Overview of the case, Strategic Management at Zhujiang Iron and Steel Company
Zhujiang iron and steel company (ZISCO) is an important strategic business unit within Guangzhou iron and steel enterprises holding limited (GISE), established in 1997 as a state owned organization. Before 2003, ZISCo pursued a product differentiation strategy with a focus on domestic niche markets because ZISCo was new in steel market and had no distribution channel. With this strategy ZISCo couldn’t achieve economies of scale, minimum cost, high product quality and continuous production. This strategy also increased inventory cost, reduced the company’s bargaining power with supplier and created co-ordination problems.
On March 2003, Zhang was appointed as…show more content…
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Porter’s five forces model analysis
Threat of new entrants
Threat of new entrants is low for ZISCo because barriers to entry are high as steel industry is large scale and experienced. Huge capital is required, entrants also need differentiation and most importantly access to distribution channel is big barrier.
Threats of substitute products
Threat of substitute product is low because consumer cannot use iron or wood (high cost) instead of steel because of low performance and if they will use good metal than steel it would be costly for them.
Bargaining power of suppliers
Suppliers are not very powerful as large number of suppliers is available because steel can also be manufactured through recycled products and threat of forward integration is very low.
Bargaining power of buyer
Buyers in this market are not very weak and powerful. They are few in numbers and can switch to other manufacturers for product quality but number of manufacturers is few and backward integration also seems impossible.