Johannsen Steel Corporation

Johannsen Steel Company (JSC) initially focused on high-quality, high-carbon, and high-margin steel wire and ever made big success. In 1946 it was sold to West Virginia Steel (WVS) and then experienced the shocking change of steel industry during 1960s and 70s. Facing the pressure of competitors, JSC began to intend to expand sales and cut cost to maintain its profit level. As a result, the sales revenues kept increase, but the net profit was very low (no more than 2%). JSC now has to make some changes on its production strategy to well control operation costs and obtain more profits.

After analysis, I think that JSC faced both external threats and internal problems:

External: As more and more customers turned to look for more oversee steel suppliers with the same level of quality but lower price, JSC endured the pressure of price and market share.

Internal: How to control costs and increase productivity are two very important things to do, but the company was in such a situation:

1. The company failed to keep its traditional strength. As the case mentioned: “The percentage of these high-quality/high-margin sales to total sales continued to decrease”.

2. Because of the limited investment, the current productivity is low. And the plants need to spend a lot of money to maintain old machines and equipment.

3. As the subsidiary of WVS, JSC has to use the raw materials with low quality which WVS provided. This will make JSC difficult to control material costs and might bring potential quality risks. In addition, because of the out-dated technology, using such raw materials will also increase production costs.

4. The lacking funding limited new designs in company. It will be harmful to a company’s long-term development and impair its competition ability.

5. To operation department, sales stuff are not only those men who merely sale out products, but also can bring back the newest marketing information about both customers and competitors. The operation department needs such information to adjust the company’s production strategy.

In sum, JSC focused more on expanding its market share. It succeeded in this area but failed to obtain more profits along with increased sales.

Here I want to put forward some recommendations for JSC to make changes:

1. Keep its strengths. JSC’s strength is high quality