Business Marketing Report on Corus Group Plc - Essay Example

15 October 2006 Business to Business Marketing Report on Corus Group Plc Executive Summary Corus Group Plc (Corus) is currently one of the most important players in the steel and iron industry with its exposure into almost all the sectors in the global economy. The company’s main strengths lies on its size, scope, brand equity, economies of scale and customisation strategy. However, Corus is also faced with financial challenges because of declining profitability, risky financial structure, and inefficient utilisation of resources. Looking at the company’s environment, Corus can take advantage of globalisation, development in economies like China and India, increase in disposable income, and the boom in the industries served by the firm such as automotive, appliance, and consumer goods. However, Corus must also face the challenge of more intense competition due to the elimination of trade barriers and globalisation. The company can strengthen its stance in the industry by addressing its financial weakness, forging strategic alliances with its customers, enhance customer value through customisation, and enhance operational efficiency to price competitively. Company Overview Corus traces its roots in October 1999 with the merger of Koninklijke Hoogovens N.V. and British Plc. The business organisation is one of the largest producers of steel and aluminum in the world. Its size and scope has made it a very important player in the global economy as it is a supplier to other companies in almost all industries (Corus Group 2006). Currently, Corus it is being acquired for $9 billion by Tata Steel, an Indian steel company (Yahoo finance 2006). Corus is subdivided into four strategic business units namely, strip products division, long products division, distribution and building system division, and aluminum division in order to facilitate the manufacture of its numerous products. The company classifies its products in seventeen broad product lines: 1. bar and billet which are classified steel types, hot rolled products, bright bar and services that relates to this product line; 2. construction products and services which ranges from structural steelworks, floors, walls, roofs, modular, light framing, and other building components; 3. business services which relates to the industries where Corus is involved such as research and development, consulting, testing solutions, and transport and shipping; 4. electrical steels comprised of grain oriented steel, nonoriented fully processed steel, and nonoriented semi processed steel and complemented with lamination and transformer products; 5. narrow strips which are specially tailored according to customer’s specifications; 6. plates which are varying in size and grades like ship plate, mining and quarrying equipment and others; 7. plated steel strip which are customised according to their uses; 8. packaging steels which include blackplate, electro chromium coated steel/tin free steel, electrolytic tin plate, and polymer coated steels; 9. pre-finished steels which are classified according to the industries where they will be used like consumer products, construction, bakeware, and automotive; 10. sections including universal beams, parallel flange channels, universal bearing files, equal and unequal piles, asymmetric beams, joists, American wide flange sections, and structural tees; 11. rail products like rail, steel sleepers, switches and crossings and services like consultancy, design, renewals and services, and modular solutions; 13. strip products which are classified into hot-rolled, cold-rolled, and metallic coated strip; 14. special profiles which are customised according to customers’ specifications; 15. support products like fasteners, fitting flanges, radiation portal monitors, reinforcement products, and self-jigging shipkits; 16. tube products which includes automotive and engineering tubes, cold formed tubes, energy pipes, and others; and 17. wire rods for varied applications (Corus Group Plc 2006). The company’s wide range of products and services are targeted to different business organizations in various industries. Corus has become a major input supplier in the global aerospace, automotive, construction, consumer products, defense and security, energy, engineering, packaging, rail, shipbuilding, and yellow goods industries. It should be noted that the company is exclusively targeting other business entities and not individual customers. Its products are widely used as materials in the manufacture of other companies’ commodity (Corus Group Plc 2006). For example, Corus’ metals are suitable in the assembly of automotive making it a major supplier of Ford, Honda, and Jaguar. It should also be noted that Corus’ operation has a very wide scope encompassing almost all the countries in the world. This is even strengthened by the current integration of economies due to the pressures of globalisation. Analysis of the External Environment It is irrefutable that the operation of a company is directly linked with its external environment. In order to analyse the external environment of Corus, this section will look at the different factors which have strong implications in the strategic direction that the company will take. This will be done by employing a strategic management tool called PEST analysis. PEST stands for political, economic, social, and technological. Classifying these trends and developments in the environment according to the aforementioned categories will highlight how different actors affect the operation of the steel company. Political. The current political regulations and laws have a great bearing in the operation of Corus. One of the most important policies instituted are the integration of economies through the creation of free trade zones such as the European Union. These policies further hasten the move through globalisation by eliminating the barriers to trade. This integration presents opportunities for Corus, knowing that these policies open up economies for trade and foreign direct investment. However, this also poses a challenge for the business organisation knowing that it presents more intense competition among rivals in the steel and iron industry as competitors eye and vie for customers’ patronage in the markets being served by Corus. Economic. Economically speaking, the world is witnessing the emergence and rise of developing economies like China and India in the global arena. This development is expected to boost the demand for infrastructure triggering an increase in demand for Corus’ products. The economic developments in these regions are also expected to lead to mounts in disposable income and the creation of a larger number of middle class who will now be able to afford durable goods like cars and better housing. All these economic changes are expected to move for the benefit of Corus. Social. It should be noted that customers and the public are becoming increasingly concern about the externalities that a company’s operation bring in its environment and the society where it operates. There has been an intense clamor from the public to more socially responsible operations necessitating companies to promote sustainable development. This trend is expected to continue in the future as societies are becoming more vigilant and informed about the hazardous effects of company’s operations in certain geographic regions. This social awareness and development puts strong pressure in Corus to operate more responsibly even if it means higher cost to the business organization. Technological. Technological advancements have pioneered changes in the global business arena. It should be noted that technological revolution has become a major driver in almost all industries where Corus is involved. Specifically, the wide popularity and commercialisation of the internet have opened up a new distribution channel for Corus where it can market its product and interact with its customers. The internet has also widen the geographical scope that the company covers as well as made its business processes more efficient. Rapid technological advancement is expected to give Corus more opportunity as it indicates creation of new products in the industries that it currently serves. Analysis of the Industry/Competitive Environment BlueScope Steel Limited (BlueScope). BlueScope is an Australian based steel manufacturer primarily engaged in the manufacture of metallic coated, pre-painted steel, tinplate, blackplate, and roll-formed building and industrial steel. Its products are marketed to the automotive, construction, and general manufacturing industries. BlueScope’s main strengths lie on its size, scope, and interests. It should be noted that the company is recognised as the largest steel manufacturer in Australia. The company owns 50% interest in North Star Steel Incorporated, an Ohio based steel minimill and 48% on Castrip LLC. The company’s strong financial muscle is indicated with its acquisition of US based Butler Manufacturing for US$205 million in 2004. The company is also enjoying growth as its revenue mounted by 12.06% year on year in 2005. Number of company’s employees increased by 34.90% (BlueScope 2006). However, amidst these strengths the company seems to be underutilising the opportunities available to it. Arcelor Mittal Steel Company (ArcelorMittal). ArcelorMittal comes from the merger between Arcelor and Mittal Steel Company in June 2006. The company boasts of being the largest steel company in the world with 320,000 employees in 60 markets. ArcellorMittal, like Corus targets business organisations in the automotive, construction, household appliance, and packaging. The company capitalizes on its strong brand equity and leadership in the global steel industry. It should be noted that Arcelor is the largest steel company while Mittal is the second largest. Combining these two mean strengthening their capacity and power in the global industry. ArcelorMittal is also strong in terms of research and development. The company has a trusted team of experts which are tasked to continuously conduct studies on how to improve the products of the company. ArcelorMittal scope allows it to cover a large market with 27 countries in Europe, the Americas, Asia, and Africa (ArcelorMittal 2006). In order to support its operations in this geographic regions, the company also has an efficient distribution system and networks which is unmatched by its competitors. What is also apparent is the company’s dedication to serve both the developed and developing countries. ThyssenKrupp AG (Thyssen). Thyssen is recognised as the giant engineering and steel company in Germany. The business organisation is one of the largest steel companies in the world with bright prospects on growth. Thyssen’s operation is subdivided into three: steel which focuses on the manufacture and distribution of carbon and stainless steel; capital goods which consist of elevator and technologies segments; and services which provides “tailor-made materials, environmental services, mechanical engineering, and scaffolding services.” Thyssen’s main strength, like the two other competitors, is its scope and size. This gives the company a very strong brand equity which it uses in order to attract customers. Thyssen’s annual statement also shows very high profitability. It should be noted that “pre-tax earnings rose to €2.6 billion, compared with €1.7 billion a year earlier” (ThyssenKrupp 2006) The company is also admired for its intensive innovation efforts which puts in on top of the global industry. Summary SWOT Analysis Strengths. Corus capitalizes in its size and scope. The company’s size enables it to reap economies of scale in production, marketing, and distribution. It also exposes the business organisation to profitable markets in almost all the sectors. It should also be notes that the Corus’ customers are high-profile companies which are recognised worldwide. This also gives the company a very strong brand equity. In this evolving hypercompetitive industry, Corus has made a good strategy of letting its clients customise the products that they want to purchase. This adds value to the customer experience as well as serves as an indication of the company’s flexibility. Weaknesses. Corus problems lie in the financial aspect of its operations. It can be seen that the company’s revenue has hugely contracted in 2005, amidst the mounting revenue and profits of its major competitors. The company seems to have a problem on its cost management and effective utilisation of its assets. In spite of its huge resources, Corus has not been able to maximise it. It should also be noted that the company have a problem in financing as it has a very risky financial structure. However, the company is very much dependent on the acquisition of Tata Steel which can give it the much needed financial muscle. Opportunities. With the current state of the external environment, Corus can take advantage of the emerging opportunities especially due to globalisation. The elimination of trade barriers posts opportunities for expansion as trade barriers are rapidly eliminated. This encourages Corus to expand its operation to countries where resources are lower in costs. The rapid growth and development in economies like China and India also becomes beneficial for Corus as this economic progress is expected to result to a growth in modern infrastructure and housing. The emergence of a middle class and the increase in developing economies commands higher demand for automobiles, appliances, and other durables which can make the customers source more inputs from Corus. It should also be noted that technological developments in the sectors served by Corus can spill over to the steel company as an increased in demand and orders. Threats. With the merger of the largest steel companies in the world, it is expected that steel and iron industry will face a more intense rivalry. Corus also faces the threat of aggressive marketing moves which will be launched by other competitors. Globalisation also exposes Corus into the threats of battling head with firms which are not currently operating on its markets. Lower tariffs and tax breaks given by developing economies to foreign investors might steal the company’s customers especially when competitors develop more aggressive strategies. Key Marketing Challenges and Suggested Actions The above discussion has revealed the most important issues that the company is facing at the moment. It can be seen that Corus is dealing with a lot of opportunities as well as various challenges. This section will offer the strategic direction which the company can take in order to respond to the different marketing issues and challenges. The strategies which will be outlined in here are specifically applied in the medium term or five years. First, the company needs to find a solution to its financial problem. Even though the acquisition by Tata Steel is expected to infuse the capital the company needs in its operation, Corus still needs to look at its entire operations and look at the changes which it can institute in order to efficiently manage its costs and enhance its profitability. It is strongly suggested that the company conducts a value chain analysis in order to identify and eliminate the activities in the value chain which do not add value to the customer. Elimination of non-value adding activities is expected to reduce operations costs. The company can also look at the activities which it can outsource to other business entities in order to cut expenses. Its association with an Indian company can make it easier to find a business process outsourcing company which can take care of the back office processes at lower costs. This move of improving the financial performance of Corus should be conducted within a year. Second, the company should forge a stronger strategic alliance with its suppliers through the use of technological advancements. In the current global business arena, it is notable that companies serving other business organisations are becoming more and more integrated through the use of internet technologies. Corus should also take advantage of this trend by creating a portal which is especially dedicated in serving its customers. With this portal, the company can allow customers to put their orders and alert the strategic business units which will manufacture the orders. This can add value to customers and is expected to forge a stronger relationship with them. This can help in customer retention and ward off competition from other players. This system should be fully operational within six months. In this hypercompetitive environment, Corus should ensure that it is extending superior value to its clients. The company should continue to display its flexibility by intensifying its commitment of customising its product offerings according to the specification of the clients. Corus should be fully aware of the new trends in the environment of its clients and be able to provide superior solutions to them. This move should be ongoing as this is the main goal of any organisation. It is expected that companies in the steel and iron industry are going to battle in terms of price war. This is in the face of the higher competition and rapid improvements in technology. As steel companies merge and reap economies of scale in production, it is expected that low costs in manufacturing will lead to less priced products. In response to this, Corus should intensify its efforts in boosting the efficiency of operations. The company should also find ways to competitively price its products. The company should do this within two years. References “ArcelorMittal,” 2006, Retrieved 15 December 2006, from http://www.arcelormittal.com/ “BlueScope Steel Australia,” 2006, Retrieved 15 December 2006, from http://www.bluescopesteel.com.au/ “Corus Group,” 2006, Retrieved 15 December 2006, from http://en.wikipedia.org/wiki/Corus_Group “Corus Group Plc,” 2006, Retrieved 15 December 2006, from http://www.corusgroup.com/en/ Kotler, Philip. “Marketing Management.” 2003. Upper Saddle River, New Jersey: Prentice Hall “ThyssenKrupp AG,” 2006, Retrieved 15 December 2006, from http://www.thyssenkrupp.com/ Thomson, A. & Strickland, J. 2002, ‘Strategic Management,’ New Jersey: Thomson Read More