Strategic Marketing Planning Essay Example | Topics and Well Written Essays - 1500 words

Strategic Marketing Planning - Essay Example However, during the last 20 years, this industry has been experiencing a rapid decline. Declining industries were once growth industries but a continuing fall in demand for their products has resulted in their decline. The steel industry is typical of the British decline in the manufacturing sector. This industry was in a position of supremacy in the 1870's but by 1910-14 British output had fallen behind that of the United States and Germany (Pope, 1998:24). Whilst annual output averaged 7 million tonnes, Germany was averaging 15 million tonnes and the United States averaging 27 million (Pope, 1998: 24). The US and German producers benefited from home markets protected by tariffs. A guaranteed home market, especially one dominated by huge corporations like US Steel or cartels, encouraged investment in large scale integrated plants utilising the latest technology. These plants gave the US and German producers a competitive edge. However the British industry comprised of mainly modest sized family firms, lacking the capital resources or the market to justify investment in the latest, large-scale and integrated plants (Pope, 1998: 24). Western Europe accounts for more than 60% of total steel production; with North America accounting for 50% and Japan for about 80% of steel production. Nevertheless the industry is still fragmented and even with the creation of the Mittal Steel Company the top 5 producers in the world account for fewer than 25% of global steel production. By contrast, the top 5 iron ore producers account for about 90% of the global iron ore market; in the automotive sector, the 5 biggest players account for about 65% of market share (Varin, 2005: 4). Although the UK steel industry has made great strides to become internationally competitive, and is on a par with the most efficient producers in Europe, the depreciation of the euro since its launch at the beginning of 1999 has undermined the viability of UK manufacturing. To offset its price disadvantage, UK manufacturing has sourced semi-finished products increasingly from overseas. In addition, UK distributors have increasingly purchased finished goods from abroad. As a result of these developments, steel in imported goods is now the biggest source of steel used in the UK, representing nearly 40% of UK steel consumption, against 25% in 1989 ( Hickman, 2001:11). As a result of increased import penetration largely via the steel content of finished and semi-finished goods, the steel demand chain in the UK is under pressure. UK mill products now satisfy little more than one third of total UK consumption. The competitiveness of UK mill products has inevitably been affected by sterling's strength, and the mill product share of total consumption has fallen from 53% to 35% over the past decade. Imported mill products rose by 36% in the ten years to 1999, but this was a much slower rise than the 68% rise of steel contained in imported goods (Hickman, 2001:11). This sharp rise reflects moves by manufacturers of consumer goods to produce increasingly in locations where labour and energy costs are cheapest. There is clearly a growing threat to the steel i ndustry from a contracting customer base, as the UK manufacturing sector continues to suffer from global competition, and an over-valued pound. This is illustrated by the performance of the main markets for steel.