Analysis of the steel production company POSCO

Analysis of the steel production company POSCO 1. Introduction The project that started with a few people at the city of Pohang at the East coast of Korea has today grown to the company that most of us knows as POSCO. Today POSCO is not only among the top steelmakers in the world in terms production, but also in terms of technology has the company captured one of the leading positions. More specifically the company is today the third biggest steelmaker in terms of production, and has earlier figured as number before different mergers and acquisitions changed this status. POSCO has succeeded by constantly investing in new production facilities and new technologies. This is underlined by their slogan: â€Å"Resources are limited; Creativity is unlimited†. POSCO was founded in cooperation with the Korean government, which wished to create a local supply of steel. Thus, POSCO has always been highly dependant on the Korean market and the Korean government. Even today this dependence is preserved, emphasized by POSCO having 72% of their sales in Korea (Business and Company Resource Center, 2010). However POSCO is also starting to position themselves at the global market, where the patterns of competition is completely different than the ones at their home market. This paper will examine the position of POSCO at the Korean market as well as the global market, and what kind of possibilities and challenges they are facing in order to prosper. The role of technology development plays a crucial role in this matter. Despite being an old and established industry, steel production is highly dependant on the development of technology, especially in terms of new processes of production. The paper should therefore also take into consideration how POSCO will succeed in further improving their technological competencies in order to stay competitive. The structure of the paper will be as follows: After the introduction some theoretical considerations in relation to the paper will be provided. Second, a presentation of POSCO, including its historical development as well as a short presentation of steelmaking will be provided. Third, the competitive market of the steel industry that POSCO are acting in will be analysed through the model, Porter’s five forces. After this, the technological development within POSCO will be described and analysed. At last, the future challenges in terms of technology strategy and the possibilities improving their position in the market will be analysed. These will be complemented by some specific recommendations on how to prosper. 2. Theoretical Considerations This study will consist of a business strategic part as well as a technology strategic part. The aim of the paper is to explain how the technology strategy of POSCO can be utilized in order to carry out the business strategy of the company, ultimately leading to a sustainable competitive advantage. At the business strategy level this paper seeks to combine the market-based view (Porter, 1980) and the reso urce-based view (Barney, 1991; Prahalad & Hamel, 1990). The paper adopts an outward-in perspective, starting out by analysing the current market situation of POSCO. For this purpose a Porter’s five forces model is used. By making this analysis it becomes visible what kind of position POSCO holds in their current competitive environment, and how they can eventually use their internal resources, more specifically technologies, to obtain a more favourable position relative to their nearest competitors. The resource-based view is not applied in the same systematic way, but rather as a mean to understanding the importance of technology development for the overall resources of the company.