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Industry Analysis: Porter’s Five Force ModelThis section shows how different environmental trends are affecting industry competitors,and allows the reader to better understand the steel industry’s competitive structure and profit possibilities within.

Threat of New Entrants:

In the steel industry, there is a moderate threat of new entrants for many reasons. In thiscapital intensive industry, a company can only be efficient on a large scale, and to obtainscales of economies for production requires a lot of investment. This deters possible newentrants from wanting to enter the industry. Low switching costs for buyers of steel makethe threat of new entrants more of a risk. However, there is low product differentiation,which increases the threat of new entrants, whose products would easily replace those of existing companies. Exporting steel to new entrants overseas is another possibility, thoughhigh tariffs imposed by the United States and other countries make this less likely of a possibility. Governmental regulations on the steel industry also deter new entrants fromwanting to enter.

Threat of Substitute Products:

There are a few products that have the chance of becoming substitute products for steel products, though their actual feasibility in replacement is low, making this threat also low. Plastics are one category of products, with their low costs of production compared to steel,and the environmental benefits as well, though plastics are not typically strong enough to beused in place of steel bars. Bricks and stone are also becoming more frequently used for construction materials in replacement of steel, though they also cannot replace the strengthand durability steel provides. Aluminum and fiberglass are also products being morefrequently used in automobiles for their lightweight qualities and cost effectiveness, thoughswitching costs are incredibly high, and to rework production lines to accommodate to newmaterials is too costly to make the actual...