Final (steel) Paper

—The paper is due by the finish of exams on Friday 18 December 2015—

please put a pledged hard copy in the box outside my office door; keep an electronic copy as backup

For your final paper focus on one firm in the steel industry and argue what their strategic direction should be. You may pick a steel firm, or an upstream/downstream firm in the industry (a mining firm or a steel user). One way to frame the paper is as a memo from yourself (as VP of Strategy) to the CEO or Board.

As resources use (i) annual reports and similar material for that firm, (ii) the Martin text and (iii) class content. Of course you should also draw upon (iv) the Warrian book!

Keep in mind key structures in the industry:

  • fixed vs variable costs
  • price elasticity of demand
  • technical change
  • substitution possibilitiess
  • number of firms and other metrics of competition
  • vertical structure
  • product differentiation
  • intellectual property – copyrights, patents, trade secrets
  • advertising

However, do keep it concrete by focusing on a firm, and not the industry as a whole.

I am structuring this as a paper, not as an exam. So while from the syllabus and Martin text you can list topics covered this term, you may conclude that some are not central to the strategic choices you wish to present. If so, don’t feel compelled to list them!

This should be a standard paper: ① name/date at the top, ② a title, ③ an introduction including your key claim, ④ a presentation of the theoretical issue(s), ⑤ a presentation of data, and ⑥ your analysis/results. You then ⑦ conclude (not summarize!) the paper followed by ⑧ your bibliography. While it is binding whether or not you explicitly do so, it’s also good to ⑨ pledge at the end. If you stick to this format, then you need about 1 page for the intro plus summary, 1-2 pages to set forth your analytic framework, 2 pages to set forth your data, and 1-2 pages to undertake your analysis.

Again, you should aim for lean prose and tight argumentation – if you make a point in the paper, it should not be reiterated, and should certainly not appear in your conclusion. Instead in your final paragraph(s) you could for example note strategic issues that you believe are important other than the one(s) taken up as your topic, or data that you don’t have but that should be available and are critical to your argument.

Recent Posts

GM Looking to Sell Opel and Vauxhall in Europe

General Motors continues to lose money in Europe.  Despite attempts to reduce costs, the company recorded losses of $813 million in 2015 and $257 million in 2016 before taxes. Even with these losses the French automaker, Peugeot, may be looking to purchase the GM’s European fleet that contains both Vauxhall and Opel.  The announcement of such measures on Tuesday have caused GM’s stock prices to soar, with the potential to unload this segment of its business with such large losses.

GM predicted that the company would break even in 2016.  As such, the first two quarters of 2016 revealed the potential for the European region to yield a profit for GM.  After the Brexit turmoil, the company believes a weak pound and decline in vehicle demand influenced $257 million in losses.  Still, 2016 remains one of the company’s better years in Europe, and the company aims to break even by 2018 now.  With such enormous losses, why then does Peugeot want to buy Opel and Vauxhall?

A major factor inhibiting the profitability of GM’s European division remains its inability to appropriately utilize factory capacity.  Last year, only 63% of its factory capacity was used, lower than industry averages.  This remains a problem across Europe, as the government makes it difficult to close factories and lay off workers, yet the operating capacity of GM remains 8% below the industry average.  As a global giant in the auto industry, the low production capacity in Europe evidently reveals a large problem; however, Peugeot may seem to think they have the ability to harness some of this capacity.  As such, the acquisition would stand to make Peugeot the second largest player in the European car market, behind Volkswagen.

In 2016, GM’s European subsidiary showed potential for profit.  As such, Opel recorded two straight months of strong sales to start the year in the German market, an increase of over 25% during that period.  These sales were largely driven by the Opel Astra, the European “Car of the Year” in 2016.  Currently, it is difficult to tell whether GM is finally abandoning its European segment after years of losses, approaching almost $20 billion since 1999, or whether the company is selling high after the displayed potential for profits and sales in 2016.  However, it remains to be seen whether the sales in Germany alone will continue to rise across all of Europe.  If they do, the acquisition of Opel and Vauxhall may prove lucrative for Peugeot.

Sources:

http://www.businessinsider.com/gm-reportedly-in-talks-to-sell-european-business-2017-2

http://www.cnbc.com/2017/02/15/general-motors-could-exit-europe-with-1-billion-opel-sale-to-peugeot-analyst.html

https://www.fool.com/investing/2016/08/09/how-general-motors-turned-a-loss-into-a-profit-in.aspx

http://www.freep.com/story/money/cars/general-motors/2017/02/14/gm-opel-psa-group-peugeot/97886608/

https://www.gm.com/mol/m-2016-opel-03-02-sales-increase-february-28-percent.html

http://www.marketwatch.com/story/gm-faces-bumpy-road-to-profit-in-europe-2017-02-05

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