Zhang National Steel Company -Case Analysis
Liu Hong is faced with a task of convincing the chairman of Zhang National Steel Company and the investors that moving the business into the International Arena would be the best move, necessary for its survival. Fundamental to his successful presentation is the need to appeal to the members that the drastic increase in production in the country and consumption of the product in the foreign market presented an opportunity to retain the jobs while enhancing the influx of money to the economy. It is clear that the local demand for steel has been surpassed by the supply of the commodity. Going international is the only way to save the company and the thousands of households that depend on it directly or indirectly. If by any chance, the China fails to maintain the large steel business, the rates of unemployment and layoffs are likely to escalate leading to instability (Czinkota & Ronkainen, 2013). It is, therefore, the responsibility of all employers, private and public to find ways to provide and maintain jobs.
An analysis of the business environment and the company situation suggests the availability of various drivers that push for internationalization of operations. The location of the steel mills along the Yangtze River offers a competitive advantage to the China companies as it drives the industry and firms to move into the global market (Czinkota & Ronkainen, 2013). Besides, the competition among the elite western countries, Europe, US, and China for the lucrative market shifts the advantage to China for its better pricing- a factor that appeals to the consumers (Huang, 2016).
By employing an aggressive marketing strategy and by taking a geocentric orientation, the company will position itself positively in the international market. The strategy behind the geocentric firms is attaining a status of a low-cost manufacturer and marketer. The said companies achieve competitive by embracing manufacturing processes that increase value per a cost of a unit of the product than the competitors. Mr. Hong should also bring to the attention of the chairman and the executive members of the growing market in India. The Indian market is growing rapidly, and yet the production of steel is still only 10% of the total production from China (Papadopoulos & Heslop, 2014).
To overcome the protectionism of European countries and the USA, the company can persuade the government to help it highlight the facts and benefits of a free trade policy. This can be achieved by a recruitment of competent economists. For example, by allowing the importation of cheaper steel produced in China, the construction costs in the USA and Europe will be drastically reduced (Huang, 2016).
The steel industry in the global context is undergoing the stage of growth in the product life cycle. The total production of steel in the world has grown exponentially, fueled by the establishment in the industrial and construction. It may not be feasible to move the labor overseas as this may undermine the competitive advantage. Shifting labor will also translate to a loss of jobs locally (Papadopoulos & Heslop, 2014).
Given that China produces desirable quality steel at relatively affordable prices than most of her competitors, the maintain and increasing the employment opportunities to the local population while increasing the profit margins for the investors are among the reasons that the chairman and the investors should consider as benefits of going global (Huang, 2016). The drivers for penetrating the international market are evident and the sooner they leverage and start the process rolling, the better chance of sustaining the operations of the company.
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