br />2009 Sustainability Reporting in China’s Largest Coporations<br /><ul><li>Recently (2009) beaten by Hubei Iron and Steel Company as the largest steel producing company in China
  8. 8. 40.2 vs. 38.9 million tonnes</li></li></ul><li>International IndustryAnalysis<br />
  9. 9. International Competitors<br />Huge International Network<br />Clients within 27 countries worldwide<br />Threatens Domestic Sales<br />Many clients throughout China <br />Large Asian Exporter<br />Nippon Steel exports triple that of BaoSteel<br />
  10. 10. SWOT Analysis<br />
  11. 11. Product Segments<br />
  12. 12. Issues and Constraints<br />
  13. 13. Sustainability and the Environment<br />Sustainability and the Environment<br /><ul><li>Steel is not an environmentally-friendly industry to begin with
  14. 14. 3BL has become a standard for all companies
  15. 15. Large capital asset costs</li></li></ul><li>Consumption of resources and raw materials (2007)<br />
  16. 16. IT Strategic Grid<br />
  17. 17. Raw Material<br />Rising RMB <br />Labour Costs<br />Pricing Volatility<br /><ul><li>Pressures from raw material price increases
  18. 18. Iron Ore prices have shot up in the last few years.
  19. 19. RMB is currently rising.
  20. 20. Increase in RMB will result in a better position for BaoSteel to import raw materials.
  21. 21. Rising labour costs in China due to government regulations & increase in skilled labour.</li></li></ul><li>Government Intervention<br />Government Intervention<br /><ul><li>85.41% ownership by the government
  22. 22. Government demand lowering steel production in China due to decreasing steel cost
  23. 23. Government reducing export rebates</li></li></ul><li>Objectives<br />
  24. 24. Sustainability Strategies<br />
  25. 25. Cost Reduction Strategies<br />
  26. 26. Implementing Strategies<br />
  27. 27. Timeline<br />2011<br />2012<br />2013<br />2014<br />2015<br />Objective #1: Sustainable<br />Government & board approval<br />Initiate Diversity Improvement Program <br />Incorporate 25 million yuan incentive plan to mass technical innovation.<br />R&D Funding on New Sustainable Solution <br />Objective #2: Cost Reduction<br />Government & board approval<br />Vertical Expansion of SCM<br />Decrease Supply of Steel <br />
  28. 28. Diluted culture<br />Allocation of senior managements to new acquisition & develop corporate bonding through social events.<br />Ineffectiveness of steel decreasing policy<br />By acquiring parts of SCM<br />Risk of low or negligible results from R&D<br />By increasing diversity in the workforce<br />Risk and Mitigations<br />
  29. 29.
  30. 30. Questions<br />