a © bruno g. ruettimann which globalization for the aluminium industry ? which globalization for...

© Bruno G. Ruettimann

A

Which Globalization for the Aluminium Industry ?Which Globalization for the Aluminium Industry ?

Bruno G. Rüttimann, Alcan Engineered ProductsBruno G. Rüttimann, Alcan Engineered Products

ALUMINIUM 2008 - Essen, September 23-25ALUMINIUM 2008 - Essen, September 23-25Trade Fair & ConferenceTrade Fair & Conference


A

1995

Alcoa buys Alumix

1995

Alcoa buys Alumix


A

1997

Alcoa buys Inespal

1997

Alcoa buys Inespal


A

1998

Alcoa buys Alumax

1998

Alcoa buys Alumax


A

1999

Alcan to merge with Alusuisse and Pechiney

1999

Alcan to merge with Alusuisse and Pechiney


A

1999

Alcoa buys Reynolds

1999

Alcoa buys Reynolds


A

1999

Hoogovens merges with British Steel

1999

Hoogovens merges with British Steel


A

2000

Alcan merges with Alusuisse

2000

Alcan merges with Alusuisse


A

2000

Alcoa buys British Aluminium

2000

Alcoa buys British Aluminium


A

2002

Norsk Hydro buys VAW

2002

Norsk Hydro buys VAW


A

2003

Alcan buys Pechiney

2003

Alcan buys Pechiney


A

2004

Alcan spin-offs Novelis

2004

Alcan spin-offs Novelis


A

2006

Corus sells downstream to Aleris

2006

Corus sells downstream to Aleris


A

2006

Rusal merges with Sual and Glencore

2006

Rusal merges with Sual and Glencore


A

2007

Hindalco buys Novelis

2007

Hindalco buys Novelis


A

2007

Alcoa fails to buy Alcan

2007

Alcoa fails to buy Alcan


A

2007

Alcoa Extrusion merges with Sapa

2007

Alcoa Extrusion merges with Sapa


A

2007

Rio Tinto buys Alcan

2007

Rio Tinto buys Alcan


A

2007

Alcoa sells Packaging

2007

Alcoa sells Packaging


A

2008

Rio to sell Packaging and Engineered Products

2008

Rio to sell Packaging and Engineered Products


A

2008

BHP Billiton bids for Rio Tinto

2008

BHP Billiton bids for Rio Tinto


A


AWhat have

Globalization of mining

Globalization of primary aluminium

Globalization of extrusions

Globalization of automotive

in common?

What have

Globalization of mining

Globalization of primary aluminium

Globalization of extrusions

Globalization of automotive

in common?


A

Analyzing the Industry Structure

Defining Business Types and associated Globalization Types

Evaluating the future evolution of the Aluminium Industry and possible Business Models

Analyzing the Industry Structure

Defining Business Types and associated Globalization Types

Evaluating the future evolution of the Aluminium Industry and possible Business Models

Which Globalization for the Aluminium Industry Which Globalization for the Aluminium Industry ContentContent


AAnalyzing the Industry StructureAnalyzing the Industry StructureFramework and determinants Framework and determinants

MarketstructureMarketstructure

ProductcharacteristicsProductcharacteristics

OperatingconfigurationOperatingconfiguration

BusinesstypeBusinesstype

Type of globalizationType of globalization


AAnalyzing the Industry StructureAnalyzing the Industry StructureBasic classification of business typesBasic classification of business types

MarketstructureMarket

structureProductcharacteristicsProductcharacteristics


BusinessclassificationBusinessclassification



AAnalyzing the Industry StructutreAnalyzing the Industry StructutreBasic classification of business typesBasic classification of business types













PR

OD

UC

T C

HA

RA

CT

ER

IST

ICS

no

n d

iffe

ren

tia

ted

d

iffe

ren

tia

ted








PR

OD

UC

T C

HA

RA

CT

ER

IST

ICS

no

n d

iffe

ren

tia

ted

d

iffe

ren

tia

ted

polypolistic oligopolisticMARKET STRUCTURE

Commodity

Speciality

Standards

Convenience


A

Convenience

Standards

Speciality

CommodityBauxite


PR

OD

UC

T C

HA

RA

CT

ER

IST

ICS

no

n d

iffe

ren

tia

ted

d

iffe

ren

tia

ted

Alumina

Primary

Rolling

Extrusion

Forging

Casting

Components

Secondary

Systems

Analyzing the Industry StructureAnalyzing the Industry StructureThe aluminium businessesThe aluminium businesses


ADeriving Typologies of GlobalizationDeriving Typologies of GlobalizationThe natural types of globalization The natural types of globalization


PR

OD

UC

T C

HA

RA

CT

ER

IST

ICS

no

n d

iffe

ren

tia

ted

d

iffe

ren

tia

ted

Type IIType II






Type IType I

Type 1: material G. (physical)

Type 2: immaterial G. (financial)


ADeriving Typologies of GlobalizationDeriving Typologies of GlobalizationThe natural types of globalization The natural types of globalization


PR

OD

UC

T C

HA

RA

CT

ER

IST

ICS

no

n d

iffe

ren

tia

ted

d

iffe

ren

tia

ted

Type IbType Ib

Type IaType Ia

Type IIType II









ANature of Globalization TypesNature of Globalization TypesType 1a: globalization of commoditiesType 1a: globalization of commodities


ANature of Globalization TypesNature of Globalization TypesType 1b: globalization of specialtiesType 1b: globalization of specialties


ANature of Globalization TypesNature of Globalization TypesType 2: financial globalizationType 2: financial globalization


ADeriving Typologies of GlobalizationDeriving Typologies of GlobalizationPrice discrepancy within different economies and corresponding propensity for globalizationPrice discrepancy within different economies and corresponding propensity for globalization

Volume

Price

FDI

CH

B GA

EpA

pK

Price span of similar economies

Demand ZSupply Z

ZpZ

Transaction cost cZK

Globalization propensity (pK-pZ-cZK)


ADeriving Typologies of GlobalizationDeriving Typologies of Globalization... An additional subtype is emerging ... An additional subtype is emerging


PR

OD

UC

T C

HA

RA

CT

ER

IST

ICS

no

n d

iffe

ren

tia

ted

d

iffe

ren

tia

ted

Type IbType Ib

Type IaType Ia

Type IIType II






Type IcType Ic




ANature of Globalization TypesNature of Globalization TypesType 1c: opportunistic globalizationType 1c: opportunistic globalization


ANature of Globalization TypesNature of Globalization TypesComparison of NA with EU extrusion import dynamics from PRCComparison of NA with EU extrusion import dynamics from PRC

0

50

100

150

200

250

300

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Imp

ort

s fr

om

PR

C (

kT) Reality NA

Model max NA

Model NA

Model min NA

Reality EU

Model max EU

Model min EU


ADeriving Typologies of GlobalizationDeriving Typologies of GlobalizationType 3 within the context of the other globalization typesType 3 within the context of the other globalization types

Type IIIType III


PR

OD

UC

T C

HA

RA

CT

ER

IST

ICS

no

n d

iffe

ren

tia

ted

d

iffe

ren

tia

ted

Type IbType Ib

Type IaType Ia

Type IcType Ic

Typ

e II

Typ

e II

su

pp

ort

internal

Type 3:

service type G. (human factor)


ANature of Globalization TypesNature of Globalization TypesType 3: human factor globalizationType 3: human factor globalization

100.000 $100.000 $

20.000 $20.000 $


A

Type IIIType III


PR

OD

UC

T C

HA

RA

CT

ER

IST

ICS

no

n d

iffe

ren

tia

ted

d

iffe

ren

tia

ted

Type IbType Ib

Type IaType Ia

Type IcType Ic

Typ

e II

Typ

e II

su

pp

ort

internal

Nature of Globalization TypesNature of Globalization TypesDifferent types existingDifferent types existing

Conclusion Conclusion

Globalization Globalization

is not equal tois not equal to

GlobalizationGlobalization


A

Bauxit mining ,

Alumina production

Primary smelter , Casting

Rolling , Extruding ,

Die casting , Forging ,...

Components ,

Finished products

Recycling

Usa

ge

Remelters ,Foundry

Scrap

waste

Secondary

Aluminium value addition chain and business typesAluminium value addition chain and business types

Analyzing the Industry StructureAnalyzing the Industry Structure

Holding,Services


A

Bauxit mining ,

Alumina production




Components ,

Finished products

Recycling

Usa

ge

Remelters ,Foundry

Scrap

waste

Secondary

Holding,ServicesType IaType Ia

Type IaType Ia

Type IIType II

Type Ib Type Ib Type IIType II

Type IIType II

Type IIIType III

Nature of Globalization TypesNature of Globalization TypesAluminium value addition chain and globalization typesAluminium value addition chain and globalization types

Type IcType Ic

Type IcType Ic


A

Down stream integration

Ca

pit

al in

ten

sit

y

Entry

barrie

rs

CSF: cost

CSF: providing solution

Compet

itive

inte

nsity

CSF: service

Nature of Globalization TypesNature of Globalization TypesCritical success factors along the value addition chainCritical success factors along the value addition chain

Bauxit mining ,

Alumina production




Components ,

Finished products

Type Type IaIa

Type Type IaIa

Type IIType II

Type Type IbIbType IIType II

Bauxit mining ,

Alumina production

Bauxit mining ,

Alumina production

Primary smelter , CastingPrimary smelter , Casting





Components ,

Finished products

Components ,

Finished products

Type Type IaIa

Type Type IaIa

Type IIType II

Type Type IbIbType IIType II


A

Saturation in existing

end markets

Saturation in existing

end markets

World-wide communication

network

World-wide communication

network

Searching for optimization potential

Searching for optimization potential

Searching for geographical expansion

Searching for geographical expansion

Searching for diversification opportunities

Searching for diversification opportunities

M&AM&A

Opening of a global market

with new competitive environment

and new world market

price

Opening of a global market

with new competitive environment

and new world market

price

+PricePrice//margin pressure margin pressure PricePrice//margin pressure margin pressure

Change of competitive system

Change of competitive system

Shake-outShake-out

Concentration processConcentration processConcentration process

The Phenomenon of Economic GlobalizationThe Phenomenon of Economic GlobalizationSymptoms, causes and effectsSymptoms, causes and effects

Export orientation

of emerging low price

economies

Type IIType II

Type IcType Ic


A

Alcan Alcoa Alumax Alumix Alusuisse British Alu Hoogovens Hydro Inespal Kaiser Pechiney Reynolds VAW

Evolution of the Aluminium IndustryEvolution of the Aluminium IndustryDrastic change of market structureDrastic change of market structure

19801980 19901990 20002000 20102010

Market S

tructu

reM

arket Stru

cture

100%100%

50%50%

concentration and dis-integration process by M&A of Western integrated aluminium companies from advanced economies

prolieferation of

independent companies

by specialization


AEvolution of the Aluminium IndustryEvolution of the Aluminium IndustryDrastic change of market structureDrastic change of market structure

19801980 19901990 20002000 20102010

Market S

tructu

reM

arket Stru

cture

100%100%

50%50%

Alcan Alcoa Alumax Alumix Alusuisse British Alu Hoogovens Hydro Inespal Kaiser Pechiney Reynolds

Alcan Alcoa Corus Hydro

Alcoa Hydro

Sapa Aleris Novelis

Engineered-Products Rio-Tinto-

Alcan (2009) …………… .


A

BauxitBauxit

AluminaAlumina

Primary AlPrimary Al

Rolled semisRolled semis

Extruded semisExtruded semis

CastingsCastings

ForgingsForgings

ComponentsComponents

SystemsSystems

BauxitBauxit

AluminaAlumina




CastingsCastings

ForgingsForgings


SystemsSystems

Vertical Vertical integrationintegration

Horizontal Horizontal specializationspecialization

Reasons for the alternative business modelsReasons for the alternative business models

Evolution of the Aluminium IndustryEvolution of the Aluminium Industry

PastPast TodayToday



19801980 19901990 20002000 20102010

Market S

tructu

reM

arket Stru

cture

100%100%

50%50%



Alcoa Hydro

Sapa Aleris Novelis


Alcan …………… .

. increasing importance of

aluminium companies from emerging economies



19801980 19901990 20002000 20102010

Market S

tructu

reM

arket Stru

cture

100%100%

50%50%



Alcoa Hydro

Sapa Aleris Novelis


Alcan …………… . CBA

Chalco Dubal

UC-Rusal Hindalco

Asia-Aluminium


A

Economy Life CycleEconomy Life Cycle

Integ

ration

Deg

reeIn

tegratio

n D

egree

EmbrionicEmbrionic Growth Growth Maturity Aging Maturity Aging

Integ

rated

Integ

rated

Sp

ecialised S

pecialised

Phase of Phase of IntegrationIntegration

Phase of Phase of DisintegrationDisintegration

(Phase of (Phase of Reintegration)Reintegration)

Vertical integrationVertical integration

Shake-outShake-out

Horizontal specializationHorizontal specialization

General Industry Life CycleGeneral Industry Life CycleAlternation of integration and dis-integrationAlternation of integration and dis-integration


A


Integ

ration

Deg

reeIn

tegratio

n D

egree


Integ

rated

Integ

rated

Sp

ecialised S

pecialised

Vertical integrationVertical integration

Co

nste

llatio

n IC

on

stella

tion I

Co

nste

llatio

n II C

on

stella

tion II

Horizontal specialization ?Horizontal specialization ?

Advanced economies: Advanced economies: present statepresent state

Aluminium Industry Life CycleAluminium Industry Life CycleAdvanced economiesAdvanced economies


A


Integ

ration

Deg

reeIn

tegratio

n D

egree


Integ

rated

Integ

rated

Sp

ecialised S

pecialised

Vertical integration ?Vertical integration ?

Co

nste

llatio

n IC

on

stella

tion I

Co

nste

llatio

n II C

on

stella

tion II

Emerging economies: Emerging economies: present statepresent state

Aluminium Industry Life CycleAluminium Industry Life CycleEmerging economiesEmerging economies

Horizontal specialization ?Horizontal specialization ?


A

BauxitBauxit

AluminaAlumina




CastingsCastings

ForgingsForgings


SystemsSystems

Constellation IIIConstellation III

BauxitBauxit

AluminaAlumina




CastingsCastings

ForgingsForgings


SystemsSystems

BauxitBauxit

AluminaAlumina




CastingsCastings

ForgingsForgings


SystemsSystems

Constellation IConstellation I Constellation IIConstellation II

Vertical Vertical integrationintegration

Horizontal Horizontal specializationspecialization

Contingent Contingent approachapproach

Future Evolution of Aluminium Industry StructureFuture Evolution of Aluminium Industry StructureComparison of alternative business modelsComparison of alternative business models


A

To build a successful business model:

Take into consideration

The changing logic of business (Life cycle analysis)

The CSF of the business (Value addition chain)

The globalization type (Operating model)

Decide inbetween the two opposite models of

Minimizing risk (Vertical integration approach)

Maximizing synergy (Horizontal specialization approach)

To build a successful business model:

Take into consideration

The changing logic of business (Life cycle analysis)

The CSF of the business (Value addition chain)

The globalization type (Operating model)

Decide inbetween the two opposite models of

Minimizing risk (Vertical integration approach)

Maximizing synergy (Horizontal specialization approach)

Future Evolution of Aluminium Industry StructureFuture Evolution of Aluminium Industry StructureFramework of decisionFramework of decision


AModeling Economic GlobalizationModeling Economic GlobalizationA Post-Neoclassic View on Foreign Trade and CompetitionA Post-Neoclassic View on Foreign Trade and Competition

a © bruno g. ruettimann which globalization for the aluminium industry ? which globalization for...

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