Johannannsen Steel Company Case Study: Johannsen Steel Company

2) Weakness:
2.1 How to control costs and increase productivity are two very important things to do, but Johannsen Steel Company was in a situation:
 The company failed to keep its traditional strength. As the case mentioned: “the percentage of these high-quality/high-margin sales to total sales continued to decrease”.
 Johannsen Steel Company focused more on expanding its market share. It succeeded in this area but failed to obtain more profits along with increased sales.
 Several JSC product innovations appearing is not significant
2.2 Financial integration without a proper set of preconditions/producing goods against customer wants might lead to few growth benefits and more output and consumption volatility.
 Without the proper precondition

2.4 Very little spending on capital investment.
 The changes did not occur rapidly. The set of problem s and errors that befell JSC occurred over a 25 years period, probably beginning in the middle 1950s with a failure to reinvest in new equipment, followed in the 1960s by a failure to assess the changes in the competitive environment. Comparing the most recent year’s performance to last year’s or the last several years would not provide a sufficient means or depth of analysis.
 The profits had been too little since the mid-1970s for both JSC and WVS, the "mother corporation" was spending little on capital investment.WVS had other restrictions on its JSC subsidiary. Therefore resulting to decrease in quality and production.
 WVS won’t spend much unless a 40% return on investment (ROI) before taxes could be demonstrated.
 Sixty percent of JSC 's total purchase of steel rod (the raw material for steel wire) is to be purchased from

 As the subsidiary of WVS, JSC has to use the raw materials with the low quality which WVS provided. This will make JSC difficult to control materials costs and might bring potential quality risks. In addition, because of the out-dated technology, using such raw materials will also increase production costs.
 There is limitation of decision making body in Johannsen steel Company. Since Western Virginia Steel as a mother of corporation for Johannsen Company, without the option for JSC Sixty percent of JSC 's total purchase of steel rod (the raw material for steel wire) had to be purchased from WVS, even though it was well acknowledged throughout the industry that WVS 's steel rod was the lowest in quality.
 JSC’s president was under pressure to buy WVS’s steel rod—it was ok for commodity quality wire, but unsuited for higher quality products. This mandate also prevented JSC from benefiting from the larger Bethlehem Steel rod coils

2.6 Mid of 1970s their profit rate