1

B2B OrganizationsB2B OrganizationsThe Steel IndustryThe Steel Industry

Akcaglayan, Halit Bortey, Ishmael

Chang, Thomas T. Chien, Jane Y

Cukier, Juan J

2

  "Selling steel over the Internet is very

embryonic. It could become an Amazon.com, or it could be not much. But it would be naïve to close our eyes

to the Internet."

-- USX chairman, Tom Usher

3

General Facts About General Facts About the Steel Industrythe Steel Industry

Worldwide production is over 750M tons of the 3.000 different catalogued steel types available.

China, US and Japan are the largest steel-producing countries, followed by Germany, Russia and Korea.

Steel use is closely linked to the wealth of an economy (e.g., steel “consumption” per person is about 20kg in Africa, against 420kg in the US).

The industry employs about 1.3M people worldwide.

Source: International Iron and Steel Institute

4

Key US PlayersKey US Players

CompanyCompany RankRank SpecialtySpecialty

USS (usx) 1 All types

LTV Steel 3 Flat rolled

National Steel

4 Flat rolled

Nucor 8 Recycling

Timken ___ Bearings

Source: International Iron and Steel Institute

5

Steel and the B2B ModelSteel and the B2B Model B2B in the steel industry is characterized

by:– Small market segments– Big amount purchases, both in money and

volume– High expectations for service– Knowledgeable buyers– Most based on auction model (value is created

by spatial matching of buyers and sellers)

6

Market ShareMarket Share

By 2001, $32 billion of steel will be sold through internet portals compared to only $150 million today – Morgan Stanley Dean Witter

By 2005, 40-60% of all metal produced in the world will be sold via the Internet

E-commerce in metals sector is still in infancy – about 3% of total sales (Andersen’s global metal practice)

7

Space for B2B sites to operate Space for B2B sites to operate

Supplier Producer

Intermediary

Customer

= Space for an online steel site to operate

New Value Chain for MetalSite

Raw materials, coal, iron, scrap metal

Integrated or Mini mill – about 60-80 producers

Toll process, Distributor, Service centers – about 10,000 intermediaries

8

Major Players in Major Players in the E-Industrythe E-Industry

MetalSite Metal Suppliers Online Metal Network Exchange Services E-Steel

All sites are relatively new. MSO was the first-mover, on Feb 1997.

All use rigorous qualifying standards before permitting companies to sell and buy online.

9

Online Front Page SamplesOnline Front Page Samples

• Membership is highly sought

• All sites provide multiple sources of information

10

How Do They Attract How Do They Attract Customers Online?Customers Online?

Cold calls (most) Direct mail (most) Links from .org-steel related sites (all) Exchange of advertising for links (most) Word of mouth (all) Search engines (all) Physical presence in conferences and seminars

(all) Recommend this site button (MSO)

11

Three Components of Online Three Components of Online Steel SitesSteel Sites

Buyers, who can:– Buy direct from steel manufacturers– Bid and negotiate deals– Order, ship, track and pay online

Sellers, who can:– Reduce selling costs– Select buyers (be in control)– Bring on new buyers economically– Take no cost risk of being on the Net

Industry managers, who can:– Read specialized news, industry analysis and editorials– Research and compare global metals industry specifications

12

Advantages of Being OnlineAdvantages of Being Online

Provides an honest, secure and anonymous platform to trade metal distribution services.

Gives metal consumers the means to post inquiries which are immediately relayed to MNXS vendors that supply similar materials.

Further reach for sellers Better prices for consumers Lowered purchasing costs Online auctions

13

Online Auction OperationOnline Auction Operation

1. Define Product1. Define Product

2. Specify Commercial Terms2. Specify Commercial Terms

3. Target Audience3. Target Audience 4. Negotiate & Conclude4. Negotiate & Conclude

• A mastery of the subject is needed A mastery of the subject is needed when auctioningwhen auctioning

Source: e-Steel

14

Incentives For Customers Incentives For Customers to Returnto Return

Online utilities– Specifications search– Materials property data– Metric converter– Glossary

Subscription to newsletters (all) Online donation capabilities (most) Extensive archives, statistics, and databases Updated regulatory information

15

Careers databanks (MSO) Bookstore (most) Calendar with industry’s events (MSO) Updated steel’s news (all) Industry links (all) Very strict privacy policy (all)

Incentives For Customers to Incentives For Customers to Return (II)Return (II)

16

Suggested Strategic MovesSuggested Strategic Moves Create virtual private marketplaces

– These would preserve pre-negotiated terms and relationships between buyers and suppliers for future reference.

Increase security on transactions– Currently, no encryption is used, although privacy is a

major concern among customers Redesign pages; do not clot with information Offer specialized advice and counseling Implement a “guest” section

– Most of the sites are only available to subscribers

17

Suggested Strategic Moves (II)Suggested Strategic Moves (II)

Grow towards “meta B2B portals”– Provides closely related products– Allows sharing of infrastructure and services

Offer educational tours about the industry Offer links to the participating companies Establish consultant / consultee relations, not only

seller / buyer Remind buyers about offers according to previous

purchases Personalize pages

18

Suggested Strategic Suggested Strategic Moves(III)Moves(III)

Expand into International markets Standard Steel Language- sites should be

consistent with the way they describe steel terminology.

Create some kind of online CAD hosting software

• For product customization

Move into other types of Internet transactions other than auction/direct offers. For example.

• Sites could offer Virtual marketplace and Collaborative Direct Transaction types.