The report on “The Steel Industry Analysis and the Supply Chain Management of BSRM” has been prepared based on the collected information through inter...
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Letter of Transmittal January 22, 2017 Md. Rashedur Rahman Assistant Professor Department of International Business ni!ersity of Dha"a #u$% #u$%e&t e&t'' Sub Submiss mission ion of report report on: The Steel Industr Industry y Analys Analysis is and the Sup Supply ply Chain Chain Management of BSRM
Dear #ir, It is a (reat pleasure for me to su$mit the Report on ) The Steel Industry Analysis and the re+uireme ement nt for &ourse &ourse Ban(lad Ban(ladesh esh in Supply Sup ply Chain Chain Manage Management ment of BSRM* as per our re+uir Inte Intern rnat atio ional nal Busi Busine ness ss,, IBIB-10. 10. It Its a des& des&ri ript pti! i!ee study study.. /riti ritin( n( this this Repor Reportt has has $een $een a &hallen(in( $ut interestin( eperien&e for me. After &ompletin( this Report I &an say that I ha!e learnt a lot a$out the insi(hts of steel Industry. It (a!e me an opportunity to (rasp a thorou(h "noled(e on the su$%e&t matter and I am &onfident that this "noled(e ill pro!e to $e of utmost !alue and importan&e to me in future. I ha!e tried my $est for su&&essful &ompletion of this report and I hope that any unintentional error hile preparin( this Report ill $e &onsidered ith sympathy. herefore, I hope your "ind &onsideration in this re(ard. I ill $e !ery (rateful if you find my effort satisfa&tory and o$li(e there$y. #in&erely, 3asi$ur Rahman ID' 14 Dept of International Business ni!ersity of Dha"a 1
Table T able of Contents 5etter of ransmittal........................................................................................................................1 6e&uti!e #ummary.........................................................................................................................hapter 01' Introdu&tion..................................................................................................................8 1.1 9ri(in of the report................................................................................................................8 1.2 Ba&"(round of the #tudy........................................................................................................8 1.4 #tatement of the Resear&h Pro$lem.......................................................................................8 1.- Resear&h 9$%e&ti!es...............................................................................................................8 1.: Methodolo(y..........................................................................................................................7 1.8 #&ope of the #tudy.................................................................................................................; 1.7 5imitations of the #tudy.........................................................................................................; hapter 02' 5iterature Re!ie.........................................................................................................< hapter 04' Industry Information=Ban(ladesh and >lo$al?..........................................................10 4.1 Ban(ladesh Perspe&ti!e........................................................................................................10 4.1.1 3istory...........................................................................................................................10 4.1.2 Ma%or Players.................................................................................................................11 4.1.4 ustomers of the #teel Industry....................................................................................11 4.1.- Mar"et...........................................................................................................................12 4.1.: >roth of the Industry..................................................................................................12 4.1.8 Ban(ladeshs Position in the >lo$al #teel Industry......................................................12 4.2 >lo$al Perspe&ti!e...............................................................................................................14.2.1 3istory...........................................................................................................................14.2.2 Ma%or Players................................................................................................................14.2.4 Ma%or Produ&ts of #teel Industry'.................................................................................1: 4.2.- ustomers of the Industry.............................................................................................1: 2
Table T able of Contents 5etter of ransmittal........................................................................................................................1 6e&uti!e #ummary.........................................................................................................................hapter 01' Introdu&tion..................................................................................................................8 1.1 9ri(in of the report................................................................................................................8 1.2 Ba&"(round of the #tudy........................................................................................................8 1.4 #tatement of the Resear&h Pro$lem.......................................................................................8 1.- Resear&h 9$%e&ti!es...............................................................................................................8 1.: Methodolo(y..........................................................................................................................7 1.8 #&ope of the #tudy.................................................................................................................; 1.7 5imitations of the #tudy.........................................................................................................; hapter 02' 5iterature Re!ie.........................................................................................................< hapter 04' Industry Information=Ban(ladesh and >lo$al?..........................................................10 4.1 Ban(ladesh Perspe&ti!e........................................................................................................10 4.1.1 3istory...........................................................................................................................10 4.1.2 Ma%or Players.................................................................................................................11 4.1.4 ustomers of the #teel Industry....................................................................................11 4.1.- Mar"et...........................................................................................................................12 4.1.: >roth of the Industry..................................................................................................12 4.1.8 Ban(ladeshs Position in the >lo$al #teel Industry......................................................12 4.2 >lo$al Perspe&ti!e...............................................................................................................14.2.1 3istory...........................................................................................................................14.2.2 Ma%or Players................................................................................................................14.2.4 Ma%or Produ&ts of #teel Industry'.................................................................................1: 4.2.- ustomers of the Industry.............................................................................................1: 2
4.2.: ontri$ution to the /orld 6&onomy.............................................................................1: hapter 0-' >lo$al Industry Analysis............................................................................................18 -.1 Porters @i!e @or&es Model'..................................................................................................18 -.2 #/9 Analysis....................................................................................................................1< -.4 riti&al #u&&ess @a&tors of the #teel Industry......................................................................20 -.- In!estment Potential 9f #teel Industry................................................................................20 hapter 0:' ompany Analysis' B#RM #teel...............................................................................21 :.1 A$out B#RM........................................................................................................................21 :.2 ision of B#RM'..................................................................................................................22 :.4 Ma%or Produ&ts of B#RM....................................................................................................22 :.- #/9 Analysis of B#RM...................................................................................................24 :.: #upply hain Mana(ement 9f B#RM.................................................................................2: hapter 08' @indin(s and Re&ommendations................................................................................27 on&lusion.................................................................................................................................27 8.1 @indin(s................................................................................................................................27 8.2 hallen(es............................................................................................................................27 8.4 Prospe&ts'.............................................................................................................................2; 8.- Re&ommendations'...............................................................................................................2;
3
Executive Summary he report on )he #teel Industry Analysis and the #upply hain Mana(ement of B#RM* has $een prepared $ased on the &olle&ted information throu(h internet and nespaper pu$li&ations and ma(aines. Its a des&ripti!e resear&h &ondu&ted as a re+uirement of our Ban(ladesh in International Business &ourse. he entire report is di!ided into si &hapters. In &hapter one, the introdu&tion, o$%e&ti!e, methodolo(y, and limitations of the report ha!e $een des&ri$ed. he o$%e&ti!e of the study is to (et eperien&e in industry analysis pra&ti&es in Ban(ladesh and >lo$al perspe&ti!e espe&ially in de!elopin( and least de!eloped &ountries. he o$%e&ti!e of the report is to (et eperien&e in steel industry and &omplete the &ourse re+uirements. he sour&es of the data are mainly internet and different or(aniations e$site. In hapter to of the report literature re!ie on the industry analysis has shon. Pre!ious industry analysis or"s, arti&le and nespaper re!ies and summary ha!e shon in the report. Industry analysis is a $roader &on&ept $ut in some report it had shon too narroly as ell as the de!elopin( &ountry steel industry has not $een studied too mu&h $efore. Information on the industry analysis and pre!ious or" has also shon in this part. hapter three dras some steel industry information from $oth Ban(ladesh and >lo$al perspe&ti!e. #teel industry is an esta$lished and (roin( industry in Ban(ladesh. Predominantly $ased in the port &ity of hitta(on(, the industry has emer(ed as a ma%or &ontri$utor to the national e&onomy. In this part the history of Ban(ladeshi steel industry ha!e shon here the first e!er steel mill as esta$lished in 1<:2 $y the 3 A"$erali >roup of Industries. Ban(ladeshi steel industrys ma%or players, &ustomers, (roth of the industry and the position of Ban(ladeshi steel industry ha!e shon shortly in this part. Alon( ith the Ban(ladesh part the >lo$al steel industry has also shon here here the dominant position is hold $y the hina produ&ers and mar"eters. he history of the modern steel industry $e(an in the late 1;:0s, $ut sin&e then, steel has $een $asi& to the orldCs industrial e&onomy. he ma%or players, &ustomer (roups and the &ontri$ution to the orld e&onomy of this industry ha!e shon here.
4
hapter four shos industry analysis usin( different te&hni+ues as the Porters @i!e @or&es model, #/9 Analysis, &riti&al su&&ess fa&tors of the Industry. In Porters @i!e @or&es the ma%or Bar(ainin( poer of suppliers is 5o &ost of sit&hin( suppliers, the ma%or Bar(ainin( poer of Buyer are Ma%or players ha!e 3i(h $ar(ainin( poer and lar(e &ustomer (roup, the ma%or Barriers to 6ntry are apital Re+uirement and >o!ernment re(ulation re(ardin( the #teel industry and the other to for&es are threat of su$stitute produ&ts and ri!alry amon( esta$lished &ompanies. In #/9 analysis the ma%or stren(ths of this industry are A$undant resour&es of iron ore and 5o &ost and effi&ient la$or for&e. he ea"nesses of this industry are 3i(h &ost of ener(y 3i(her duties and taes, 3i(h &ost of &apital and la$or re(ulations. he &riti&al su&&ess fa&tors of this industry are A&&ess to ra materials at lo &osts, finan&ial stru&ture and the A$ility to 6port. In this part the in!estment potential of this #teel Industry has also shon. hapter fi!e des&ri$es a Ban(ladeshi &ompanys a&ti!ities and the #upply hain Mana(ement of the &ompany hi&h produ&es steel. In this part the Ban(ladesh #teel Rerollin( Mills =B#RM?s a&ti!ities ha!e $een des&ri$ed. B#RM is the leadin( steel manufa&turin( &ompany and one of the prominent &orporate houses in Ban(ladesh. he B#RM (roup as esta$lished in 1<:0 in steel $usiness under the splendid initiates of fi!e $rothers. he !ision of the B#RM is to Preser!e the trust of all our sta"eholders $y adoptin( ethi&al $usiness pra&ti&es and #upport the so&iety throu(h orporate #o&ial Responsi$ility initiati!es. 3ere the analysis on B#RM (roup has also &ondu&ted usin( the #/9 analysis. he ma%or produ&ts of B#RM (roup and the supply &hain mana(ement analysis ha!e $een &ondu&ted here. B#RM supply &hain is there to ensure uninterrupted supply of plan and materials to manufa&turin(, finished (oods to &ustomers, indire&t (oods and ser!i&es to all throu(h inte(rated supply &hain mana(ement of lo(isti&s and sour&in( at optimum &ost hile ensurin( &ustomer satisfa&tion. hapter si of the report shos the &on&ludin( parts of the report, ma%or findin(s and re&ommendations for the #teel Industry. he ma%or findin(s of B#RM are Pioneer in steel industry, #u$sidiary of the mar"et leader in the rerollin( industry and eperien&ed mana(ement. he entire report fo&uses on the #teel industry analysis and the #upply hain Mana(ement of the B#RM (roup. he report &an $e used as (uidan&e in this re(ard and for further resear&h in future.
Chapter 01: ntro!uction "
1.1 Origin of the report he report on )Analysis on #teel Industry* as &arried out as a part of our Ban(ladesh in International Business &ourse. he report as authoried $y our &ourse tea&her as a part of our a&ademi& re+uirement. After &olle&tin( information a&&ordin( to the tea&hers instru&tion and (uidan&e, I prepared the report a&&ordin( to the tea&hers (uidan&e.
1. Ba!"ground of the Study In&reasin( domesti& and (lo$al &ompetition, e&onomi& donturn, rapidly &han(in( mar"et trends, and !olatile finan&ial mar"ets ha!e all added to the pressure on or(aniations to &ome up ith effe&ti!e responses to sur!i!e and su&&eed. he su&&ess of an or(aniation operatin( in domesti& and (lo$al mar"et depends on many fa&tors from plannin( to ee&ution. he su&&essful &ompletion of all the tas"s depends on &hoosin( and pra&ti&in( and dealin( ith proper produ&ts, mar"et stru&ture, &ompetitor analysis, tradin( pro&ess and sharin( of information to different parties.
1.# Statement of the Resear!h $roblem his report is mainly for sear&hin( the ansers of the folloin( +uestions'
/hat is the pro&ess of operatin( in #teel industry /hat are the !arious produ&ts E ser!i&es /ho are the &lients of this steel industry 3o idely the (lo$al steel industry is spreaded /hat is the ran(e of &ompetition fa&ed $y the industry &ompetitors /hat is the main sour&e of profita$ility /hat are the ays to impro!e eistin( operation
1.% Resear!h Ob&e!ti'es he aim of the report is to de!elop an understandin( of #teel Industry of Ban(ladesh and (lo$al mar"et.
(eneral ob&e!ti'e '
#
o (et an eperien&e a$out #teel Industry. his ill (i!e me an opportunity to understand the different aspe&ts and limitations of steel industry as ell as the ay to impro!e the present &ondition. Spe!ified Ob&e!ti'e '
he spe&ifi& o$%e&ti!es of my hole study are as follos'
o fulfill the re+uirement of our &ourse.
o analye &riti&ally the sele&ted topi&s.
1.) Methodology he study undertoo" des&ripti!e resear&h approa&hes. he purpose of the study refers to perform +ualitati!e analysis usin( se&ondary data. i* Resear!h +esign
he purpose of my report is to des&ri$e different aspe&ts of steel industry, produ&ts E ser!i&es, &lient $ase, operations type, &ompetition, and ays of impro!ement of ser!i&es of&ompany. It is a des&ripti!e study. Data mainly &ame from se&ondary sour&es from different e$sites of the &ompanies, nespaper arti&les and internet. ii* Sample design
A&&ordin( to the tea&hers (uidan&e of sele&tin( an industry, &ondu&tin( analysis from Ban(ladesh and (lo$al perspe&ti!e, #teel Industry has $een sele&ted. In that sense it is a random sample sele&tion. It is not a representati!e of all population $ut it ser!es a spe&ifi& purpose and &an $e said a purposi!e sample sele&tion. iii* +ata !olle!tion and field,or"
Data mainly &olle&ted from se&ondary sour&es, the industry related arti&les, nespapers, &ompany e$sites, annual reports and Ma(aine pre!ie.
i'* Analysis $
It is a +ualitati!e and +uantitati!e resear&h and I ha!e done narrati!e analysis. Based on my &olle&ted information I &ompleted the report.
1.- S!ope of the Study In preparin( this report I tried to &o!er these topi&s'
he real pi&ture of the #teel Industry has $een pro!ided. It shos not only the Ban(ladeshs #teel industry se&tor $ut also shos the (lo$al steel industry mar"et.
ondition of earnin(s and profita$ility.
o!er a $road area and &ustomer epe&tation.
Role of steel industry se&tor in the e&onomy.
1. /imitations of the Study he preparation of this report as not an easy tas". I had to fa&e some pro$lems E limitations durin( the preparation of this report. he limitations ere'
ompleity' the data as diffi&ult to analye.
5a&" of primary data' thou(h I &olle&ted data ta"en from internet $ases $ut it ould $e $etter if e had more data.
5a&" of eperien&e' la&" of personal eperien&e of formin( that resear&h and analyin( data as diffi&ult for me.
Chapter 02: Literature %evie& '
#teelte&hnolo(y.&om shos the lar(est steel produ&in( &ompanies of the orld. At the $e(innin( of the mer(e, the multinational steel manufa&turin( &orporation announ&ed 4: transa&tions orldide and &ontinued to in!est, ith transa&tions announ&ed in Australia, @ran&e, #outh Afri&a, anada, Brail, ur"ey, osta Ri&a, #eden, eneuela, the # and nited Ara$ 6mirates. Ar&elorMittal is operatin( in more than 80 &ountries. It produ&es 10F of the orldCs steel. he other ma%or &ompanies are Gippon #teel E #umitomo Metal orporation =G##M?, 3e$ei Iron and #teel >roup. Renoned artist Mattar Bin 5ahe% ho has $een usin( steel to &reate &alli(raphi& s&ulptures said that he s&ulpture &onsists of si(ns and sym$ols in a $alan&ed !ision and presents the history of Ara$i& &alli(raphy throu(h the years to its &ontemporary form as 4D artor". Desi(ners are hen&e resortin( to te&hnolo(y for ma"in( &reati!ity &ome ali!e. 3ua%ian >ao, tea&her of desi(nin( at Bron ar(ued that )/e &all it the +uality flei$ility tradeoff*. 3e and his asso&iates ha!e dis&o!ered a path around that tradeoff in &ham$ers made ith a spe&ifi& sort of steel &alled tinnin(affe&ted !ersatility =/IP? steel. Anandi handrashe"har said that, he in&rease in &ost of ra material ould only $e a near term &on&ern for Indian steel &ompanies a&&ordin( to a report $y Hota" Institutional 6+uities. he 6&onomi& imes refers that AA >roups interim &hairman Ratan ata hailed as the sa!iour of the H steel industry after the ata >roup announ&ed a 10year &ommitment of one $illion pounds in!estement to sa!e thousands of %o$s for its em$attled steelor"s in the &ountry, hi&h shos a !ery promisin( (roth in the steel industry of our nei(h$ourin( &ountry India. @rom the aforesaid literature re!ie, it is e!ident that on line steel industry analysis &an a&t as a &omplementary toards other dominant se&tors. /ith the help of steel industry analysis, the &ountry &an &reate opportunities as this ill help $oth produ&ers and &ustomers. But these theoreti&al o$ser!ations may not $e feasi$le in this &ountry. As su&h the study see"s to e!aluate hether the &ountry has proper infrastru&ture for doin( steel industry $usiness /hat are the statuses of steel $usiness in our &ountry Aforesaid +uestions arises hi&h the study intends to eamine. (
his report is important for further resear&hers in their resear&h. Im pretty sure that this report ill add !alue to the eistin( resear&h. his report is prepared in a stru&tured ay and it is full of important information.
Chapter 03: n!ustry nformation)*an+la!esh an! ,lobal#teel is a $asi& ra material for infrastru&tural de!elopment a nd multiple other uses. he demand for steel ill ine!ita$ly (ro in line ith the &ountrys e&onomi& and infrastru&tural de!elopment. Ma%or $uyers of mild steel and rerolled produ&ts in&lude indi!iduals, (o!ernment and institutional $uyers =de!elopers?.
#.1 Bangladesh $erspe!ti'e #teel industry is an esta$lished and (roin( industry in Ban(ladesh. Predominantly $ased in the port &ity of hitta(on(, the industry has emer(ed as a ma%or &ontri$utor to the national e&onomy. A&&ordin( to the eperts, the (roth of steel industry in Ban(ladesh is mainly indu&ed $y the rapid epansion of the &ountryCs ship$uildin( and real estate se&tor, as ell as the ma%or in!estments in !arious infrastru&ture pro%e&ts throu(hout the &ountry. #.1.1 0istory he first e!er steel mill as esta$lished in 1<:2 $y the 3 A"$erali >roup of Industries as the
Ban(ladesh #teel Rerollin( Mills =B#RM?. 5o&ated at Gasira$ad, hitta(on(, the plant formed reenfor&in( $ars and stru&tural se&tions. he mill (radually prolon(ed, adoptin( ne te&hnolo(i&al "noho $y settin( up a &rossnation 6uropean mill in 1<;7 hi&h in&orporated a irerod mill. he B#RM (roup added a &apti!e $illet manufa&turin( plants in 1<<8 so as to ma"e sure a sta$le distri$ution of $illets of its plants. In 2008, the &ompany installed pilot &old rollin( mill to ma"e ri$$ed hi(h stren(th ires. By this time, H#RM #teel Plant 5td emer(ed. ery re&ently, they ha!e esta$lished Billet Plant at hitta(on(. heir fa&tory situated at >horamara, #ita"unda at hitta(on(. H#RM is a steel manufa&turin( or(aniation $elon(in( to Ha$ir >roup of Industries. 9ne of the lar(est rollin( mills in Ban(ladesh.
#.1.# Customers of the Steel Industry ontra&tors
Property de!elopers
11
6port pro&essin( ones
Road and $rid(e &onstru&tion &ompanies
Real 6state se&tor
#hip$uildin( &ompanies et&.
#.1.% Mar"et he domesti& &onsumer demand of steel is (roin( day $y day due to the in&reased pu$li& or"s
and some on(oin( lar(e pro%e&ts. he steel eporters of Ban(ladesh ha!e ensured stron( foothold espe&ially in the Afri&an mar"ets. As a result, Ban(ladesh is no &onsidered as a ma%or emer(in( player in the (lo$al sta(e #.1.) (ro,th of the Industry Ban(ladesh #teel industry is emer(in( as one of the ma%or industrial se&tors of the &ountry. It
&onsists of small up to the lar(est s&ale of steel meltin( and rerollin( fa&tories a&ross the &ountry that mostly produ&e deformed $ar rod of different (rade =-0, 80, :00?, an(el, &hannel and &oil for the &onstru&tion industry. hou(h the history of #teel Industry is not older one $ut it &an ma"e a (lorious future. Before 1<71 Ban(ladesh did not ha!e any steel mill and e!en after the li$eration there ere only a fe steel fa&tories in the &ountry. In 1<<0s the a&tual de!elopment $e(an in this se&tor throu(h a re!olution. Durin( that period the $uildin( &onstru&tin( a(en&ies or de!eloper &ompanies &ame forard to $uild modern infrastru&ture. hen ith the in&reasin( demand, ne in!estors started in!estin( in steel or rod produ&tion. In 2012 e ha!e almost -00 mills a&ross the &ountry in&ludin( Dha"a, hitta(on(. Althou(h most of them are manual steel plants, 40 mills amon( them are automated. #.1.- Bangladeshs $osition in the (lobal Steel Industry
/ith an estimated mar"et sie of 400 Billion BD, the steel industry in Ban(ladesh is &urrently eperien&in( an upsur(e in demand. his (roth is dri!en mostly $y (o!ernment spendin( on infrastru&ture pro%e&ts, hi&h a&&ounts for -0F of steel &onsumption in Ban(ladesh. As ith the 12
(lo$al mar"et, there is also a supply surplus in the lo&al steel industry' the &urrent demand is around - million tonnes, hile the total &apa&ity is around ; million tonnes. he steel industry in Ban(ladesh produ&es mainly to &lasses of produ&ts' flat steel =mainly I sheet and R &oil? and lon( steel =M# rodM $ar?. Althou(h there are &urrently o!er -00 a&ti!e firms in the industry, the top 20 &ompanies ser!i&e more than half of the demand. he steel industry in Ban(ladesh is still lar(ely dependent on domesti& (roth dri!ers su&h as (o!ernment infrastru&ture pro%e&ts and the real estate industry. At the moment, per &apita steel re$ar &onsumption in Ban(ladesh is only 2: "(, &ompared to :7 "( in India and the orld a!era(e of 217 "( in 2012. his is epe&ted to (ro to :0 "( $y 2022.
Many steel produ&in( &ompanies ha!e (ained reputation as a $rand. Amon( them, M#/,>P3 Ispat, B#RM,R#RM,H#RM,Anar #teel, 3H> #teel, AH steel, Rahim steel, A$ul "hayer >roup are orth mentionin(. oday the hi(hest steel produ&in( &ompany is B#RM. hey are doin( $usiness for 80 years. heir produ&tion is almost si and half la"h ton per year hi&h meets 28F demand of the lo&al mar"et. Go (rade 80 rods are $ein( sloly repla&ed $y (:00 rods hi&h a num$er of rollin( mills in our &ountry are no manufa&turin(. /ith (:00, the real estate $uilders and de!elopers &an also sa!e minimum 1:F further +uantity of steel than (80.
13
urrently, Ban(ladesh eports :7.< Million #D orth of iron and steel produ&ts and ra materials. Althou(h $i( mar"ets su&h as India &urrently feature amon( Ban(ladeshs top eport destinations for steel produ&ts, fo&usin( more on other (roin( Asian mar"ets as ell may $e "ey to future eports (roth. As the (lo$al steel industry &ontinues to transition to a ne phase, the lo&al se&tor has the prime opportunity to not only (ro to satisfy the domesti& demand $ut also se&ure position in the emer(in( eport mar"ets of tomorro.
#. (lobal $erspe!ti'e #teel is an alloy of iron and other elements, primarily &ar$on, hat is idely used in &onstru&tion and other appli&ations $e&ause of its hi(h tensile stren(th and lo &ost. #teelCs $ase metal is iron, hi&h is a$le to ta"e on to &rystalline forms =allotropi& forms?, $ody &entered &u$i& =B? and fa&e &entered &u$i& =@?, dependin( on its temperature. o ma%or de!eloped nations, the steel industry is often &onsidered as an indi&ator of e&onomi& pro(ress, $e&ause of the &riti&al role played $y steel in infrastru&tural and o!erall e&onomi& de!elopment.In 1<;0, there ere more than :00,000 .#. steelor"ers. By 2000, the num$er of steelor"ers fell to 22-,000 #..1 0istory he history of the modern steel industry $e(an in the late 1;:0s, $ut sin&e then, steel has $een
$asi& to the orldCs industrial e&onomy. he $ul" produ&tion of steel $e(an as a result of 3enry Bessemer Cs de!elopment of the Bessemer &on!erter in 1;:7. Pre!iously steel as !ery epensi!e to produ&e and only used in small epensi!e items su&h as "ni!es, sords and armour. 14
In 1;7:, Britain a&&ounted for -7F of orld produ&tion of pi( iron and almost -0F of steel. -0F of British output as eported to the .#., hi&h as rapidly $uildin( its rail and industrial infrastru&ture. o de&ades later in 1;<8, hoe!er, the British share of orld produ&tion had plun(ed to 2roup Gippon #teel and #umitomo Metal orporation =G##M? Baosteel >roup #ha(an( >roup Ansteel >roup J@6 #teel orporation #hou(an( >roup ata #teel >roup 3KGDAI #teel ompany nited #tates #teel orporation #..# Ma&or $rodu!ts of Steel Industry:
he #teel 5on( Produ&ts Mar"et 9utloo" in&ludes pri&e fore&asts for "ey re(ions, alon(side our epe&tations for demand, supply and trade on a &ountry$y&ountry $asis throu(h the :year fore&ast period for all lon( produ&ts mar"ets' •
Re$ar
•
Mer&hant $ar
•
/ire rod
•
Beams
•
Rail
•
#eamless tu$e and pipe
1"
#..% Customers of the Industry
6n(ineerin( industry Automoti!e industry onstru&tion industry /ind poer 9ff shore #u$&ontra&tors
#..) Contribution to the 2orld 3!onomy #teel has ena$led our modern ay of life. It has helped lift so&ieties out of po!erty, spurrin(
e&onomi& (roth, and &ontinues to do so around the orld today. Iron, steels pre&ursor, fueled the industrial re!olution startin( in 17:0, ena$lin( manufa&turin( e+uipment in fa&tories and rail transport. Modern steelma"in( as de!eloped 1:0 years a(o ith the in!ention of the Bessemer pro&ess alloin( for the afforda$le massprodu&tion of steel =an iron alloy?. his set off a se&ond industrial re!olution, and sustained e&onomi& (roth. /orldsteel fore&asts that (lo$al steel demand ill de&rease $y 0.;F to 1,-;; Mt in 2018 folloin( a &ontra&tion of 4.0F in 201:. In 2017, it is fore&ast that orld steel demand ill return to (roth of 0.-F and ill rea&h 1,-<- Mt. 9n a positi!e note, some emer(in( e&onomies in #outh and #outheast Asia sho resilient (roth and alon( ith GA@A and the 6 ill support a re&o!ery in 2017. /e epe&t that steel demand outside hina ill &ontinue to (ro $y 1.;F in 2018 and this (roth ill a&&elerate to 4.0 F in 2017.
Chapter 04: ,lobal n!ustry .nalysis he (lo$al steel se&tor has $een (oin( throu(h a &hallen(in( moment, ith &rude steel produ&tion don to 1,:<; million tonnes in 201: and estimated to drop further to 1,:-: in 2018. /ith de&reasin( steel pri&es, produ&tion !alue is estimated to ha!e &ollapsed from #L 2.: trillion in 2011 to merely #L 1.: trillion in 201:. he de&rease in demand and produ&tion of steel in hina are in lar(e part to $lame and other orld mar"ets anti&ipate a further 2.
As a result, most of the top steel (roups in the orld ha!e suffered losses in 201:, and numerous ha!e de&reased their steel sales steadily sin&e 2011. 9n the other hand, a positi!e outloo" for the main e&onomi& se&tors supplied $y the steel &onstru&tion, automoti!e, materials allos eperts to epe&t a re&o!ery of the industry from 2017. 6mer(in( mar"ets ill sho the (reatest (roth o!er the net 10 years.
%.1 $orters 4i'e 4or!es Model: he most influential analyti&al model for assessin( the nature of &ompetition in an industry is Mi&hael PorterCs @i!e @or&es Model, hi&h is des&ri$ed $elo'
Bargaining po,er of suppliers:
5o &ost of sit&hin( suppliers =#teel Industry Analysis? has a si(nifi&ant impa&t, so an analyst should put more ei(ht into it. 5o &ost of sit&hin( suppliers is a diffi&ult +ualitati!e fa&tor to defend, so &ompetin( institutions ill ha!e an easy time o!er&omin( it. 5o for inte(rated plants =#teel Industry Analysis? ill ha!e a lon(term positi!e impa&t on the this entity, hi&h adds to its !alue. 5o for inte(rated plants =#teel Industry Analysis? is an easily defenda$le +ualitati!e fa&tor, so &ompetin( institutions ill ha!e a diffi&ult time o!er&omin( it. 1$
Bargaining po,er of buyers:
Ma%or players ha!e 3i(h $ar(ainin( poer =#teel Industry Analysis? has a si(nifi&ant impa&t, so an analyst should put more ei(ht into it. his statement ill lead to an in&rease in profits for this entity. /hen &ustomers &herish parti&ular produ&ts they end up payin( more for that one produ&t. his positi!ely affe&ts #teel Industry Analysis. /hen there are lar(e num$ers of &ustomers, no one &ustomer tends to ha!e $ar(ainin( le!era(e. 5imited $ar(ainin( le!era(e helps #teel Industry Analysis. Barriers to entry:
/e $elie!e that the $arriers to entry are medium. @olloin( are the fa&tors that !indi&ate our !ie. apital Re+uirement' #teel industry is a &apital intensi!e $usiness. It is estimated that to set up 1 mtpa &apa&ity of inte(rated steel plant, it re+uires $eteen Rs 2: $n to Rs 40 $n dependin( upon the lo&ation of the plant and te&hnolo(y used. 6&onomies of s&ale' As far as the se&tor for&es (o, s&ale of operation does matter. Benefits of e&onomies of s&ale are deri!ed in the form of loer &osts, RE D epenses and $etter $ar(ainin( poer hile sour&in( ra materials. It may $e noted that those steel &ompanies, hi&h are inte(rated, ha!e their on mines for "ey ra materials su&h as iron ore and &oal and this prote&ts them for the potential threat for ne entrants to a si(nifi&ant etent. >o!ernment Poli&y' he (o!ernment has a fa!ora$le poli&y for steel manufa&turers. 3oe!er, there are &ertain dis&repan&ies in!ol!ed in allo&ation of iron ore mines and land a&+uisitions. @urthermore, the re(ulatory &learan&es and other issues are some of the ma%or pro$lems for the ne entrants. Produ&t differentiation' #teel has !ery lo $arriers in terms of produ&t differentiation as it doesnCt fall into the luury or spe&ialty (oods and thus does not ha!e any su$stantial pri&e differen&e. 3oe!er, &ertain &ompanies li"e ata #teel still en%oy a premium for their produ&ts $e&ause of its +uality and its $rand !alue &reated more than 100 years $a&". Bar(ainin( poer of 1'
$uyers' nli"e the @M> or retail se&tors, the $uyers ha!e a lo $ar(ainin( poer. 3oe!er, the (o!ernment may &ur$ or put a &eilin( on pri&es if it feels the need to do so. he steel &ompanies either sell the steel dire&tly to the user industries or throu(h their on distri$ution netor"s. #ome &ompanies also do eports. Threat of substitutes: It is medium to lo. Althou(h usa(e of aluminum has $een risin(
&ontinuously in the automo$ile and &onsumer dura$les se&tors, it still does not pose any si(nifi&ant threat to steel as the latter &annot $e repla&ed &ompletely and the &ost differential is also !ery hi(h. Ri'alry among Competitors:
It is medium in the domesti& steel industry as demand still e&eeds the supply. India is a net importer of steel. 3oe!er, a threat from dumpin( of &heaper produ&ts does eist.
%. S2OT Analysis: Strengths of Steel Industry:
A$undant resour&es of iron ore
5o &ost and effi&ient la$or for&e
#tron( mana(erial &apa$ility
#tron(ly (lo$alised industry and emer(in( (lo$al &ompetiti!eness
Modern ne plants E modernied old plants
#tron( DRI produ&tion $ase
Re(ionally dispersed mer&hant rollin( mills
2ea"nesses of Steel Industry:
3i(h &ost of ener(y 3i(her duties and taes
1(
3i(h &ost of &apital
uality of &o"in( &oal
5a$or las
Dependen&e on imports for steel manufa&turin( e+uipments E te&hnolo(y
#lo statutory &learan&es for de!elopment of mines
Opportunities of Steel Industry:
3u(e Infrastru&ture demand
Rapid ur$aniation
In&reasin( demand for &onsumer dura$les
ntapped rural demand
In&reasin( interest of forei(n steel produ&ers
Threat of Steel Industry:
#lo (roth in infrastru&ture de!elopment
Mar"et flu&tuations and hinaCs eport possi$ilities
>lo$al e&onomi& slodon
%.# Criti!al Su!!ess 4a!tors of the Steel Industry: he attempt to impro!e the effi&ien&y and &ompetiti!eness of an industrial se&tor is aided $y the determination of &riti&al su&&ess fa&tors =#@s? hi&h fo&us efforts in those areas that really affe&t the hole industry, there$y &onser!in( limited resour&es.
20
he attempt to impro!e the effi&ien&y and &ompetiti!eness of an industrial se&tor is aided $y the determination of &riti&al su&&ess fa&tors =#@s? hi&h fo&us efforts in those areas that really affe&t the hole industry, there$y &onser!in( limited resour&es. he ma%or fa&tors that alloed su&&ess for the steel industry are folloin('
A&&ess to ra materials at lo &osts
Proimity to inputs and mar"et
@inan&ial stru&ture
Di!erse produ&t mi and proportion of !alueadded produ&ts
A$ility to eport
%.% In'estment $otential Of Steel Industry: /orldide Iron and steel industry is the most potential industrial se&tor. And this is the $a&"$one of &onstru&tion industry. Be&ause iron and steels are the ma%or ra materials for at least nine other ma%or industries. hese are the automo$ile, automo$ile &omponents, &onstru&tion, defen&e manufa&turin(, ele&tri&al ma&hinery, railays, renea$le, thermal poer, and oil and (as. In addition, there are thousands of an&illary industries depend on this main industry. he potential in!estments may $e in folloin( areas'
Iron E #teel 6portImport Guts E Bolts
#eamless Pipe @ittin(s
#tainless #teel utlery
#tainless #teel essels 21
#taple Pin
/eldin( 6le&trodes
/rou(ht Iron @urniture
Chapter 0": Company .nalysis: *S%/ Steel ).1 About BSRM
B#RM is the leadin( steel manufa&turin( &ompany and one of the prominent &orporate houses in Ban(ladesh. 9!er the years B#RM steel produ&ts has $een &hosen solely for $uildin( ma%or Gational landmar"s and infrastru&tures. he B#RM (roup as esta$lished in 1<:0 in steel $usiness under the splendid initiates of fi!e $rothers =Afri&an 9ri(in? of a sin(le family. 5ater on, the $usiness &on&erns under of this (roup ere run $y the families of late Mr. A"$erali. #in&e its in&eption, the >roup is in!ol!ed only in the steel se&tor. he family has $een su&&essfully runnin( the (roup for the last :: years and re(arded as the $est mana(ed steel units in the &ountry. he (roup is also the lar(est &ontri$utor to the national e&he+uer under the steel se&tor and also ha!in( lar(est set up in the &ountry &onsiderin( its inte(ration in all areas of steel industry.
22
). 5ision of BSRM: Maintain our leadership positions in the steel industry $yprodu&in( the $est +uality steel produ&ts, &ontinuously enhan&in( &ustomer satisfa&tion and $e&omin( a relia$le $usiness partner of our ustomers and #uppliers. •
Be an employer of &hoi&e, ith fo&us on nurturin( talent and de!elopin( future leaders of the or(aniation.
•
Prote&t the interest of our shareholders throu(h sustaina$le (roth and !alue &reation.
•
Preser!e the trust of all our sta"eholders $y adoptin( ethi&al $usiness pra&ti&es.
•
#upport the so&iety throu(h orporate #o&ial Responsi$ility initiati!es.
).# Ma&or $rodu!ts of BSRM: B#RM is &ountrys first produ&er of :00 MPa yield stren(th re$ar, $randed and mar"eted as Ntreme :00/, pro!in( B#RMs +uest for &ontinuous inno!ation as nation $uildin( partner. Beside re$ar produ&tion, B#RM rolls and mar"ets se&tional steels su&h as an(les and &hannels and ri$$ed ire hi&h are manufa&tured in separate plants of B#RM. he $ars, spe&ially Ntreme :00 / and se&tional produ&ts ran(in( in !arious sies &onformin( to I#9 8<4:2'201: and I#9 8404'2012=6? respe&ti!ely hi&h are the laful standard of the &ountry. Ma%or produ&ts are'
Ntreme Maima ltrima Ntron( entura
23
).% S2OT Analysis of BSRM
A s&an of the internal and eternal en!ironment is an important part of the strate(i& plannin( pro&ess. 6n!ironmental fa&tors internal to the firm usually &an $e &lassified as stren(ths =#? or ea"nesses =/?, and those eternal to the firm &an $e &lassified as opportunities =9? or threats =?. he #/9 analysis pro!ides information that is helpful in mat&hin( the firmCs resour&es and &apa$ilities to the &ompetiti!e en!ironment in hi&h it operates. As su&h, it is instrumental in strate(y formulation and sele&tion. he folloin( dia(ram shos ho a #/9 analysis fits into an en!ironmental s&an. STR36(T0s:
Mar"et leader' B#RM is the mar"et leader in the steel Mar"et of Ban(ladesh. hey o&&upy 12 F of the total steels mar"et. >reat &ompetiti!e s"ills' It has $een or"in( &onsistently in steel produ&tion se&tor. #o it has a&hie!ed (reat &ompetiti!e s"ills. It has the a$ility to fa&e stron( &ompetition. Relia$ility' Preferred $usiness partner of the &ustomer and suppliers $y offerin( +uality and timely ser!i&es.
24
#tron( employee $ondin( and $elon(in(ness' B#RM employees are one of thema%or assets of the &ompany. he employees of B#RM ha!e a stron( sense of &ommitment toards or(aniation and also feel proud and a sense of $elon(in( toards B#RM. he stron( &ulture of B#RM is the main reason $ehind this stren(th. #tron( Mar"etin( 5ineup' B#RM has de!eloped a sound and effe&ti!e mar"etin( poli&y to share "noled(e a$out their produ&ts ith desi(n en(ineers, thus &reatin( more aareness in the minds of the &ustomers. #tron( Produ&ts Distri$ution 5ineup' B#RM has appointed more than 400 dealers all o!er the &ountry so that people &an (et B#RM produ&ts ithin a reasona$le time. Besides this they ha!e se!eral sales and supply depots in Dha"a, omilla, Bor(a,#hylet, and Hhulna. Modern 6+uipment E e&hnolo(y' he B#RM )Ntreme :00*pro%e&t has $een &on&eptualied $y the >erman &onsultants )Badis&he #tahl 6n(ineerin( =B#6?* and the &omplete plant and ma&hineries ha!e $een supplied $y Danieli >roup, Italy O one of the three lar(est suppliers of e+uipments and plants in metal industry orldide. #o it has the latest and Modern e+uipment and e&hnolo(y. Ba&"ardlin"a(e industry' o stren(then the &ompetiti!e ad!anta(e of the&ompany and to minimie the dependen&y on o$tainin( ra materials, B#RM >rouphas ta"en initiati!e to esta$lish the lar(est $illet ma"in( plant in Ban(ladesh under the name of B#RM Iron E #teel o 5td =BI#9?.B#RM de&ided to ta"e o!er the onership of BI#9 throu(h a&+uisition of <:F of its entire share holdin(s from their eistin( shareholders. 23A763SS3S
3i(h interest rates de&line profit' B#RM has a lar(e lone from !arious $an" and finan&ial institutes of Ban(ladesh. #o the interest rates drop don the profits of the &ompany. Poer rises' In Ban(ladesh the poer &risis is in&reasin( day $y day. As B#RM is a hea!y industry it needs lots of poer supply and (as in daily produ&tion. As the (o!ernment is failed to ma"e uninterrupta$le supply of poer and (as the produ&tion is de&line. O$$ORT86ITI3S
Mar"et Dominan&e' As B#RM o&&upy 12F of the steel mar"et of Ban(ladesh and also they are the mar"et leader. #o there is a (ood pro$a$ility that they &an dominate the mar"et. Moreo!er 2"
they are in&reasin( their produ&tion from 47:,000 M.ons to:00,000. After the epansion they &an o&&upy 20 F of the lo&al mar"et. International #&ope' As B#RM is internationally renoned &ompany so its ha!e a stron( possi$ility to eport steels produ&t in near future. In&reased demand for the produ&ts' B#RM has a (reater opportunity of profit as the demand for the :00(rade rods in&reasin( day $y day in the lo&al mar"et. 9r(aniational >oal' he (oal of the ompany is to ma"e life of the people se&ured and safe $y pro!idin( +uality produ&ts at a &heaper pri&e and to $e a partner in the nation $uildin( a&ti!ities. As B#RM is the mar"et leader they ha!e to opportunity to fulfill their or(aniational (oal. T0R3ATS
Ge &ompetitors' In re&ent days some ne &ompanies ha!e started their steel produ&tion. Amon( them AH# =A$ul Hhayer #teel? is one of them. hey are tar(etin( to produ&e ;00,000 M.ons of steel per year. But no they are produ&in( only 200,000M.ons. 6&onomi& &risis' /orld re&ession and the so&io politi&al situation that pre!ailed in200; in Ban(ladesh sta(nated all de!elopment or"s in the &ountry. hen the sales of steel de&rease to half due to re&ession. >roin( ompetition' All the $i( steel produ&ers of Ban(ladesh ish to in&reasetheir produ&tion &apa&ity. If they in&rease the produ&tion &apa&ity then their produ&tion&ost ill de&line. #o &ompetition ill also in&rease in the steel mar"et. 5a$or nions' 5a$or unions are one of the emer(in( threats of Ban(ladesh noadays. Poer risis' Poer &risis is in&reasin( day $y day and thats hy the produ&tion of steel in a de&line position. @or eample A$ul Hhayer only &an produ&e one forth of their produ&tion &apa&ity due to (as &risis.
).) Supply Chain Management Of BSRM #upply hain Mana(ement means mana(in( the supply &hain of in$ound and out$ound (oods and ser!i&es in the most &ost effe&ti!e and time sensiti!e ay. his &an $e done $y desi(nin( a strate(i& route plan for the +ui&"est possi$le pi&"up and deli!ery re(imen, from the appropriate suppliers, for all points throu(hout the assem$ly line, in order to a&hie!e &ost and time related effi&ien&y le!els. hen optimum operational smoothness &an $e (uaranteed (i!in( a $usiness an
2#
ed(e o!er &ompetitors in mar"etin( (oods and ser!i&es $y introdu&in( (oods and ser!i&es +ui&"er than esta$lished trend. Ban(ladesh #teel Rerollin( Mills =B#RM? is one of the lar(est (roups of &ompanies operatin( in Ban(ladesh. At B#RM, the &onsumer is at the &entre of $usiness. 3ere people operate in a hi(h speed en!ironment an under tremendous pressure, so they need the stren(th of mind to ma"e +ui&" de&isions, often $asin( them on limited information. hey also need to $e open to inno!ati!e solutions that &an impro!e their pro&esses and $alan&e supply and demand hile minimiin( or"in( &apital. B#RM supply &hain is there to ensure uninterrupted supply of plan and materials to manufa&turin(, finished (oods to &ustomers, indire&t (oods and ser!i&es to all throu(h inte(rated supply &hain mana(ement of lo(isti&s and sour&in( at optimum &ost hile ensurin( &ustomer satisfa&tion. #upply &hain department of B#RM is the heart of all the $usiness a&ti!ities. @rom pro&urement of ra materials to deli!er the produ&t to the ultimate &onsumers is under the supply &hain fun&tions. his report $asi&ally fo&uses on the supply &hain strate(ies pra&ti&ed $y B#RM. . here are an imita$le supply &hain strate(ies and fun&tions hi&h ill $e role model for e!ery lo&al Eamp multinational &ompany. he (oal of a supply &hain should $e to maimie o!erall supply &hain profita$ility. #upply &hain profita$ility is the differen&e $eteen the re!enue (enerated from the &ustomer and the total &ost in&urred a&ross all sta(es of the supply &hain. #upply &hain de&isions ha!e a lar(e impa&t on the su&&ess or failure of ea&h firm $e&ause they si(nifi&antly influen&e $oth the re!enue (enerated as ell as the &ost in&urred. B#RM follos orlds standard supply &hain strate(ies here e &ant find any ina&&ura&y or in&onsisten&y. But there are some $asi& o$ser!ations that &an $e ta"en into the &onsideration for further impro!ement. odays shared "noled(e and &olla$orati!e a$ilities of B#RM and is supply&hain mem$ers are the results of transparen&y in information sharin(. he &lear !isi$ility in material orderin(, produ&tion plannin(, in!entory supply and mana(ement does lead to si(nifi&ant impro!ements in the o!erall performan&e of the supply &hain of B#RM. 2$
Chapter 0#: in!in+s an! %ecommen!ations Con!lusion #teel is an alloy of iron and other elements, primarily &ar$on, that is idely used in &onstru&tion and other appli&ations $e&ause of its hi(h tensile stren(th and lo &ost. #teelCs $ase metal is iron, hi&h is a$le to ta"e on to &rystalline forms =allotropi& forms?, $ody &entered &u$i& =B? and fa&e &entered &u$i& =@?, dependin( on its temperature. Britain led the orldCs Industrial Re!olution ith its early &ommitment to &oal minin(, steam poer, tetile mills, ma&hinery, railays, and ship$uildin(. BritainCs demand for iron and steel &om$ined ith ample &apital and ,
ener(eti& entrepreneurs, made it the orld leader in the first half of the 1
lo$al demand for steel has &ontinued to (ro in spite of the su$dued e&onomy orldide. /hile the (lo$al e&onomi& donturn &hallen(ed the steel industry in terms of de&linin( output, the industry remains on tra%e&tory toards stron( (roth to 2020. he analysis of the (lo$al steel industry in&ludes an industry o!er!ie, !alue addition to the e&onomy and a &ompanys supply &hain a&ti!ities.
-.1 4indings:
#ound e+uity $ase Pioneer in steel industry #u$sidiary of the mar"et leader in the rerollin( industy. 6perien&ed mana(ement #tate of the art plant 3u(e mar"et !a&uum of +uality produ&ts #ound infrastru&tural arran(ement
-. Challenges:
In&reased &ompetition in the industry A&ute (as shorta(e in the produ&tion plant han(e in (o!ernment poli&y @ull dependen&e on import for ra materials
-.# $rospe!ts:
3u(e mar"et eposure 6pansion on forard and $a&"ard lin"a(e 6pansion of produ&t line 2'
apa&ity epansion #upporti!e poli&y of the (o!ernment.
-.% Re!ommendations: A&&ordin( to the a$o!e o$ser!ations e li"e to en&lose the folloin( re&ommendation for the impro!ement'
6pansion of forard and $a&"ard lin"a(e throu(h lon( term plannin( As the ne &ompetitors are enterin( mar"et ith impro!ed &apa&ity B#RM should $e &on&ern a$out &apa&ity epansion #hould minimie the dependen&y on imported ra material Maintain &olla$orati!e netor" for ra materials import thus use effe&ti!eness in pur&hase strate(y Arran(e a utility mana(ement team as early as possi$le for &ontinues operation 3u(e mar"et eposure is re+uired to penetrate the mar"et to limitin( the fied &ost $urden Alays "eep eye on de!elopment of inno!ati!e te&hnolo(y
