Strategic Analysis of Severstal: Future Options and Recommendations

This report provides a comprehensive analysis of Severstal, a major player in the steel and mining industry, using PESTLE, SWOT, and Porter's Five Forces frameworks to evaluate its external challenges, internal business situation, and competitive environment. It identifies key political, economic, sociological, technological, legal, and environmental factors impacting Severstal, along with its strengths, weaknesses, opportunities, and threats. The analysis further explores the bargaining power of suppliers and customers, competitive rivalry, and the threat of new entrants and substitutes. The report proposes several future strategic options for Severstal, including increasing steel demand, leveraging digitization in mining, investing in R&D, prioritizing worker safety, recycling steel scrap, substituting hydrogen for coal, expanding into international markets, and addressing the threat of substitutes. Finally, the report recommends enhancing quality standards, investing in labor training, and exploring electricity-saving measures to ensure Severstal's continued success over the next decade. Desklib provides access to similar reports and solved assignments for students.

Organisational Strategy

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
What are the key external challenges and opportunities facing Severstal?.................................1
What are the most important aspects of the internal business situation of Severstal?.................2
What are some future strategic options and directions that Severstal should consider?.............4
What steps would you recommend for Severstal to take over the next decade?.........................5
CONCLUSION ...............................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Organizational strategy can be defined as a long term plan used by the entities for
carrying out their operations effectively by allocating their resources in the best possible way to
support the business activities. These strategies help companies achieve the aspired goals by
serving as guidelines to them (Alblooshi, Shamsuzzaman, and Haridy, 2020). Severstal is a
renowned company which operates in the steel and mining industry. The company has its
headquarters Cherepovets. It is the Russia's largest steel company and is listed on Moscow
Exchange. This report have PESTLE as well as SWOT analysis of Severstal along with Porter's
Five Forces. These are applied to analyse the external as well as internal situation of the
company respectively. Further, some future strategies that the company should adopt with some
recommendations are also discussed.
MAIN BODY
What are the key external challenges and opportunities facing Severstal?
PESTLE ANALYSIS
There are various external factors which impacts the working of the organization. These
factors may bring challenges or opportunities for the business. It depends upon the organization
as to how the entity deals with the same. Tackling a challenge and grabbing an opportunity at the
right time is an art and must be done properly to take the most advantage of it (Callander, 2020).
An analysis of these factors in relation to the company, Severstal, is discussed below:
Political factors – US has started to impose tariffs on the imported steel and steel
derivatives. Further, the annexation of Crimea by Russia is creating troubles for the business
(Gamede, and van der Westhuizen, 2020). Along with this, carbon border tariffs have been
introduced in Europe affecting the steel and mining industry highly. Severstal is trying its best to
tackle these challenges.
Economical factors – Covid-19 pandemic affected the businesses all over the globe.
Severstal too was affected and faced an economic downturn. Recessions in the economy of
Russia reduced the demand to a great extent.
Sociological factors – Urbanization plays an important role in providing the revenue to
the steel industry. Further, consumers now-a-days prefer cookwares made from iron and steel
1

which increases the demand to a great extent. As these are the things people regularly use in their
day to day life.
Technological factors – Due to the chemical composition of steel, it has a lasting life or
long-term usability,i.e., the products of steel are quite durable. Further, the investment on latest
automation increases production. Thus, the company, Severstal is using the technology quite
smartly.
Legal factors – The Russian Civil Code in 2014 was amended due to which the Code was
converted into PAO. Further the adherence of UK governance Code in London Stock Exchange
for GDR help Severstal make the operations more effective as well as achieving long term
success.
Environmental factors – Severstal is using latest technical tools and innovative ideas in
order to eradicate or reduce the emission of GHG to some extent for the preservation of
environment. The company is trying to substitute hydrogen for coal to avoid pollution.
What are the most important aspects of the internal business situation of Severstal?
SWOT ANALYSIS
SWOT analysis is done to analyse the internal situation or the internal environment of the
company in order to identify the strengths, weaknesses, opportunities and threats (Kankisingi,
2019). SWOT analysis in relation to Severstal is discussed below:
Strengths
 Severstal reduced the cost of steel
produced which helped to enhance
demand. The company made key collaborations
with other businesses to boost the
business going towards recession.
Weaknesses
 The company do not recycle iron which
go waste.
 Severstal is highly depended upon the
Russian residents for their potential
sales or for the demand of their
products.
Opportunities
 The company is using new markets to
compensate the loss it previously
suffered. Technology accumulation through the
Threats
 The biggest threat to the company is the
increase in number of substitutes of
steel in the market.
 Due to their contribution in enhancing
2

company serves as an opportunity for
the Venture Severstal.
pollution, several barriers are imposed
on iron and steel industry.
PORTER'S FIVE FORCES
It is used to analyse the company's competitive strength which can be used in the internal
as well as external environment. To analyse the competitive strength of the company, Severstal,
this model is applied below:
Bargaining Power of Suppliers – As the Russia's steel industry is the fourth largest
industry in the world, it is seen that it is quite vast. Hence, the industry have a range of suppliers
in the industry (Kinloch, Grant, and Hattie, 2021). This shows that the company, Severstal is not
dependent on any one supplier for the supplies the company needs. They can easily switch from
one supplier to another and can choose among the best deal offered to them. Thus, Severstal need
not worry about suppliers as they have low powers in the industry.
Competitive Rivalry – Steel industry has various companies and thus the company,
Severstal faces high competition. Not only this, the company faces competition from other
companies too who are the producers of the substitutes of steel. The company can invest more on
R&D department for the latest updates and to make the best use of technology.
Threat of New Entrants – Severstal is the largest steel company of Russia in the steel
industry and hence is quite powerful. The company need not worry about the entry of new
entrances as they are not capable enough to fight with Severstal at least at the beginning. Thus,
the company keeps a watch on the activities of the new entrances as it can not just ignore them.
Further, entry in the steel and mining industry requires significant amount of capital (Lima,
McMahon, and Costa, 2021). Hence, the threat of new entrants is quite low.
Threat of Substitutes – As the technology is enhancing, it is increasing the threats for the
existing businesses as it brings opportunities for the new ones (Lu, Papagiannidis, and Alamanos,
2018). The threat of substitutes to Severstal is quite high. There are a number of substitutes
available in the market for the steel. The company should invest on bringing some innovative
ideas in order to make its products more appealing to fight with its competitors.
Bargaining Power of Customers – With the increase in technology, substitutes are
increasing (Munir, Kiviniemi, and Jones, 2019). Along with this threat Severstal has to deal with
the threat of the bargaining powers of customers. As it is huge industry, customers have a range
3

of choices to select from and they will choose the best deal offered to them,i.e., best quality at
low cost.
What are some future strategic options and directions that Severstal should consider?
Strategies are guidelines through which companies can achieve their objectives or goals.
These are necessary for the company as proper planning is very important for its execution and
for the success of the company. Some of the strategies, directions or guidelines that the company,
Severstal should consider are narrated below:
 The company, Severstal should try to generate more and more demand for steel. The
company should initiate the slogan “Make in Steel” to intensely boost the demand for
steel products and their usage.
 The company, Severstal should try to increase the production of raw material with the
help of leveraging digitization in mining. This will improve the productivity of the
company and will help the company reduce its cost.
 The company should invest more on research and development sector in order to enhance
the knowledge and for knowing the latest updates of about the industry. This will enable
Severstal take the most advantage from the investment it made in.
 As steel and mining industry is quite a dangerous industry from the point of view of
workers especially, the company should seriously address this issue and think about the
safety of its workers and employees (Stretton, 2018. Tripathi, and Kumar, 2020). It is the
duty of the company to look after the well being of its workers at the workplace.
Providing a safe and secure environment is a responsibility and must be fulfilled. Further,
providing safety equipments will help company attract more and more workers and build
a strong and huge workforce for the company who will be safe enough.
 Severstal should train its workers and employees as per the requirement of their job. This
will help the manpower to develop skills which further will enhance with the passage of
time by practising and using the same.
 The company, Severstal should try to recycle the steel scrap or come up with some iron
scrap policy in order to recycle the same so that the waste do not harm the environment
and the same can be used by the companies too.
 Coal is quite expensive and also contributes a lot to the pollution and global warming that
is being enhancing in the world. Coal is a natural mineral and hence is available in a
4

limited quantity. The company can substitute hydrogen for coal this will help them
reduce their cost, reduce pollution and also preserve coal for other essential purposes.
This will also help them enhance their sales as this good deed will definitely be
appreciated by the consumers.
 The company, Severstal should not depend on the Russian citizens only for their potential
sales. Instead the company should try to expand their business in the international
markets so that it can supply products all over the glove and is not dependent on only one
nation for the sales in order to generate revenue.
 The company should seriously address the issue of enhancing the number of substitutes
in the marketplace. Severstal should invest and come up with innovative ideas in order to
make the steel products give new and appealing appearances for attracting customers and
give tough competition to the substitutes prevalent in the market.
What steps would you recommend for Severstal to take over the next decade?
Recommendations
 The company, Severstal can enhance their standards of quality to increase the life of their
products,i.e., the durability of the steel. Effective monitoring and extension of quality
control orders can be introduced in order to achieve these standards.
 The company can invest more on giving training to its labours to make them more
skilled. Skilled labours are much effective and efficient as compared to unskilled or semi
skilled labours. This help to increase their productivity which will help the company to
ultimate;ly reduce their costs and provide the consumers products at a relatively low cost
as compared to the one it is providing now.
 Mining and steel industries require regular supply of electricity for their smooth
operations. The company should invest on bringing up with innovative ideas in order to
save the electricity so that it can use it regularly as per its convenience. Further. Investing
on solar systems too is a nice option to opt.
 As iron is a natural mineral, it is available in a limited quantity. Thus, the company
should try to make the best possible use of it even by recycling its scrap.
5

CONCLUSION
From the above report, it has been concluded that the strategy is very important for an
organization for the success of the company. These strategies act as guidelines and provide
directions to the company in which the organization should move. The internal and external
environment of the company is analysed to identify the strengths and opportunities which the
company can have. While the analysis also helped in identifying the weaknesses and threats
which the company have to tackle during the business operations. Strategies such as cut down of
costs, initiation of “Make in Steel”, recycling of scrap, substituting hydrogen in place of carbon,
can be adopted by the company for its growth and success in near future or the upcoming days.
6

REFERENCES
Books and Journals:
Alblooshi, M., Shamsuzzaman, M. and Haridy, S., 2020. The relationship between leadership
styles and organisational innovation: A systematic literature review and narrative
synthesis. European Journal of Innovation Management.
Callander, J. S., 2020. Business Goal Setting (BGS) bridging strategy and organisational
behaviour; as part of strategy development, what elements of business goal setting
contribute to employee intellectual buy-in? A multiple case-based study (Doctoral
dissertation, University of Southampton).
Gamede, V. W. and van der Westhuizen, T., 2020, December. Determinants for Crafting a
Winning Organisational Strategy for the South African Manufacturing Sector:
Perspectives from Shop Floor Employees. In Proceedings of the 21st European
Conference on Knowledge Management (pp. 277-283).
Kankisingi, G. M., 2019. The relationship between entrepreneurial orientation, organisational
orientation and innovation performance of manufacturing small and medium
enterprises in KwaZulu-Natal province (Doctoral dissertation).
Kinloch, J., Grant, M. and Hattie, A., 2021. P-159 Implementing organisational change: a
hospice site move.
Lima, E. S., McMahon, P. and Costa, A. P. C. S., 2021. Establishing the relationship between
asset management and business performance. International Journal of Production
Economics, 232, p.107937.
Lu, Y., Papagiannidis, S. and Alamanos, E., 2018. Internet of Things: A systematic review of the
business literature from the user and organisational perspectives. Technological
Forecasting and Social Change, 136, pp.285-297.
Munir, M., Kiviniemi, A. and Jones, S. W., 2019. Business value of integrated BIM-based asset
management. Engineering, Construction and Architectural Management, 26(6),
pp.1171-1191.
Stretton, A., 2018. Series on organisational strategic planning & execution1.
Tripathi, R. and Kumar, A., 2020. Humanistic leadership in the Tata group: the synergy in
personal values, organisational strategy and national cultural ethos. Cross Cultural &
Strategic Management.
7