Internet Case for Chapter 2: Operations Strategy in a Global Environment
Johannsen Steel Company
Johannsen Steel Company (JSC) was established by three Johannsen brothers in 1928 in Pittsfield, Rhode Island. The brothers began JSC by concentrating on high-quality, high-carbon, high-margin steel wire. Products included "music wire" for instruments such as pianos and violins; copper, tin, and other coated wires; and high tensile-wire for the newly emerging aircraft industry. JSC even pioneered new types of wire. Throughout the 1930s and 1940s JSC prospered while maintaining its reputation for high-quality products and in-house design/construction of its own equipment. In 1946, the last remaining Johannsen brother sold the company to West Virginia Steel for $4 million. For its investment, West Virginia Steel (WVS) obtained three Johannsen steel mills–located in Pittsfield, Rhode Island (500 employees), Akron, Ohio (100 employees), and Los Angeles (16 employees)–and two steel-wire warehouses–one in Chicago (8 employees) and one in Los Angeles (4 employees). WVS kept Johannsen completely intact as a wholly owned subsidiary. The 1940s and 1950s witnessed increasing JSC sales to the U.S. military and to U.S. automakers and tire makers. JSC also sold wire for use in staples, nails, cables, cookie cutters, steel brushes/wire wheels, and electrical products, leading to a continued climb in sales and profits. The year 1960 was important for the U.S. steel industry. A 14-week strike caught steel customers off guard. With stocks nearly exhausted, customers throughout the United States turned to the Japanese. They found the quality, price, and even delivery of steel acceptable. No longer was competition from offshore steel makers insignificant. The combination of offshore competition and a productivity-minded economy drove steel prices down to very competitive levels throughout the 1960s and 70s. Attention in the industry– and in JSC–turned toward cost cutting and sales...
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