1. The risk of entry by potential competitors: High
a. Capital Requirement: Steel industry is a capital intensive business. b. Economies of scale: Research and Development expenses and better bargaining power while sourcing raw materials. It may be noted that those steel companies, which are integrated, have their own mines for key raw materials such as iron ore and coal and this protects them for the potential threat for new entrants to a significant extent. c. Government Policy: Regulatory clearances and other issues are some of the major problems for new entrants. d. Product differentiation: Steel has very low barriers in terms of product differentiation as it doesn’t fall into the luxury or specialty goods and thus does not have any substantial price difference.
1. The intensity of rivalry among established companies within an industry: High e. The steel industry is truly global in terms of competition with large producing countries like China significantly influencing global prices through aggressive exports.
2. Bargaining power of suppliers: High
f. The bargaining power of suppliers is low for the fully integrated steel plants as they have their own mines of key raw material like iron ore coal for example
3. Bargaining power of Buyers: Mixed
g. Some of the major steel consumption sectors like automobiles, oil & gas, shipping, consumer durables and power generation enjoy high bargaining power and get favorable deals.
4. Threat of substitutes: Low
h. Plastics and composites pose a threat to steel in one of its biggest markets - automotive manufacture. For the automobile industry, the other material at present with the potential to upstage steel is aluminum. Steel has already been replaced in some large volume applications:...