Overview of the case, Strategic Management at Zhujiang Iron and Steel Company Zhujiang iron and steel company (ZISCO) is an important strategic business unit within Guangzhou iron and steel enterprises holding limited (GISE), established in 1997 as a state owned organization. Before 2003, ZISCo pursued a product differentiation strategy with a focus on domestic niche markets because ZISCo was new in steel market and had no distribution channel. With this strategy ZISCo couldn’t achieve economies of scale, minimum cost, high product quality and continuous production. This strategy also increased inventory cost, reduced the company’s bargaining power with supplier and created co-ordination problems. On March 2003, Zhang was appointed as the new president of ZISCo, to develop and implement new strategy to improve ZISCo’s long term competitive advantage. To implement value creation strategy, Zhang’s first task was to increase production volume and improve product quality through cross functional co-ordination at ZISCo. He also reduced material procurement costs and stabilizes supply sources through consolidation of its supply base. Zhang also replaced the niche marketing strategy with the strategy of targeting relatively large market segments and also introduced one-stop-shop service for container manufacturers. This strategy also brought positive changes in Human resource management, communication and leadership at ZISCo, which resulted in satisfactory profits from 2003 to 2006. Although the business strategy implemented by Zhang in 2003 had achieved quite a satisfactory outcome, there were still several challenges facing senior management in early 2007. Among these challenges, need to cultivate a new organizational culture to support value creation at ZISCo, how to create further competitive advantages and sustain those which have been achieved so far and to develop organizational capability to manage the organization strategically are the most important challenges. Furthermore it is also very important to figure out, would ZISCo on market or product development or, alternatively, focuses on cost reduction and improving quality to increase its market share in existing markets. SWOT analysis
* Implementation of a value creation strategy
* Compact strip production research centre at ZISCo
* Alike administrative system
* Technologically leading role in the Chinese steel industry * Establishment of product quality assessment, IT and equipment department * Project-based organizational structure is established to facilitate Cross functional co-ordination * Established enterprise resource planning system at ZISCo * One-stop-shop service for Chinese container manufacturers * Consolidation of supplier base
* No distribution channel
* Most employees are university graduates
* Change in organizational culture is slow and organizational systems for strategic management are still not well established * ZISCo outsourced most of its auxiliary services
* Annual interest on bank loan is a huge financial cost for ZISCo Opportunities
* Emerging markets of container manufacturers within or outside China * Target other markets like auto, appliances and steel furniture manufacturers * Preference towards stainless steel has also developed new opportunity like surgical stainless steel. * Building of new cities and skyscrapers worldwide has increased consumption of steel Threats
* Competition is high
* Significant increases in the price of raw material like scrap steel and energy * Government rules and regulations for state owned organizations * Increase in general sales tax and also import and export taxes are a threat.
Key External Factors| Weight | Rating | Weighted Score | Opportunities | | | |
* Emerging markets of container manufacturers within or outside China | 0.2| 3 | | * Target other markets...