In present time steelworks are at a stage of permanent changes that are marked with still stronger competition pressure. Therefore managers must solve questions of how to decrease production costs, how to overcome competition and how to survive in the world market. Still more attention should be paid to the modern managerial methods of market research and comparison with competition. Benchmarking research is one of the effective tools for such research. The goal of this contribution is to compare chosen steelworks and to indicate new directions for their development with the possibility of increasing the productivity of steel production

A. Csikósová

A. Seňová

K. Čulková

M. Antošová

Directory of Open Access Journals

410   METALURGIJA 52 (2013) 3, 410-412M. ANTOŠOVÁ, A. CSIKÓSOVÁ, K. ČULKOVÁ, A. SEŇOVÁ1BENCHMARKING RESEARCH OF STEEL COMPANIES IN EUROPEReceived – Prispjelo: 2012-11-05Accepted – Prihvaćeno: 2013-01-20Review Paper – Pregleni radISSN 0543-5846METABK 52(3) 410-412 (2013)UDC – UDK 669.14:658.831:64.011=111M. Antošová,  A. Csikósová,  K. Čulková, A. Seňová -  Fakulty of Min-ing, Ecology, Process Control and Geotechnology, Technical University of Košice, SlovakiaIn present time steelworks are at a stage of permanent changes that are marked with still stronger competition pres-sure. Therefore managers must solve questions of how to decrease production costs, how to overcome competition and how to survive in the world market. Still more attention should be paid to the modern managerial methods of market research and comparison with competition. Benchmarking research is one of the eff  ective tools for such research. The goal of this contribution is to compare chosen steelworks and to indicate new directions for their de-velopment with the possibility of increasing the productivity of steel production. Key words: steelworks, benchmarking, competitiveness, market research, economical eff  ectiveness INTRODUCTIONFrom the global view steelworks industry presents a large number of various producers, the majority of which are mid- size producers. Ten biggest steelworks   represent only 25 % of the whole world production. Such a fraction of the steelworks industry resulted lately in  excessive increase of production capacities and de-crease of steel prices. Steelworks organizations are now in a situation, in which the value of ﬁ  rms has been sig-niﬁ  cantly increased through reduction of the production costs. Therefore managers are confronted with the ques-tion of how to decrease production costs, how to over-come competition and how to survive in the world mar-ket. So it is necessary to pay still more attention to the modern managerial methods of market research and comparing with the competition. Benchmarking is one of the effective tools for im-proving the ﬁ  rms, which is orientated to increasing the operative and strategic effectiveness that is the real con-tent of organization activity [1]. This method leads to the realignment of the ﬁ  rm’s culture towards the proc-ess of new knowledge acquisition, increasing  working knowledge, qualiﬁ  cation and effectiveness.Although benchmarking means mainly comparing with others through certain standard „Benchmark“, the goal is not to be equal to others. The ﬁ  nal goal is higher: to become the best in given area of business activity and that means to become a new Benchmark. But it is not possible to enter into such situation only by comparing   numerical data from performance indexes and ﬁ  nding the answer to the question: How? Or How much to be behind? Benchmarking namely answers to the three ba-sic questions: – Where are we now? – Where do we want to get? – How to get there? Answers to such questions are the goal of this con-tribution along with the determination of new directions for the development of steelworks society and discover-ing the possibility to increase productivity of steel pro-duction. SITUATION AT THE MARKET WITH STEEL PRODUCTION In 1980, there were more than 500 000 U.S. steel-workers. By 2000, the number of steelworkers fell to 224 000 [2].The economic boom in China and India has caused a massive increase in the demand for steel in recent years. Between 2000 and 2005, world steel demand increased by 6 %. Since 2000, several Indian [3] and Chinese steel ﬁ  rms have risen to prominence like Tata Steel, Shang-hai Baosteel Group Corporation and Shagang Group. Arcelor Mittal is however the world’s largest steel pro-ducer.In 2005, the British Geological Survey stated China was the top steel producer with about one-third of the world share, Japan, Russia, and the US followed respec-tively [4]. In 2008, steel began trading as a commodity on the London Metal Exchange. At the end of 2008, the steel industry faced a sharp downturn that led to many cut-backs [5]. Table 1 illustrates 10 Top steel-producing companies in 2011.Over the course of the 20 th century, production of crude steel has risen at an astounding rate, now fast ap-proaching a production level of 800 million tons per year. Today, it is difﬁ  cult to imagine a world without steel [6].411 METALURGIJA 52 (2013) 3, 410-412M. ANTOŠOVÁ et al.: BENCHMARKING RESEARCH OF STEEL COMPANIES IN EUROPEIn present time steelworks production is in a global recession. It is a consequence of continuing imbalance among steelworks capacities in Europe, USA, Canada, Japan and the global demand. Figures 1, 2 illustrates change of world’s rate of steel production in 2011 (1 518 million tones) against 2001 (851 million tones) crude steel.From the development of steel production we can see that production in Europe decreased about 47 %, as well as in other countries, excluding China that record-ed more than two-fold (253 %) increase of steel produc-tion [6].  Eventually, Europe as well as EU countries will proﬁ  t from the EU extension from the viewpoint of steel market, mainly because this process will bring the re-moval of production capacities in incorporated coun-tries as well as higher possibilities of sales in these countries. In this way both sides will proﬁ  t from general advantages of globalization. The development of steel market shows an emergent need to reduce steel produc-tion in the industrialized countries in accordance with the present cyclic decrease of demand. BENCHMARKING IN CHOSEN STEELWORKS COMPANIES Competition-oriented benchmarking was realized from the viewpoint of orientation and level of applica-tion that means comparing the U.S. Steel, s.r.o. Košice (USS KE) performance with the performance of com-petition steelworks companies: – Arbed – Luxembourg  company,  – Rautaruukki – Finnish company,  – Voestalpine AG – Austrian Co.  The main business in chosen companies is produc-tion and sale of steel products. The main consumers of the metallurgical companies are EU states, then other states from Central and Eastern Europe and also states from the Mediterranean, Balkan, Near East and Asia are important consumers. The above-mentioned chosen companies are rank-ing among west European competitors of USS KE, which was the main reason for their choice as bench-marking partners for the biggest steel producer in Cen-tral Europe. The chosen companies have been analyzed from the following viewpoints: –   Basic characteristics of the chosen companies – total consolidated sale according to territories and division of the company, ﬁ  rm’s structure and its main products, annual steel production, and aver-age number of employees–   Comparing the company based on economic in-dexes in 2006-2010 – market rate, cost index, work productivity, employment and structure of work-ers. In the following Table 2 are illustrated summary re-sults from the performance comparing in individual companies, mainly according to the level of achieved economical results that are illustrated by the individual economic indexes. A steelworks company received 5 points in the case when it reached, in given area, at least twofold better results than its competition. According to point evaluation the ﬁ  rst place belongs to USS KE due to the outstanding point lead. The larg-est inﬂ  uence on these results had the best situation in the area of immediate liquidity, stocks management, management and usage of long term property, indebted-ness, mark of employee per proﬁ  t and proﬁ  tability. USS KE also achieved, against its competitors from the EU, the lowest wage, depreciation, and total cost index [7]. At the same time the development of employment was positive from the viewpoint of work productivity in this steelworks company that is different from its bench-marking partners. On the other hand USS KE reached the lowest rating in the global world and European markets. During the analysis in the case of biggest Central European pro-ducer of rolled plates, problems have been identiﬁ  ed in the area of common liquidity, claims management, work productivity and employee’s equipment with long term Table 1 Top 10 steel-producing companies Rank Company  Tonnage/t 1 ArcelorMittal 97,22 Hebei Group  44,43 Baosteel Group  43,34 POSCO 39,15 Wuhan Group  37,76 Nippon Steel  33,47 Shagang Group  31,98 Shougang Group  30,09 JFE 29,910 Ansteel Group 29,8Figure 1 Steel production and use in 2001Figure 2 Steel production and use in 2011412   METALURGIJA 52 (2013) 3, 410-412M. ANTOŠOVÁ et al.: BENCHMARKING RESEARCH OF STEEL COMPANIES IN EUROPEproperty, in which USS KE obtained lowest number of points in comparison with the chosen companies. CONCLUSION Benchmarking method can be applied in every ac-tivity of the ﬁ  rm. In this contribution we have been dealing with the ﬁ  rm’s evaluation and its business activ-ity as a whole by means of economic indexes, while from the viewpoint of orientation and application level it meant competition-oriented benchmarking, compar-ing the performance of USS KE with the performance of competition ﬁ  rms. According to the obtained results we came to the following recommendations for the steelworks compa-ny USS KE: –   Prevention of further increase of claims by con-sistent rating of clients and suppliers.   –    Determination of credit limits and their control with the goal of preventing the rise of high claims against one client and in this way diversify the risk of nonpayment.Table 2 Comparison of companiesIndexMetallurgical companyUSS KEArbed Rautar-uukkiVoestal-pineAbsolute mark on world market  1 5 2 3Absolute mark on European market 15 2 3Immediate liquidity 5 3 1 2Common liquidity  1 2 3 5Turnover of stocks 5 1 3 2Turnover of claims  1 5 3 2Turnover of long term property  4 1 3 2Total indebtedness  4 3 1 2Measure of indebtedness  4 4 1 2Profi  tability of total capital  5 2 0 3Profi  tability of own capital  5 1 2 3Service cost index  2 1 4 3Cost index for material and energy 21 3 4Wage cost index  4 3 2 1Depreciation cost index 5 3 2 1Total cost index  5 1 3 2Mark of employee per profi  t / loss  1 5 4 3Work productivity  (thousand EUR/ employee)52 1 3Work productivity  (tonnes / employee)14 2 3Using of long term property  5 2 3 2Employee’s equipping with long term property 15 3 4Development of total employ-ment 41 3 1Sum of points 72 62 56 60Average number of points  3,13 2,70 2,43 2,61–   Prompt payment of invoices by clients must be stimulated by advantage discounts from goods. –   Decrease service cost index by providing perform-ance from own sources through reevaluation of present contracts. –   Modernization of existing production equipments and building of new services with the aim of in-creasing work productivity. –   Gradual  increase of the number of employees in production and decrease of the number of admin-istrative employees. –   Finding new markets for realization of steel sale, with regard to the stagnation of sale in Western Europe. Conclusions from comparing chosen companies in given business areas, used for suggestions of recommen-dations on how to increase the effectiveness of manage-ment in USS KE led to optimization of economical and technical processes and improvement of the position on the market. However, if the company wants to improve its competition position on the European steel market and to decrease great differences mainly in the area of work productivity, it must involve every employee in the proc-ess of increasing  production effectiveness. AcknowledgmentThe article is partial result of research task VEGA No 1/1033/12 – Indicators for social responsible busi-ness of small and middle ﬁ  rms in context of regional development.REFERENCES[1]   L. Bednárová, I. Liberko,  R. Weiss: Benchmarking v ria-dení podnikov. In: Acta Montanistica Slovaca. 14 (2009) 1, 86-91.[2]   Congressional Record V. 148, Pt. 4, April 11, 2002 to April 24, 2002. United States Government Printing Ofﬁ  ce.[3]   India’s steel industry steps onto world stage. http://csmoni-tor.com/2007/0212/p07s02-wosc.html.[4]    Long-term planning needed to meet steel demand. The News.  http://www.webcitation.org/ 5twr3Sstf. [5]   Uchitelle, Louis. Steel Industry, in Slump, Looks to Fede-ral Stimulus. The New York Times. http://www.nytimes.com/2009/01/02/business/ 02 steel.html?_r=1&partner=permalink&exprod=permalink[6]    World Steel in ﬁ   gures 2012. World Steel Association. Brussels, Belgium, 2012. http://www.worldsteel.org/dms/internetDocumentList/bookshop/WSIF_2012/document/World%20Steel%20in%20Figures%202012.pdf.[7]    M. Andrejkovič, Z. Hajduová, L. Mixtaj, E. Weiss, R. Weiss: Improvement of processes in metallurgy company. In: Metalurgija. 50 (2011) 2, 141-144.Note:   The responsible for English language version is L. Pivka, Techni-cal University of Košice, Slovakia

Benchmarking research of steel companies in Europe

Hrčak - Portal of scientific journals of Croatia

410  METALURGIJA 52 (2013) 3, 410-412M. ANTOŠOVÁ, A. CSIKÓSOVÁ, K. ČULKOVÁ, A. SEŇOVÁ1BENCHMARKING RESEARCH OF STEEL COMPANIES IN EUROPEReceived – Prispjelo: 2012-11-05Accepted – Prihvaćeno: 2013-01-20Review Paper – Pregleni radISSN 0543-5846METABK 52(3) 410-412 (2013)UDC – UDK 669.14:658.831:64.011=111M. Antošová,  A. Csikósová,  K. Čulková, A. Seňová -  Fakulty of Min-ing, Ecology, Process Control and Geotechnology, Technical University of Košice, SlovakiaIn present time steelworks are at a stage of permanent changes that are marked with still stronger competition pres-sure. Therefore managers must solve questions of how to decrease production costs, how to overcome competition and how to survive in the world market. Still more attention should be paid to the modern managerial methods of market research and comparison with competition. Benchmarking research is one of the eff ective tools for such research. The goal of this contribution is to compare chosen steelworks and to indicate new directions for their de-velopment with the possibility of increasing the productivity of steel production. Key words: steelworks, benchmarking, competitiveness, market research, economical eff ectiveness INTRODUCTIONFrom the global view steelworks industry presents a large number of various producers, the majority of which are mid- size producers. Ten biggest steelworks represent only 25 % of the whole world production. Such a fraction of the steelworks industry resulted lately in  excessive increase of production capacities and de-crease of steel prices. Steelworks organizations are now in a situation, in which the value of ﬁ rms has been sig-niﬁ cantly increased through reduction of the production costs. Therefore managers are confronted with the ques-tion of how to decrease production costs, how to over-come competition and how to survive in the world mar-ket. So it is necessary to pay still more attention to the modern managerial methods of market research and comparing with the competition. Benchmarking is one of the effective tools for im-proving the ﬁ rms, which is orientated to increasing the operative and strategic effectiveness that is the real con-tent of organization activity [1]. This method leads to the realignment of the ﬁ rm’s culture towards the proc-ess of new knowledge acquisition, increasing  working knowledge, qualiﬁ cation and effectiveness.Although benchmarking means mainly comparing with others through certain standard „Benchmark“, the goal is not to be equal to others. The ﬁ nal goal is higher: to become the best in given area of business activity and that means to become a new Benchmark. But it is not possible to enter into such situation only by comparing numerical data from performance indexes and ﬁ nding the answer to the question: How? Or How much to be behind? Benchmarking namely answers to the three ba-sic questions: – Where are we now? – Where do we want to get? – How to get there? Answers to such questions are the goal of this con-tribution along with the determination of new directions for the development of steelworks society and discover-ing the possibility to increase productivity of steel pro-duction. SITUATION AT THE MARKET WITH STEEL PRODUCTION In 1980, there were more than 500 000 U.S. steel-workers. By 2000, the number of steelworkers fell to 224 000 [2].The economic boom in China and India has caused a massive increase in the demand for steel in recent years. Between 2000 and 2005, world steel demand increased by 6 %. Since 2000, several Indian [3] and Chinese steel ﬁ rms have risen to prominence like Tata Steel, Shang-hai Baosteel Group Corporation and Shagang Group. Arcelor Mittal is however the world’s largest steel pro-ducer.In 2005, the British Geological Survey stated China was the top steel producer with about one-third of the world share, Japan, Russia, and the US followed respec-tively [4]. In 2008, steel began trading as a commodity on the London Metal Exchange. At the end of 2008, the steel industry faced a sharp downturn that led to many cut-backs [5]. Table 1 illustrates 10 Top steel-producing companies in 2011.Over the course of the 20 th century, production of crude steel has risen at an astounding rate, now fast ap-proaching a production level of 800 million tons per year. Today, it is difﬁ cult to imagine a world without steel [6].411METALURGIJA 52 (2013) 3, 410-412M. ANTOŠOVÁ et al.: BENCHMARKING RESEARCH OF STEEL COMPANIES IN EUROPEIn present time steelworks production is in a global recession. It is a consequence of continuing imbalance among steelworks capacities in Europe, USA, Canada, Japan and the global demand. Figures 1, 2 illustrates change of world’s rate of steel production in 2011 (1 518 million tones) against 2001 (851 million tones) crude steel.From the development of steel production we can see that production in Europe decreased about 47 %, as well as in other countries, excluding China that record-ed more than two-fold (253 %) increase of steel produc-tion [6].  Eventually, Europe as well as EU countries will proﬁ t from the EU extension from the viewpoint of steel market, mainly because this process will bring the re-moval of production capacities in incorporated coun-tries as well as higher possibilities of sales in these countries. In this way both sides will proﬁ t from general advantages of globalization. The development of steel market shows an emergent need to reduce steel produc-tion in the industrialized countries in accordance with the present cyclic decrease of demand. BENCHMARKING IN CHOSEN STEELWORKS COMPANIES Competition-oriented benchmarking was realized from the viewpoint of orientation and level of applica-tion that means comparing the U.S. Steel, s.r.o. Košice (USS KE) performance with the performance of com-petition steelworks companies: – Arbed – Luxembourg  company,  – Rautaruukki – Finnish company,  – Voestalpine AG – Austrian Co.  The main business in chosen companies is produc-tion and sale of steel products. The main consumers of the metallurgical companies are EU states, then other states from Central and Eastern Europe and also states from the Mediterranean, Balkan, Near East and Asia are important consumers. The above-mentioned chosen companies are rank-ing among west European competitors of USS KE, which was the main reason for their choice as bench-marking partners for the biggest steel producer in Cen-tral Europe. The chosen companies have been analyzed from the following viewpoints: –  Basic characteristics of the chosen companies – total consolidated sale according to territories and division of the company, ﬁ rm’s structure and its main products, annual steel production, and aver-age number of employees–  Comparing the company based on economic in-dexes in 2006-2010 – market rate, cost index, work productivity, employment and structure of work-ers. In the following Table 2 are illustrated summary re-sults from the performance comparing in individual companies, mainly according to the level of achieved economical results that are illustrated by the individual economic indexes. A steelworks company received 5 points in the case when it reached, in given area, at least twofold better results than its competition. According to point evaluation the ﬁ rst place belongs to USS KE due to the outstanding point lead. The larg-est inﬂ uence on these results had the best situation in the area of immediate liquidity, stocks management, management and usage of long term property, indebted-ness, mark of employee per proﬁ t and proﬁ tability. USS KE also achieved, against its competitors from the EU, the lowest wage, depreciation, and total cost index [7]. At the same time the development of employment was positive from the viewpoint of work productivity in this steelworks company that is different from its bench-marking partners. On the other hand USS KE reached the lowest rating in the global world and European markets. During the analysis in the case of biggest Central European pro-ducer of rolled plates, problems have been identiﬁ ed in the area of common liquidity, claims management, work productivity and employee’s equipment with long term Table 1 Top 10 steel-producing companies Rank Company Tonnage/t 1 ArcelorMittal 97,22 Hebei Group 44,43 Baosteel Group 43,34 POSCO 39,15 Wuhan Group 37,76 Nippon Steel 33,47 Shagang Group 31,98 Shougang Group 30,09 JFE 29,910 Ansteel Group 29,8Figure 1 Steel production and use in 2001Figure 2 Steel production and use in 2011412  METALURGIJA 52 (2013) 3, 410-412M. ANTOŠOVÁ et al.: BENCHMARKING RESEARCH OF STEEL COMPANIES IN EUROPEproperty, in which USS KE obtained lowest number of points in comparison with the chosen companies. CONCLUSION Benchmarking method can be applied in every ac-tivity of the ﬁ rm. In this contribution we have been dealing with the ﬁ rm’s evaluation and its business activ-ity as a whole by means of economic indexes, while from the viewpoint of orientation and application level it meant competition-oriented benchmarking, compar-ing the performance of USS KE with the performance of competition ﬁ rms. According to the obtained results we came to the following recommendations for the steelworks compa-ny USS KE: –  Prevention of further increase of claims by con-sistent rating of clients and suppliers.   –  Determination of credit limits and their control with the goal of preventing the rise of high claims against one client and in this way diversify the risk of nonpayment.Table 2 Comparison of companiesIndexMetallurgical companyUSS KEArbed Rautar-uukkiVoestal-pineAbsolute mark on world market 1 5 2 3Absolute mark on European market 1 5 2 3Immediate liquidity 5 3 1 2Common liquidity 1 2 3 5Turnover of stocks 5 1 3 2Turnover of claims 1 5 3 2Turnover of long term property 4 1 3 2Total indebtedness 4 3 1 2Measure of indebtedness 4 4 1 2Profi tability of total capital 5 2 0 3Profi tability of own capital 5 1 2 3Service cost index 2 1 4 3Cost index for material and energy 2 1 3 4Wage cost index 4 3 2 1Depreciation cost index 5 3 2 1Total cost index 5 1 3 2Mark of employee per profi t / loss 1 5 4 3Work productivity  (thousand EUR/ employee)5 2 1 3Work productivity  (tonnes / employee)1 4 2 3Using of long term property 5 2 3 2Employee’s equipping with long term property 1 5 3 4Development of total employ-ment 4 1 3 1Sum of points 72 62 56 60Average number of points 3,13 2,70 2,43 2,61–  Prompt payment of invoices by clients must be stimulated by advantage discounts from goods. –  Decrease service cost index by providing perform-ance from own sources through reevaluation of present contracts. –  Modernization of existing production equipments and building of new services with the aim of in-creasing work productivity. –  Gradual  increase of the number of employees in production and decrease of the number of admin-istrative employees. –  Finding new markets for realization of steel sale, with regard to the stagnation of sale in Western Europe. Conclusions from comparing chosen companies in given business areas, used for suggestions of recommen-dations on how to increase the effectiveness of manage-ment in USS KE led to optimization of economical and technical processes and improvement of the position on the market. However, if the company wants to improve its competition position on the European steel market and to decrease great differences mainly in the area of work productivity, it must involve every employee in the proc-ess of increasing  production effectiveness. AcknowledgmentThe article is partial result of research task VEGA No 1/1033/12 – Indicators for social responsible busi-ness of small and middle ﬁ rms in context of regional development.REFERENCES[1]  L. Bednárová, I. Liberko,  R. Weiss: Benchmarking v ria-dení podnikov. In: Acta Montanistica Slovaca. 14 (2009) 1, 86-91.[2]  Congressional Record V. 148, Pt. 4, April 11, 2002 to April 24, 2002. United States Government Printing Ofﬁ ce.[3]  India’s steel industry steps onto world stage. http://csmoni-tor.com/2007/0212/p07s02-wosc.html.[4]  Long-term planning needed to meet steel demand. The News.  http://www.webcitation.org/ 5twr3Sstf. [5]  Uchitelle, Louis. Steel Industry, in Slump, Looks to Fede-ral Stimulus. The New York Times. http://www.nytimes.com/2009/01/02/business/ 02 steel.html?_r=1&partner=permalink&exprod=permalink[6]  World Steel in ﬁ gures 2012. World Steel Association. Brussels, Belgium, 2012. http://www.worldsteel.org/dms/internetDocumentList/bookshop/WSIF_2012/document/World%20Steel%20in%20Figures%202012.pdf.[7]  M. Andrejkovič, Z. Hajduová, L. Mixtaj, E. Weiss, R. Weiss: Improvement of processes in metallurgy company. In: Metalurgija. 50 (2011) 2, 141-144.Note:  The responsible for English language version is L. Pivka, Techni-cal University of Košice, Slovakia

Benchmarking research of steel companies in Europe

Abstract

Similar works

Full text

Available Versions

Directory of Open Access Journals

Hrčak - Portal of scientific journals of Croatia