Strategic Management At Zhujiang Iron And Steel Company Harvard Case Solution & Analysis

INTRODUCTION

Zhujiang iron and steel company (ZISCo) was founded in 1997 as a Chinese-owned enterprise. ZISCo is one of China’s key national projects in the National Ninth Five Year Plan. ZISCo produces a wide range of steel sheets and plates that are used in various other products. The basic purpose of ZISCo is to deliver quality products and services to its customers and suppliers. The first production line of ZISCo was started in 1999 with a production capacity of one million tonnes of steel products. Moreover, the second production line of ZISCo was completed in 2003 with an annual production of two million tonnes of steel sheets products.

ZISCo is an essential business unit within the Guangzhou Iron and Steel Enterprise Holding Limited (GISE), established in 1997. The core product of the company is thin steel sheets, which are used for making standard shipping containers. Rousheng Zhang became a president of ZISCO in March 2003 and implemented a value creation strategy in the company. Prior to 2003, the company initiated a differentiation strategy with a focus on domestic niche market because the company was a new player in the iron and steel marketplace(CK Prahalad, 2004).

Moreover, the company did not have any distribution strategy to launch their product on a large scale. Furthermore, ZISCo failed to achieve economies of scale, high product quality, minimum cost, and continuous production. The reason for the failure is also because of high competition in the steel industry. The failure led the company to face multiple challenges and problems such as increase inventory and operating costs, reduced the bargaining power with suppliers, increased selling costs and created cooperation issues (Grzegorz, 2010).

The company faced various challenges in the main areas of business strategy, human resource, production, sales and procurement, and, as a result, poor financial problem, and low-margin products. Therefore, it is necessary for ZISCo to develop a strategy, to overcome the challenges and lead the company to gain competitive and customers’ advantage, in order to maximize the profitability and productivity of the company.

PROBLEM STATEMENT

In 2007, ZISCo faced numerous challenges and problems such as organizational culture change, competitive and customers’ advantage sustainability, knowledge management and learning capability. Therefore, the company should develop a strategy to overcome these challenges, in order to achieve company’s goals and objectives. Moreover, it help the company to sustain its competitive advantage strategically and operationally.

Furthermore, ZISCo should implement a value creation in the company, in order to sustain the growth of the company in the long run. However, it is important for the company to concentrate on market development and quality of products and services to increase its market share. Moreover, this case is about strategy and execution, and therefore, it is necessary to conduct SWOT analysis, Porter’s five forces model, and PESTLE analysis, in order to answer the questions effectively and efficiently and drive possible solutions and recommendations.

Q. Can you describe the Zhunjiang’s strategy and to what extent is different from Porter’s focused differentiation strategy?

Mr. Zhang, the president of ZISCo, initiated a strategy to implement value creation strategy in the company, to improve ZISCo’s long term competitive advantage. The value creation strategy helped the company to increase its production volume and to improve the quality through cross-functional coordination at ZISCo. Moreover, this strategy helped to overcome the hurdles faced by the company such as implementing business strategy, production, procurement, financial and operating costs problems, decreasing inventory costs and lack of human resource and R&D department.

Furthermore, the value creation strategy helped to implement effective organizational culture change and increase the learning capability and knowledge management among the employees. Apart from that, the learning capability helped the employees and management team to gain more skills, abilities, and knowledge, to work effectively and efficiently. Zhang with the value creation strategy also reduced material procurement costs and stabilizes supply sources through an alliance with suppliers. Zhang’s purpose is to bring positive change in the human resource management, effective communication and leadership at ZISCo (X Zhao, 2008).

PORTER’S FIVE FORCES MODEL

Porter’s five forces model helped the company to analyze the company's strategy carefully and successfully implement the change in the organization(Porter, 1980).

Threats of new entrants

The threats of new entrants for ZISCo are moderately low because it is difficult for the new player to compete on global scale. Moreover, huge investment and resources are required to enter in the iron and steel industry and difficult to develop product differentiation to gain competitive advantage. Furthermore, new entrants require an appropriate distribution channels to distribute their product at the right place. Lastly, they also require barriers of no direct switching costs and indirect switching costs of quality and delivery...........................

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