This paper examines the United States steel industry and its position in the global marketplace. Beginning with a brief historical overview that traces iron and steel production from colonial times through the post-Civil War boom and the industry's peak in 1969, the paper then assesses current conditions marked by foreign competition and consolidation pressures. The core of the paper presents a SWOT analysis evaluating the industry's established infrastructure and global reputation as strengths, declining union membership and supply management issues as weaknesses, multinational expansion as an opportunity, and intensifying competition from Europe and China as principal threats. Prevailing trends toward global marketing and new technology adoption are also discussed.
This paper examines the United States steel industry and its current status on the world market. First, it provides a brief history of the steel industry. Second, it offers an overview of how the industry is currently performing. Third, it presents a SWOT analysis of the steel industry, evaluating the industry's strengths, weaknesses, opportunities, threats, and trends.
For as long as the United States has been a nation, steel has been an important industry. It began with iron mining in Virginia and Massachusetts, and by the year 1700 the Americas were producing 2% of the world's iron. Demand grew, and as a result so did production of a specific form of iron called pig iron. "In 1723 only fifteen tons were exported, all from Virginia and Maryland" (Gordon, 2004, par. 3). By the Revolutionary War, the United States was producing one-seventh of the world's supply of iron. After the war, these numbers increased markedly as mills producing nails, hinges, and plows were built in other states.
Up until the Civil War, the United States imported most of its steel. With the advent of steam technologies, this changed and opened a whole new market. After the Civil War, the steel industry grew at astonishing speed as the nation's new economy expanded to become the world's largest. During this time, "steel production increased from 1.25 million to more than 10 million tons" (Gordon, 2004, par. 11). This growth continued through the World Wars but peaked in 1969 at 141,262,000 tons produced. The industry then began facing competition abroad from producers who could make more steel faster and at lower cost. By 1988, production had fallen to 102,700,000 tons, and the industry showed signs of weakness as it began to lose employees (Gordon, 2004, par. 15). The United States steel industry has since become competitive on the world market once again, but the Steel Age has been replaced by that of the computer and microchip.
Vicki Smith (2005) writes, "Borders have blurred as the ever-changing Steel Industry goes global, with fewer major players duking it out" (par. 4). The global market has made it possible for American companies to produce steel for foreign firms. Where the United States industry was once the dominant giant, a growing trend has been to look abroad for better or cheaper steel. Not only European countries are at the forefront of this shift — the United States steel industry is also facing significant competition from China.
American producers have lacked the consolidation achieved by competitors in other countries, and as the domestic supply starts to shrink, more plants close and blue-collar towns decline. Compounding the situation, the United States began importing cheap steel from abroad, alongside new trade law agreements imposed during the Bush administration. All of these changes have left the American steel industry in a period of adjustment and recovery.
The United States steel industry has an established infrastructure, centuries old, that includes a strong labor union. The nation's ongoing military commitments have also created demand for steel to build planes, weapons, and transportation systems. American steel carries a global reputation, and the industry possesses the technology needed to compete in a global marketplace.
In recent years, there has been a reduction in steelworker union membership, and towns that relied on the industry have declined. As a result, morale within the industry is low. Better management of supply is also needed to compete effectively on the global scale.
Endless opportunities are available when thinking with a multinational mindset. The United States has a strong reputation for helping other countries build and rebuild, and these relationships represent opportunities for global expansion. Involvement in international conflicts and reconstruction efforts can also stimulate new avenues of demand for American steel.
Threats consist of foreign competition from not only European countries but also China. These countries are able to produce higher volumes of steel faster and at a lower production cost, placing significant pressure on American producers.
"Strengths, weaknesses, opportunities, threats, and trends"
SWOT Analysis. Retrieved June 29, 2005 from the World Wide Web: http://www.quickmba.com/strategy/swot/.
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