Corporate Strategy Case Study

Posco - Moving towards raw material

OR

Abstract:
South Korea based POSCO, the fifth largest steel producer of the world, planned to set up a steel plant of 12 million tones per annum (mtpa) at Paradeep, India. This U$ 12 bn investment is POSCO’s first investment outside its home country, Korea. The company chose India as its raw-material source due to her high quality iron-ore reserves. The company planned to produce primary steel in India and transport the semi-finished steel to its manufacturing facility in Korea. Analysts opine that the new initiatives will help POSCO to compete more effectively with BaoSteel, Mittal Steel and Arcelor in the South-East Asian market. But a group of analysts are skeptical whether POSCO can successfully leverage its US$ 12bn investment as it envisaged. The case provides a scope to students for discussing the recent trends in the global steel industry. It also analyses how POSCO plans to leverage its investment and the challenges it might face to accomplishing its objectives

Pedagogical Objectives:

• To discuss the trends and pattern of global steel industry
• To discuss how control over raw material act as a key growth driver in global steel industry
• To discuss the value chain of the global steel industry
• To discuss the key growth factor in global steel industry
• To discuss how steel companies plan to integrate backward
• To discuss the key factors that a steel company judge before investing and plan to leverage it

Keywords : POSCO; Global steel industry; Merger and acquisition; Crude steel; Backward integration; Locational advantage; Speciality steel; Primary steel making; Secondary steel making; Corporate Strategies Case Study; Steel industry value chain; Downstream products; Value added steel; Cold rolling mill; Consolidation; Acquisition