Question

The costs of producing steel have declined substantially from building a conventional hot-rolled steel mill down to the new minimill technology that requires only scrap metal, an electric furnace, and 300 workers rather than iron ore raw materials, enormous blast furnaces, rolling mills, reheating furnaces, and thousands of workers. What effect on the potential industry profitability would Porter's Five Forces framework suggest this new technology had? Why?

Answer 1

The new minimill technology in the steel industry would have a significant effect on the potential industry profitability according to Porter's Five Forces framework.

Step-by-step explanation:

Porter's Five Forces framework suggests that the new minimill technology in the steel industry would have a significant effect on the potential industry profitability. The introduction of this new technology has reduced the costs of producing steel by eliminating the need for iron ore raw materials, blast furnaces, and rolling mills, which were expensive components of the conventional hot-rolled steel mill. By using scrap metal and an electric furnace, the new minimill technology has made steel production more efficient and cost-effective. This lower cost of production would likely increase industry profitability as it allows steel mill owners to offer their products at better prices, attracting more customers and increasing market share.