Novolipetsk Steel SWOT and PESTLE Analysis

Strength

1. Vertically integrated steel manufacturer with a well-balanced value chain: Novolipetsk Steel is a vertically integrated company with a balanced value chain which controls all the stages of steel production, from the process of mining raw materials to finishing high-tech product sales to end users. The company has been able to create a unique business model. These integrations allow the company to make out the strategic advantages based on the geographic locations of its machinery. The company has balanced its assets by keeping the most material consuming and resource rich process of production of steel present in the low cost zones while the finished products get produced much closer to the company’s headquarters. This strategy reduces the expenditure of production and logistics costs. It also allows the company to quickly adapt to the changing requirement of the customers and being able to take charge of the sales. The company divides its production into three parts, upstream, i.e. the mining of raw materials for steel production, midstream, i.e. production of steel from the materials mined and downstream i.e. making the finished products that it sells. Novolipetsk owns all three parts of the production process and has integrated internally which gives it a huge competitive advantage over its competitors.

2. Well established R&D labs for product innovation and for maintaining diversified product portfolio: One of the strategic goals of Novolipetsk Steel is to innovate its technology to ensure growth and profitability of the company in the future. Thus, the company has invested its resources in finding and quickly integrating new technology which would improve the efficiencies of the processes. The company does its innovations through a quick project implementation method and has high tolerance for testing potential solutions and technologies. This has allowed the company to reduce implementation costs while being able to adopt the innovative solutions into its operations. This methodology also reduces the innovation-related risks. Novolipetsk Steel has built an R&D department and a corporate Centre for Research and Development (R&D Centre) to support research and innovation. These centres operate from Belgium and Russia. The centres operations are driven by unique research competencies and state-of-the-art measurement equipment. These facilities will allow the development of new steel grades and products for the automotive, energy, and construction sectors. Novolipetsk leverages this R&D center for gaining competitive advantage and continuously improve its product lineage.

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Weakness

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Opportunity

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Threats

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Political

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Economic

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Social

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Technological

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Legal

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Environmental

1. Russian government introduced new norms to check on emissions: In December 2018, the Russian Federation’s Ministry of Economic Development passed a bill on state regulation of emissions and absorption of greenhouse gases. The aim of the bill is to generate conditions for reducing greenhouse gas emission while enabling sustainable economic development of the Russian Federation in accordance with the country’s international obligations. It allows the government to regulate the emissions by maintaining targets for reduced direct emissions or increased absorption of greenhouse gases for Russia across multiple sectors of the economy. The Russian Federation has proposed a permit system for direct emissions while having economic mechanisms to check for emissions and absorptions. There is also provision to include mechanisms of transferring or trading units of emissions and absorption along with privileges in taxation. With these regulations in place, the manufacturing plants will attract additional adherence costs resulting in price rise of products which will be forcibly passed onto consumers. Thus, manufacturers such as Novolipetsk have to account for these changes and try to focus on innovative techniques to reduce emissions in their plants in order to reduce costs and comply with permissible limits to limit environmental impact.

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