The Impact of Automakers Demands on the Steel Industry - Assignment Example

Consumer behavior is an important determinant of the development of any industry. Increased competition among different companies within different industries has led to the establishment of different consumer-related mechanisms, which place the consumer demands for consideration in the promotion of their products. Constant changes in consumer behavior affect the nature of competitiveness of different companies and thus their performance. According to a New York Times article by Jaclyn Trop, “Steel Industry Feeling Stress as Automakers Turn to Aluminum”, published on 24th February, a shift of Ford towards constructing its vehicles using Aluminum has greatly affected the some of the steel makers who banked on it as a major consumer [Tro14].

Ford’s River Rouge factory’s partnership with steel mill has gone for a long time with the partnership leading to the construction of highly popular vehicles in America, ranging from the Model A to F-150 pickup truck [Tro14]. However, in 2014, Ford announced its switch to the use of Aluminum in the construction of its F-150 trucks. This is not just a concern to Steel mill but all steel makers within the US as most of the car makers have turned their attention towards the use of aluminum in construction of cars.

Being the second vital source of revenue for steel makers, only after the construction industry, the automakers constitute about 20 percent steel sales for the steel makers within the US on an annual basis [Tro14]. As such, a shift towards aluminum as a replacement of steel would have a great impact on the revenue of the steel industry. The automakers are pushed towards adopting the lighter steel as a major component of their cars as a result of the push by both the administration and the consumers to develop fuel efficient vehicles.

The steel industry has effectively and rapidly responded to this shift in consumer demands by developing lighter, high-strength steel that would meet the needs of the consumers. For Steel Mill, this has led to the adoption of the lighter steel by Ford in building the frame of its F-150 trucks [Tro14]. This type of steel is sold at a lower price than the initial steel, which has reduced the cost for the consumers while at the same time increasing the sales for the steel-makers. Other companies within the steel industry have also been forced to merge with other companies that have proficiency in development of lighter steel, as a strategic move aimed at holding onto their consumers.

For instance, United States Steel embarked on a joint venture with an investment of $400 million in Kobe Steel of Japan to allow for the development of advanced light but high-strength steel for the company’s loyal customers [Tro14]. It is important to note that as much as these changes within the steel industry have posed a challenge towards the sustainability of the steel makers, such changes have created an opportunity for this industry’s players to explore other competitive measures and to expand their customer reach.

According to Trop (2014), one of the advantages held by steel makers is that aluminum is much more costly than even the lighter and stronger steel [Tro14]. In addition, the flexibility of steel makers also gives them an upper hand against their aluminum competitors. However, the change concerning the fuel-efficiency standards set by the US federal government is a major industrial change that would require the steel industry to be apt in adapting to change in terms of its products in order to maintain its loyal customers and to even reach out to new markets.

Work CitedTro14: , (Trop),