SOE09701: (Strategic Management in a Global Context) Case Study: Severstal: growth and consolidation strategies in a turbulent global steel industry

Module / Subject / School:

SOE09701: Strategic Management in a Global Context

Edinburgh Napier University

Requirements:

Case Study: Severstal: growth and consolidation strategies in a turbulent global steel industry [pages 661 – 667 of the 12th Edition]

This case study can be found in the case study section of the 12th Edition of the prescribed reading:

Whittington et al (2020) Exploring Strategy Text and Cases, 12th edition,

This assessment contributes 50% of your final mark for this module and you are required to analyse one case study on Severstal. A digitised copy of the case study is available on Moodle.

The case study gives you background information and overview of the company as well the opportunities and challenges it has faced in recent years. The corporate website provides information on the company’s history as well as some key facts and figures.

The annual report provides financial information about the organisation and its current strategic direction. The case study has been published a few years ago and you should use the corporate website, annual reports and reliable web sources to access updated information.

Make use of these sources in combination to answer this assignment.

Questions:

1. Drawing on your knowledge of the PESTLE model, analyse the external

environment facing Severstal and identify the key external factors which impact on the company. (35%)

2. Carry out a 5 Forces analysis and analyse the attractiveness of the global steel industry in which Severstal operates. (35%)

3. Using Porter’s Generic Competitive Strategies, analyse the competitive strategy employed by Severstal. (20%)

Mark allocated for the presentation of analysis, use of case evidence and conclusions. (10%)

What we score:

73%

Our Writer’s Comment

This assignment is designed to assess students’ understanding of business practices.

To secure an A+ grade, adhere to these guidelines and make sure your work aligns with the grading criteria:

1. PESTLE Analysis (35%)

This section is worth a significant portion of your grade, so you need to get it right. Here’s how to approach it:

Political Factors: Consider how government policies, political stability, and international relations impact Severstal. Since Severstal is a global player, think about how tariffs, sanctions, or trade agreements influence the steel industry. Recent geopolitical events like the Russia-Ukraine conflict or relations between Russia and other countries might be particularly relevant here.
Economic Factors: Focus on how global economic trends, such as recessions, commodity prices, or currency fluctuations, affect Severstal’s operations. For instance, how has the demand for steel changed in emerging markets or in sectors like construction and automotive?
Social Factors: Think about how changing consumer preferences, workforce demographics, or environmental consciousness affect Severstal. Social pressures toward sustainability and reducing carbon emissions could play a role here.
Technological Factors: Consider how technological advancements in steel production or automation impact the company’s operations. Is Severstal leveraging new tech to improve efficiency or reduce costs?
Legal Factors: Discuss regulations related to environmental protection, trade laws, or safety standards. Severstal operates globally, so it must comply with laws in multiple regions.
Environmental Factors: Climate change is a key factor. Talk about the pressure on Severstal to reduce carbon emissions or adopt more sustainable production practices.

Key Tip: Don’t just list these factors—explain how they impact Severstal. For example, “Rising environmental concerns and stricter regulations on carbon emissions may require Severstal to invest heavily in sustainable technologies, which could increase operational costs.”

2. Five Forces Analysis (35%)

The Five Forces model assesses industry attractiveness, so you need to dive deep into each force:

Threat of New Entrants: Analyze barriers to entry. The steel industry has high capital costs and established players like Severstal, which make it hard for new competitors to enter. However, look at any shifts in global trade policies that might open the door for new entrants.
Bargaining Power of Suppliers: Severstal’s reliance on raw materials (like iron ore and coal) is key here. Are suppliers concentrated, and do they have the power to raise prices? Or has Severstal developed strong relationships or vertical integration to reduce supplier power?
Bargaining Power of Buyers: Severstal’s buyers are often large corporations. Does this give them leverage to demand lower prices, or is demand for steel high enough that Severstal holds power? Discuss how customer demand for sustainable materials might be shifting the power dynamics.
Threat of Substitutes: What are the substitutes for steel? Is aluminum or recycled materials becoming a more attractive option for Severstal’s customers? Explore how the threat of substitutes could affect Severstal’s market share.
Industry Rivalry: The global steel industry is highly competitive. Talk about Severstal’s main competitors (like ArcelorMittal or Tata Steel) and how price wars or technological advancements have shaped the rivalry. Consider how consolidation in the industry might affect Severstal’s strategy.

Key Tip: After analyzing each force, assess the overall attractiveness of the industry. For example, if supplier power is high and rivalry is intense, this might make the industry less attractive for new investments.

3. Porter’s Generic Competitive Strategies (20%)

In this section, analyze which of Porter’s three generic strategies Severstal uses:

Cost Leadership: Is Severstal trying to be the low-cost producer in the steel industry? Talk about how it achieves this, perhaps through economies of scale or vertical integration.
Differentiation: Is Severstal differentiating its products through quality, technology, or sustainability? Discuss if Severstal focuses on premium steel products or unique services to set itself apart from competitors.
Focus/Niche Strategy: Is Severstal targeting a specific segment of the market, like high-tech industries or regional markets?

Key Tip: Back up your analysis with examples from the case study. If you think Severstal is using a differentiation strategy, point to areas where it is innovating or investing in sustainability to appeal to eco-conscious buyers.

4. Presentation of Analysis, Use of Case Evidence, and Conclusions (10%)

Clear Structure: Use headings and subheadings to guide the reader through each section (e.g., PESTLE Analysis, Five Forces Analysis, Porter’s Strategy). Make sure your arguments flow logically from one section to the next.
Case Evidence: Reference specific examples from the case study to support your points. For instance, if Severstal invested in sustainable technology, mention this as part of your analysis on environmental factors or differentiation strategy.
Conclusion: Summarize your findings and make well-supported conclusions. For example, “Severstal’s ability to navigate environmental challenges while maintaining cost leadership positions it well for future growth, despite high industry rivalry.”

Final Tips:

Critical Analysis: The key to scoring well is critically analyzing the case. Don’t just describe what’s happening—explain why it matters and how Severstal can use these insights to its advantage.
Updated Information: Since the case study was published a few years ago, be sure to incorporate recent datafrom annual reports, the corporate website, or reliable sources to reflect Severstal’s current position.
APA Referencing: Make sure all your sources are correctly cited in APA format. This includes the case study, additional articles, and Severstal’s corporate reports.

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