Strategic Management

Project Submission (Part I)

BSRM Steel Mills Limited

Submitted to:
Yurika Uematsu Bhuiyan

Department of Management
North South University

Submitted by:
Course: MGT 489
Section: 03 (Spring 2017)
Group Name: Team Spectra
Name ID
Mohammad Sharfaraz Ahmed 132 0305 030
Shah Alvi Rahman 132 0180 030
Khandekar Nazmus Shakib 111 0859 030
Abdullah Al Noman 131 1159 030
Asif Mahdi 132 0115 030
Mohammad Ali 132 0334 030
Irtiza Hasan 132 0669 030
Rakibul Azad 141 0008 030

Date of Submission: February 26, 2017

 Table of Contents

History, Development, and Growth ...........................................................................1

Internal Environment Analysis ..................................................................................2
External Environment Analysis .................................................................................3
SWOT Analysis .........................................................................................................7
Business Definition Analysis .....................................................................................9
Distinctive competencies Analysis ..........................................................................10
Financial Performance: ............................................................................................11
Competitive advantages ...........................................................................................13
Quality of current Business Model ..........................................................................14
Bibliography.............................................................................................................16

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History, Development, and Growth

BSRM Steel Mills Ltd (Bangladesh Steel Re-rolling Mills) is the first steel mill in Bangladesh,

established by H. Akber Ali Group of Industries back in 1952 (About Us, n.d.). It was located in

Nasirabad, Chittagong. Followed by BSRM steel mills, many other steel manufacturing companies

emerged, but very few of them could make their way this far. BSRM has always been prioritized

over other steel manufacturing companies for being the pioneer in this industry. BSRM steel

products have been widely used in major national infrastructures and architectures. Along with

providing quality products to its customers, the company ensures efficient corporate practices and

career growth to its employees.

Adaptations to the newest technology and the continuous pursuit of improvement have enabled

BSRM to sustain a competitive position in the market. In 1984, BSRM came up with high strength

twisted bars. In 1987, a cross-national European mill was established in Bangladesh, and BSRM

was a part of it. It was commissioned as the largest billet making plant in Bangladesh in 1996. In

2008, BSRM started producing internationally recognized Grade 500 steel bars as a first

Bangladeshi manufacturing company. After a couple of years, in 2010, BSRM started its

commercial production. At present, being the market leader, BSRM holds the position of the

largest ever induction furnace based billet making plant. Their next objective is to set up a coal

based power plant to meet their own demand as well as to contribute to the national grid (About

Us, n.d.).

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Internal Environment Analysis

Resources: Resources owned by BSRM Steel Mills Ltd can be differentiated into two broad

categories. They are

Tangible resources: In the year 2016, BSRM reported its tangible assets to be worth of

above BDT. 9 billion (Summary-of-Balance-Sheet, 2016). It includes properties like

buildings, power and steel manufacturing plants, equipment and machineries. At present

BSRM has 13 offices in Bangladesh and 2 overseas offices in India. Their factory building,

which is located in Zorwarganj, Chittagong covers an area of over 2 hundred thousand

square feets. It has got several air separation units, blast furnaces, basic oxygen furnace

plants, coal washing plants, continuous caster volutes, DRI plants, electric arc furnaces,

ladle furnaces, vacuum degasing stations that covers two third of its total fixed assets.

Intangible Resources: The intangible resources mostly involve their ability to source raw

materials, long experience, technical knowhow, best brand image in Bangladesh and they

have the most market share. BSRM Steel Mills Ltd is the market leader as far as steel

manufacturing industry is associated. It has earned enormous brand image by providing

quality products and after sale services. The companys reputation is soaring high over the

average industry benchmark. It has got a unique and efficient set of engineering, production

and management skill.

Capabilities: At BSRM, More than 2,000 employees work together to integrate the resources and

make the most out it through effective management and production processes. BSRM is an

employer of choice that focuses on nurturing talents. Individuals working at BSRM are

experienced and qualified enough to handle any situation and take effective decisions that in the

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long run generate positive impact on the productivity and quality. BSRM believes in the consistent

improvement of quality and immediate reaction towards changing business and environmental

needs using technologies. The interaction between the engineering and management team enables

the best utilization of resources, both tangible and intangible and improve every process through

innovation and efficient workplace practices.

The vision of BSRM Steel Mills Ltd is to maintain its dominance over the steel industry by-

producing the best quality steel products, continuously intensifying customer satisfaction and

becoming a reliable and committed business partner of its customers and suppliers. The company

wants to protect the interest of the shareholders and preserve the trust of the stakeholders by

adopting ethical business and corporate practices. It values quality, reliability, trust, leadership,

customer satisfaction and social responsibilities, and wants to address each of these factors with

utmost proficiency (Vision and Values, n.d.).

External Environment Analysis

Industry Analysis

Industry the Company Competes in: Construction Steel

BSRM is basically in the business of steel rerolling which is iron rod used for construction. The

products manufactured by the Company include Xtreme (Grade 500 rod), Maxima (Grade 80 rod),

Ultima (Grade-60 rod), Xtrong (Grade 36) and Centura (Products, n.d.) Construction steel industry

is one of the major contributors to the national economy. The rapid expansions of the countrys

shipbuilding sector and enormous investments in real-state have promoted the growth of this

specific industry. At present, there are 12 companies operating in this particular industry.

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Porters Competitive Forces Model

Competition in the industry

There are basically 3 key players in the market- BSRM, AKS and KSRM. According to 2014 data

BSRM , Abul Khair Steel Mill and KSRM are dominating the overall market. Together they supply

more than 60% of the iron rod in Bangladesh and 400 other small companies supply the rest of the

product (Big steel companies displace small ones, 2014). In addition smaller manufacturers are

constantly facing various challenges due to pricing, cost of raw materials, promotional prowess of

big competitors, etc. So to some extent the market is now monopolistic and there isnt much price

war between the key competitors. People put emphasis on the quality of iron rod they will be using

for construction so in most cases they go for the established Companies and there arent many big

brands in the market.

Threat of New Entry

Firstly, it is important to mention that the initial investment cost is very high for building a steel

mill. Also there are issues of setting up proper supply chain, recruiting people with experience,

technical knowhow, passing appropriate government regulations and many other aspects. All these

factors would make it unlikely for a new competitor to enter the market.

Threat of Substitution

There are no substitutes for steel or iron rod in the construction industry. So from this aspect BSRM

is in a pretty safe position.

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Bargaining Power of Suppliers

BSRM does not own any iron mine and they mostly depend on the scraps of old ships. This poses

several issues exchange rate issues, fluctuation in international market price and many other

factors. So bargaining power of suppliers is pretty high in this case.

Bargaining Power of Buyers

Even though there are various steel manufacturers in the Country but only a handful has good

brand image. Steel is a crucial element in terms of safety in constructions. Priority is often on

quality first and then price. Therefore bargaining power of buyers is medium in such case.

Industry Life Cycle Analysis

Firstly, it is important to mention that as of 2015 the per capital steel consumption is 26 Kg in

Bangladesh relative to 217 Kg of the world. Even that of India is 57 Kg (Big steel companies

displace small ones, 2014). This shows that there is huge potential for growing demand in the

coming years as the GDP growth rate of Bangladesh is well over 6 % at the moment. However due

to the nature of the industry (huge investment) there are less chances of new entrants which means

the industry can be called mature. Unless a multinational invests and brings new technologies and

expertise the market will remain stable and the increase in demand will be enjoyed mostly by the

existing key players of the market.

Macro Environment Analysis: PESTLE Model

Political

The overall political environment of the Country has been quite stable for the past couple of years.

This has helped to maintain a stable growth pattern throughout the years. So currently there are

various mega construction projects which demands significant amount of steel. In addition if the
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trend continues the overall economy of the Country will improve which shall further boost the

industry

Economic

As mentioned earlier the countrys economy is growing at a stable rate of above 6% per annum

for the past few years. This will require many constructions related to infrastructure, housing, etc.

which in turn will lead to more demand for the steel industry.

Social

Optimistic estimates suggest that the per capita income has crossed 1400 USD (Per capita income

rises to $1466, 2016). This means as people has more money they will want to improve their living

conditions. This means they will move towards better constructed homes which in turn means

more demand for the steel industry.

Technological

Recently major players of the industry brought billet manufacturing technology and the 500-grade

(BSRM Extreme) technology. These initiatives mean that manufacturers are differentiating

themselves by creating better products and also they are improving their overall production

efficiency. This means that big brands like BSRM will get even bigger by gaining more market

share from smaller brands as a result they can move even further ahead of smaller players.

Legal

In terms of legal perspective there hasnt been mush issues as of now from the governments and

overall government seems to be friendly towards the industry.

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Environmental

Element like slag, dust and sludge are considered waste in the steel industry (Waste Disposal and

Recycling in Steel Industry, n.d.)

SWOT ANALYSIS:

Strengths

Leader of the market: BSRM is the leader of the steel market of our country. Currently the

3 big brands including BSRM supplies more than 60% of the needs of the market.

Superior competitive skills.

Reliability: BSRM fulfills ISO 6935-2: 2015 and ISO 630-3: 2007 standards. BSRM tests

all its products to ten most demanding tests of steel, some of which includes Fatigue test,

elongation test, bend test, yield strength test etc. (Test, n.d.).

Employee bonding with BSRM: BSRM feels that their employees are the main reason

behind their success and give them proper value. As a result the employees are highly

motivated and committed towards the organization.

Best brand image: BSRM was the first to introduce 500W steel and their promotional

strategies were effective in building the perception of quality in consumer mind.

Product varieties: BSRM are currently producing 5 different types of steels (Xtreme,

Maxima, Ultima, Xtrong, Centura) and each of these items is targeting different consumer

groups (Products, n.d.). For example, Xtreme is mainly targeting multi storied construction

or high rise buildings whereas Centura is targeting low end users who might be willing to

construct foundation of wall.

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 Strong Distribution Channel

Modern Equipment and Technology: For their Xtreme 500W project, BSRM is receiving

consultancy from a German consultancy firm (Badische Stahl Engineering) and they are

bringing their plant and all the machineries from a famous Italian group named Danieli.

(BSRM Steels to set up fourth melting plant, 2016).

Backward Integration: To minimize their material cost and increase their competency,

BSRM is planning to establish the largest billet making plant in Bangladesh. They will

supply it to other companies also.

Weakness

They have over BDT. 500 million in loans (Summary-of-Balance-Sheet, 2016). Increased

Interest on Loan: BSRM is under the pressure of giving huge interest for the loan they have

taken from various bank and financial institution.

Shortage of Power Supply. Bangladesh has shortage of power supply and this results in

increase in production cost as Steel manufacturers have to build their own power supply

infrastructure.

Opportunities

Currently BSRMs is leading the market and they are planning to expand their production

capacity from 375,000 M tons to 500,000 M tons. By the end of 2017 they will gain 20%

of total market (SWOT Analysis of BSRM Steels, 2016).

Potential international market. There is huge market in Assam and other eastern parts of

India as they yet do not have much infrastructure to manufacture steel.

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 Increased demand from GDP growth: Various government funded infrastructure projects

such as Padma Bridge along with boom in real estate sector will increase demand also as

mentioned before the per capital steel consumption is below 30kg which is far lower than

global average of above 217 kg. Thus there is huge chances of increased demand of

construction steel.

Threats

Increased competition from existing rivals The 2 key competitors are AKS and KSRM,

both of these competitors have the capability to give BSRM a tough fight in order to get

some market share from BSRM as the demand increases.

Instability in the real estate sector. The real estate sector of Bangladesh is unstable as prices

and demand often fluctuate. This means there is also significant fluctuation for the demand

of steel.

Portrayal of ship breaking industry in a bad light. It is often observed that media and NGOs

project this industry in a bad manner. This means the image of major steel manufacturer

often come under jeopardy due to these activities

Fluctuation cost of raw materials, rising cost of energy and labor. As mentioned before the

Company does not have much control over the price of raw materials as it does not fully

control its supply chain.

Business Definition Analysis

Customer Groups

The customers groups involve- real estate developers, private contractors, government institutions

and ordinary consumers. According to our primary research we have figured that their major

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source of revenue is through real estate developers and ordinary consumers. However government

institutions and private contractors help BSRM to gain popularity and credibility, for e.g. when

BSRM products are used in building Padma Bridge then their overall brand image is enhanced.

Customer needs

The customer needs of BSRM involve reliable and trustworthy construction steel (iron rod) at a

relatively competitive price to similar brands. The rods and steels are BUET and BSTI tested as

well as they follow ISO standards

Method of satisfying needs

BSRM satisfies their customer needs of trust worthiness and reliability through consistently

conducting various tests on their products, obtaining various certifications and by always trying to

associate their brand with quality, for e.g. they try to showcase that their product has passed fatigue

test, their product is used in building bridges, etc. Thus through all these aspects BSRM projects

reliability and trustworthiness to their customers.

Distinctive competencies Analysis

The primary distinctive competency of BSRM is that they are the oldest iron rod manufacturer of
the Country. In addition they have the largest production capacity in the Country (Big steel
companies displace small ones, 2014). They also have the best brand image in the market relative
to KSRM and AKS. Also their long experience makes them technically superior in terms of
technical knowhow.

First of all, BSRM is the oldest manufacturer of iron rod in Bangladesh. This definitely makes
them different due to having more experience, technical knowhow and overall this creates a
different perception in consumer mindset.

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Secondly, currently they have the largest production capacity in the Country. This will help them
cater to the rising demand and capture market share better than their competitors.

Thirdly, BSRM has the best brand image amongst construction steel manufacturers. This is mostly
due to coming up with 500W bar before others, associating their brand with quality then price and
simply due to frequent communications to consumers.

Financial Performance:

Financial Performance highlights the financial strength and the profitability of a company.

Measures of financial performance are discussed below;

Liquidity Performance

BSRM Steel Mills Limited is bearing a satisfactory level in terms of its liquidity performance.

The company is has a current ratio of around 1 on an average for the last 3 financial years (2014,

2015, 2016). This indicates good position in terms of solvency. Besides, the current assets to

current liabilities is around 0.5. It indicates that BSRM Steel invests more on inventories which is

similar to its competitors.

Liquidity Performance Activity Profile

2 1.06 1.01 0.97 0.61 4.69 3.42 6.37
Times

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Times

0.57 0.4 1.31 1.42 1.52

0 0
2015 2014 2013 2015 2014 2013
Years Years
Current Ratio Inventory Turnover Ratio Asset Turnover Ratio

Fig: Liquidity Performance Fig: Activity Profile

Activity Profile

BSRMs operational activities are snapped by its activities profile for last 3 years. The company

has finished off its inventories on average 4.8 times in a year to generate its revenue. It indicates

the operational efficiency of the firm regarding transforming the inventories into finished goods.

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Besides, it has also finished up its total asset on average 1.41 times to generate its revenue. Thus,

it indicates an efficient operations of BSRM Steel Mills Limited.

Solvency and the Market Position of the firm

BSRMs financial records for last 3 financial year indicate that the firm is financially solvent

enough. As the companys earnings are around 5 to 6 times more than its interest payments.

Besides, the company wants to avail tax benefits and to lower its cost of capital by maintaining

appropriate proportions of debt and equity. Thus, it enables the firm to generate more profit.

Besides, the market position of the firm which is measured by its yearly market capitalization and

share price is still satisfactory with gradual increase in share price due to its better performance

and profitability. It ensures higher capital gain for its shareholders.

Solvency of the firm Market Position

10 5.37 6.32 5.83 50,000 32,913 29,974 23,480
Times

BDT

1.48 2.36 1.99

96.30 87.70 68.70
0 0
2015 2014 2013 2015 2014 2013
Years
Years Market Price per Share (as of Dec)
Interest Coverage Total Debt to Equity
Market Capitalization ( as of December)

Fig: Solvency of the firm Fig: Market Position

Profitability of the firm

Profitability of the firm is also satisfactory for BSRM which is measured by its net profit ratio,

return on invested capital and earnings per share. The firm is maintaining a good balance of net

profit ratio of 4.33% on average for last 3 years. Besides, the firm provided 19.8% return on the

total capital invested in the firm with an average earning per share (EPS) of BDT 4.74 for last

3years for its investors. The firm provided on average 40% of its EPS as dividend and kept rest of

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the amount as retained earnings for its investment in companys growth. Thus, it indicates that

BSRM is both profitable and has profit growth potential.

Percentage/BDT Profitability of the firm

30 22.93 24.49
19.8 21.05
20 14.4912.49
10.83
7.01
6.44 6.09 5.5 4.95
10 3.18 4.67
0.49 2.82 0.47 0.3
0
2015 2014 2013
Years
Net Profit Ratio EBITDA margin to sale Return on Equity
Return on Invested Capital Earnings Per Share Dividend Payout Ratio

Fig: Profitability of the firm

Thus, based on the above financial analysis it can be concluded that BSRM Steel Limited has a

good financial record. It has both profitability and profit growth which are the indicators that the

company is operating to ensure the maximum benefit for shareholders.

Competitive Advantages

BSRM Steel Mills Ltd (Bangladesh Steel Re-rolling Mills) has different competitive advantages

over their competitors. Because they are the biggest steel company as well as they are the pioneer

of this industry in Bangladesh.

Brand loyalty: They successfully established their brand and now it is in very strong position. In

terms of goodwill, trust and reliability BSRM holds the first position of this steel industry in

Bangladesh. Whenever people think of this brand they can rely on this and they also believe that

they will definitely provide quality product. So it is a big competitive advantage for BSRM.

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Biggest Supplier: They are the biggest supplier of construction steel in our country. BSRM Steel

Mills Ltd has the highest production capacity among all of the steel companies in our country.

Price determination: The largest 3 Companies- BSRM, KSRM and AKS can determine the price

because they provide 60% of market demand and BSRM is the leader so they can easily influence

the price in the market and rest of the companies need to follow their pricing.

Own ship breaking yards & Billet manufacturing Industry: having this supporting industry

helps them to be cost efficient and produce more compared to other competitors. Though there are

some two or three other competitors who has the similar kind of facilities but there are almost 300

companies. Having this supports helps them to be more competitive in the market.

Quality of current Business Model

The core value creation process comprises of ship breaking, accessing of high end raw materials

and producing high quality steel for the customers of different segments. At the core of the value

creation process is the business model which represents a well-integrated steel manufacturing

operation starting from collecting the raw materials to the manufacturing high end steel products.

BSRM produce outputs (Flat and Long steel products and solid waste as a by-product). The

business activities includes minimization of the environmental and social issue as well as

maintaining social responsibilities and to achieve and sustain a high level of profitability and also

enrich the brand image. The layout of the business activities have shown in the business model.

The Company measures the outcomes of different activities of business model and take necessary

steps to improve overall quality maintaining different strategic aspects to achieve a long term

customer relationship. The vision, mission, values, our systems & process approach and long-term

relationship with stakeholders is at the very core of the operations that leads to sustainability of

the business. Fundamental activities and processes is the culture of innovation and continuous
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improvement to generate new products to meet the customer requirements. The goal of BSRM is

to attain best possible technologies, improve resource efficiency, developing process innovation

and manufacture best quality product which will be environmental friendly. The overall

performance of BSRM is unique due its magnitude of operation, technological advancement

approach, and well innovative practices.

Now the current business model of BSRM is shown in a chart basing on different activities of

BSRM.

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Bibliography
About Us. (n.d.). Retrieved from BSRM: http://bsrm.com/about-us/history/

Big steel companies displace small ones. (2014, Aug 8). Retrieved from The Daily Star:

http://www.thedailystar.net/big-steel-companies-displace-small-ones-36566

BSRM Steels to set up fourth melting plant. (2016, Oct 10). Retrieved from The Daily Star:

http://www.thedailystar.net/business/bsrm-steels-set-fourth-melting-plant-1296652

Per capita income rises to $1466. (2016, April 06). Retrieved from The Daily Star:

http://www.thedailystar.net/frontpage/capita-income-rises-1466-1204930

Products. (n.d.). Retrieved from BSRM: http://bsrm.com/products/

Summary-of-Balance-Sheet. (2016, March 1). Retrieved from BSRM: http://bsrm.com/wp-

content/uploads/2016/03/1.-Summery-of-Balance-Sheet.pdf

Test. (n.d.). Retrieved from BSRM: http://bsrm.com/quality/test/

Vision and Values. (n.d.). Retrieved from BSRM: http://bsrm.com/about-us/vision-values/

Waste Disposal and Recycling in Steel Industry. (n.d.). Retrieved from steel-technology:

https://www.steel-technology.com/articles/id/wastedisposal

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