Porter's Five Forces Of The Steelmaking Industry
Political and Legal:
Political policies can have huge impact on steelmaking industry. Due to globalization, the steel makers are competing internationally. Therefore, if the government imposes tariffs on importing steels, the domestic steel prices can be protect from dumping from other countries. In the U.S., the government sometimes gives subsidy to some steel makers, which will cause marginal competitions. In addition, the regulation from environment protection can also cause costly modifications for steel makers. Therefore, the risk from political and legal factors is high for steelmaking industry.
Steelmaking industry is …show more content…
Porter’s Five Forces Analysis:
Threat of new entrants:
The steelmaking industry is mature. There is a barrier for new entrants is the ability to produce on economies of scale in order to survive. This industry also requires large capital investment. In addition, there is little switching cost for customers due to lack of product differentiation. Even worse, due to globalization, the customers can easily switch to foreign competitors. Moreover, the steelmaking industry faces uncertainty from changing government policies and regulations. Therefore, the threat from new entrants is moderate.
Bargaining power of suppliers:
The main raw materials in steelmaking industry are steel shreds, iron core and etc. There is scarcity of raw materials especially scrap metals, and fewer suppliers in the United States, and most of the raw materials are imported. Therefore, the bargaining power from suppliers are high.
Bargaining power of buyers:
There are many steel makers in the United States and the competition among them is intensive. The competition is mainly based on prices. There is little switching cost for buyers. In addition, the fluctuation in economic cycle will cause cyclical demand and sometimes there will be oversupply condition. All these factors contribute to the bargaining power of buyers. Therefore, the bargaining power from buyers is very …show more content…
However, there is no real substitute for steels due the high strength of steels. Therefore, the risk from substitute products is low.
Intensity of rivalry among competitors:
There are many existing players in the United States. And as mentioned above, they are competing on price of the products, and there is little differentiation among the products. Therefore, the competition among competitors is extremely intensive. In addition, the foreign steel makers who can produce at even lower costs due to cheaper labor and relax government regulations make the competition even worse in the U.S. market.
Although the risk from the new entrants and substitute goods are low, due to the intensive existing competition, and the strong bargaining power from both suppliers and buyers, steelmaking industry is a risky and unattractive