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B2B Organizations The Steel Industry. Akcaglayan, Halit Bortey, Ishmael Chang, Thomas T. Chien, Jane Y Cukier, Juan J. "Selling steel over the Internet is very embryonic. It could become an Amazon.com, or it could be not much. But it would be na ï ve to close our eyes to the Internet."

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b2b organizations the steel industry

B2B OrganizationsThe Steel Industry

Akcaglayan, Halit Bortey, Ishmael

Chang, Thomas T. Chien, Jane Y

Cukier, Juan J

"Selling steel over the Internet is very embryonic. It could become an Amazon.com, or it could be not much. But it would be naïve to close our eyes to the Internet."

-- USX chairman, Tom Usher

general facts about the steel industry
General Facts About the Steel Industry
  • Worldwide production is over 750M tons of the 3.000 different catalogued steel types available.
  • China, US and Japan are the largest steel-producing countries, followed by Germany, Russia and Korea.
  • Steel use is closely linked to the wealth of an economy (e.g., steel “consumption” per person is about 20kg in Africa, against 420kg in the US).
  • The industry employs about 1.3M people worldwide.

Source: International Iron and Steel Institute

key us players
Key US Players

Source: International Iron and Steel Institute

steel and the b2b model
Steel and the B2B Model
  • B2B in the steel industry is characterized by:
    • Small market segments
    • Big amount purchases, both in money and volume
    • High expectations for service
    • Knowledgeable buyers
    • Most based on auction model (value is created by spatial matching of buyers and sellers)
market share
Market Share
  • By 2001, $32 billion of steel will be sold through internet portals compared to only $150 million today – Morgan Stanley Dean Witter
  • By 2005, 40-60% of all metal produced in the world will be sold via the Internet
  • E-commerce in metals sector is still in infancy – about 3% of total sales (Andersen’s global metal practice)
space for b2b sites to operate





Space for B2B sites to operate

New Value Chain for MetalSite

Raw materials, coal, iron, scrap metal

Integrated or Mini mill – about 60-80 producers

Toll process, Distributor, Service centers – about 10,000 intermediaries

= Space for an online steel site to operate

major players in the e industry
Major Players in the E-Industry
  • MetalSite
  • Metal Suppliers Online
  • Metal Network Exchange Services
  • E-Steel
  • All sites are relatively new. MSO was the first-mover, on Feb 1997.
  • All use rigorous qualifying standards before permitting companies to sell and buy online.
online front page samples
Online Front Page Samples
  • Membership is highly sought
  • All sites provide multiple sources of information
how do they attract customers online
How Do They Attract Customers Online?
  • Cold calls (most)
  • Direct mail (most)
  • Links from .org-steel related sites (all)
  • Exchange of advertising for links (most)
  • Word of mouth (all)
  • Search engines (all)
  • Physical presence in conferences and seminars (all)
  • Recommend this site button (MSO)
three components of online steel sites
Three Components of Online Steel Sites
  • Buyers, who can:
    • Buy direct from steel manufacturers
    • Bid and negotiate deals
    • Order, ship, track and pay online
  • Sellers, who can:
    • Reduce selling costs
    • Select buyers (be in control)
    • Bring on new buyers economically
    • Take no cost risk of being on the Net
  • Industry managers, who can:
    • Read specialized news, industry analysis and editorials
    • Research and compare global metals industry specifications

Advantages of Being Online

  • Provides an honest, secure and anonymous platform to trade metal distribution services.
  • Gives metal consumers the means to post inquiries which are immediately relayed to MNXS vendors that supply similar materials.
  • Further reach for sellers
  • Better prices for consumers
  • Lowered purchasing costs
  • Online auctions
online auction operation

1. Define Product

2. Specify Commercial Terms

4. Negotiate & Conclude

3. Target Audience

Online Auction Operation
  • A mastery of the subject is needed when auctioning

Source: e-Steel

incentives for customers to return
Incentives For Customers to Return
  • Online utilities
    • Specifications search
    • Materials property data
    • Metric converter
    • Glossary
  • Subscription to newsletters (all)
  • Online donation capabilities (most)
  • Extensive archives, statistics, and databases
  • Updated regulatory information

Incentives For Customers to Return (II)

  • Careers databanks (MSO)
  • Bookstore (most)
  • Calendar with industry’s events (MSO)
  • Updated steel’s news (all)
  • Industry links (all)
  • Very strict privacy policy (all)
suggested strategic moves
Suggested Strategic Moves
  • Create virtual private marketplaces
    • These would preserve pre-negotiated terms and relationships between buyers and suppliers for future reference.
  • Increase security on transactions
    • Currently, no encryption is used, although privacy is a major concern among customers
  • Redesign pages; do not clot with information
  • Offer specialized advice and counseling
  • Implement a “guest” section
    • Most of the sites are only available to subscribers
suggested strategic moves ii
Suggested Strategic Moves (II)
  • Grow towards “meta B2B portals”
    • Provides closely related products
    • Allows sharing of infrastructure and services
  • Offer educational tours about the industry
  • Offer links to the participating companies
  • Establish consultant / consultee relations, not only seller / buyer
  • Remind buyers about offers according to previous purchases
  • Personalize pages
suggested strategic moves iii
Suggested Strategic Moves(III)
  • Expand into International markets
  • Standard Steel Language- sites should be consistent with the way they describe steel terminology.
  • Create some kind of online CAD hosting software
      • For product customization
  • Move into other types of Internet transactions other than auction/direct offers. For example.
      • Sites could offer Virtual marketplace and Collaborative Direct Transaction types.