Acerinox: Managing the Change in the Global Market Why a much smaller company, compared with its main competitors (Arcelor Mittal, Thyssen Krupp, etc.. ) can be competitive in a volume industry, like it is the stainless steel? Financial Policy The first reason why Acerinox shows competitiveness in a volume industry is because of the way it all began. For the first ten years after it’s foundation, the company applied what they called Financial Policy, which meant that shareholders would not receive dividends at the end of the year (for those ten years).
Instead that money would be used to cover expenditures and serve as investment to improve processes. International Orientation The demand in Spain wasn’t enough to reach scale economies, creating the necessity to expand abroad. In 1975, with the fall of the Spanish government, Acerinox saw the opportunity to expand, opening its doors to other countries and setting up there. The first country where Acerinox established itself was France. As well, Spain’s inclusion in the European Union also helped increase sales ten times more in a 10-year period.
They were able to do this with the help of international agents, creating a joint venture with Nissho Iwai Co. , Nisshin Steel Co. , and Spanish investors (Grupo Banesto, Banesco, and Banco Guipuzcuano). Because of conflicting interests between the Japanese and Spanish companies, business relations ended early, but this happened only after these alliances provided Acerinox with sufficient information and support for sales. Efficiency in Production Processes
Being part of an international market made Acerinox realize that its products needed high degrees of standardization; because of this they focused large efforts on constantly improving (KAIZEN) there production processes through economies of scale and cost minimization. Also because of this they opted for an integrated plant that gave them the advantage to control the whole production process and achieve a great saving in costs. Their high obsession with constant improvement, has made them one of the few companies remaining in profit even in the worst years of the stainless steel economic cycle. Vertical Integration (Downstream)
Since Acerinox controls the entire production process (which begins with the melting of the raw materials in the melting shop to the production of the polished, finished, stainless steel flat products through the processes carried out in the cold rolling mill) and the commercial structure, they have more reach on the final client. Horizontal Diversification Another strategy that gives them competitiveness is the creation of service centers in which products are processed to meet the needs of large clients and of warehouses for selling the stainless steel products that are designed for small clients.
In order to get better reach of smaller clients, Acerinox took advantage of the acquisition of GRUPINOX, which was a company that had a 25-warehouse network and a service center in Spain. Later on, the creation of Inoxfill S. A. , a company specializing in the production of stainless steel wire, in order to carry out the necessary processes for selling stainless steel flat products, long products and wire also helped them expand their market. Innovation
One of the main factors contributing to this company’s success was constant innovation; this goes hand-in-hand with the constant improvement of processes and productivity. First, in 1985, they set up CEDINOX, a center of promotion, developing new products and technical services relating to stainless steel. Later, in 1988, they set up the Jose Maria Aguirre Gonzalo Research & Testing Center to improve production processes and search for new materials to meet market requirement. This allowed the company to use its in-house know-how, which serves as a training facility for their employees’ as well as their competitors’.