Business Strategy for Global Steel Industry

Running head: BUSINESS STRATEGY
Business strategy
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Introduction
Current business state of affairs for the global steel industry is competitive as well as
challenging due to the complex external business factors. In the recent past, the emergence of the
economic recession in 2008 also changed the exiting business trends for the global steel industry.
With the change in the external business factors, it is also becoming important for the leading
players in this industry in changing their business strategies to gain the maximum return from the
market (Holburn and Vanden Bergh 2014). It is reported that majority of the steel brands are
incorporating merger and acquisition strategies in coping up with the challenges in the market. It
is also reported that merger and acquisition strategies are being majorly initiated by the steel
companies due to the reason that the global steel industry is facing the challenge of overflow of
supply more than the demand (Fu et al. 2014).
In the case of Severstal also, similar business strategies are being followed and
implemented in managing the competitiveness in the market. This is due to the reason that with
the help of the merger and acquisitions, the distance and differences between the steel companies
and the iron ore producers got reduced and helped in gaining competitive advantages.
This essay will discuss about the situation of the current global steel industry and their
major challenges with the help of the strategic tools. In addition, key motives and objectives of
Severstal will also be discussed in terms of their business strategies. The impact will be
evaluated along with the advantages and disadvantages.
Determination of the external business factors
Prior to the critically analyzing the effectiveness of the business strategies of Severstal, it
is important to determine the external business situations for them. This will help to identify the

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extent to which the business strategies of Severstal are effective enough. In this case, PEST
analysis will be used.
Political factors
Global steel industry is facing turbulence in terms of the political factors. This is due to
the reason that protectionism is on the rise. In the recent time, the tariff war between the United
States and China is further causing challenges for the global steel industry. This is due to the
reason that United States imposed added 22 percent of import duty on the import of steel from
China. These issues are restricting the free trade flow for the global steel industry. In the case of
Severstal, this challenge is relevant due to the reason that they are based in Russia and
diplomatic strain between Russia and the United States is creating barrier in the free trade of
Severstal (Hudson and Sadler 2017). On the other hand, political instability in key regions is
contributing in the challenges for global industry due to the fact that iron ore is not available
across the world and the countries with having adequate amount of iron ore are the only source
for global steel industry. Thus growing of political of stability majorly in the African region and
Middle Eastern countries are posing challenges for the steel industry. Severstal is also dependent
on different countries due to the fact that they source their raw materials from different regions.
Thus, growing political instability is causing issues for Severstal in terms of sourcing raw
materials. In this case, merger and acquisitions with the iron ore producers is the key way to gain
competitiveness (Wilson 2013).
The recent amendments in the legal aspects including the introduction of stricter laws are
also creating challenge for global steel industry. This is due to the reason that according to the
global reports, steel industry is one of the largest contributors of carbon in the world and thus

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they are facing the major wrath of the environmental regulations. Moreover, with the
introduction of newer United Nation protocols, more regulations are implemented on the global
steel industry. Thus, the average cost of operation for the steel brands is increasing and causing
challenges for them.
Economical factors
Economical factors are also important in determining the effectiveness and business
viability of the global steel industry. This is due to the reason that development in the economy
will determine the extent to which the sales will be trended. In the recent time, the emergence of
the global economic recession cause huge challenges for the steel industry. This is due to the
reason that with the emergence of economic recession, development activities in different
countries especially in the developed countries got affected and reduced the demand for steel
(Coccia 2014). On the other hand, emergence of the economic recession also affected the
demand in other industries such as automobile industry. This also reduced the demand from the
existing client base for the steel industry. This risk is having higher probability in the future and
thus economic uncertainties are the major economic challenges for the global steel industry.
On the other hand, increase in the competition is also posing threat for the steel industry
due to the reason that entry of the new competitors mainly the Chinese competitors caused more
supply than demand. Thus, in accordance to the basic law of economies, price of the steel fell in
the international market. In addition to this scenario, Chinese competitors are offering and
flooding the global steel market with cheaper products, which is further intensifying the situation
for the other players (Popescu 2016). Thus, the more is the competition in the market, the lower
is the profitability for the existing players in the market and this same situation is applicable for