Nippon Steel & Sumitomo Metal Ltd. Report

This report analyzes Nippon Steel & Sumitomo Metal Ltd.'s organizational strategy, covering macro-environment factors, industry positioning, internal resources, and stakeholder perspectives. It explores the company's strengths and weaknesses in the global steel market, particularly in the automotive sector, and discusses the challenges and opportunities it faces.

ORGANISATIONAL
STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
Macro-environment factors affecting Nippon:.......................................................................1
Industry positioning of Nippon using Porter's Five Forces Model:.......................................3
Analysing Internal resources and capabilities using VRIO Model:.......................................4
Stakeholders' perspective.......................................................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Organizational Strategy can be defined as a series of steps that are taken in order to
achieve its future goals and objectives. An effective organisation strategy can help the
organisation in achieving its goals and reach new milestones (Furniss, Curzon and Blandford,
2018). This report is based on Nippon Steel & Sumitomo Metal Ltd. which is engaged in steel
manufacturing of products such as steel plates, steel sheets, pipes and tubes. Nippon has its
manufacturing bases all around the world. Its operational mainly in Japan, Europe, Middle East
and North America. The given report will focus on four main areas viz. Macro-environment
factors affecting Nippon Steel, Industry position, Internal resources and capabilities and
stakeholder perspectives of Nippon Steel & Sumitomo Metal Ltd.
Macro-environment factors affecting Nippon:
Macro-environment factors, in a broad context, are concerned with the study of macro-
economic variables affecting a particular organisation in which it operates. These factors can
mainly be divided as Political, Economic, Social, Technological, Legal and Environmental
factors. This study of factors is popularly known as PESTLE Analysis. It gives an overall picture
of that organisation in a nutshell. These factors are explained below:
Political
Political factors define the boundaries to the extent of which the government can
influence the operations of a business or industry. Since Nippon Steel is a global organisation, its
operations are not governed by public policies prevalent in an individual economy. The World
Steel Association formulates the rules and regulations for steel manufacturing globally. This
Association formulates a policy in relation to low carbon emissions, Nippon will have to adhere
to such regulations and develop a strategic plan that would include both minimization of carbon
emissions as well maximization of operational efficiencies. The liberalization policy launched by
government can relax the trade restrictions for Nippon Steel in importing and exporting of steel
worldwide. This will allows an organisation to grab the raw material to produce eminent steel
sheets that can be provided to Auto-mobile organisations (wayu, Lal and Abubakre, 2018).
Economic
Economic factors relate to the variables such as economic growth, interest and exchange
rates prevalent in the economy. Nippon Steel will face a challenge in setting up a manufacturing
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base in a country like Israel where there is low availability of steel resources and may have to
incur high cost of acquiring raw materials, this would result in increase in the prices of steel in
the market. This may require the management to restructure their variable costs to fixed costs
ratio and develop a plan to reduce wastage. Countries with booming energy markets such as
Thailand would help Nippon to achieve cost advantage if they are available easily. This will
allows the organisation to provide their products in more economic manner and to ascertain large
number of profits by providing their sheets in Auto-mobile sector.
Social
Social factors focus on the demographics, values, beliefs and culture of the economy in
relation to a business. Nippon has a work culture of maximum productivity. Its cultural and
social values would contradict to cultural values and beliefs of US. Thus, it is important for the
company to harmonize its operational etiquettes in line with US culture. Nippon Steel being a
Japanese company would follow a strict line of authority in its organisation unlike its US
counterparts who focus on individualization of roles and responsibilities. This may hamper
smooth running of production process and having indirect impact upon the quality of steel sheets
(Haynes, 2018). A booming market with high literacy rate would provide better human capital
to the company as well as increase employment opportunities provided by Nippon to the citizens
of that economy. Since steel manufacturing requires in-depth knowledge of such processes, it
would be cost effective,in terms of training, for the company to obtain human capital which
already possesses such knowledge. It help to produce more reliable sheets that can deliver
maximum output to the auto-mobile companies.
Technological
These factors focus on analysing how innovations made in technology help in
advancement of the business as well as the industry that are set up in the economy. Innovations
made in Waste Management technology and steel manufacturing techniques would help Nippon
reduce wastage and increase efficiency. This will help in improvement of their sales of high
defined sheets within auto-mobile sector. Obsolescence of technology used by Nippon due to
wear and tear like induction furnace instead of electric furnace would result in increase in costs
as well as maximize wastage with reduced efficiency.
Legal
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Legal factors are mainly concerned with the rules and regulations that are imposed by the
government on the business of an economy. Tariffs imposed by Trump Administration imposes
on importing of steel used in car production as high as 25% in order to promote local steel
producers, Nippon has faced increased costs in USA, resulting in seclusion of profits of the
company (Legal trends in Steel Usage in Automotive Industry. 2019). On the other hand, in
countries where the government provides relaxed work laws such as Special Economic Zones
(SEZ) along with tax holidays, Nippon would be able to set up and manufacture steel sheets
easily to deliver at low cost in all over the world.
Environmental
Environmental factors concerns itself with various issues pertaining to the environment
of the industry such as climatic changes and emission regulations. If Nippon is not able to follow
WSA's Fuel Efficiency and Emissions Reduction Regulation enacted in automotive industry of
US and Europe, the company may face a threat of closure by World Steel Association (WSA)
(Moehler, Hope and Algeo, 2018). Conducting CSR activities such as planting of trees and
contributing to the society may help Nippon create goodwill that will attract brands like Suzuki,
Hyundai to associate with it.
Industry positioning of Nippon using Porter's Five Forces Model:
Porter's Five forces model can prove to be a powerful tool when used to measure and
develop a strategic plan for the organisation. This model focuses on the following five forces:
Bargaining power of Suppliers
Bargaining power of Suppliers focuses on the leverage that suppliers hold over the
business. Nippon Steel holds a substantial share that supplies steel sheets to the automotive
sector in the global market. Out of 10 suppliers associated with Nippon that provide steel sheets
to it auto-manufacturer base, seven suppliers are based out of USA accountable for a 40 to 50%
of Nippon's global equity share in steel sheet market. This shows a strong bargaining power of
Nippon. (Kuznetsov And et.al., 2018).
Bargaining power of Buyers
Bargaining power of Buyers concerns with the leverage that the organisation holds over
the buyers of its products and services. Major automotive players such as Toyota, Volkswagen
buy steel from their suppliers in large volumes. Nippon steel supplies steel products to more than
70% of the market domestically as well as internationally. Out of this, automotive market makes
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a substantial share in Asia Pacific countries such as China. Thus, Nippon enjoys a strong
bargaining power in the automotive market where it has a large market share with high number
of buyers like Toyota.
Threat of New Entrants
A booming industry will always attract new entrants. Steel manufacturing industry has
high barriers to entry and exit since it involves a huge capital investment. Increase in competition
in the automotive sector due to the growing demand for Aluminium and electric products making
way for such manufacturers to reduce market shares for companies like Nippon. However, the
auto-manufacturers have started to opt for aluminium and plastic to make light weight vehicles
which pose a threat to Nippon. In order to target this problem and maintain its bargaining power
in the market, Nippon has established an Automotive Material Planning Department to meet
requirements of both steel sheet buyers as well as aluminium and electric components buyers of
automotive industry. (Eldridge And et.al., 2018) .
Threat of Substitutes
Threat of Substitutes is faced by a business when there are many alternatives present for
the product of a business. Countries like USA have a huge automotive manufacturing sector, this
nullifies the power that Nippon holds in USA. Apart from this, low switching costs between
Nippon and U.S. Steel would act as a key factor when auto-motive companies like Toyota buy
steel from them. Ultimately, this shows that the overall power of an organisation is high.
Industrial Competition
ArcelorMittal and POSCO are the main rivals of Nippon in the steel automotive sector. In
order to fend off competition Nippon Steel signed a Global Strategic alliance agreement with
ArcelorMittal and POSCO in 2006 and 2000 respectively (Industrial competition regarding
AscelorMittal and Posco. 2019). In 2016, Nippon Steel acquired its rival Nisshin Steel with 51%
stake in the company to reduce its combined steel output (Industrial competition regarding
Nisshin Steel. 2019). This shows the level of competition in industry is low and having least
impact upon the operations of an organisation.
Analysing Internal resources and capabilities using VRIO Model:
VRIO model is technique that is used to evaluate the internal resources and capabilities of
an organisation. VRIO stands for Value, Rarity, Imitation and Organized to capture value.
Nippon Steel is a steel manufacturing organisation that provides distribution of raw materials and
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products among a global customer base. It provides lightweight steel sheets to the automotive
industry. These lightweight steel sheets are high in strength and provide collusion safety in the
automotive products ( Weber and et. al., 2018) . A VRIO analysis has been conducted for steel
sheets below:
Value
Value helps in ascertaining the worth to the resource a company holds for the purpose of
creating revenues for itself. Nippon uses advanced technological processes such as shape defect
correction and simulations to reduce defect in manufacturing steel sheets supplied to the
automotive sector. Apart from the manufacturing processes, establishment of Automotive
Material Planning Department in 2018 (Value Analysis of Nippon Steel. 2019) , that focuses on
analysing the customer needs based on latest trends also proves to be a factor that differentiates
its internal capabilities from its competitors like POSCO. This has helped them in manufacturing
sheets that contain not only steel but also aluminium embedded in them.
Rarity
Rarity helps in measuring the life of the product in relation to their availability in the
market. High strength Steel sheet products such as TS 980MPa≧ supplied by Nippon to its
automotive customers such as Toyota provides light weight to Toyota car's body framework .
Nippon also provides steel sheets that are capable of providing more strength to a car's body that
goes under a hot stamping process and is anti-corrosive.
Imitation Cost
It is important for an organisation to have resources that are difficult to imitate or have
high imitation costs. Usage of 3DQ technology, pressing technologies like Nsafe and other
predictive analysis tools for creating new products and improving internal processes makes it
difficult for others to imitate its products.
Organized to Capture value
A resource is of no use to an organisation if the organisation itself is unable to organize
its functional abilities to fully harness the value a resource holds. For Nippon to achieve
maximum efficiency in manufacturing steel sheets that not only reduce costs but also meet the
requirements of its customers, it would need to utilize the above factors efficiently.
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Stakeholders' perspective
Stakeholders of a company includes the parties such as that are interested in the
operations of business such as shareholders, employees, creditors including both suppliers as
well as financial institutions and government. Stake-holder's perspective focuses on the
expectations that the stakeholders have from an organization and how they contribute in the
decision making process of the organization. The main stakeholders for Nippon can be divided
into three categories:
Shareholders
Shareholders are the owners of the company that have invested their money in the
business. Nippon Steel's shareholders are of the view that the company protects their equity
investments by adopting policies such as Fair acquisition of substantial holdings. The Annual
general meetings held by Nippon also welcome suggestions from their shareholders regarding
any operational or functional decision to encourage new perspective on an existing problem
(Campbell, Balabanova and Howard, 2018).
Employees
Employees of Nippon Steel enjoy an environment where flexibility and new ideas are
encouraged. Employee contribution in manufacturing steel products forms one of the six
strengths of Nippon Steel Ltd.
Government
Government provides various incentives to companies to set up their operations in areas
such as Special Economic Zones where job creation is required. Nippon's decision to develop an
advanced waste management system in line with the government's attempt to achieve an eco-
friendly environment in the economy. It helps the government as well as the organisation to gain
trust among the community.
CONCLUSION
A thorough analysis of Nippon Steel in relation to macro-environment factors, industry
positioning and internal capabilities concludes that the automotive sector has seen drastic change
in trends in terms of material requirements. These essentially pertain to following WSA's fuel
efficiency and emission reduction laws as well as fending off competition that is increasing due
to fast innovations in technology. A brief analysis of Nippon's market share and the product
offering was covered in areas such as US where a large automotive sector exists and booming
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sectors such as China to ascertain its impact upon number of suppliers, buyers and barriers to
entry affect these markets and the overall internal capabilities of Nippon.
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REFERENCES
Books and Journals
Furniss, D., Curzon, P. and Blandford, A., 2018. Exploring organisational competences in
Human Factors and UX project work: managing careers, project tactics and
organisational strategy. Ergonomics. 61(6). pp.739-761.
Kwayu, S., Lal, B. and Abubakre, M., 2018. Enhancing Organisational competitiveness via
social media-a strategy as practice perspective. Information Systems Frontiers. 20(3).
pp.439-456.
Haynes, S., 2018. Why employers must align wellbeing apps with strategy. Occupational Health
& Wellbeing. 70(2). pp.11-13.
Moehler, R., Hope, A. and Algeo, C., 2018. Sustainable Project Management: Revolution or
Evolution?.
Kuznetsov, V. I. And et.al., 2018. General method for rapid purification of native chromatin
fragments. Journal of Biological Chemistry. pp. jbc-RA118.
Eldridge, M. D. And et.al., 2018. Genetic affinities of a remnant population of the brush-tailed
rock-wallaby (Petrogale penicillata) in Mt Kaputar National Park, northern New South
Wales. Australian Mammalogy. 40(1). pp.112-117.
Weber, J. and et.al., 2018. Corporate strategy, identity and culture to-wards organisational
growth through gameplay: A student and executive perspective.
Campbell, F. M., Balabanova, D. and Howard, N., 2018. The role of global public health
strategy in non‐profit organisational change at country level: lessons from the joining of
Save the Children and Merlin in Myanmar. The International journal of health planning
and management. 33(1). pp.88-101.
Online:
Industrial competition regarding AscelorMittal and Posco. 2019. [Online]. Available through:
<https://www.spglobal.com/marketintelligence/en/news-insights/trending/
g4ah2uxc8hbobun80fpqgg2>
Industrial competition regarding Nisshin Steel. 2019. [Online]. Available through:
<https://agmetalminer.com/2016/02/01/nippon-steel-and-sumimoto-metal-corp-acquires-rival-
nisshin-steel/>
Value Analysis of Nippon Steel. 2019. [Online]. Available through:
<http://www.nssmc.com/en/tech/report/nsc/pdf/103-01.pdf>
Legal trends in Steel Usage in Automotive Industry. 2019. [Online]. Available through:
<https://www.forbes.com/sites/greatspeculations/2015/05/20/trends-in-steel-usage-in-the-
automotive-industry/#71a33b331476>
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