Mike Bolden » Posts for tag 'U.S. Steel'
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The Ultimate Blue Ocean Strategy; U.S. Steel Needs To “Decommodize” Steel

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Posted in Blue Ocean Strategy
November 12, 2008
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Adapt Strong Service Model
U.S. Steel can innovate this commodity market, and differentiate itself from other steel manufacturers by wrapping strong servicing around supplying various niches. They can start with usage consultants to interface with customers on the best way to use their steel products – and/or to customize various production order batches. This may even lend itself to individualizing processing of steel products for a customer or set of buyer types. Not only does this allow differentiation, but it will allow U.S. Steel to charge a premium and widen margins. Because U.S. Steel is vertically integrated, its production and supply chain structure might have to be “flexed out” to focus on economies of scope versus scale. Dedicated resources will have to be focused on production and production types, and not on massive production scales. The fact that U.S. Steel supplies its own iron ore and a significant amount of coke can be good and bad in this economy-of-scope scenario. It’s bad if it remains geared toward massive production units. It’s advantageous if you scale into individualized production applications and units, and focus with smaller–but yet substantial–amounts of supply.

Industrial Branding For U.S. Steel; “We Know Steel”
USS can also differentiate itself by developing an “industrial branding” campaign – and really develop a brand. Again, the object is to move their steel products, and move the company away from being a commodity supplier. They should be a building solutions provider!!! They should actively pursue certain industry verticals, and seek to own these spaces. U.S. Steel needs to be the expert in steel building construction, application and usage. A branding value proposition might be, “We Know Steel.” They need to build the perception of U.S. Steel away from an “old line” company into a “new line” company which does seminars and has speakers at targeted industry vertical conferences and, of course, steel and construction conferences. U.S. Steel has a rich history along with a compelling story – and it can be a great marketing and branding tool to tell it. Think Anheuser–Busch.

Focus, Own, and Adjust; Applied Blue Ocean Strategy Playbook
In looking at what U.S. Steel can do to negate a likely, increasingly-difficult macro-environment, they need to focus, own, and adjust. They must focus on growing steady market niches based on usage and industry verticals. Then, they must seek to own spaces within them through differentiation and branding; these are a means toward an end. And, to profitably enable harvesting healthy rents, U.S. Steel must adjust its supply chain and production focus and structure to economies of scope. U.S. Steel knows steel, but the rest of world must know it – and value it!

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U.S. Steel Beaming Current Income Boom; Needs Tempering Blue Oceans To Maintain In Hard Environment

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Posted in Blue Ocean Strategy
November 10, 2008
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Currently Highly Profitable
U.S. Steel just reported its most profitable quarter ever, tripling its net income from last year’s third quarter! USS reported a net income of $919 million compared to $269 million in the third quarter of 2007. According to the Wall Street Journal’s October 29th issue, this jump was due to strong demand and pricing. Revenue soared 68% to $7.31 billion up from $4.36 billion a year-ago quarter. In particular, oil and gas industry customers fueled this growth with their strong demand for flat-rolled products and tubular goods. This growth seems to be led more by macro-factors, than as a result of a specially constructed strategy. Steel continues to be a commodity. Given this factor, the profitability and fate of its manufacturers are tied directly to the ebb and flow of macro-economic factors and the global market environment.

Slowed Growth Expected
Given the current environment, steel manufacturers are estimating a slow 4th quarter due to:
1. a volatile economy
2. a softening auto market
3. a drop in demand and sales prices
4. nervous buyers limiting their metal purchases
The biggest factor for this drag is the dramatic slowing of demand in the number of cars made in North America. Car sales for all major U.S. manufacturers were down 30% to 45% in the month of October – GM was the worst with a 45% drop in sales from October of 2007. No one is expecting car sales to dramatically increase anytime soon. To maintain profitability, U.S. Steel is going to have to shift its bets.

Go Into Blue Ocean Waves of Niche Spaces
U.S. Steel should begin to shift way from a holistic-type market presence into occupying space in a variety of niches. They should seek dominant shares in niches dictated by customer usage type and the type of steel product. USS should place bets in diversified targeted industries and product groups. Supplying these markets should be done by shifting production units to smaller dominations such as mini-mills. This more “micro-ized” production unit is greatly aided by the fact that only 65% of the total production capacity is needed to break even. Industry and product group niches that should be targeted include:
1. Electronics
2. Domestic Infrastructure
3. Alternative Energy Industry
4. Foreign Infrastructure
5. Foreign Buildings
U.S. Steel needs to take its dedicated capacity centered around the auto industry, and shift it into a combination of these areas.