Casestudy Isteelasia

Index

Introduction 1

The steel industry 2

1.1 The steel market 2

1.2 Trends and conditions 2

1.3 Market analysis 3

1.4 Future problems 3

2. Offers to the market 4

3 Revenue sources and networks 5

3.1 Revenue sources 5

3.2 Partners 5

3.3 Conclusion 5

4. Internal transition 6

5. Main success factors 7

6. Alternative future options 8

6. 1 Conclusion 8

Appendix A 9

Figure 1: world steel production 9

Figure 2: Declining U.S steel imports since the Asian Financial Crisis . 9

Appendix B 10

Figure 3: PEST model 10

Figure 4: Porter’s five forces 11

Figure 5: SWOT Analyses 12

Reference list 13

Introduction

In this paper we will analyse different aspects of the company iSteelAsia.com. We will discuss the market, market conditions, the role of e-commerce in the business, revenue sources of iSteelAsia.com, success factors and future options of the company’s marketing strategy.

iSteelAsia.com is a division of Van Shung Chong Holdings (VSC), a steel company in China. iSteelAsia.com is worlds first publicly listed vertical internet portal in steel trading. It’s engaged in the provision of steel trading and other value-added services for participants in the steel ecosystem through online and traditional steel trading operations. iSteelAsia.com is a secure, neutral trading platform created by and for steel industry professionals. It enables users to buy and sell steel, network with a global community of steel traders and find up-to-date steel industry information and news.

The steel industry is a traditional industry and the steel industry people are normally very structured. They are not into public relationships or proactive customer support; they focus mainly on sales. Because steel industry channels are so fixed, they are not flexible. In contrast people from other industry are very market-driven, customer-service focused, latest-technology savvy. Steel wasn’t attractive for investors fot a long time, but because the introduction of e-commerce, the steelmarket became a more interesting industry!

The steel industry

1.1 The steel market

The steel industry is an old traditional industry which is capital intensive and offers low returns on investment. Steel stockholding is a low value-added low margin activity (Kanter & Yatsko, 2001). The industry depends on the general status of the economy; economic expansion benefits the industry. Demand is closely tied to the gross domestic product and is plagued with inefficiencies. Industry inefficiencies include labour intensive negotiations to complete a deal, difficulties reducing supply chain cost for small players, the need to store more inventory than efficient, poor information flow and transparency, complicated transportation and storage logistics and poor communication between buyers and sellers. The steel industry is a traditional industry people are very structured, they are not into public relationships or proactive customer support; they focus mainly on sales and because steel industry channels are so fixed, they are not flexible (Kanter & Yatsko, 2001).

1.2 Trends and conditions

The challenging market conditions and different trends in the last years has effected the strategies and development of iSteelAsia.com. A lot of trends are market conditions can both be a threat and an opportunity for the company.

The world steel consumption was more than doubled in volume between 1960 and 1974. During this period, consumption grew at an average annual rate of 5.5 percent until suffering a decline of 8.2 percent in 1975 (Kaufman, 2006). Consumption recovered and then suffered a second decline of about 40 million tonnes in the 1980. World steel demand has increased steadily since 1999, but this increase has been accelerating since 2002 and represents around 50 million tonnes more per year. The increases in world steel demand can be seen as a positive trend in general for the word economy and also for the company, because they can produce more steel. In 2003, world steel consumption increased by 6 percent. In conclusion, there is an upward sloping curve in the world steel production from 1950 until now, which is an positive trend for the economy of the world but for the company this could as well a opportunity as a threat, because they also gain from more production, but on the other hand the steel prices could drop when there is more production than demand (Appendix A, figure 1).

The strong surge in steel consumption is a result of the dramatic acceleration of domestic steel demand in China, where steel consumption that had been growing by an average 2.6% a year over the period 1995 to 2000 has increased by some 25% a year since 2001 and is expected to continue to grow (Kaufman, 2006). In comparison, steel consumption in the rest of the world declined. There is a significant shift in the geography of steelmaking. The USA produced 37% of the world's steel output in the 20th century, now Asia accounts for almost 40% of the total and China has become the world's number one steel producer (Cyert & Fruehan, 2006).

Five days before iSteelAsia.com was set to list, share prices collapsed on NASDAQ in the United States (Kanter & Yatsko, 2001). There were difficult market conditions like overcapacity and deflation, partly as result of the Asian financial crisis from 1997-1999 (Appendix A, figure 2).

One problem iSteelAsia.com faces was that the steel industry players were among the most conservative in the world and slow to move to on-line trading. Year 1999