This document provides a strategic business analysis of Allegheny Technologies Inc. (ATI). It begins with an executive summary and background on ATI's history. The external analysis then examines the political, economic, technological and other factors impacting ATI's specialty metals industry. It analyzes ATI's competitors and identifies key success factors. The internal analysis evaluates ATI's organizational structure, financial performance, and strategies. The document concludes with recommendations to help ensure ATI's future survival and prosperity.

1. 1
Johnson & Wales University
Providence, Rhode Island
Feinstein Graduate School
Allegheny Technologies Inc. Strategic Business Analysis
Term Project Submitted in Partial Fulfillment of the Requirements for the
MBA Degree Course: MGMT 6800
Yaocheng Li

2. 2
Contents
1.0 Executive Summary ................................................................................................................................. 4
2.0 Background Information on Allegheny Technologies Inc. ...................................................................... 5
2.1.
Brief History of Company ............................................................................................................... 5
2.2.
Historical Timeline of ATI ............................................................................................................... 8
3.0 External Analysis ................................................................................................................................... 11
3.1.
General Environmental Analysis................................................................................................... 11
3.1.1. Political/Legal Factors ............................................................................................................... 11
3.1.2. Technological Factors................................................................................................................ 16
3.1.3. Sociocultural Factors ................................................................................................................. 20
3.1.4. Demographic Factors ................................................................................................................ 21
3.1.5. Economic Factors ...................................................................................................................... 21
3.1.6. Global Factors ........................................................................................................................... 25
3.1.7. Summary of the General Environmental Analysis .................................................................... 27
3.2.
Industry Analysis ........................................................................................................................... 27
3.2.1. Industry Description .................................................................................................................. 28
3.2.2. Industry Dominant Economic Features..................................................................................... 28
3.2.3. Market Size and Growth Rate. .................................................................................................. 28
3.3.1. The Threat of New Entrants ...................................................................................................... 29
3.3.2. The Power of Buyers ................................................................................................................. 30
3.3.3. The Power of Suppliers ............................................................................................................. 31
3.3.4. The Threat of Substitutes .......................................................................................................... 31
3.3.5. Competitive Rivalry ................................................................................................................... 31
3.4.1. Industry Competitors ................................................................................................................ 33
3.4.2. Carpenter Technology Corp. ..................................................................................................... 35
3.4.3. Precision Castparts Corp. .......................................................................................................... 36
3.5. Summary of External Analysis .......................................................................................................... 38
4.0 Internal Analysis ................................................................................................................................... 38
4.1.
Organizational Analysis................................................................................................................. 39
4.1.1. Corporate Vision and Mission ................................................................................................... 40
4.1.2. Leadership ................................................................................................................................. 40
4.1.3. Culture....................................................................................................................................... 41

3. 3
4.1.4 Structure. ................................................................................................................................... 42
4.1.5. Summary of Organizational Analysis ........................................................................................ 45
4.2. Evaluation of Financial Performance ............................................................................................... 45
4.2.1. Compare to the rivals. ............................................................................................................... 54
4.3. Strategic Analysis. ............................................................................................................................ 55
4.3.1 Corporate-Level Strategy and Internal Strategy. ....................................................................... 55
4.3.2 Business-Level Strategy and Internal Strategy........................................................................... 55
5.0 Recommendations. ............................................................................................................................... 56
6.0 Reference .............................................................................................................................................. 59

4. 4
1.0 Executive Summary
The purpose of this paper is to provide a comprehensive and exquisite strategic analysis
of Allegheny Technologies Incorporated (NYSE:ATI). This paper will concentrate on a
description of the external and internal factors that affect Allegheny Technologies Inc. in the
present and the future.
In the external analysis, a general environment analysis will be
conducted to determine the driving forces in the industry. It will continue with an industry and
competitor analysis to determine the primary firms competing in the Specialty Metals Industry.
The external analysis will conclude by talking about key success factors that Allegheny
Technologies Inc. position itself in specialty metal industry. The internal analysis will be broken
into six sections that include an organizational analysis, a look at the firm’s resources, an
objective analysis, a detailed financial analysis, strategic analysis, and a value chain analysis. A
strategic fit analysis will then be conducted to determine the direction Allegheny Technologies
Inc. needs to precede in based on the external and internal analyses. The strategic analysis will
conclude by providing two recommendations for ensuring the survival and prosperity of
Allegheny Technologies Inc. into the future.

5. 5
2.0 Background Information on Allegheny Technologies Inc.
Allegheny Technologies Incorporated (NYSE:ATI) is one of the largest and most
diversified specialty metals producers in the world. Not being as famous as Boeing and GE, ATI
is a hidden empire of manufacturing special metals. As a fully integrated supplier from raw
material for titanium and melt for other specialty alloy systems through highly engineered
finished components, ATI spans more than four industries among Aerospace & Defense, Oil&
Gas/ Chemical process, Electrical Energy and Medical in multi-nations. ATI exerts innovative
technologies to offer growing global markets a wide range of specialty metals solutions. By
dividing its business into three main segments, High Performance Metals Segment, Flat-Rolled
Products Segment, and Engineered Products Segment, ATI’s products varies from stainless and
specialty steel, nickel-based alloy and specialty alloy and titanium melt to the world most
efficient titanium, tabular quality alloys stainless sheet and precision rolled strip products.
Through its fourteen subsidiaries and two joint ventures, ATI has 11,200 full-time employees.
ATI is divided into three geographic groups, which include North America, Europe and Asia via
14 facilities and 2 joint ventures.
2.1.
Brief History of Company
Allegheny Technologies Incorporated (ATI) was founded in 1750s in New Jersey called
Pompton Furnace, as a pudding factory, which manufactured the hand-forged chain links to
block the Hudson River during the Revolutionary War.
In 1901, Allegheny Steel & Iron started to headquarter in Western Pennsylvania. As the first
company to use the electric furnace in manufacturing alloys is Allegheny Steel & Iron in 1910.
After Fourteen years, ATI received its first patent award for stainless. ATI stainless structured the
Chrysler building in 1927. In the next two years, ATI stainless was bringing in trimming on the

6. 6
Ford Model A automobile.
Allegheny Steel Company combined with Ludlum Steel Company in 1938. The first Jet
engine alloys was developed by ATI in early 1940s, as well as the first commercial gas turbine.
Titanium for the aerospace and defense market was innovated by ATI in the late 1940s.
By a consumable electrode vacuum melt process, ATI first commercialized the using of super
alloys in the Boeing 707 in 1955. ATI is the earliest one to use the key technology for
manufacturing aerospace quality nickel-base alloys is vacuum induction melting in 1957. ATI is
also a pioneer in the specialty metals necessary for the nuclear electrical power generation
industry. ATI’s zirconium products were used in the late 1950s for the nation's first full-scale
commercial power plant, built in Shippingport, PA.
In 1960, Teledyne Inc. was founded. And Teledyne ranked No.293 on the Fortune 500 list
after six years. At the same time, ATI developed Vasco Supreme, the first super-hard, high-speed
steel that revolutionized many industrialized metalworking processes. Rene® 41, a titanium and
nickel-based super alloy were used for the structure and reentry heat shield for the Gemini 4
spacecraft, whose flight included the first American spacewalk, was generalized by ATI in 1965.
In the 1970s, ATI invented the 3-2.5 Titanium alloy, used for aircraft hydraulic tubing.
ATI's titanium was used for the hydraulic control system of the Concorde supersonic transport
(SST). Meanwhile, ATI’s zirconium was used in the first large high-pressure, high-speed
centrifugal pump for an acetic acid facility for the chemical processing industry. In 1984, ATI's
AL 29-4C® alloy becomes patented; this alloy is used in high-efficiency gas furnaces.
Immediately, ATI's AL-6XN® alloy was used for the first high-strength, durable firewalls for an
offshore oil facility in the North Sea.
In 1996, Allegheny Ludlum and Teledyne, Inc. combined to form Allegheny Teledyne

7. 7
Incorporated. But in order to concentrate on its core business of metal and alloy production, ATI
spun off several subsidiaries as independent public companies such as Teledyne Technologies,
Inc. and WaterPik Technologies in 1999. This reconfiguration of the company is a milestone of
ATI strategic turn.
To add a low-cost production path for stainless sheet products and additional finishing
capabilities for our high-value sheet and strip products, ATI purchased J&L Specialty Steel in
2004. ATI sold its World Minerals subsidiary to French company Imerys in 2005.ATI 2003®
Lean Duplex Alloy was in a subsea flow line system for the Kikeh Field Development Project,
offshore Sabah, East Malaysia in 2006. In the following year, the proprietary of ATI was used for
the largest stainless roof in the world. The roof is for the New Doha International Airport in
Qatar. ATI 425® Alloy was used on the Phoenix Mars Lander in 2008. Right after that, ATI
added powder metal into its product portfolio through the purchase of Crucible Compaction
Metals and Crucible Research in 2009.
In 2010, ATI and VSMPO made the joint venture as UNITI to supply titanium for the
world's largest seawater desalination plant in Ras Az Zawr, Saudi Arabia. The plant's daily
potable water output will be the largest in the world, sufficient to meet the needs of 3.5 million
people.
Through the acquisition of Ladish, ATI added highly engineered forged, cast and
machined components to its product portfolio 2011. Simultaneously, ATI added titanium and
other high-performance metal fabrication capabilities in Bolingbrook, IL. Products include kits,
sub-assemblies, assemblies and machined components. On Nov. 4, 2013, ATI announced today
that it has completed the sale of its Tungsten Materials business to Kennametal Inc. for $605
million.

8. 8
2.2.
Historical Timeline of ATI
The following figure shows a brief timeline of the major events that have occurred in
Allegheny Technologies’ history. It highlights not only the scientific achievement the company
has reached, but also the many of the wise stripping off of subsidiaries and strategic acquisition
history.

9. 9

10. 10
The first
to use
the
electric
furnace
Pompton
Furnace
New
Jersey
1750
1920
1901
Allegh
eny
Steel
& Iron
1929
1927
Build the
Chrysler
building
specialt
y alloys
for jet
engine
Ford
Model
A
1940
1938
Combination
of Allegheny
and Ludlum
(Steel
Corporation)
Historical
Teledy
ne, Inc.
Boeing
707
1955
1950
Titanium
Alloys
S
S
T
1960
1957
Nuclear
Electric
al
Power
1970
1965
Gemini 4
spacecraft
Timeline
Subsea
Flow
Line
Allegheny
Teledyne
1984
1980
2006
1999
Firewalls
for oil
facility
Crucible
Compact
ion
Metals
ATI
425
2008
2007
Allegheny
Technologies
Incorporated
of
2010
2009
Largest
Roof in
Qatar
Tungsten
Materials
Sold
2013
2011
UNITI
Ladish
ATI.

11. 11
3.0 External Analysis
The external analysis is necessary for ATI to realize the opportunities and threats that
exist in the industry they are competing with the other peers fiercely.
The external analysis
consists of a general environmental analysis, industry analysis, five forces analysis, industry
competitor’s analysis, and the key success factors for the industry.
3.1.
General Environmental Analysis
There are six sections of external environmental factors a firm must understand to
effectively compete in a specific market, which are political/legal, economic, socio-cultural,
demographic, technological, and global. In order to provide the firm with a description of the
elements in society that directly affect the industry and the direction managers must take to
implement appropriate strategies to survive.
The detail analysis will be developed in the six
primary factors.
3.1.1. Political/Legal Factors
Different from other commercial industries, the specialty metal industry is highly
politically and legally sensitive. The definition of specialty metals can be found in 10 U.S.C.
2533b; specialty metal means any of Steel with a maximum alloy content exceeding one or more
of the following limits:
(1) Manganese, 1.65 percent; silicon, 0.60 percent; or copper, 0.60 percent; or containing
more than 0.25 percent of any of the following elements: aluminum, chromium, cobalt,
columbium, molybdenum, nickel, titanium, tungsten, or vanadium.
(2) Metal alloys consisting of nickel, iron-nickel, and cobalt base alloys containing a total
of other alloying metals (except iron) in excess of 10 percent.

12. 12
(3) Titanium and titanium alloys.
(4) Zirconium and zirconium base alloys (DFARS 225.252.7009, 2012).
As the majority products of ATI, titanium is used in airframe components and jet engines.
It offers greater strength at lower weight than other metals. Among a number of shapes it
produced, aircraft, missile and space systems, ships, Tank-automotive, weapons, ammunition
such as bars, billets and sheet are limited Department of Defense (DOD).The domestic
preference restrictions has forbid DOD from using funds to procure certain items that are not 100
percent American-made since the Berry Amendment enacted in 1941, which can be found in
United States Code (10 U.S.C. 2533a). The Berry Amendments’ specialty metals restrictions are
requirements in addition to the Buy American Act (BAA) and Trade Agreements Acts (TAA).
Furthermore, the specialty metal clause first appeared in the 1973 Defense Appropriations
Act. In 1978, the “qualifying country exception” was added to the specialty metals domestic
source restriction, which waived the requirement for procuring specialty metals produced in the
United States when the purchase relates to agreements the United States has with foreign
governments, known as the qualifying countries exception. Aircraft component manufacturers in
23 qualifying countries currently are exempt from the specialty metals domestic source
restriction and are permitted to use non-domestic produced titanium to manufacture DOD aircraft
components.

13. 13
23 Qualifying Countries
Australia
France
Poland
Austria
Germany
Portugal
Belgium
Greece
Spain
Canada
Israel
Sweden
Czech Republic
Italy
Switzerland
Denmark
Luxembourg
Turkey
United Kingdom of
Egypt
Netherland
Great Britain and
Finland
Norway
Northern Ireland
Figure 3.1.1-1: 23 qualifying countries (Source: DFARS 225.003(10))
As these qualifying countries list above, the most productive mineral resources countries
such as China, Kazakhstan, Mozambique, Norway, Ukraine, Vietnam, Sierra Leone and South
Africa are excluded from the exception. From the perspective of the author, United States
Military protection regulations jeopardize the commercial industrial operations. The compulsory
requisition of titanium products for DOD aircraft components must be made in the United States
and 23 qualifying countries makes the U.S. manufacturers lose market share to qualifying
countries that are able to use foreign produced titanium.
Defense Federal Acquisition Regulation Supplement (DFARS) issued the Restriction on
Acquisition of Specialty Metals (DFARS Case 2008-D003) in July 21, 2008. DFARS requires a
clause on the Contract Terms and Conditions Required to Implement Statutes or Executive
Orders Applicable to Defense Acquisitions of Commercial Items. It must specifically state: “The
Contractor agrees to comply with any clause that is checked on the following list of DFARS
clauses which, if checked, is included in this contract by reference to implement provisions of

14. 14
law or Executive orders applicable to acquisitions of commercial items or components.”
DFARS 252.225-7014 is also inserted into contracts via DFARS 252.212-7001(c) and
includes guidance from the Federal Acquisition Regulation (FAR): In addition to the clauses
listed above of the Contract Terms and Conditions Required to Implement Statutes or Executive
Orders, Commercial Items clause of this contract (FAR 52.212-5), the Contractor shall include
the terms of the following clauses, if applicable, in subcontracts for commercial items or
commercial components, awarded at any tier under this contract. What’s more, the specialty
metals are also regulated by FAR 25.104(a). If an end item or component contains manganese, or
is a spare/replacement part for foreign-manufactured equipment, it is arguable that this exception
could be applicable. Similar to the “Acquisitions by Foreign Vessels” exception, this is another
example of an exception in DFARS 225.7002-2 that is not maintained in the John Warner
National Defense Authorization Act of 2007 (JWNDAA). Without doubt, the preference for
Domestic Specialty Metals required by DFARS and FAR is burden compliance to commercial
industry.

15. 15
Concentrate type and country
Ilmenite and leucoxene
Rutile
Australia
1,501,000
474,000
Brazil
75,000
2,550
Canada
0
0
China
1,100,000
0
India
550,000
25,000
Kazakhstan
25,000
0
Malaysia
28,782
10,810
Mozambique
636,800
6,500
Norway
600,000
0
Sierra Leone
15,946
67,916
Sri Lanka
520,000
2,700
South Aferica
0
0
Ukraine
500,000
60,000
United States
400,000
W
Vietnam
915,000
Titaniferous slag
0
878,000
1,300,000
Figure 3.1.1-2 2011 Titanium: world production of mineral concentrates, by country.
(Source: http://minerals.usgs.gov/minerals/pubs/commodity/titanium/myb1-2011-titan.pdf)

16. 16
2,000,000
1,800,000
2011 TITANIUM: WORLD PRODUCTION OF MINERAL CONCENTRATES, BY COUNTRY
1,600,000
1,400,000
1,200,000
1,000,000
Titaniferious
800,000
Rutiles(TiO2)
600,000
Ilmenite(FeTiO3)
400,000
200,000
0
Figure 3.1.1-3 2011 titanium: world production of mineral concentrates column chart by country
(Source: http://minerals.usgs.gov/minerals/pubs/commodity/titanium/myb1-2011-titan.pdf)
However, there is a positive exception, DFARS 225.7003-3(b)(5) waives the specialty metal
domestic source restriction when DOD makes a determination that the specialty metal melted or
produced in the U.S. cannot be acquired s and when needed at a fair and reasonable price in a
satisfactory quality, a sufficient quantity, and the required form. This means when the specialty
metal aircraft components are not available in the U.S. in the required form and at a reasonable
price, the restriction is not compulsory any more.
3.1.2. Technological Factors
There are two factors of technology need to be taken into consideration. The first factor is
the manufacturing technology, while the second comes from information technology.

17. 17
The world reserves of titanium are mainly concentrated in two titanium ores, which are Ilimenite
and Rutile. In terms of FeTiO3, titanium is contained in Ilmenite, while titanium exists in Rutile
by the form of TiO2. Only two ways can get the titanium of the complex ore, the Kroll and
Hunter method. Followed by the bankruptcy of RMI, the Hunter method has been obsoleted. The
dominant Kroll method is a magnesium reduction process.
Limited to the scale of manufacturers’ facility, there are two types of furnace, the I-type
semi-combined furnace and U-type combined furnace to make the magnesium reductiondistillation process. Most large scale facilities are using the U-type combined furnace to make
titanium sponge. The process can be simplified as below,
TiCl4 + 2Mg= Ti + 2 MgCl2 + Q
The primary product is titanium sponge, which is mostly used for the preparation of titanium and
its alloys. For each country, there are different standards for titanium sponge.
The two magnates of U.S. Sponge producers are Rowley, Utah, facility of ATI and
Titanium Metal Corp. Henderson. The Rowley, UT titanium sponge facility of ATI has
completed the Standard-grade Qualification (SQ) process on Mar. 14, 2012. The ATI Rowley
facility uses the Kroll reduction - vacuum distillation process, which reduces titanium
tetrachloride with magnesium to produce the sponge, accomplished the cost-effective premiumtitanium sponge facility.
From the international trade perspective, Japan, Kazakhstan, China and Russia are the big
four countries exports and ships titanium sponge to U.S. By the analysis above, the technological
factors are relatively steady. The information technology factor for ATI is essential as well. In the
contemporary dynamic market, information technology infrastructure is critical to support
business objectives. The successful information technology infrastructure can assist the

18. 18
manufacturing industry effectively plan and generate. The instant price reporting of raw material
and finishing products will help ATI improve financial performance.

19. 19
Ore
•Ilmenity and Leucoxene
•Rutile
•Titaniferous Slag
•is the commercially pure form of titanium metal that is refined from titanium ore.
Sponge
Ingot
Mill Shapes
•A cylinder or rectangular slab, which is often produced by melting titanium sponge, titanium scrap
metal, and other metals.
•Bar & Billets
•Sheets & Slabs
•Hot- Rolling and processing Facility
HRPF
Elaborate
Processing
Finishing
Products
Markets
•Cold Rolling, Welding, Straighten, Machining
•Picking, Wire-drawing
•Precision Rolled strip
•Tubular Quality Alloys
•......
•Aerospace & Defense
•Oil & Gas/CPI
•Electrical Energy
•......
Figure 3.1.2-1 Flow Chart of Titanium Production

20. 20
3.1.3. Sociocultural Factors
Since involved in the heavy industry and armament industry, there are pros and cons must be
taken into the consideration of social-culture factors. As far as the concerned by the author, at
least three factors will affluent ATI future management, the environmental, martial and patriotic
factors.
ATI has been listed as the 26th-largest corporate producer of air pollution in the United States by
researchers of the University of Massachusetts Amherst on August 19, 2013. Approximately
590,000 lbs. of toxic chemicals are released into the air annually. ATI has also been identified as
a potentially responsible party at approximately 43 Superfund toxic waste sites, which may
require ATI investigate and remediate the cleanup cost, fines and civil or criminal sanctions.
Being a party to lawsuits and other proceeding involved in alleged violations or liabilities, ATI
has to record the estimated cost on Financial Statements. At December 31, 2012, ATI reserves for
environmental matters totaled approximately $16 million.
For instance, Allegheny Ludlum's Natrona and Brackenridge, PA, facility contributed to the
waste at the ALSCO Park Lindane Dump—an EPA Superfund site. These facilities also released
chromium into the air, which adversely affected air quality at schools in the Highlands School
District. In 2005, Allegheny Ludlum agreed to pay a US$2,375,000 penalty to settle a lawsuit
brought by the U.S. Department of Justice on behalf of the Environmental Protection Agency,
which alleged that Ludlum had unlawfully discharged oil and other pollutants, such as
chromium, zinc, copper, and nickel, into the Allegheny and Kiskiminetas rivers in the suburbs of
Pittsburgh.
The second factor comes from the political and social Turmoil. The war on terrorism as well as
political and social turmoil could put pressure on economic conditions in the United States and
worldwide. These political, social and economic conditions could make it difficult for ATI, ATI’s

21. 21
suppliers, such as China and Russia, to forecast accurately and plan future business activities
could adversely affect the financial condition. As a result, ATI’s financial condition and results of
operations could be materially adversely affected.
The third factor could be the only positive factor for ATI, that’s the patriotic factor. Registered in
Delaware, headquartered in Philadelphia, born in New Jersey and had been served for the U.S.
for more than 110 years, ATI is an authentic American Sam. Patriots will support ATI by
purchasing it products. Other governmental contractor will choose ATI as co-partner as well,
which gains business opportunities.
3.1.4. Demographic Factors
Since ATI is not a Business to Consumer company, but more Business to Business and
Business to Government company, the author will more concentrate on the analysis of business
units and facilities geographical distribution and labor allocation in internal analysis part.
3.1.5. Economic Factors
There are three factors need to be cautious from the perspective of Economics. The First
one is the Macroeconomics perspective. By the Statistics data showed by USGS, the titanium
ores of world production has been dropped in recent years. And U.S. doesn’t product as much as
it demand. Most of the Titanium Ores are relied on import.

22. 22
12,000,000
10,000,000
8,000,000
U.S. Production
Imports
6,000,000
Exports
World Production
4,000,000
2,000,000
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Figure 3.1.5-1 Overview of Titanium world Production (units in tons)
(Source: http://minerals.usgs.gov/minerals/pubs/commodity/titanium)
Besides the original mineral resources, U.S. is also a semi-product import country. The semiproduct includes the titanium sponge and titanium scrap. Both numbers of imports and exports
titanium sponge and titanium scrap has been increased since 2009. The price went down steadily.
40,000
35,000
30,000
25,000
Exports
20,000
Imports
15,000
10,000
5,000
TITANIUM SPONGE STATISTICS
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

23. 23
Figure 3.1.5-2 U.S. Titanium Sponge Imports and Exports(units in tons).
(Source: http://minerals.usgs.gov/minerals/pubs/commodity/titanium)
25,000
20,000
15,000
Unit Value($/t)
10,000
Unit Value(98$/t)
5,000
TITANIUM SPONGE STATISTICS
0
Figure 3.1.5-3 Titanium Sponge Value Variation.
(Source: http://minerals.usgs.gov/minerals/pubs/commodity/titanium)
25,000
20,000
15,000
Imports
Exports
10,000
5,000
TITANIUM SCRAP STATISTICS
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Figure 3.1.5-4 Flow Chart of Titanium Production (units in tons)
(Source: http://minerals.usgs.gov/minerals/pubs/commodity/titanium)

24. 24
18,000
16,000
14,000
12,000
10,000
Unit Value($/t)
8,000
Unit Value(98$/t)
6,000
4,000
2,000
TITANIUM SCRAP STATISTICS
0
Figure 3.1.5-5 Titanium Scrap Value Variation
(Source: http://minerals.usgs.gov/minerals/pubs/commodity/titanium)
The second factor which influent the Titanium Industry is whether the government will
stock the spillover. By the data acquired, the U.S. government hasn’t stock any titanium since
2005. The over flow has been absorbed by the industry stocks. Without the collection of
government, the titanium market trends to be a perfect competition, which price mechanism will
exerts the effects obviously on the demand and supply relationship.

25. 25
20,000
18,000
16,000
14,000
12,000
10,000
Industry Stocks
8,000
Government Stocks
6,000
4,000
2,000
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
0
Figure 3.1.5- Titanium Stocks by Industry and Government (units in tons).
(Source: http://minerals.usgs.gov/minerals/pubs/commodity/titanium)
The third factor is based on the second one. Titanium will be a price sensitive product in the
domestic market of U.S. To set up the titanium option price alert and titanium option index is
necessary.
3.1.6. Global Factors
By the unavoidable product step, TiO2, the author accesses the global demand and supply
relationship based on the production amount and the demand amount of TiO2. China producers
are very numerous, and many of these sites are very small in capacity. Asia-Pacific is the largest
consuming region, and China surpassed the US in 2009 as the largest consuming country. China
now consumes more TiO2 than any other individual region in the world, now at more than 25%.
Growth during the last five years has been led by major emerging economies – most notably
China, the emerging economies of Asia-Pacific (Indonesia, Thailand, Vietnam, Philippines, etc.),
Brazil, Turkey, Russia, and India. The mature economies of Western Europe and North America

26. 26
have remained flat or declined slightly in consumption. The sovereign debt crisis in Europe and
the resulting reduced spending and high unemployment levels have significantly eroded demand
in the region (TZMI, 2013).
13%
20%
Asia- Pacific ex C&J
China
Japan
Central & south America
27%
17%
Central Europe
Middle East Africa
North America
5%
6%
8%
Western Europe
4%
Figure 3.1.6-1 TiO2 Demand by region: 2012
(Source: http://www.tzmi.com/)
3%
2%
Chinese
11%
Dupont
32%
6%
Cristal Global
Kronos
Huntsman
8%
Tronox
Sachtleben
9%
10%
18%
Figure 3.1.6-2 Production by producer: 2012
ISK
Others

27. 27
(Source: http://www.tzmi.com/)
What’s more, the Chinese Titanium market varied a lot since 2010. It turned into a
titanium export country. And the excess production capacity forced the Chinese government to
stock titanium ingot 4,000 tons in 2010. The visible hand of Chinese government has interfered
with the market.
3.1.7. Summary of the General Environmental Analysis
Market of specialty metals is highly competitive. ATI compete with many producers and
distributors who, depending on the product involved, range from large diversified enterprises to
smaller companies specializing in particular products. Some competitors are either directly or
indirectly subsidized by governments. The biggest force that weighs heavily on the specialty
metal industry is government regulations and variable mineral price. Not only opportunities but
also risks exist in this industry. The political/ legal has a strong effect on this industry. The legal
powers and litigation cost will eventually shape the industry.
3.2.
Industry Analysis
The U.S. specialty metals industry is focused on modern, efficient, and the leading edge
in both new product development and the implementation of advanced manufacturing
technology, not conventional steel. Being isolated from the steel refining and forging, specialty
metals has been an independent industry. Strategy can be viewed as building defenses against the
competitive forces or as finding positions in the industry where the forces are weakest.
Knowledge of the company’s capabilities and of the causes of the competitive forces will
highlight the areas where the company should confront competition and where avoid it(Porter,
1998).

28. 28
3.2.1. Industry Description
The specialty metals industry has both cyclical and secular drivers from the commercial
aerospace market to medical and engine perspective. The economic fundamentals include
Allegheny Technologies (ATI), Dynamic Materials (BOOM), Carpenter Technology (CRS), A.
M. Castle (CAS)Haynes International (HAYN), RTI International Metals (RTI), Schnitzer Steel
Industries (SCHN), Universal Stainless & Alloy Products (USAP) and Worthington Industries
(WOR).
3.2.2. Industry Dominant Economic Features
The high valued-added premium alloys that are more levered to the commercial
aerospace market is the most robust demand. The modern society us going through a transition
here with wide-body aircraft garnering a larger percent of the global aircraft market, so beyond
the sheer size of the larger aircraft benefiting the specialty metals industry, there are also
structural changes underway, as well as some of these aircraft are more composite-based. This
consequently results in a higher mix of specialty metals beyond just the larger size of the aircraft.
So you have both cyclical and secular drivers that are benefiting the specialty metals side of the
world.
Additionally, new aircraft engines as well as those that are still being designed call for
higher thrust and fuel efficiency and typically operate at higher temperatures, which is an
additional secular driver for the specialty metals industry. What’s more, the use of titanium in
industrial applications is more price sensitive in Europe and North America Market than in
China.
3.2.3. Market Size and Growth Rate.
U.S. imports more than half the world trade in titanium sponge. After shrinking to 124,000 tons

29. 29
in 2009, global supply of titanium sponge rose by an average of 26.5% per year from 2010 to
2012 to 241,000mt, an estimated 20,000 tons surplus in demand. To the smaller segment market
of titanium recovered rapidly from the stagnancy in 2009, and the demand for mill product has
bad been reached 165,000 t in 2011, the highest level experienced by industry.
3.3.
Five Forces Analysis
Whatever their collective strength, the corporate strategist’s goal is to a find a position in
the industry where ATI can best defend itself against these forces or can influence them in its
favor. The strongest competitive force or forces determine the profitability of an industry and so
are greatest importance in strategy formulation (Porter, 1998).
3.3.1. The Threat of New Entrants
The threat of new entrants by new competitors in the domestic specialty metal
industry is considered to be low, while the international specialty metal industry is moderate.
Except the large capital investment and technology thresholds, new entrants have to overcome
regulatory and legislative barriers before they can compete in the specialty metal market. From
the domestic perspective, there is no real threat of new entrants into the market. The construction
and infrastructure of melting and forging facilities is not a short period. The standards of
products qualification also takes time to get proven. The patent and royalty controlled by
magnates made a prerequisite to exclude new entrants. The acquisition and merger strategy of
industrial magnates wielded slows entry into this industry. The restrictions of capital and scale of
firms makes its even hard for small entrants to compete with the magnates.
But from the international perspective, the threat of new entrants is coming from the
developing countries, such as China, India, Russia and so on. Due to the blockade of techniques,
these countries with abundant mineral resource might research and develop the technologies on

30. 30
their own. For example, Baoji Titanium Industry Co., Ltd.is established in 1999, Shaanxi, China,
is a newborn infant in Titanium Industry; while the production of Baoji Titanium Industry Co.,
Ltd., takes 40% to 50% of China’s titanium market. New entrants are established under the
political instructions in a collectivism culture, the Entry Barrier of high capital input and
technology is not a challenge anymore. However, this possibility is relatively small. Product
Differentiation and Access to Distribution Channels also block the new entrants. ATI uses the
strategy of Joint Venture, which help it get the royalty in these resourceful countries and also
restraint these small companies in the miniature size.
3.3.2. The Power of Buyers
The power of buyers in the waste disposal industry is moderate to low. ATI has
long-term agreements with customers for Mission Critical Metallics® in the form of mill
products and components, to reduce their supply uncertainty. These agreements include a
titanium products supply agreement for aircraft airframes and structural components with The
Boeing Company that extends through the end of 2018.ATI has long-term agreements with
Rolls-Royce PLC for the supply of nickel-based super alloy disc-quality products and precision
forgings and castings for commercial jet engine applications. ATI has long-term agreements with
GE Aviation for the supply of premium titanium alloys, nickel-based alloys, and vacuum-melted
specialty alloys products for commercial and military jet engine applications.
The commercial aerospace market’s use of titanium alloys is expected to increase
significantly as new aircraft airframe designs use a larger percentage of titanium alloys. For
example, the airframe of the new Boeing 787 Dreamliner, which entered service in late 2011,
uses significantly more titanium and titanium alloys as a percentage of total weight than any
previous commercial aircraft airframe. New aircraft designs from Airbus, the A380 and A350-

31. 31
XWB, and from defense contractors also utilize a greater percentage of titanium alloys. Given
the significant current backlogs of Boeing and Airbus, as well as the engine manufacturers, this
increasing demand for titanium alloys mill products is expected to last for at least the next
several years. ATI announced it has extended its long-term titanium products supply agreement
with Boeing Company on Oct. 16, 2013. The extension agreement covers value-added titanium
mill products and provides opportunity for greater use of ATI's next-generation and advanced
titanium alloys in both long product and flat-rolled product forms.
3.3.3. The Power of Suppliers
In evaluating the power of suppliers, it was found to be very low. First of all, ATI
is now a fully integrated supplier, from raw material (for titanium) and melt through highly
engineered technically complex parts, creating a more stable and sustainable supply chain for
aerospace, defense and industrial markets. Secondly, the energy supplier such as national grid
would be relatively steady.
3.3.4. The Threat of Substitutes
The treat of substitutes in the waste disposal industry is considerably low. Being
lightweight, strong, and corrosion and heat resistant, there is not much competitive substitute
product of titanium. However, the new material Carbon-Fiber Reinforced Polymers (CFRP) is
compatible with titanium from some aspects, especially its lower-cost. But titanium’s key
material position in the frame and jet engine of aircraft is unshaken, even the new generation of
large passenger aircraft, the A380 and A350 from Airbus and the B787 from Boeing, used greater
volumes of CFRP.
3.3.5. Competitive Rivalry
The specialty metal market is one that is high when it comes to competitive rivalry.

32. 32
Different countries compete with each other in this industry. The world production of titanium in
2010 is 111,721 tons, China produced 38,323 tons, 34.3% of the whole world, U.S. produced
34,635 tons, Russia produced 21,000 tons, Japan produced 13,783, and Europe produced 4,000.
The Russian company VSMPO-AVISMA is the leading supplier of mill products to the
aerospace industry, supplying in excess of 20,000 tons in 2012. Manufacturers and distributors of
U.S. are Allegheny Technologies International Inc., RTI International Metals Incorporated,
Titanium Metals Corporation (TIMET, which is purchased by Precision Castparts Corp in Nov.
2012), Carpenter Technology Corporation. In Japan, there is no independent titanium company;
most of the titanium producers are set in the steel company, which saves cost. The Chinese
producers include Baoji Titanium Industry Co., Ltd. (Baoti Group Ltd.), Shanghai Baosteel
Group Corporation and Fushun Titanium Co. Ltd. As referred before, the Russia, American and
Japanese are focus on the aerospace grade titanium production, while Chia is currently supplying
the chimerical grade products, which is the low and primitive level of titanium products.
3.4. Industry Competitive Analysis
The specialty metal is a mature business with different competitors. Competition can be
divided into four categories by the three segments of ATI business, which are high performance
metals, flat- rolled products and engineered products. The author will illustrate the three
segments of ATI revenue percentage first, and then list the major competitors by four categories.
By Figure 3.4-1, the flat- rolled products makes the largest percentage of revenue, the high
performance metals ranks the second. The engineered products make 10% of whole revenue.

33. 33
10%
43%
High performance Metals
Flat- Rolled Products
Engineered Products
47%
Figure 3.4-1: ATI three business segments revenue percentage of 2012.
(Source: ATI Annual Report, 2013)
3.4.1. Industry Competitors
Nickel-based alloys and superalloys and specialty steel
alloys
Carpenter Technology Corporation
A
a
Special Metals Corporation,
Precision
Castparts
Corp.
company
C
Haynes International, Inc.
B
Outokumpu oyj (Finland)
C
Titanium and titanium-based alloys
a
Precision
Titanium Metals Corporation
company
RMI titanium,
an
Castparts
RTI
Corp.
C
international
Metal C

34. 34
Company
VSMPO - AVISMA (Russia)
A
Precision forgings and titanium investment castings
Precision Castparts Corp
A
Firth Rixson Limited (United Kingdom):
A
Aubert & Duval, a group member of Eramet (France)
A
Zirconium and related alloys
Cezus, a group member of AREVA (France)
A
H.C. Starck
A
Western Zirconium Plant of Westinghouse Electric Company, owned by Toshiba
Corporation
A
Stainless steel
AK Steel Corporation
B
North American Stainless (NAS), owned by Acerinox S.A. (Spain)
B
Outokumpu Oyj (Finland)
B
Imports from
B
Aperam (formerly part of Arcelor Mittal) (France, Belgium and Germany)
B
Outokumpu Oyj (Finland) including Mexinox S.A. de C.V., group member (Mexico):
B
Ta Chen International Corporation (Taiwan)
B
Tungsten and tungsten carbide products
Kennametal Inc
D
Iscar (Israel)
D
Sandvik AB (Sweden)
D

35. 35
Seco Tools AB (Sweden), owned by Sandvik AB
Figure 3.4.1-1: ATI’s major competitors.
(Source: ATI Annual Report, 2013)
As showed above, within each industry ATI has different competitors by different
product. A stands for High Performance Metals segment; B stands for Flat-Rolled Products
segment; C is the aggregate of High Performance Metals and Flat-Rolled Products segments; and
D is Engineered Products segment. The author will choose three domestic companies to
compare.
3.4.2. Carpenter Technology Corp.
Carpenter Technology Corp. (NYSE:CRS) was incorporated in 1904 and headquartered
in Wyomissing, PA. CRS develops, manufactures and distributes stainless steels and high
performance specialty alloys to meet the difficult challenges of advancing technologies.
Similarly involved in Aerospace and Defense, Automotive and Energy, and Medical industries, it
has a very close market capitalization as ATI, but only half of ATI’s employees. Approximately,
15% of the 11,200 ATI employees are located in outside of U.S. at a market capitalization of
$3.65 billion. Similar to ATI’s market capitalization at $3.25 billon, the Carpenter Technology
Corp. has 4,800 employees as their workforce. By the same industries involved in, ATI doubled
the employee numbers of CRS. The author made an inference that ATI is a more labor intensive
company than its peer.
D

36. 36
Table 3.4.1-2: Current Financial Information of CRS
(Source: CRS Annual Report, 2013)
Table 3.4.1-2: Business Segment revenue and percentage of CRS
(Source: CRS Annual Report, 2013)
In addition, CRS considers acquisition, joint ventures and other business combination
opportunities, as well as possible business unit dispositions, as part of business strategy, which
opportunities involve uncertainties and potential risk. Gross profit of CRS in fiscal year 2012
increased to $391.0 million for fiscal year 2011. The results primarily reflect the higher volumes
in fiscal year 2012, an improved product mix, price increases and better operating performance.
Fiscal year 2012 results include costs associated with $11.6 million of acquisition inventory fair
value cost adjustments in connection with the Latrobe Acquisition.
3.4.3. Precision Castparts Corp.
Precision Castparts Corp. (NYSE:PCC), a worldwide manufacturer of complex metal

37. 37
components and products, provides high-quality investment castings, forgings, fasteners/fastener
systems and aerostructures for critical aerospace and power generation applications. Quite
different from ATI and CRS, at a market capitalization around $3.65 billion and $3.25 billion,
PCC has a market capitalization of 36.55 billion and 28,500 employees, which is makes PCC a
real market leader in specialty metals industry. PCC owns unique Revert Management, which
includes metal chips, casting gates, bar ends, forging flash and other byproducts from forging,
casting and fastener manufacturing processes that can be re-melted and reused. PCC’s
infrastructure and capabilities create a closed loop system for the retention and reuse of
internally-generated reverts. Besides, PCC also provide metallurgical processing solutions and
services worldwide for our use and for other companies that require the melting and processing
of specialty alloys. Major markets include specialty alloy producers, foundries and other
industries with special metallurgical requirements.
Table 3.4.3-1: Current Financial Information of PCC
(Source: PCC Annual Report, 2013)

38. 38
Table 3.4.3-2: Current Financial Information of PCC
(Source: PCC Annual Report, 2013)
Strategically, PCC utilize the acquisition to keep their position in the specialty industry.
During 2012, by issuing senior, unsecured notes PCC acquired 8 companies which include
TIMET, the largest titanium manufacturer in the U.S., offers a full range of titanium products,
including ingot and slab, forging billet and mill forms. TIMET operates seven primary melting or
mill facilities in Henderson, Nevada and Toronto, Ohio.
3.5. Summary of External Analysis
Recognized by the major competitor by the industry leader PCC, ATI positioned second
in the specialty metal industry. The key to growth—even survival—is to stake out a position that
is less vulnerable to attack from head-to-head opponents, whether established or new, and less
vulnerable to erosion from the direction of buyers, suppliers, and substitute goods. Both ATI and
PCC devise strategy of acquisition to keep the new entrants out of this industry. But compare
with PCC, ATI is more technology focused, it builds most facilities by themselves, investing
capital and technology via a long period. Innovation in marketing can raise brand identification,
the ATI exclusive products, such as ATI 425 has built a production differentiation from other
products based on the stringent industry demand.
4.0 Internal Analysis
To determine the core competitive advantage that exists within a firm, internal analysis
evaluates the capabilities and resources that a firm possesses which relates to achieving core
competencies. This helps to develop solutions and creates a competitive advantage in the
industry. This ultimately provides a strategic competitiveness the company can use to ensure a

39. 39
profitable future. The analysis consists of an organizational analysis, the analysis of the
firm’s resources, the objectives of the firm, and an evaluation of its financial performance. This
ultimately leads to a strategic analysis.
4.1.
Organizational Analysis
Registered in Delaware, headquartered in Pittsburgh, Pennsylvania, ATI has 14 facilities
in the U.S. and 2 Joint Venture overseas.
ATI principle properties are scattered in the whole U.S. territory, such as Titanium
sponge production facilities are located at Rowley, UT and Albany, OR. Domestic melting
operations are located in Monroe, NC, Bakers, NC, and Lockport, NY (vacuum induction
melting, vacuum arc re-melt, electro-slag re-melt, plasma melting); Richland, WA (electron beam
melting); and Albany, OR (vacuum arc re-melt). Production of high performance metals, most of
which are in long product form, takes place at our domestic facilities in Monroe, NC, Lockport,
NY, Richburg, SC, Albany, OR, and Oakdale, PA. Our production of zirconium and related alloys
takes place at facilities located in Albany, OR, Huntsville, AL, and Frackville, PA. Our
production of highly engineered forgings, castings, and machined components takes place at
facilities in Cudahy and Coon Valley, WI, Windsor, CT, Albany, OR, and Irvine, CA. The melting
stainless steel and other flat-rolled specialty metals are located in Brackenridge, Midland and
Latrobe, PA. Hot rolling of material is performed at our domestic facilities in Brackenridge,
Washington and Houston, PA. Finishing of our flat-rolled products takes place at our domestic
facilities located in Brackenridge, Bagdad, Vandergrift, Midland and Washington, PA, and in
Wallingford and Waterbury, CT, New Bedford, MA, and Louisville, OH.
ATI constructed a new advanced specialty metals Hot-Rolling and Processing Facility
(HRPF) for our Flat-Rolled Products business segment at our existing Brackenridge, PA site.

40. 40
Construction of the HRPF is expected to be completed with assets ready for service by the end of
2013. The HRPF is designed to produce thinner and wider hot-rolled coils of exceptional quality
at reduced cost with shorter lead times and require lower working capital requirements. The
engineered production facilities are located in Nashville, TN, Huntsville, Grant and Gurley, AL,
Houston, TX, and Waynesboro, PA (tungsten powder, tungsten carbide materials and carbide
cutting tools and threading systems). Other domestic facilities in this segment are located in
Portland, IN and Lebanon, KY (carbon alloy steel forgings), LaPorte, IN (grey and ductile iron
castings), Bolingbrook, IL (specialty metals fabrication) and southwestern Pennsylvania
(precision metals finishing services) (ATI, 2013).
4.1.1. Corporate Vision and Mission
Set aside the slogan of building the world’s best Specialty Metals Company. An ATI
initiative is to integrate and coordinate ATI’s global capabilities to offer current and new
customers access to the Company’s full range of products, processes, and technical resources. Its
strategy is to identify secular growth trends in the global economy that have a meaningful impact
on the use of products.
In addition to achieving with the safety performance, ATI set cost reduction targets in
each year of every business cycle. ATI improved cost structure with nearly $114 million in gross
cost reductions. This brings ATI nine-year total to over $1.2 billion in gross cost reductions,
before the effects of inflation. Driving a lean manufacturing throughout operations made ATI
success from the Business System. ATI has targeted additional gross cost reductions of at least
$100 million in 2013.
4.1.2. Leadership
ATI understands that pursuing long-term, sustainable leadership in the specialty metals

41. 41
industry mandates more than operational excellence. Leadership requires us to achieve
excellence in employee safety, environmental stewardship, and social responsibility. The health
and safety of our employees and environmental compliance go hand-in-hand with operational
excellence. We are committed to continuing to improve safety in all of our operations.
ATI’s goal is to finish each day incident and injury free. In 2012, OSHA Total Recordable
Incident Rate of ATI was 2.71 and Lost Time Case Rate was 0.58 per 200,000 hours worked,
which is competitive with world-class performance. As a demonstration of environmental
stewardship, ATI Wah Chang achieved ISO 14001 certification in 2012. ISO 14001 recognizes
our system to identify and control environmental impact and constantly improve environmental
performance. In addition, as a corporate citizen, we believe in giving back to the communities in
which we operate. Across ATI, in 2012 we raised more than $1 million for United Way charities,
and many employees donated their time by participating in Days of Caring(ATI, 2013).
4.1.3. Culture
In Building the World’s Best Specialty Metals Company, ATI is committed to Relentless
Innovation. ATI aims to do more, makes our products better, and implements and executes faster
through the ATI Business System (ATIBS). ATIBS drives lean manufacturing initiatives,
improves safety, quality and yields, leads to improved productivity and cost efficiencies, and
delivers excellent customer reliability and service (Richard J. Harshman, 2013).
That is through a shared commitment to our core values. ATI believe that Values-Based Leaders
are the true difference in companies that move people to new levels of achievement and success.
Key core values ATI addressed are,
• Integrity as the Cornerstone of our business. To that end, we must be honest and forthright in

42. 42
everything we do.
• We expect everyone to be treated with dignity and respect and we embrace the values of
cooperation, diversity, and teamwork.
• ATI is committed to more than just adherence to laws and regulations. ATI’s commitment is to
reflect the highest level of integrity and ethics.
• Personal accountability for outcomes ensures the long-term success of ATI.
• Safety, Health and Environmental Compliance are the prerequisites to all operations, and our
goal is to finish each day incident- and injury-free.
• Product Quality and Excellence is demonstrated in everything we do.
• Technology, Creativity, Learning, and Freedom of people to reach their individual potential is
ATI’s culture.
ATI’s commitment to Do What’s Right continues to guide us throughout our global operations
and business activities.
4.1.4 Structure.
Domestic Facilities Name
Products
Stainless & specialty steels
ATI Allegheny Ludlum
Grain-oriented electrical steel (GOES)
Titanium & titanium alloys
Nickel- & cobalt-based alloys
Nickel- & and cobalt-based superalloys
ATI Allvac
Titanium & titanium alloys
Specialty & specialty steels

43. 43
Zirconium alloys
Exotic
alloys
(hafnium,
tantalum,
tungsten
&
ATI Wah Chang
vanadium)
Titanium & titanium alloys
ATI Ladish Forging
Highly-engineered forgings
Isothermal forgings
ATI Chen-Tech Forging
Hot-die forgings
ATI Pacific Cast Technologies
Titanium investment castings
ATI ZKM Forging
Forgings
ATI Portland Forge
Carbon and alloy steel forgings
Closed-die forging, machining, heat-treating and
fabrication
ATI Casting Service
High-quality ductile and gray iron castings
Superalloy,
nickel,
and
titanium
powder
metal
ATI Powder Metals
components
ATI Precision Finishing
Precision finishing services
ATI Ladish Machining
Aerospace machining and subassembly
Aerospace precision machining
ATI Valley Machining
Aerospace sonic configuration machining
ATI Ladish Diecast Tooling
High-quality shot-end tooling
rough mold, semi-finished and finished cemented
ATI Firth Sterling
tungsten carbide and tungsten heavy alloy components.
ATI Stellram
indexable and solid carbide cutting tool systems,

44. 44
specialty abrasives
Table 4.1.4-1: ATI facilities and products.
(Source: http://www.atimetals.com/businesses/business-units/Pages/default.aspx )
Two Global Joint Ventures
Shanghai STAL Precision Stainless Steel Co., Ltd (STAL) is a joint venture company
between ATI Allegheny Ludlum and Baosteel, China’s largest integrated steel company. STAL
specializes in manufacturing and marketing precision-rolled stainless strip. STAL is located in
Xin-Zhuang Industrial Zone and equipped with state-of-the-art equipment, including 20-roller
Sendzimir mills, continuous bright annealing furnaces, tension levelers, degreasing cleaning
lines and precision slitters. STAL is the first manufacturer in China to produce super thin, super
flat and super hard precision stainless steel. The products are sold to mainland China, Taiwan and
Hong Kong, as well as many countries in Asia, for such industries as information technology,
computers, automotive, medical equipment, tubing, semiconductors and more.
UNITI Titanium brings together two major global titanium producers with complimentary
manufacturing and technical capabilities: ATI and VSMPO-AVISMA (Verkhnaya Salda
Metallurgical Production Association – Berezniki Titanium-Magnesium Works) from Russia, to
create a joint venture focused on titanium mill products for industrial, consumer and other nonaerospace, non-military and non-medical markets. Uniti Titanium integrates the synergistic use
of the raw material, melting, hot rolling, finishing, research and technology resources of the two
companies. Uniti Titanium is a supplier of a broad array of commercially pure titanium products
for target markets in ingot, slab, plate, sheet, coil, bar, billet, welded tubing and seamless
tubing(ATI,2013).

45. 45
4.1.5. Summary of Organizational Analysis
Geographical scattered facilities locations don’t influent ATI’s manufacturing operation.
But the different level product line will increase the transportation cost. The heave weight and
batch process features and cost will force ATI choose maritime and train transportation, the mass
goods transportation will gear down the production efficiency. From the logistic considerations,
reasonably arrange the contract products from the closest facility would help to reduce the
transportation cost. For instance, ATI ZKM Forging, located in Stalowa Wola, Poland, the west
coast of U.S., is one of Central Europe’s largest suppliers of forgings. But the transportation fees
would definitely larger than the European locals, or even larger than the other manufacturers in
the east coast.
4.2. Evaluation of Financial Performance

46. 46
Table 4.2-1 ATI 2010-2012.ATI Consolidated Statements of Income
(Source: ATI annual report, 2013).
Recovered from the financial crisis in 2009, ATI and its industry peers increased steadily
from the chasm. By the Sales amount of $5,031.5 million and net in $9.4 million, the specialty
metal industry is a high input and low output industry. Morningstar gave ATI a narrow economic
moat, which is formed by high-performance titanium- and nickel-based alloys. A narrow
economic moat means slight competitive advantage that one company enjoys over competing
firms operating in the same industry. A narrow moat is still an advantage for a company, but it is
one that only provides a limited amount of economic benefit and will typically last for only a
relatively short period of time before competition marginalizes its importance. Multiple specialty
products that must be developed to exacting customer specifications, using production methods
that are not easy to replicate, creating barriers to entry for competitors. With only a handful of
companies able to supply the specialty alloys demanded by the aerospace industry, many
aerospace customers enter into long-term contracts with Allegheny to assure supply. Some new
alloys are developed in collaboration with customers, usually capped off by a long-term sourcing
agreement for the new alloy. For such circumstance, high-performance metal business benefits
from switching costs, and competition in the industry will be largely limited to existing players.
From the balance sheet showed below, from the year 2011 to last year, all the assets accounts has
been decrease except the inventory account. This might not be a good signal from the perspective
of effective operation. The overstocking might being caused by ATI doesn’t have a good
understanding of the future market. However, ATI explained this as below,
Inventories are stated at the lower of cost or market, less progress payments. Costs
include direct material, direct labor and applicable manufacturing and engineering overhead, and

47. 47
other direct costs. Most of our inventory is valued utilizing the LIFO costing methodology.
Inventory of our non-U.S. operations is valued using average cost or FIFO methods. Under the
LIFO inventory valuation method, changes in the cost of raw materials and production activities
are recognized in cost of sales in the current period even though these material and other costs
may have been incurred at significantly different values due to the length of time of our
production cycle. The prices for many of the raw materials we use have been extremely volatile
during the past four years. Since we value most of our inventory utilizing the LIFO inventory
costing methodology, a rise in raw material costs has a negative effect on our operating results,
while, conversely, a fall in material costs results in a benefit to operating results(ATI, 2013).
The explanation is very acceptable, but from the perspective of financing position, the author
suggests ATI to change their inventory method on 10-K, but keep using it as an internal control.

48. 48
Table 4.2-2 ATI 2010-2012.ATI Consolidated Balance Sheet.
(Source: ATI annual report, 2013).

49. 49
Table 4.2-3 ATI 2010-2012.ATI Consolidated Balance Sheet.(Source: ATI annual report, 2013).
From the cash flow table, ATI use the money earned from operation and issuing longterm debt to acquire other companies to enlarge their product portfolio, and ATI is a stock barely
releases
dividends.

50. 50
Allegheny Technologies Inc.
TERM
Year End 12/31/2012
Year End 12/31/2011
Year End 12/31/2010
Year End 12/31/2009
Year End 12/31/2008
5,031.50
5,183.00
4,047.80
3,054.90
5,309.70
Year End 12/31/2012
Year End 12/31/2011
Year End 12/31/2010
Year End 12/31/2009
Year End 12/31/2008
Altman Z-Score
1.81
2.26
2.72
2.3
3.03
Sustainable Growth Rate
3%
6%
0%
-2%
25%
20.3
22.9
76.1
137.3
4.5
Gross Profit Margin on Sales
13.80%
15.70%
12.10%
13.40%
21.70%
Net Profit Margin (Pre-tax)
4.80%
6.50%
3.10%
2.10%
16.30%
Net Profit Margin (After-tax)
3.10%
4.10%
1.70%
1.00%
10.70%
Operating Expense to Sales
93.70%
91.70%
95.40%
97.30%
83.60%
Operating Profit to Sales
6.30%
8.30%
4.60%
2.70%
16.40%
Basic Earning Power
3.90%
5.60%
2.80%
1.50%
20.80%
Return on Assets (After-tax)
2.50%
3.50%
1.60%
0.70%
13.60%
Return on Equity
6.40%
8.70%
3.50%
1.60%
28.90%
Net Sales in $M
PREDICTOR RATIOS:
PROFITABILITY RATIOS:
P/E Ratio

51. 51
Table 4.2-4 ATI 2008-2012.Profitability Ratios.
(Source: http://0-www.ventureline.com.helin.uri.edu/ratio-analysis-accounting-ratios/sample/publicly_traded_company/)
From the five year Profitability Ratios, it’s clear to see the cyclic driving factor behaved in ATI’s financial ratios. Periodically up and
down profit margin. ATI has a steadily growth in net profit margin. In the year end 2008, ATI has its best net profit margin and highest
return on equity, however, the hurt of financial crisis showed delayed in the recent four year, different from the retailer industry or
financial derivatives industry.

52. 52
Allegheny Technologies Inc.
Year End
Year End
Year End
Year End
Year End
12/31/2012
12/31/2011
12/31/2010
12/31/2009
12/31/2008
48
44.2
42.3
55.1
40.7
44.5
49.9
49.2
46.8
36.5
3
3.6
3.8
3.1
4.6
2.8
3.2
3.5
3.2
4.7
122.9
100.6
94.9
118.1
79.2
3.1
3
3.1
2.2
4.3
Fixed Asset Turnover
2
2.2
2
1.6
3.3
Total Asset Turnover
0.8
0.9
0.9
0.7
1.3
Year End
Year End
Year End
Year End
Year End
12/31/2012
12/31/2011
12/31/2010
12/31/2009
12/31/2008
Current Ratio
2.9
3
2.7
3.2
2.8
Quick Ratio
1.1
1.4
1.4
1.9
1.5
Sales/Receivables
8.2
7.3
7.4
7.8
10
37.10%
37.40%
31.10%
34.00%
20.20%
ASSET MANAGEMENT RATIOS:
Collection
Period
(Period
Average)
Collection Period (Period End)
Inventory Turns (Period Average)
Inventory Turns (Period End)
Days Inventory
Working Capital Turnover
LIQUIDITY RATIOS:
Gearing Ratio

53. 53
Year End
Year End
Year End
Year End
Year End
12/31/2012
12/31/2011
12/31/2010
12/31/2009
12/31/2008
Times Interest Earned
3.5
4.2
2.6
2.1
23.7
Equity Multiplier
2.5
2.4
2.2
2.2
2.1
Fixed Assets (net)/Net Worth
1.03
0.96
0.97
0.95
0.83
Debt Ratio
0.6
0.6
0.5
0.5
0.5
Debt to Equity
1.5
1.4
1.2
1.2
1.1
Long-term-debt to Equity
0.6
0.6
0.5
0.5
0.3
Current-debt to Total Debt
23.10%
24.10%
32.20%
26.80%
31.40%
DEBT MANAGEMENT RATIOS:
Table 4.2-5 ATI 2008-2012 Assets Management Ratios and Liquidity Ratios.
(Source: http://0-www.ventureline.com.helin.uri.edu/ratio-analysis-accounting-ratios/sample/publicly_traded_company/).
The days of inventory is getting longer in the five years. There must be an effective operation problem in Inventory management. The
Debt Ratio is almost not changed, while the Debt to Equity is getting bigger, this means ATI getting more cash to buy new properties
by
issuing
long-term
bonds,
but
not
issuing
stocks,
which
cost
is
more
interest
but
less
tax

54. 54
4.2.1. Compare to the rivals.
By the same data the author get, the Industry leader PCC maintains a net profit margin around
23.3% to 25.4% during the five years, compare to ATI’s Net Profit Margin used to be 16.3% to
4.8%. The market capitalization of PCC is ten times of ATI, the conclusion of scale of economy
and scope of economy authentically helped PCC to avoid the effect of financial crisis. Different
from ATI’s nonferrous operation, PCC contains more steel manufacture.
Compare to the smaller rivals, RTI, around one third market capitalization of ATI, its net profit
margin drops from 14.4% to 4.3% in 2012, which also match the trend, the smaller, the easier
fluctuate.
Table 4.2.1-1: Comparison with CRS.
(Source: www. finance.yahoo.com).
For more detailed contrast to the same size rivals, CRS is giving more solutions. The half
employee size saved labor cost and administration fees. ATI has to take the necessary human
resource consult into consideration. Besides, by more than $ 2 billion revenue, the Earnings
before Interest and Tax of ATI is even smaller than CRS’s, this is abnormal. The large

55. 55
expenditure should be investigates.
4.3. Strategic Analysis.
To recall ATI’s goal and objectives, this part will analyze the strategy ATI applied.
4.3.1 Corporate-Level Strategy and Internal Strategy.
By Acquisition and Joint venture, ATI diversify into new business. As recorded above,
ATI strategically acquire related business companies and relevant suppliers and customers. The
quick entry avoid barriers and gained ATI complementary resources and capabilities. For
example, ATI acquired Ladish at a price of $778 million in 2011. Ladish used to be a major
customer of ATI’s titanium and nickel business makes a range of highly specialized metal parts
for the aerospace industry and the larger industrial market. ATI currently had a much smaller
presence in the engineered products sector; it makes fasteners and shafts for Rolls Royce jet
engines. Obviously, ATI choose related business as their diversification path, which has
competitively valuable cross business value chain and resource matchups.
4.3.2 Business-Level Strategy and Internal Strategy.
The product differentiation strategy is applied by ATI. ATI has developed and innovated
the new products to meet the customers’ demand. For instance, to replace the traditional titanium
alloy for jet engines, ATI innovated the 6-4 titanium. As well the next-generation and futuregeneration jet engines require more ATI 17™ alloy and ATI 6-2-4-2™ alloy. Similarly, while the
workhorse nickel-based superalloy has been 718, hotter-burning, next- generation and futuregeneration jet engines require ATI 718Plus® alloy, Rene 65 alloy, ATI 720™ alloy, powder
metals, and titanium aluminates.
Without doubt, the commitment to relentless innovation guides ATI’s management
actions to improve the competitiveness of their legacy products while charting a course to realize

56. 56
future benefits of new products and processes. Sustaining innovation maintains or grows our
position in legacy products. Game-changing innovation creates competitive advantage and
advances ATI’s leading position in specialty metals technology in our key growth markets, as
well as in markets that are more commoditized. Relentless Innovation earns ATI the ability to
engage in long-term strategic relationships that are mutually beneficial with our customers at the
highest levels. Our relationships are with the OEMs and the key suppliers on whom they depend
(ATI annual Report).
5.0 Recommendations.
Six recommendations will be conclude into this article.
Firstly, continue the efforts to reduction of cost. The manufacture nature is not labor
intensive; ATI’s employee numbers is quite outrageous. The necessary administration
examination and human resource review need to be done in this instantly grow company. During
the fast acquisition, the human resource redundancy might generate unnecessary cost. To
reallocate the function of different departments in the new acquired companies is imperative.
Secondly, the Financial Statements need to be improved by the cooperation of accounting
firms. 10-K is not an internal control file, but a demonstration method to show the public how
efficient and effective the company operation. The method and presentation ATI currently used is
not excellently to demonstrate its strength and capability. Make the accounting fees works. By
creating a new appearance of its Financial Statements, ATI will definitely win more benefit from
the stock market and more opportunities to get investing and financing cash flows. For example,
to change the method of recording Inventory, will definitely avoid the currency exchange rate
fluctuation and raw material price vibrations.
Thirdly, not only getting cash flows from issuing a long-term bond, the benefit of saving

57. 57
tax from interest cost is limited. Although issuing stocks is more costly, but the nature of stocks
will gain ATI more cash flows to control. Set up a portfolio of issuing bonds and stocks,
integrated the financial tools to acquire more capital from the market.
Improve the information system in the specialty metal market. Since ATI use surcharge
pricing for its alloy products, which helps insulate ATI from wild fluctuations in raw material
prices, the more sensitive the information system is, the more efficient operation ATI will have.
As we known, ATI buys scrap metal, nickel, molybdenum, cobalt, and other metals to make
products. Price fluctuations in metal and scrap prices can have a large impact on near-term
results for the company, but, in general, surcharges and index mechanisms offset the impact of
increased raw material costs over the long run. While changes in metal prices don't always
directly affect results, periods of high metal demand (and resulting high prices) usually coincide
with solid results for
Besides, due to the pollutants released into the air, especially contaminating facilities in
the demographically intensive area, ATI have to improve its public image. Improving the
technology of purring exhaust gas, absorbing the exhausted heat into new use or product in to
secondary product, such as supply the civil heating. At the same time, by encourage technology
innovation, sponsor mechanical majored student or involving philanthropic and environmental
activities, ATI will gain favorable impression from the public.
Last but not least, the expand direction ATI decided is wisdom. Engaged into the
engineering products market is an excellent strategy. Keep tracking to affordable sized
companies, acquiring them at a reasonable price will aggregate the market share and revenue
percentage of ATI. Statically enlarge its capitalization will help ATI get the benefits of scale
economy and scope of economy. Maintaining the innovation of specialty metals will hold the

58. 58
current leadership. Name more products start by ATI will improve the brand recognition.

59. 59
6.0 Reference
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The
Boeing
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(2013).
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Technology
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