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1、SHANGHAI BAOSTEEL GROUP CORPORATIONTRADING RESTRUCTURING PROJECTPresentation To BaoSteel Group Senior Management 30 July,2001THE BOSTON CONSULTING GROUPBaoSteel-Board-Presentation-30Jul01-JS-SHI-1-AGENDAObjectives and processGlobal market context for BaoSteelTrading vision and corporate structure Co
2、re business strategy and organizationRestructuring impact and change pathBaoSteel-Board-Presentation-30Jul01-JS-SHI-2-AGENDAObjectives and processGlobal market context for BaoSteelTrading vision and corporate structure Core business strategy and organizationRestructuring impact and change pathBaoSte
3、el-Board-Presentation-30Jul01-JS-SHI-3-PROJECT CONTEXT AND OBJECTIVES BaoSteel Group has decided to grow its trading business into the 2nd pillar business within the GroupEnhance Group asset return and profitabilityDiversify the business portfolio towards higher value added services BCG was brought
4、in to design an overall organization structure for the post-integration trading business and develop business models for two core businesses BCG project therefore addresses the following questionsHow should BaoSteel trading be organized to optimize the integration of existing entities trading resour
5、ces?What should be the future business model and organization structure options for the finished goods trading and iron ore trading?What are the e-commerce and logistics linkages to the core businesses?BaoSteel-Board-Presentation-30Jul01-JS-SHI-4-High-Level Service DefinitionOrganization Structure D
6、esignBCG FOCUSED ON THE BUSINESS MODEL AND ORGANIZATION DEVELOPMENT WORK OF THE PROJECTRoll-Out&Market LaunchBusiness Model&OrganizationDetailed Business Planning10 weekstbd.tbd.Evaluation of and restructuring of BaoSteels trading resourcesBusiness concept and trend of core businessesReview of marke
7、t potential and customer requirements Definition of service offer and analysis of underlying economicsDescription of required capability build-up and of operational processesTop-level organization structure design(1st&2nd level,further details for finished goods and iron ore trade)Definition of depa
8、rtmental functions and initial staff headcount estimatesOrganizational KPIDetailing of specific service offers for each business stream and for e-commerce links/platformsDetailed financial modelingDetailed outlining of required capability build-up and of operational processesDetailed organizational
9、structure design at 3rd and department levelActual investment decisions and infrastructure buildingHuman resource build-upSetting up of operational infrastructureIT architecture for e-commerceImplementation phasing and potential pilot programsGo to marketDetailed Situation AssessmentBusiness Concept
10、 Options&OrganizationBaoSteel-Board-Presentation-30Jul01-JS-SHI-5-StinnesCorusThyssenKrupp StainlessThyssenKrupp AGDillinger HuetteRyerson TullUsinorThyssen-SchulteBHPMitsuiWE CONDUCTED EXTENSIVE GLOBAL STEEL AND TRADING COMPANY RESEARCHPNippon Ssteel24-KanematsuBaoSteel-Board-Presentation-30Jul01-J
11、S-SHI-6-IN ADDITION,SIGNIFICANT DOMESTIC MARKET INTERVIEWS Shanghai黑龙江哈尔滨哈飞青岛海尔集团百盛包装海信集团济南小鸭吉林一汽集团江苏跃进汽车春兰集团无锡阿里斯顿无锡小天鹅上海捷品电机震旦家具外高桥船厂三菱日立林内上海大众汽车现代集装箱新树金属制品日用友捷汽车工业集团美固龙金属制品江西昌河汽车广东美的格兰仕万家乐容声湖南长沙伊莱克斯长沙金荣湘钢湖北东风汽车武钢四川长安汽车安徽江淮汽车滁州西门子合肥荣事达天津钢线钢缆集团扎努西电机汽车工业总公司天津LG钢厂钢材成品用户云南昆钢河北唐钢邯钢北京首钢BaoSteel-Board-Pr
12、esentation-30Jul01-JS-SHI-7-MARKET RESEARCH BACKED BY WIDE RANGE OF ANALYTICS Market by sectors,product and regionCustomer requirementsProjection of shearing and cutting marketShearing&cutting economics and outsourcing ratesOrganizational benchmarkingRole of the Center analysisEvaluation of trading
13、assetsSimulated net capital effects on BSITIron ore market projectionCustomer shares by segmentCustomer requirementsImport and logistics economicsRevenue,cost,gross profit and net capital aggregationInternal and external headcount benchmarksFinancial modeling to estimate impact of key recommendation
14、sFinished GoodsCorporate StructureIron OreFinancial ModelingBaoSteel-Board-Presentation-30Jul01-JS-SHI-8-JOINT TEAM EFFORT BETWEEN BAOSTEEL AND BCGSteering CommitteeProject managementBaoSteel executiveHe Wen BoZhang MiaoWu Dong YinBCG VPJim HemerlingBaoSteel teamGuo Jian GuangFeng Ai HuaXia JiangLi
15、YongChen JinBCG teamJan SchwierJudy PanFinished goodsBaoSteel teamWang JinZhang YongZhang Xue ChengHou JianYang Zhi CaiZhang Zhi YongBCG teamJames XuDiana QianJasper PanIron oreBaoSteel teamLiu Yong ShunShen Wen FuXi Zhi QiangChen JinWang Hua QiangBCG teamAaron FangBill WuOrganization structureBaoSt
16、eel teamZu Xue ChaoLi Jian WeiLi Shi PingWu Yi MingLi YongLi Han MinBCG teamJudy PanBill WuE-CommerceBaoSteel teamWang JinYang Zhi CaiBCG teamCindy ChiLogisticsBaoSteel teamGuo QiangZu Xue ChaoBCG teamFang AaronBCG AdvisorsHideaki ImamuraColin CarterMartin WortlerFrancois RouzeauBaoSteel-Board-Prese
17、ntation-30Jul01-JS-SHI-9-AGENDAObjectives and processGlobal market context for BaoSteelTrading vision and corporate structure Core business strategy and organizationRestructuring impact and change pathBaoSteel-Board-Presentation-30Jul01-JS-SHI-10-GLOBAL STEEL MARKET CONTEXT FOR BAOSTEELSummary of Ke
18、y MessagesGlobal steel economics remain challenging for integrated producersRegional supply curves in steel are very flatThe industry suffers from chronic overcapacityIndustry structure exerts downward price pressureMajor players manage value creation along three strategic directionsFocus on the cor
19、eDownstream migrationDiversification Important implications for BaoSteel Trading as well as the BaoSteel Group overallDownstream migration should become an integral part of strategyContinued need to drive asset productivity and integrated distribution perspectiveSuccessful diversification requires a
20、 value oriented portfolio frameworkBaoSteel-Board-Presentation-30Jul01-JS-SHI-11-HOW TO CREATE FURTHER VALUE IN THE STEEL SECTOR?Options Basically in Three DirectionsIntegrated key account strategyPurchasing strategyDrive asset productivity -engineeringHigher value added transformation productsDiver
21、sify into new servicesPortfolio strategyValue management“Focus on the core“Improvement of core business“Downstream migration“Migration along the value chain“Diversification“Move into new businessesValue creation123BaoSteel-Board-Presentation-30Jul01-JS-SHI-12-GLOBAL BENCHMARKS MANAGE THEIR KEY ACCOU
22、NTS FROM AN INTEGRATED PERSPECTIVE Source:BCG benchmark interviewsAuto sector of its distribution division sources 90%of its steel from Usinor and is managed centrally with steel mills.It is also linked to Usinor product and technology databaseIn home market,own service centers work closely with ste
23、el mills to increase Corus product share(75%internal sourcing)Only in overseas markets downstream activities are more emphasizedHigh-margin products are sold through own direct sales channels to maximize steel mill profitsLow-margin products are handled through 3rd-party traders or trading affiliate
24、s1UsinorCorusThyssenKruppBaoSteel-Board-Presentation-30Jul01-JS-SHI-13-WHERE YOU ARE TODAY AFFECTS WHERE YOU GOFour Stages Of Purchasing Strategy MaturityCost/QualityTimeStage 1:Local negotiationLocal buyingDecentralizedOne-Time10-15%SavingsOne-Time10-20%SavingsOngoing Savings5-15%/yearStage 2:Conso
25、lidationConsolidate procurement&supplier baseStandardizeStage 3:PartnershipsFocus on reducing suppliers costs Help to supplier to improve productivityProcess integration via e-procurementStage 4:Long-term OptimizationSupplier management approach differentiated by segmentBuyer focuses on own core com
26、petenciesValue added partnerships with supplierContinuous joint performance improvement1BaoSteel-Board-Presentation-30Jul01-JS-SHI-14-HOW TO DRIVE ASSET PRODUCTIVITY?Benchmarking of ThyssenKrupp vs.Other Global PlayersSource:BCG-AnalysisAsset productivity1.480.490.70Days sales outstandingInventory t
27、urnsCash ratioCurrent ratioPeriod of payment20792628.410.1963223351.730.010.172.660.590.14315.63.677WorstBestTop quartile valueGreen(yellow)=Better(worse)than top quartileTK0.02Intangible assetsFixed assetsFinancial assetsProductivity of net current assetsProductivityof fixed assets2.970.621.284.721
28、.762.885.010.781.910.670.120.230.010.13Benchmarks1BaoSteel-Board-Presentation-30Jul01-JS-SHI-15-ENGINEERING AS LEVER TO IMPROVE PROFIT MARGINS-Engineering is the Next Phase of E-Businesse-ProcurementReduction of the cost of sales and purchasinge-Knowledge managementInternet-supported product and bus
29、iness developmentReduction of development costs and cyclesEarly identification of market changesReduction of process costsImprovement of customer and supplier relationships-EngineeringE-optimized processesand interfaces1 Basic Steel Value chainRaw materialsupplyMeltingCastingHotformingColdformingSur
30、face treatmentDistri-butionTradeMarketResearchProductDevelop.Pre-machin-ingR&De-Sales/Improvement of customer access and value;higher reachBaoSteel-Board-Presentation-30Jul01-JS-SHI-16-MANY COMMODITY BUSINESSES LIKE STEEL WITH DOWNSTREAM VALUE MIGRATION OVER TIME Value chainRaw materialsupplyMelting
31、CastingHotformingColdformingSurface treatmentDistri-butionTradePre-machin-ingComponentmanu-facturingModulemanu-facturingSysteminte-grationAftersalesOperation Value creationSource:BCG project experience Full capture of migrated value only through package offerTrade/distribution alone usually not suff
32、icientValue migration2BaoSteel-Board-Presentation-30Jul01-JS-SHI-17-CORUS EXPANDS INTO DOWNSTREAM SERVICE AND TRANSFORMATION BUSINESS CorusInternational Market UnitNorth America Market Unit18 Business Units in Manufacturing,Engineering Service,R&D etc.4 product portfoliosLong productsStrip productsD
33、ownstream productsAluminumSteel mill units have own commercial capability to conduct direct key account sales3 Trading unitsEuropean Market Unit.Tailored product and service solutions covering all markets outside western Europe and North AmericaFull range of Corus steel products and services through
34、out NAFTA statesWestern Europe through an extensive network of sales offices and service centresService CenterService Center.4 Mn out of total 21 Mn ton of steel Corus produced is sold through service centersServices centers source roughly 75%from Corus mills2Source:BCG benchmark interviewsBaoSteel-
35、Board-Presentation-30Jul01-JS-SHI-18-USINOR HAS MIGRATED FORWARD TO BECOME AN AUTOMOTIVE PRE-FABRICATOR UsinorAutoIndustrial(non-auto)PackagingCentral Marketing&SalesTrading AffiliateTransformation DistributionAuto DedicatedNon-AutoSteel millsDirect sales and technical capabilityNegotiate directly w
36、ith large accountsDirect sales and technical capability in business units.After merger with Arbed,sales are going to be merged with central Marketing and SalesIndependent production and distribution systemBy industry and key accountManages international(non-EU)businessSell non-Usinor branded and als
37、o Usinor branded products20-30 distribution centers located close to customersEach center has warehousing and processing capability90%deal with Usinor productsJointly owned with industry suppliers,e.g.auto part producerclosely coordinated with Auto BUOver 100 sites taken over during the distribution
38、 consolidation period in EuropeOperated with big autonomyPrice is negotiated quarterly according to market with UsinorCan also operate as competitorsTrading.2Source:BCG benchmark interviewsBaoSteel-Board-Presentation-30Jul01-JS-SHI-19-Cost reduction servicesJIT deliveryMaterial specificationSupply c
39、hain mgmtMaterials managementAutomated replenishment and person-in-the-plant programsMetallurgical servicesMaterial science expertise to help customers with product and process designFirst-stage processingThermal processingSlittingCutting to lengthSawingFabricationProduction of semi-finished parts a
40、nd subassembliesINDEPENDENT TRADING PLAYERS ALSO MIGRATE DOWN THE VALUE CHAIN Example:Ryerson(USA)Value added servicesOutsourcing capabilities“Service Shelf”Development of Ryerson“By adding value to a piece of metal,we help our customers in several ways.When we deliver product in a more finished for
41、m,it consumers less space and spends less time in our customers inventory.The customer avoids committing capital to processing equipment.By coordinating the process and ensuring consistent quality-we allow our customers to focus on what they do best.”Rudi TanckMerchandising Manager Fabrication Servi
42、ces,Ryerson2Source:BCG benchmark interviewsBaoSteel-Board-Presentation-30Jul01-JS-SHI-20-DIVERSIFICATION INTO NEW BUSINESSESExample:Overview of ThyssenKrupp ActivitiesPlant TechnologiesProduction SystemsReal EstateInformation ServicesMarineAutomotiveElevatorsMaterialsIndustrial ServicesMechanical En
43、gineeringTechnologiesStainless SteelCarbon Steel3BaoSteel-Board-Presentation-30Jul01-JS-SHI-21-CONCENTRATION OF GROWTH INVESTMENT IN VALUE-CREATING BUSINESS SEGMENTSOverview of the ThyssenKrupp Portfolio in 1999/2000ROCE(%)Growth rate(%)1999-2000Note:Growth rates refer to capital employedSource:Publ
44、ic Disclosure;BCG AnalysisAvg.TK growth(11%)SteelEngineeringProductionSystemsComponentsReal estateAvg.WACCca.9%ElevatorsAutomotiveFacilities Services=1BSalesMaterials ServicesCreating value(CVA0)Destroying value (CVA20南京重庆新余萍乡杭州沙洲鄂州合肥南昌苏州芜湖铜陵达钢唐山太原天铁安阳凌钢莱芜抚顺长治威远顺达泰钢沙华三明湘潭昆明水城攀枝花柳州涟源韶关广州成都BS shareBao
45、Steel-Board-Presentation-30Jul01-JS-SHI-69-SIGNIFICANT OPPORTUNITIES FOR BAOSTEEL TO GROW SHARE WITH MEDIUM AND SMALL USERSSystematically target and sell to grow import share in each customer Leverage its iron ore purchasing scale to provide ore at a lower costRegional focus on North and Yangtze are
46、aDirect channel for medium-sized customers and indirect for small customerBaoSteel-Board-Presentation-30Jul01-JS-SHI-70-RECOMMENDED ORGANIZATION FOR IRON ORE BUSINESS I.HeadII.Business Dept.III.Supporting Dept.R&RStrategy,policy and plan Across-business coordinationManage business operation:procurem
47、ent and customer development Maximize own revenue and profitSupport the business deptMaximize synergy in serving all three businessesOrganization structureIron OreCoalAuxiliaryVP Raw MaterialProcurementSale/ServiceProcurementSale/ServiceProcurementSale/ServiceServe BS MillsNorthCJ SouthIron OreCoalA
48、uxiliaryCharteringDistributionTech ResearchMkt ResearchTech ServiceMine Investment(tbd)Logistics MgtMarketing&Tech.BaoSteel-Board-Presentation-30Jul01-JS-SHI-71-E-COMMERCE LINKAGES SUMMARY Benchmark suggests e-commerce linkages to be placed at three points along the steel value chaine-Procuremente-S
49、ales e-Exchange E-procurement and e-sales often structured dedicatedly to the respective functions,while public exchange requires a high degree of neutrality and independence Management determines that B should be positioned to support internal procurement and sales for the Group for the feasible fu
50、ture It implies that B to be operated as a technical service providers and platform for various Group functions,in particular,procurement and sales.It will be set up as an independent technical service company within the new trading company E-team need to be built up within procurement and sales fun