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American steel producers don't have their business act together

In the early 2000’s, I conducted a course for the Bao Steel Company on behalf of University of California at Berkeley Worldwide. The course was about research and marketing methods specifically applied to the steel industry. Twenty six students attended, and they were all PhD candidates. Their company wanted them to learn how to price steel products. Bao Steel wanted the students to learn market research and marketing methods. The company had a great website that would rival any competitors in the world. I discovered that I could access their general ledger on the website and suggested that they not share that. It just shows how forthcoming the company was as executives were concerned about being accused of dumping their products at below cost.

A person walks past the remains of the Packard Motor Car Company, which ceased production in the late 1950`s.
Spencer Platt, Getty Images

Their planning methods were disciplined and governed by executive committee that made decisions annually. That practice tended to commit them to pricing with less flexibility and market responsiveness than desired.

What I discovered in the process is that at that time the Chinese company was very good at producing high volume commodity products, while American companies were best at producing specialized and custom products. It seemed to me that Chinese companies and American producers would have done well by partnering and collaborating to exploit the best of their unique capabilities. At that time, it was difficult to get American producers attention.

Some reasons included that American producers were excessively preoccupied with government policy versus being committed to understanding customers needs and wants. Second, American producers seemed to have lost creativeness in producing competitive business models. The situation had less to do with organized labor and a lot to do with inept management innovation and technical invention.

So, Lydia Depillis addresses the topic today in the Washington Post. Now, it is the Koreans who are being accused of dumping. The fact is, American steel manufacturers need some new geniuses intent on optimizing performance of the steel industry in the USA for global competition.

"Is cheap steel killing American jobs?

May 13 at 3:26 pm

The American steel industry is in trouble. It's long been under pressure from cheaper foreign imports. Then, demand dropped off a cliff during the recession as construction slowed. And over the past few months, as activity was recovering -- especially natural gas extraction, which requires miles and miles of steel tubing -- a flood of production started coming online from Asia, sending prices through the floor."

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