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Corus: Case Study

The document discusses the formation of Corus through the merger of British Steel and Hoogovens Steel. It describes challenges faced by Corus including overcapacity, price pressure, lack of long-term vision, and cultural differences between UK and Dutch operations. Potential solutions explored are expanding into new markets in Asia and Africa while focusing on aluminum, and exploiting existing markets through improved IT, supply chain, and selling more stainless steel and aluminum to the automotive industry. The best recommendation is to pursue new markets while developing new aluminum products and usages of steel for construction.

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Xprt Khan
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19 views

Corus: Case Study

The document discusses the formation of Corus through the merger of British Steel and Hoogovens Steel. It describes challenges faced by Corus including overcapacity, price pressure, lack of long-term vision, and cultural differences between UK and Dutch operations. Potential solutions explored are expanding into new markets in Asia and Africa while focusing on aluminum, and exploiting existing markets through improved IT, supply chain, and selling more stainless steel and aluminum to the automotive industry. The best recommendation is to pursue new markets while developing new aluminum products and usages of steel for construction.

Uploaded by

Xprt Khan
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Corus

CASE STUDY
Scenario

Introduction
World Steel Industry
Privatization Bring Success
New Directions
Merger and Birth of Corus
Further Drive on Cost
Crisis
Financial Gloom
Introduction

Corus is a steel giant made by the merger of British


Steel (British)and Hoogove (Dutch) Steel companies.
(20 million tons production)
Another Steel Merger made by unison of Unisor,
Arbed and Aceralia – which is the biggest steel
maker (46 million ton production)
World Steel Industry

Appendix 1, Import and Export of Steel


Countries with their own industry has little import or
export of steel.
UK situation is changing decline from 20 million
tons usage in 1970 to 13.9 million in 2000
UK was exporting more than half of their production
Change in steel business
 Cars using 0.8 mm steel instead of 2mm
 High need of steel in construction
Privatization Bring Success (British Steel)

BSC – Nationalized to British Steel Plc (Privatized)


Improved Financial Performance – Appendix 2
Competitive advantage to be gained through logistics
and product development
British steel held 30% of stock in UK, (Major Player)
The need of utilizing IT for increase customer service
and reduce cost.
New Directions

Brian Mofatt the New CEO .


Dream of making Corus an international firm like no
other.
Exchange rate in favour of DM to Pound to Dollar
Problem arise with the introduction of Euro.
Hedging Policy adopted by British Steel
80% of sales in Europe
UK auto business decline and revived by Japanese
firms entering UK
Merger and Birth of Corus

Hoogoven British Steel


Aluminum 44200 employees
22100 employees
Both served Europe but
their holdings elsewhere.

• Benefit of Merger
• Employees
• Shareholder
• Customers
• Wide Range Product
Further Drive on Costs

How to control costs


Multi-skilled technician model.
Productivity increase methods/approaches – focus
on management reduction.
IT and its use to decrease costs.(Supply Chain).
Crisis

Industry Overcapacity
Price Pressure
Need for High productivity
Lack of Long Term Vision
Strategic Incapacity of Corus
Different Corporate Culture at UK and Netherlands.
Govt want Corus to engage in dialogue with trade
unions, Unions are also not happy with Corus
Increase in stock price because of Lay off decision.
Crisis

Problem of Euro lower price and UK not being part


of it.
Britain's Gloomy Economic Environment
 Write Down of Assets
 Why do companies have to take write-downs?
Typically, when a company makes an acquisition, the price that it
pays is recorded on its balance sheet as an asset. If the value of that
business declines, then the acquirer has to write down the asset on
its balance sheet to reflect its current value. This is true whether the
acquisition is made in cash or with stock.
 Stainless Steel and Aluminum activities were profitable
 Carbon Steel (Oversupply) – but demand was buoyant.
 Distribution and further processing needs focus as they are
profitable too.
 Marked difference between product group and territories.

Identify Main Problems

Lack of Competitiveness of Corus


Job Losses and losing image of the firm
UK economic Slump and changing steel related
industry
Exchage rate problem – 80% export to Europe
Lack of Long Term Vision of Corus
Product is low valued + Technologically poor
Different Corporate Cultures in UK and Netherlands
leading
Analyze Issues in Context of Theoretical
Framework

Strategic Fit –
 the changing Environment and need for mergers,
 capacity handling according to the environment
 Use of IT for better supply chain
 Need to focus on aluminum and stainless steel
Opportunity
 Buoyant steel demand of carbon steel
 IT and supply chain development
Threats
 Other Mergers
Strength
 Resource Sharing of the two companies
Corporate and Business Level Strategy
 CORUS vs. Carbon Steel, Aluminum, Stainless Steel
Corporate Governance
 Shareholders of the firm (how would they want the firm to
continue)
Operational Level Strategy
 How to deal with operations (De layering)
 Multitasking Skills of Employees
Corporate Culture Change
 Mergers fail for not bringing both cultures together
Unique Resources and Core Competencies
 Market share in UK, Aluminum focus
Values and expectations of people in power
 CEO Vision about British Steel/Corus
Method of Strategy Development
 Bring together Brit and Dutch managers to develop strategy
Synergies
 Synergies can be developed by both the firms.
Exploring Alternate Solution with reference to
Theoretical Framework

Solution 1 – Explore New Markets


 Explore new markets in Asia and Africa (Opportunity)
 Focus on Aluminum and develop new products (this can be done by
developing a product development department) – Strategy Fit
 Focus on new usages of steel (Construction). Opportunity
 Develop new products for construction - Strategic Fit/Business level
strategy
 Use IT for Supply Chain development – Opportunity/Strategic Fit
 Deal with Labour to agree for Multitasking - Operational Strategy
 Restructure the organization with more focus on distribution and
supply chain (new managers should be hired or re located to IT
skills)
Solution 2: Exploit Old Markets
 Exploit the buoyant market of Carbon Steel through IT
 Exploit the US operations and sell products more in US
 Increase sale of Stainless Steel and Aluminum with Car
Industry in UK (Japanese Firms).
 Use Dutch resources to sell more aluminum in Europe
Choose the Best Solution

Suitability of Strategy

Feasible in terms of sources and Competences

Acceptable to Stakeholders
Recommendations

 Explore new markets in Asia and Africa


 Focus on Aluminum and develop new products (this can be
done by developing a product development department)
 Focus on new usages of steel (Construction).
 Develop new products for construction
 Use IT for Supply Chain development –
 Deal with Labor to agree for Multitasking
 Restructure the organization with more focus on distribution
and supply chain (new managers should be hired or re located
to IT skills)

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