Chaparral Steel
Question 1
Consider the company’s operations during the years from 1975 to 1979, and answer the following questions:
a. How has the above complex approach actually worked, over these four years? What was the outlook (as of the case date) for further progress in this matter?
In 1975 Chaparral Steel commissioned minimill and started production. Minimills are different from traditional integrated steel plants. In minimill an Electric Arc Furnace (EAF) is used for steel making purpose and in downstream long product is made using rolling mill. The advantage of minimill is it requires less capital investment and a good solution when only long products needed to be produced. In case of Chaparral they invested $40 million in minimill as against $200 million requires for an integrated steel plant. The input to minimill is scrap or Direct Reduced Iron (DRI) and electricity is used to melt the scrap in EAF. So in countries like USA where scrap is available readily and electricity cost is relatively cheap compared to coking coal required for blast furnace minimill is even cheaper.
While set up of minimill can be considered a deliberate strategy Chaparral Steel continues modest investment in new equipments and procedures as and when needed so the emerging ideas from shop floors are facilitated. So it is a mix of both deliberate and emergent strategy. To get new ideas and make emerging strategy successful Chaparral has introduced profit sharing plan. Profit sharing contributed to additional 10-15% on average hourly wage of $16. As it empowered employees and followed participatory management employees were happy and there was no union thus further boosting profitability. Chaparral also sends employees for continuous training and development. They send their employees to other steel plants and equipment manufacturers to know about procedures better which by turn fuelled development of emerging strategies.
Chaparral Steel set up the minimill with finishing mill capacity at
Consider the company’s operations during the years from 1975 to 1979, and answer the following questions:
a. How has the above complex approach actually worked, over these four years? What was the outlook (as of the case date) for further progress in this matter?
In 1975 Chaparral Steel commissioned minimill and started production. Minimills are different from traditional integrated steel plants. In minimill an Electric Arc Furnace (EAF) is used for steel making purpose and in downstream long product is made using rolling mill. The advantage of minimill is it requires less capital investment and a good solution when only long products needed to be produced. In case of Chaparral they invested $40 million in minimill as against $200 million requires for an integrated steel plant. The input to minimill is scrap or Direct Reduced Iron (DRI) and electricity is used to melt the scrap in EAF. So in countries like USA where scrap is available readily and electricity cost is relatively cheap compared to coking coal required for blast furnace minimill is even cheaper.
While set up of minimill can be considered a deliberate strategy Chaparral Steel continues modest investment in new equipments and procedures as and when needed so the emerging ideas from shop floors are facilitated. So it is a mix of both deliberate and emergent strategy. To get new ideas and make emerging strategy successful Chaparral has introduced profit sharing plan. Profit sharing contributed to additional 10-15% on average hourly wage of $16. As it empowered employees and followed participatory management employees were happy and there was no union thus further boosting profitability. Chaparral also sends employees for continuous training and development. They send their employees to other steel plants and equipment manufacturers to know about procedures better which by turn fuelled development of emerging strategies.
Chaparral Steel set up the minimill with finishing mill capacity at