<p style="text-align: justify;">Nippon Steel &; Sumitomo Metal Corporation is a Japanese Steel Company, it was formed in 2012 by the merger of the old Nippon Steel and Sumitomo Metal. The company is renamed Nippon Steel Corporation in 2019 (Nippon Steel, 2021). The company is based in Tokyo. It operates through the following business segments: Steelmaking and Steel Fabrication; Engineering and Construction; Chemicals; New Materials; and System Solutions.</p>
<p style="text-align: justify;">Steelmaking and fabrication is its major business, in which it produces and distributes steel sheets, plates, bars and wire rods, pipes and tubes, and machinery parts. It is one of the largest steel producers in the world and number one in Japan. Porter&#8217;s five forces model is a valuable tool to identify threats and opportunities faced by Nippon Steel in the steel industry in the world.</p>
<h2 style="text-align: justify;">Competitive Rivalry in The Market</h2>
<p style="text-align: justify;">The steel industry is dominated by conglomerates all over the world. Japan is the 3rd highest steel producer in the world behind India and China (WorldSteel, 2020). The steel industry has a fierce rivalry. The industry runners have global influence, and the economy of scale is high. The industry is growing steadily at the moment. It provides opportunities for companies to compete for a better share. The main rival of Nippon Steel is Shagang Group, HBIS Group, ArcelorMittal and China Baowu Group.</p>
<p style="text-align: justify;">All of these companies are the steel production leader in the world based on production volume (Statista, 2021). It produced 41.58 million metric ton of crude steel in 2020 (Statista, 2021). Nippon Steel posted annual revenue of $47.459 billion in 2020, is ranked at 198th position in Fortune Global 500 (Fortune, 2021). The competition within the industry is increasing.</p>
<h2 style="text-align: justify;">Threat of Substitutes</h2>
<p style="text-align: justify;">Substitute products offer customers different choices and allow them options within the industry and beyond it to products that may fulfil a similar need (Luenendonk, 2019). The threat of substitution is low to medium; it is because of the two main reasons. Steel is a permanent material it is essential to our society. Which can be recycled over and over again without losing its properties, steel is also fundamental to a successful circular economy. From transport systems, infrastructure and housing, to manufacturing, agriculture or energy.</p>
<p style="text-align: justify;">The scale of the industry and availability of viable product at that scale provides it with an edge. Steel act as the base of the majority of the product. Aluminum and Plastic is replacing steel in some industries, but it is impossible to replace them in every industry. The overall threat of substitutes is low to medium.</p>
<h2 style="text-align: justify;">The Threat of New Entrants</h2>
<p style="text-align: justify;">The threat of new entrants in the steel industry is low. The major factors are a higher initial capital requirement, the economy of scale, government policies and product differentiations. The higher capital investment in production and innovation makes it difficult for startups. The scale of operation does matter in this sector. Benefits of economies of scale are derived in the form of lower costs, R&; D expenses and better Steel has very low barriers in terms of product differentiation as it doesn&#8217;t fall into the luxury or specialty goods and thus does not have any substantial price difference.</p>
<p style="text-align: justify;">However, certain companies like Nippon Steel still enjoy a premium for their products because of their quality and its brand value created more than 100 years back. The company is moving with time and using its resources to expand its business. The company is venturing with other leaders to capture the market in developing countries (Ray, 2020). The threat of the latest entrant against it is relatively low.</p>
<h2 style="text-align: justify;">Bargaining Power of Buyers</h2>
<p style="text-align: justify;">The major steel consumption sectors are automobiles, mechanical products, domestic appliances, electrical equipment, building and infrastructure and metal equipment maker. It provides them with a bigger clientele and multiple channels to sell their products. Product quality, differentiation, and price can attract the buyer.</p>
<p style="text-align: justify;">The Bargaining Power of Buyers is high if the buyers are large; they can switch easily to another supplier who may be in numbers (Slater &; Olson, 2002). Usually, steel buyers are bulk buyers, and their final product depends on the steel. Therefore, it provides them with a better bargaining chip. Bulk buyers can get favorable deals. However, small and retail consumers who are scattered and consume a significant part do not enjoy these benefits. All the factors mentioned above are the reason for low to medium and it depends on buyers too.</p>
<h2 style="text-align: justify;">Bargaining Power of Suppliers</h2>
<p style="text-align: justify;">The supplier in the industry is the one who provides the raw material, production equipment for the industry and human resources. The raw material providers are the major deciding factor, the end products depend on their material. The raw material in the steel industry is iron ore. The suppliers are concentrated in this industry. Vale, Rio Tinto, BHP, Fortescue Metals Group, and Angelo American provide the majority portion of raw material in the world (NS Energy, 2021).</p>
<p style="text-align: justify;">The production equipment is expensive and directly links with the quality of the product. The sector in which equipment is connected with the quality of the product and malfunction in it can cost huge losses (Porter, 1979). The companies need their services for regular maintenance and up-gradation after purchasing the equipment. The supplier, in this case, became the backbone of the industry. The supplier, in that case, holds moderate to high power in negotiating the deal.</p>
<h2 style="text-align: left;">
References</h2>
<p style="text-align: left;">Luenendonk. M. (2019). Threat Of Substitutes &#8211; Porter’s Five Forces Model. Available at: https://www.cleverism.com/threat-of-substitutes-porters-five-forces-model/<br />
Porter., E. M (1979). How Competitive Forces Shape Strategy. Available at: https://hbr.org/1979/03/how-competitive-forces-shape-strategy<br />
Slater, Stanley &; Olson, Eric. (2002). A fresh look at industry and market analysis. Business Horizons. 45. 15-22. 10.1016/S0007-6813(02)80005-2.<br />
WorldSteel. (2021). 2020 World Steel in Figures. Available at: https://www.worldsteel.org/en/dam/jcr:f7982217-cfde-4fdc-8ba0-795ed807f513/World%2520Steel%2520in%2520Figures%25202020i.pdf<br />
Statista. (2021) The world&#8217;s largest crude steel producers in 2020, by production volume. Available at: https://www.statista.com/statistics/271979/the-largest-steel-producers-worldwide-ranked-by-production-volume/<br />
Fortune. (2021) Nippon Steel Corporation. Available at: https://fortune.com/company/nippon-steel-sumitomo-metal/global500/<br />
Nippon Steel. (2021). Chronology. Available at: https://www.nipponsteel.com/en/company/about/history/index.html<br />
NS Energy. (2021). Profiling the world’s top five iron ore producing companies in 2020. Available at: https://www.nsenergybusiness.com/features/top-five-iron-ore-producing-companies-world/<br />
Ray. S. S. (2020). Arcelor Mittal-Nippon Steel lays out large expansion plan, seeks support. Available at: https://www.financialexpress.com/industry/arcelor-mittal-nippon-steel-lays-out-large-expansion-plan-seeks-support/2133035/</p>