Case analysis of Steelco
Part 1 Problem statement
1.1 Industry analysis
Steelco, one of the two major producers of wide-flange beams (I-beams) in the United States, could produce I-beams from 6 to 24 inches, while its competitor USX could roll products from a full range from 6 to 36 inches. However, there has been a definite trend toward the larger and heavier sections. The supply chain of steel industry contains three parties; they are suppliers like Steelco, structural fabricators, and downstream customers, called contractors.
1.2 Introduction to Steelco’s new technology
Recently, Steelco developed a new production technology, which allowed Steelco to provide up to 60-inch flange by welding three plates together into a section with the same dimensional and physical properties and almost the same cross section as a rolled wide-flange beam. In this way, Steelco could not only make use of the excess plate capacity, but also set a competitive advantage in larger size wide-flange beams. Thus, Steelco could break the monopoly position of USX in 24 inches or above segment market. In the long run, these larger sizes might offer a significant breakthrough for the construction industry.
1.3 Market reaction and possible reasons
However, the market reaction was disappointing when the new products are brought in. The reasons are as follows. Firstly, from the perspective of customers, the sales department only explains the new technology to fabricators, so the customers are not aware of the new production process, wondering whether the new product has the same dimensional and physical properties and the same cross section as a rolled wide-flange beam. Besides, they cannot understand why Steelco makes extra efforts for something unfamiliar with no price advantage. So it is extremely important to use certain promotion method to inform customers the new technology and its future impact on construction industry. Secondly, from the point of salespeople, even...