British Steel Industry: Macro Factors, Trade Theories, and Crisis

This report offers a comprehensive analysis of the British steel industry within the context of international business. It begins with an overview of the industry's background, both in the UK and globally, highlighting its significance and evolution. The report then delves into key macro-environmental factors, including recessions, crises, Chinese influence, rising energy prices, and falling global prices, which have significantly impacted the industry's performance. It proceeds to apply relevant trade theories, such as Mercantilism and the New Trade Theory, to understand the industry's operations and challenges. Furthermore, the report examines the role of the government in addressing the current crisis faced by British Steel, including policy interventions and support measures. Finally, the report provides recommendations for the industry to overcome its challenges and ensure future sustainability, emphasizing the need for effective workplace management, appropriate tariffs, and strategic investment. This report serves as a valuable resource for understanding the complexities and strategic considerations within the British steel industry, as contributed by a student and published on Desklib, a platform providing AI-based study tools for students.

International Business

Table of Contents
INTRODUCTION ..........................................................................................................................1
BACKGROUND OF BRITISH STEEL INDUSTRY & GLOBAL STEEL INDUSTRY.............1
KEY MACRO ENVIRONMENTAL FACTORS ..........................................................................2
APPLICATION OF TRADE THEORIES & ITS APPLICABLITY .............................................3
ROLE OF GOVERNEMENT IN HANDLING THE CURRENT CRISIS....................................4
RECOMMENDATIONS.................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
In today's context, business is regarded as a major source to carry out transactions
between two countries beyond the political boundaries. International business provides an
opportunity to the commercial entity to expand its operations and avail different options to make
the entire functioning (D'Costa, 2013). Both private and public enterprises expand their frontiers
to generate profits and fulfil their objectives. Within the broad array, distinctions which are make
between these businesses are related to their business operations. Various operations determine
the inflow and outflow of goods and services across the geographical boundaries. The steel
industry is very large as they manufacture the various product and services to meet the demand
of steel by the business unit to deliver the finish goods into the market. The business are
expanded with the boundaries of the other nations in order to create the demand of the
manufactured steel within the boundaries of the other nations and generate ample amount of
money in return of the offering made related to the product. The share of the UK steel industry is
very valued within its economic system through comparison with the other steel industry. The
present report discuss about the background of British Steel Industry and Global Steel Industry
along with key macro environmental factors which are related to the UK and the other economy.
Various theories are discussed with the applicability. With the role of the government in order to
meet the current crisis which is being faced by British Steel Industry.
BACKGROUND OF BRITISH STEEL INDUSTRY & GLOBAL STEEL
INDUSTRY
British Steel Industry is a major producer in the steel industry. All the aspects related to
the functioning of British Steel plc. are evaluated properly to determine its impact over the
government policies in UK economy. It was basically originated from the British Steel
Corporation and now, it is running from the investment made by the private companies (D'Costa,
2013). It comprises of 90 percent of the entire UK steel making capacity along with the
employment of more than two lac sixty eight thousand employees.
On the other hand, Global Steel Industry has been functioning at the best position over
the last decade. There is intensive growth in the market prices of steel product as demand is
likely to increase within certain time duration (Evans, San Marchi and Mortensen, 2013). Global
steel industry consists of several techniques that are beneficial to increase the production volume
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of steel and generate ample amount of profits. There are many factors that lead in downsizing of
Global steel industry as prices were not reduced during recession. Thus, it results in reducing the
demand of steel’s products and services in the market.
KEY MACRO ENVIRONMENTAL FACTORS
Contribution of the UK steel industry is very valuable within its economy with
comparison to the other steel industry. Beside this, both British Steel and Global Steel have faced
major crises that resulted in the major downturn during that time frame (Mudie, 2016). There are
several macro environmental factors that are external and uncontrollable components. Such
factors impact the entire functioning of the industry and lead to the crisis. There are several
factors that relate with the entire functioning of respective units in order to manage their working
and deal with the issues that are encountered during recession. These factors are discussed
below:
 Recessions: These factors also lead to the downturn of British Steel Industry as different
norms and policies were developed by the government to carry out business operations in
a legal manner within and outside the boundary of nation (Campbell, Eden and Miller,
2012). Whereas, British Steel also faced the issues which were related to enter into new
country. At that time, policies and norms were very stagnant and resulting in downturn of
the industry. This is affecting the overall growth of British Steel Industry (Neumayer,
2004).
 Crisis: These factors help to analyse the economic trends that are related to the
functioning of British Steel Industry such as the inflation rate, unemployment and many
others. All these factors have affected to a greater extent as British Steel Industry faced
the excessive downturn in the demand of steel (Bowler, 2016). Rather than this,
subsidiaries of British Steel Industry also faced the same crisis as the operations were
interlinked to each other. The entire economy faced the recession phase during 2011 and
measures were not adopted to raise back in order to deal with the crisis.
 Chinese influence: The entire functioning of British Steel Industry was based on the
previous strategies. There was no further modification in the working which resulted in
the downsizing of such industry (Mudie, 2016). Due to which, it failed to establish
business transactions with the other countries. Significantly, the countries except UK also
made the downturn in the operational activity of British Steel Industry as they entire steel
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industry was facing the downturn as they are highly influenced by the Chinese work
culture. As the Chinese stifles the appetite of the world largest steel industry.
 Rise in energy prices: The prices of the energy is rising at a greater speed over the year
and helps in predicting the tends, changes and the movements that are occurring within
the country. To sustain within the market of UK and cope up easily with the crises as it
brings advancement in the entire operational activities and make the necessary
investment (Brown and Yücel, 2002.). The entire functioning of British Steel Industry
was still associated with the old practises and the norms of the old working. Beside the
economy of UK, the steel industry is facing massive downturn as the demand of steel is
reduced to a greater extent.
 Fall in global prices: There are several factors which are affecting the functioning of
British Steel Industry as there is huge wastage of raw materials. As the steel industry is
being affected by the several factors that are high electricity prices, climatic change
policies and many other. Along with this, resources were not available in ample amount
and affecting the entire functioning (Bowler, 2016). Significantly, in the other countries
the climate factors are considered in order to extract raw material and meet the demand.
Hence it resulted in huge crisis for the entire steel industry and significantly for British
Steel Industry. All the aspects which are related to the climatic conditions are very
essential as they lead to major crisis and affect the entire functions. There is huge amount
of emission of gases into the environment which is affecting the entire activities. Due to
this the climatic condition has been hindered to a greater extent (Ghosh, 2010).
APPLICATION OF TRADE THEORIES & ITS APPLICABLITY
There are various trade theories which are beneficial to evaluate the entire functioning
and adopt necessary measures to overcome from the crisis faced by British Steel Industry
(Milford and et.al, 2013). Different industries are engaged to carry out the production process
and several operations to meet the demand which is present within the market place. The cost
associated with the trading policies and operations differs from country to country as they hike
with the change in economic structure of different countries. These trade theories help in
balancing the entire functioning of organizations that are engaged in carrying out the business
operations (Burchill and et.al. 2013). Such theories deal with the issues and analyze the effect of
operations over the trade practises within the geographical dimensions of other countries in order
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to evolve the thought of carrying out business with the other countries. The trade mechanism is
based over the applicability of trade theories which are related with the global trade practises.
Theory of Mercantilism: This is the theory which is based on the development of
country’s economic condition to determine the entire holding in order to resolve the crisis of
British Steel Industry. All the aspects are equally promoted and monitored which are related to
the export and imports of the product and services of British Steel Industry (Heckscher, 2013).
Surplus is equally valued in order to meet up with the crisis that is faced by British Steel
Industry. In order to overcome the trade deficit, industry reforms the trade practises to strengthen
the trade practises and manage the crisis in an appropriate manner. All the policies are equally
monitored and the combinations are made in such manner that entire policies can benefit the
British Steel Industry within the national boundaries as well as international boundaries.
New Trade Theory: This theory explains the similar trade dimensions within the country and
thus, it helps to develop the operational activities in such manner that benefits British Steel
Industry effectively (Wild, Wild and Han, 2014). This is the theory which dictates various
dimensions that are associated with the potential and success of the business unit. In order to
overcome from the crisis, this theory states the trade practise that can be performed by British
Steel Industry to manufacture product with the similar industry of the other nations. Thus, it
focuses on the role of increasing the returns of the scale and the network to effective develop and
build the strong industrial base into the other countries (Barrios, Görg and Strobl, 2003).
ROLE OF GOVERNEMENT IN HANDLING THE CURRENT CRISIS
Government bodies play a significant role to monitor the entire functioning and
effectively manage the crisis that are faced by British Steel Industry. These bodies help the
organizations to regain their position over the time period by reforming the policies and
procedures which are defined for the trade practises with the other countries (Steel crisis: has the
UK government let down industry over dumping? 2016).
The major crisis which is encountered by British Steel Industry is related to several
perspectives that have resulted in downturn of the steel industry. Demand of the steel is crashed
to a greater extent as it is falling by the 1.7 percent in 2015 and the market is very expensive over
the international markets. In the year 2014, UK imported 687,000 tonnes of the steel to meet the
demand of manufacturers but it leads to lower the prices and growth of British Steel Industry.
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The government bodies frame several policies to compensate the downturn with the help of extra
cost with the slow growth over the time period (Brown and Yücel, 2002).
European Union has defined the rules and regulations to restrict the wrong functioning
and support the government to raise the standard of various operations (Bowler, 2016). During
recession, there were huge job losses in the entire steel industry. Likewise, in British Steel
Industry, there were around 1015 job losses of the employees who are engaged into the
operations to manufacture steel and meet the demand of customers. At the crucial stage, the
government of UK removed the rule which amounted to protectionism to various situations and
sectors (D'Costa, 2013). British Steel Industry was not the labour-intensive as automation and
computerization had reduced the demand for the employees. In order to meet the unemployment
crisis, government of UK took the clear action by lowering the business rates to a greater extent.
The compensation structure was related to the major projects of British Steel Industry.
RECOMMENDATIONS
As per the above aspects, there are some necessary recommendations which need to be
followed by the British Steel Industry in order to deal with the crisis.
 Businesses working in British Steel Industry need to maintain effective workplace in
order to manage the entire working effectively so that the crisis will not be faced in the
future time frame.
 Tarrifs and other aspects shall be equally set so that the average is determined in a proper
manner to sustain in the competitive industry and meet the set averages.
 Government can direct the investors to make investment in order to overcome from the
crisis faced by British Steel Industry. This can be done by adopting the effective measure
such as leniency in the policies which are defined by the government.
 They must not get easily influenced by the trends that are present in to the Chinese
context. In order to re-frame the entire functioning they need to adopt the proper policies
to keep on functioning.
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REFERENCES
Books and Journals
Barrios, S., Görg, H. and Strobl, E., 2003. Multinational enterprises and new trade theory:
Evidence for the convergence hypothesis. Open Economies Review. 14(4). pp.397-418.
Brown, S.P. and Yücel, M.K., 2002. Energy prices and aggregate economic activity: an
interpretative survey. The Quarterly Review of Economics and Finance. 42(2). pp.193-
208.
Burchill, S. and et.al., 2013. Theories of international relations. Palgrave Macmillan.
Campbell, J.T., Eden, L. and Miller, S., 2012. Multinationals and corporate social responsibility
in host countries: Does distance matter?. Journal of International Business Studies. 43(1).
pp.84-106.
D'Costa, A., 2013. The Global Restructuring of the Steel Industry: Innovations, institutions and
industrial change. Routledge.
Evans, A., San Marchi, C. and Mortensen, A., 2013. Metal matrix composites in industry: an
introduction and a survey. Springer Science & Business Media.
Ghosh, J., 2010. The unnatural coupling: Food and global finance. Journal of Agrarian Change.
10(1). pp.72-86.
Heckscher, E.F., 2013. Mercantilism. Routledge.
Milford, R.L. and et.al., 2013. The roles of energy and material efficiency in meeting steel
industry CO2 targets. Environmental science & technology. 47(7). pp.3455-3462.
Neumayer, E., 2004. Recessions lower (some) mortality rates:: evidence from Germany. Social
science & medicine, 58(6), pp.1037-1047.
Turnbull, P.W. and Valla, J.P. eds., 2013. Strategies for international industrial marketing.
Routledge.
Wild, J., Wild, K.L. and Han, J.C., 2014. International business. Pearson Education Limited.
Online
Bowler, T., 2016. Britain's steel industry: What's going wrong?. [Online]. Available through: <
http://www.bbc.com/news/business-34581945>. [Accessed on 16th February, 2016].
Mudie, K., 2016. How the UK steel industry crisis and worldwide slump in oil prices will affect
YOU. [Online]. Available through: < http://www.mirror.co.uk/news/uk-news/how-uk-
steel-industry-crisis-7232861>. [Accessed on 16th February, 2016].
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Steel crisis: has the UK government let down industry over dumping?.2016. [Online]. Available
through: < http://www.theweek.co.uk/65968/steel-crisis-has-the-uk-government-let-
down-industry-over-dumping>. [Accessed on 16th February, 2016].
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