Strategic Management

Project Submission (Part II)

BSRM Steel Mills Limited

Submitted to:
Yurika Uematsu Bhuiyan

Department of Management
North South University

Submitted by:
Course: MGT 489
Section: 03 (Spring 2017)
Group Name: Team Spectra
Name ID
Mohammad Sharfaraz Ahmed 132 0305 030
Shah Alvi Rahman 132 0180 030
Khandekar Nazmus Shakib 111 0859 030
Abdullah Al Noman 131 1159 030
Asif Mahdi 132 0115 030
Mohammad Ali 132 0334 030
Irtiza Hasan 132 0669 030
Rakibul Azad 141 0008 030

Date of Submission: March 23, 2017

 Table of Contents

Recommendations based on strengths and opportunities ..........................................1

Corporate Level Strategy Recommendations ............................................................3

Business Level Strategy Recommendations ..............................................................5

Functional Level Strategy Recommendations ...........................................................6

Technology Strategy Recommendations ...................................................................8

Revised Business Model ............................................................................................9

Bibliography.............................................................................................................11

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Recommendations based on strengths and opportunities

Utilize the Strength of Being the Market Leader: BSRM is the leader in their industry with

maximum market share amongst peers and possess best brand recognition as mentioned in

previous parts. In regard to the macroeconomic environment as the economy of Bangladesh grows

at a rate above 7% (7.11% GDP growth in Bangladesh, 2016) there would be significant growth

of real estate sector. This in turn will increase demand of construction steel. Therefore, BSRM

should already invest in extending their production capacity so that they are able to fulfil the market

demand. The process of increasing capacity is time consuming and capital intensive so if BSRM

does not start planning now they may get blindsided.

Plan on Serving Majority Market Share in Assam: Bangladesh is close to the eastern part of India

and this represents a huge opportunity for grabbing market of Assam (primary research). Logistical

issues have resulted in somewhat disconnection of the particular region of India which means in

terms of distributions major steel producers of India are finding it difficult to reach the market.

Assam has a population of above 30 million people (Assam Population Census data 2011, n.d.).

This represents potential for infrastructure and other construction related development. Thus, even

though BSRM is exporting small volumes of product to the region but they should start planning

distributions, promotions and other aspects to gain significant market share of the region.

Acquire Small Steel Producers and Take Advantage of Strong Distributions: As already

mentioned there are 3 key construction steel manufacturers in Bangladesh but there are various

small manufacturers who are in most cases struggling as economies of scale is an important factor.

BSRM can acquire these small manufacturers, use their resources and capabilities to serve the

growing demand.

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Take Advantage of Booming Bangladeshi Economy: Booming economy of Bangladesh is an

opportunity for BSRM. They can capitalize on the increasing demand from both government and

private construction projects. As they enhance their economies of scale by increasing production

due to rising demand; both profitability is increased and they can make it even more difficult for

their competitors to be in the market.

Enhance Lobbying Process with Government: As mentioned earlier rise in government projects

will demand a significant proportion of the industrys sales. In addition, BSRMs product is

already being used for giant projects like Padma Bridge .So being able to supply in Government

projects will boost BSRMs credibility and image. In this regard, BSRM should employ seasoned

experts who are experienced in dealing with such matter or have long relationships with

appropriate government bodies.

Improve Working Conditions of Ship Breaking Yards: Earlier the issue has been included under

threat. We believe such an issue can build negative perception for the brand. In addition, as BSRM

plans on expanding internationally as recommended before these issues may create barriers in

terms of regulations and brand image. The issue may raise questions regarding compliance and

similar factors.

Increase R&D Investments: BSRM introduced 500W construction steel way back in 2008. The

Company hasnt brought any new product since then. Introducing innovative products or adding

even superior products to their portfolio will enhance brand image and may also replace imported

products. Thus, we believe that BSRM should increase investments in R&D in order to enhance

their brand image and increase their long run profitability.

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Take More Control Over Supply Chain: BSRM heavily relies upon outside suppliers for old ships

and scrap. In most cases, BSRM has to go through layers of agents and other mediums to

communicate with suppliers. So this has a negative impact on their overall cost structure and

scheduling. Thus, we suggest that BSRM have their own agents taking control over

communications and also they can introduce auctions to attract more suppliers and in turn increase

bargaining power over suppliers.

Corporate Level Strategy Recommendations

First of all, in terms of corporate level strategic choices- BSRM should continue being only in the

steel industry as there is still strong scope for rising demand, in terms of value creation activities

the Company should try to increase their product portfolio for construction steel. In addition certain

steel products such as span, guarder, etc. are being imported from China and other Countries so

BSRM can venture into producing such products as well.

Horizontal Integration: As mentioned in recommendations -BSRM should go for acquisitions

strategy. This shall help the Company to make use of their already strong distribution channels

and improve their economies of scale. This also ensures lower cost structure, less industry

competition and increased bargaining power over their raw material suppliers as BSRM will order

in even larger quantities as they get bigger. However, BSRM is already the biggest player in the

construction steel industry of Bangladesh and as they get even bigger the Company may get more

bureaucratic making decision making process less flexible. In addition, political scenario in

Bangladesh is relatively unstable and government may impose regulatory challenges as the BSRM

turns into a market mover.

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Vertical Integration: We suggest that BSRM focus on backward vertical integration. According

to our primary source scrap steel and recycled ships are key sources of raw materials for the

industry. Also there are various chemicals and materials such as coking coal which are often

imported. BSRM should invest in iron ores or entities handling iron ores. According to experts

(primary research) scrap steel does not produce most ideal steel products in terms of quality. So

by having control over iron ores BSRM can add higher quality products to their portfolio. BSRM

should also invest in companies which are in charge of trading of old ships. This means overall

cost structure is reduced and profitability is increased. Thus, BSRM should only focus on moving

into upstream industries. In turn, they shall be able to enhance their product quality along with

overall scheduling of their production operations. The disadvantages of changing technology and

market demand that is usually related to vertical integration is not applicable in this case as the

market demand is already far lower than similar environments such as India (Big steel companies

displace small ones, 2014) and the GDP growth rate of Bangladesh is consistently on a growing

trend. On the other hand, the product- construction steel does not evolve much relative to

technological products such as Iphone so the risk of having a completely new technology is quite

rare for this industry. Thus, in terms of vertical integration the advantages far outweigh the

disadvantages for BSRM. And lastly, BSRM needs a continuous flow of power supply for their

production process (Primary research). We all know that in our country there is a shortage of power

supply especially in the summer. So, they should also plan on building their own power house to

get continuous power supply.

Competitive Bidding Strategy: BSRM can start an online auctioning process for their raw material

suppliers worldwide. This may create buzz amongst industry suppliers and they may want to get a

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share of the pie by bidding the lowest price. This shall further enhance BSRMs profitability by

improving their cost structure.

Strategic Alliance: In order to enhance technical know-how, BSRM should form an alliance with

global steel brands such as ArcelorMittal S.A. This shall not only improve their technical

knowhow but it will also enhance BSRMs brand image due to being associated with such a well-

known brand.

Business Level Strategy Recommendations

In terms of Business Level Strategy, BSRM Steel Ltd is following broad differentiation strategy

with standardization in market segmentation. BSRM being a market leader always tries to focus

on quality features of the steel and steel bar products only. Currently, they are charging relatively

higher prices (primary research). This has been as a result of better brand image than competitors.

Broad Differentiation Strategy: For the next 5 years, BSRM should focus on broad differentiation

strategy improving their products in terms of quality. Besides, to capture more market share and

also the market of Assam through their flagship product Xtreme 500W, they need to expand

their production improving their unique features of the steel bars and along with their distribution

system.

Value Innovation: BSRM should focus on innovating the process and products to best serve their

customers. The major portion of the customer base prefers BSRM over other manufacturer due to

perception of quality and reliability. If they focus more on innovation through proper market

research and R & D, they can add more products to their portfolio.

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Horizontal Merger: BSRM should also use horizontal merger. Currently, there are only 3 main

players in the industry. If BSRM could merge or acquire those small companies, it will help them

to expand their current production and distribution as well as to lower their cost structure and

industry competition. Besides, it will give BSRM more bargaining power over suppliers regarding

price. As a result, the profitability of BSRM will increase.

Capacity Control: Proper capacity control is suggested for BSRM Steel Limited for the expansion

of production. Because as BSRM plans on expanding production capacity they will need proper

capacity control of their production lines. BSRM should consider both overproduction and deficit

production. As this may result in either lost customer or idle inventory. They would able to avoid

such scenario by continuous market research and coordinating with retailers.

Functional Level Strategy Recommendations

We suggest BSRM to focus on efficiency as the Company produces similar products and being

able to lower their cost structure shall effect their efficiency immensely. BSRM should focus on

the following value creation functions in order to improve efficiency:

Infrastructure: Individual employees working at BSRM should possess clear understanding of

the companys corporate, business and functional level strategic goals and their part in achieving

them. They should be provided with proper training and guidance regarding improving the overall

production. A sense of coordination and synergy has to be instilled into the minds of employees.

Production: The steel industry is going to face a massive rise in demand. The present per capita

steel rebar consumption in Bangladesh is 25kg, which is expected to grow to 50 kg by 2022

(Market Insight: Emerging Steel Industry in Bangladesh, 2016). BSRM should focus on increasing

their production capacity. BSRMs flagship product Xtreme 500W generates 97% of its total

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revenue (Bangladesh Steel Industry Review, 2016). Reacting to the rise in demand, BSRM can set

up more Xtreme 500W production plants. As a result, the company will achieve improved

economies of scale

Materials Management: The nature of the final products does not allow BSRM to go for just in

time inventory system. Its dependency on shipbreaking industry has recently been threatened by

the recent EU regulatory policies (Market Insight: Emerging Steel Industry in Bangladesh, 2016).

BSRM has to go for in-house raw material sourcing, on which the company has already started

working (Commercial production of BSRM by Sep, 2015). A quality control department has to

be set up to ensure the quality of raw materials. BSRM can become a prominent supplier for other

local steel manufacturing companies to minimize inventory holding and maximize inventory

turnover.

Research and Development: The research and development function of BSRM has to come up

with new products that are consistent with their customers needs, and innovate efficient

production methods that will add some level of flexibility in the production process and also lower

cost structure. At present this function should focus more on the Xtreme 500w products and their

development, since the success earned from this particular sector has drawn all other steel

manufacturing companys attention. The research and development function has to have good

relationship with the marketing and production function to generate knowledge about the

customers and the production criteria.

Information System: The information system has to keep track of all other functions and keep

them integrated. Along with automating the entire process, it has to calculate the defection rates,

and manage logistics. A web based platform has to be set up to interact with the customers and

distributors in order to receive their feedback.

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Human Resources: BSRM has always sought to hire talented and ambitious people (Career,

2017). The human resource function has to allow individuals to grow their expertise through

efficient learning process and training, and foster a positive working environment. The payment

has to be linked with performance and individuals contribution towards accomplishing goals has

to be recognized.

Technology Strategy Recommendations

As recommended by business level strategy BSRM is planning to have focus differentiation

strategy for the next five years. In such cases, BSRM should adopt best practices, modern

technologies and innovation to ensure that its resources are efficient and sustainable with minimal

or no environmental or social impact to better quality product. In order to be technologically

advanced BSRM needs to invest more on their R&D (research and development) and focus

primarily on product research and applications research for the building and construction sector.

BSRM needs to focus on process research for the mills operations, concentrating largely on

environmental research. BSRM needs to work on HIsarna process of iron making as it is a smelting

reduction technology which offers the potential to eliminate the sinter, pellet and coke production

steps from the primary iron making process and which in principle offers a 20% energy (and CO2)

reduction opportunity without carbon capture and storage. Other than process innovation and

energy reduction, BSRM needs to develop new products with innovative features which will

differentiate themselves from the competitors and create value for the consumers. In addition

BSRM can develop organic coated steel with outstanding scratch resistance for roofs and facades,

offering a full spectrum of beautiful crystalline colors such as Granite Quartz launched by

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ArcelorMittal (Innovation in steel for construction, 2015). This product not only will help in

construction but also beautify the construction and thus definitely create value for the customers.

Now as recommended in the corporate level strategy, BSRM should go for horizontal integration

for utilizing better distribution channel and economies of scale. Now there are several new

technologies that have either already impacted distribution or will soon do so. For better warehouse

management and distributions BSRM can use RFID technology. RFID Tags (radio frequency

identification tags) can be used in warehouses, on assembly lines, and in retail (The Future of the

Distribution System: New Technologies, 2016). They consist of a small tag with an electronic

circuit that can send identification information to a reader when the reader sends them a radio

signal query. Through using RFID tags, it will be very easy to have a better distribution as well as

helps to track record the inventory. Other than this, as BSRM is recommended to go for vertical

integration so for that they should use different supply chain management softwares such as

Quickbase, Megaventory etc. Besides this as mentioned in the corporate level strategy that high

quality steels can be manufactured using scrap so they should apply HBI & DRI technologies (HBI

as ferrous raw material in the electric arc furnace, 2013) which helps to collect purified steel from

scrap. The innovative process saves costs and raises the availability of the smelting furnaces.

Revised Business Model

As we mentioned earlier, at the core of the value creation process, BSRMs business model

represents a well-integrated steel manufacturing operation starting from collecting the raw

materials to manufacturing high end steel products. We have recommended in the earlier parts

about some changes they need to make strategically and add some new ones. In this part, we like

to add those changes in our revised business model-

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Key Activities Value Proposition Customer Relationship Customer Group
Manufacturing Trusted Strong Base Automotive
Warehousing Brand Value Driven Construction
Research and Highly valued Engineering
Development by all Consumer
stakeholders Goods
Outside country
customer
Key resources Distinctive Distributor Marketing
Access to high competencies Traditional Promotion
Raw materials
end raw supply channel Providing
specially MS
materials for inside the dealership
(mild Steel)
Highly country Providing
bars
qualified New distributor Agentship
Market Leader
expertise for foreign Market
supply research
Key partners Cost Structure: Revenue Generator:
Meghna Raw material Xtreme
Engineering cost Maxima
Works Inventory cost Ultima
Partnering with Processing cost Xtrong
key raw Interest on debt. Centura
materials Bureaucratic New products
supplier cost for that will be
(Vertical integration. innovated.
Integration) Cost for power
plant

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Bibliography

(n.d.). Retrieved from http://bsrm.bigmarket.com.bd/details/944/bsrm-xtreme-bars-500w

7.11% GDP growth in Bangladesh. (2016, Oct 25). Retrieved from Dhaka Tribune:
http://www.dhakatribune.com/bangladesh/2016/10/25/six-die-fire-malaysian-hospital/

Assam Population Census data 2011. (n.d.). Retrieved from Census 2011:
http://www.census2011.co.in/census/state/assam.html

Bangladesh Steel Industry Review. (2016). Retrieved from arx:

https://www.arx.cfa/up/post/3195/Bangladesh%20Steel%20Industry%20Review-2016.pdf

Big steel companies displace small ones. (2014, Aug 11). Retrieved from The Daily Star:
http://www.thedailystar.net/big-steel-companies-displace-small-ones-36566

Career. (n.d.). Retrieved from bsrm: http://bsrm.com/career/

Commercial production of BSRM by Sep. (2015, June 20). Retrieved from daily-sun: http://www.daily-
sun.com/printversion/details/52219/Commercial-production-of-BSRM-by-Sep

Contact Us. (n.d.). Retrieved from bsrm: http://bsrm.com/contact-us/

HBI as ferrous raw material in the electric arc furnace. (2013, 9 18). Retrieved from voestalpine:
http://www.voestalpine.com/blog/en/innovation-en/hbi-as-ferrous-raw-material-in-the-
electric-arc-furnace/

Innovation in steel for construction. (2015, Nov). Retrieved from industry.arcelormittal:

http://industry.arcelormittal.com/news/newsarchive/2476/2118/Innovationinsteelforconstructi
on

Market Insight: Emerging Steel Industry in Bangladesh. (2016, February 2016). Retrieved from
lightcastlebd: http://www.lightcastlebd.com/blog/2016/02/market-insight-emerging-steel-
industry-in-bangladesh

Price List. (2015, Oct 28). Retrieved from rsrmbd: http://www.rsrmbd.com/price-list-2/

The Future of the Distribution System: New Technologies. (2016, Aug 31). Retrieved from cerasis:
http://cerasis.com/2016/08/31/new-technologies/

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