Transcript Kein Folientitel - Bruno Ruettimann

ALUMINIUM 2008 - Essen, September 23-25
Trade Fair & Conference
A
Which Globalization for
the Aluminium Industry ?
Bruno G. Rüttimann, Alcan Engineered Products
© Bruno G. Ruettimann
A
1995
Alcoa buys Alumix
© Bruno G. Ruettimann
A
1997
Alcoa buys Inespal
© Bruno G. Ruettimann
A
1998
Alcoa buys Alumax
© Bruno G. Ruettimann
A
1999
Alcan to merge with
Alusuisse and Pechiney
© Bruno G. Ruettimann
A
1999
Alcoa buys Reynolds
© Bruno G. Ruettimann
A
1999
Hoogovens merges
with British Steel
© Bruno G. Ruettimann
A
2000
Alcan merges with
Alusuisse
© Bruno G. Ruettimann
A
2000
Alcoa buys British
Aluminium
© Bruno G. Ruettimann
A
2002
Norsk Hydro buys VAW
© Bruno G. Ruettimann
A
2003
Alcan buys Pechiney
© Bruno G. Ruettimann
A
2004
Alcan spin-offs Novelis
© Bruno G. Ruettimann
A
2006
Corus sells
downstream to Aleris
© Bruno G. Ruettimann
A
2006
Rusal merges with
Sual and Glencore
© Bruno G. Ruettimann
A
2007
Hindalco buys Novelis
© Bruno G. Ruettimann
A
2007
Alcoa fails to buy
Alcan
© Bruno G. Ruettimann
A
2007
Alcoa Extrusion
merges with Sapa
© Bruno G. Ruettimann
A
2007
Rio Tinto buys Alcan
© Bruno G. Ruettimann
A
2007
Alcoa sells Packaging
© Bruno G. Ruettimann
A
2008
Rio to sell Packaging
and Engineered Products
© Bruno G. Ruettimann
A
2008
BHP Billiton bids for
Rio Tinto
© Bruno G. Ruettimann
A
© Bruno G. Ruettimann
A
© Bruno G. Ruettimann
What have
Globalization of mining
A
Globalization of primary aluminium
Globalization of extrusions
Globalization of automotive
in common?
© Bruno G. Ruettimann
A
Which Globalization for the Aluminium Industry
Content
 Analyzing the Industry Structure
 Defining Business Types and
associated Globalization Types
 Evaluating the future evolution of
the Aluminium Industry and
possible Business Models
© Bruno G. Ruettimann
Analyzing the Industry Structure
Framework and determinants
Product
characteristics
A
Market
structure
Business
type
Operating
configuration
Type of globalization
© Bruno G. Ruettimann
Analyzing the Industry Structure
Basic classification of business types
Product
Product
characteristics
characteristics
A
Market
Market
structure
structure
Business
Business
classification
classification
Operating
Operating
configuration
configuration
Typeof
ofglobalization
globalization
Type
© Bruno G. Ruettimann
Analyzing the Industry Structutre
Basic classification of business types
Product
Product
characteristics
characteristics
A
Market
Market
structure
structure
Business
Business
classification
classification
Operating
Operating
configuration
configuration
Typeof
ofglobalization
globalization
Type
© Bruno G. Ruettimann
Analyzing the Industry Structure
Product
Product
characteristics
characteristics
Market
Market
structure
structure
Business
Business
classification
classification
Operating
Operating
configuration
configuration
Typeof
ofglobalization
globalization
Type
PRODUCT CHARACTERISTICS
differentiated
non differentiated
Basic classification of business types
A
© Bruno G. Ruettimann
A
Analyzing the Industry Structure
Product
Product
characteristics
characteristics
Market
Market
structure
structure
Business
Business
classification
classification
Operating
Operating
configuration
configuration
Typeof
ofglobalization
globalization
Type
PRODUCT CHARACTERISTICS
differentiated
non differentiated
Basic classification of business types
Convenience
Speciality
Standards
Commodity
polypolistic
oligopolistic
MARKET STRUCTURE
© Bruno G. Ruettimann
Analyzing the Industry Structure
PRODUCT CHARACTERISTICS
differentiated
non differentiated
The aluminium businesses
A
Systems
Convenience
Speciality
Components
Casting
Forging
Extrusion
Rolling
Primary
Alumina
Secondary Commodity
Bauxite
Standards
polypolistic
oligopolistic
MARKET STRUCTURE
© Bruno G. Ruettimann
Deriving Typologies of Globalization
Product
Product
characteristics
characteristics
Market
Market
structure
structure
Business
Business
classification
classification
Operating
Operating
configuration
configuration
Typeof
ofglobalization
globalization
Type
PRODUCT CHARACTERISTICS
differentiated
non differentiated
The natural types of globalization
Type 1: material G. (physical)
Type II
A
Type I
polypolistic
oligopolistic
MARKET STRUCTURE
Type 2: immaterial G. (financial)
© Bruno G. Ruettimann
A
Deriving Typologies of Globalization
Product
Product
characteristics
characteristics
Market
Market
structure
structure
Business
Business
classification
classification
Operating
Operating
configuration
configuration
Typeof
ofglobalization
globalization
Type
PRODUCT CHARACTERISTICS
differentiated
non differentiated
The natural types of globalization
Type 1: material G. (physical)
Type Ib
Type II
Type Ia
polypolistic
oligopolistic
MARKET STRUCTURE
Type 2: immaterial G. (financial)
© Bruno G. Ruettimann
Nature of Globalization Types
Type 1a: globalization of commodities
A
© Bruno G. Ruettimann
Nature of Globalization Types
Type 1a: globalization of commodities
A
© Bruno G. Ruettimann
Nature of Globalization Types
Type 1b: globalization of specialties
A
© Bruno G. Ruettimann
Nature of Globalization Types
Type 1b: globalization of specialties
A
© Bruno G. Ruettimann
Nature of Globalization Types
Type 2: financial globalization
A
© Bruno G. Ruettimann
Nature of Globalization Types
Type 2: financial globalization
A
© Bruno G. Ruettimann
Deriving Typologies of Globalization
Price discrepancy within different economies and
corresponding propensity for globalization
A
Price
pA
A C
B
D E F
pK
G
H
Price span
of similar
economies
I
Demand Z
Supply Z
Z
pZ
Globalization
propensity
(pK-pZ-cZK)
Transaction
cost cZK
Volume
© Bruno G. Ruettimann
A
Deriving Typologies of Globalization
Product
Product
characteristics
characteristics
Market
Market
structure
structure
Business
Business
classification
classification
Operating
Operating
configuration
configuration
Typeof
ofglobalization
globalization
Type
PRODUCT CHARACTERISTICS
differentiated
non differentiated
... An additional subtype is emerging
Type 1: material G. (physical)
Type Ib
TypeType
II Ic
Type Ia
polypolistic
oligopolistic
MARKET STRUCTURE
Type 2: immaterial G. (financial)
© Bruno G. Ruettimann
Nature of Globalization Types
Type 1c: opportunistic globalization
A
© Bruno G. Ruettimann
Nature of Globalization Types
Type 1c: opportunistic globalization
A
© Bruno G. Ruettimann
A
Nature of Globalization Types
Comparison of NA with EU extrusion import dynamics from PRC
300
Imports from PRC (kT)
250
Reality NA
200
Model max NA
Model NA
150
Model min NA
Reality EU
Model max EU
100
Model min EU
50
0
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
© Bruno G. Ruettimann
Deriving Typologies of Globalization
Type 3:
service type G.
(human factor)
Type III
Type Ib
Type II
PRODUCT CHARACTERISTICS
differentiated
non differentiated
support
Type 3 within the context of the other globalization types
A
Type Ic
Type Ia
polypolistic
oligopolistic
MARKET STRUCTURE
internal
© Bruno G. Ruettimann
A
Nature of Globalization Types
Type 3: human factor globalization
100.000 $
20.000 $
© Bruno G. Ruettimann
A
Nature of Globalization Types
Type 3: human factor globalization
100.000 $
20.000 $
© Bruno G. Ruettimann
A
Nature of Globalization Types
Type III
PRODUCT CHARACTERISTICS
differentiated
non differentiated
Globalization
Type Ib
is not equal to
Type II
Conclusion
support
Different types existing
Globalization
Type Ic
Type Ia
polypolistic
oligopolistic
MARKET STRUCTURE
internal
© Bruno G. Ruettimann
Analyzing the Industry Structure
Aluminium value addition chain and business types
A
Holding,
Services
Bauxit mining ,
Alumina production
Primary smelter , Casting
Secondary
Rolling , Extruding ,
Die casting , Forging ,...
Components ,
waste
Remelters ,
Foundry
Usage
Finished products
Scrap
Recycling
© Bruno G. Ruettimann
Nature of Globalization Types
Aluminium value addition chain and globalization types
Type Ia
Type Ia
Holding,
Services
Bauxit mining ,
Alumina production
A
Type III
Primary smelter , Casting
Secondary
Rolling , Extruding ,
Type Ib
Type II
Type Ic
Die casting , Forging ,...
Components ,
Finished products
Type Scrap
Ic
waste
Remelters ,
Foundry
Type II
Usage
Type II
Recycling
© Bruno G. Ruettimann
A
Nature of Globalization Types
Capital intensity
Critical success factors along the value addition chain
Bauxit mining ,
Type Ia
CSF: cost
Alumina production
Type Ia
Primary smelter , Casting
Type II
Die casting , Forging ,...
Type Ib
Type II
Finished products
Rolling , Extruding ,
Components ,
CSF:
providing
solution
CSF: service
Down stream integration
© Bruno G. Ruettimann
The Phenomenon of Economic Globalization
Symptoms, causes and effects
Saturation in
existing
end markets
A
+
Type Ic
Price/margin pressure
Change of
competitive system
Searching for
optimization potential
Searching for
geographical expansion
Type II
M&A
Opening ofa
globalmarket
with new
competitive
environment
and new
world market
price
Export
orientation
of
emerging
low price
economies
Searching for
diversification opportunities
Shake-out
World-wide
communication
network
Concentration process
© Bruno G. Ruettimann
A
Evolution of the Aluminium Industry
Drastic change of market structure
100%
Market Structure
50%
Alcan
Alcoa
concentration and dis-integration
Alumax
Alumix
process by M&A of Western
Alusuisse
integrated aluminium
British Alu
Hoogovens
companies from
Hydro
advanced
Inespal
Kaiser
economies
Pechiney
Reynolds
VAW
1980
1990
2000
2010
© Bruno G. Ruettimann
A
Evolution of the Aluminium Industry
Drastic change of market structure
100%
Market Structure
50%
Alcan
Alcoa
Alumax
Alumix
Alusuisse
British Alu
Hoogovens
Hydro
Inespal
Kaiser
Pechiney
Reynolds
1980
Alcan
Alcoa
Corus
Hydro
Alcoa
Hydro
Sapa
Aleris
Novelis
Engineered-Products
Rio-Tinto-Alcan (2009)
……………
.
1990
2000
2010
© Bruno G. Ruettimann
Evolution of the Aluminium Industry
Reasons for the alternative business models
Past
Today
Bauxit
Bauxit
Alumina
Alumina
Primary Al
Primary Al
Rolled semis
Rolled semis
Extruded semis
Extruded semis
Castings
Castings
Forgings
Components
Systems
Vertical
integration
A
Forgings
Components
Systems
Horizontal
specialization
© Bruno G. Ruettimann
A
Evolution of the Aluminium Industry
Drastic change of market structure
100%
Market Structure
50%
Alcan
Alcoa
Alumax
Alumix
Alusuisse
British Alu
Hoogovens
Hydro
Inespal
Kaiser
Pechiney
Reynolds
1980
Alcan
Alcoa
Corus
Hydro
Alcoa
Hydro
Sapa
Aleris
Novelis
Engineered-Products
Rio-Tinto-Alcan
……………
.
.
increasing
importance of
aluminium companies
from emerging economies
1990
2000
2010
© Bruno G. Ruettimann
A
Evolution of the Aluminium Industry
Drastic change of market structure
100%
Market Structure
50%
Alcan
Alcoa
Alumax
Alumix
Alusuisse
British Alu
Hoogovens
Hydro
Inespal
Kaiser
Pechiney
Reynolds
1980
Alcan
Alcoa
Corus
Hydro
Alcoa
Hydro
Sapa
Aleris
Novelis
Engineered-Products
Rio-Tinto-Alcan
……………
.
CBA
Chalco
Dubal
UC-Rusal
Hindalco
Asia-Aluminium
1990
2000
2010
© Bruno G. Ruettimann
A
General Industry Life Cycle
Alternation of integration and dis-integration
Specialised
Integration Degree
Integrated
Vertical integration
(Phase of
Reintegration)
Phase of
Integration
Phase of
Disintegration
Shake-out
Horizontal specialization
Economy Life Cycle
Embrionic
Growth
Maturity
Aging
© Bruno G. Ruettimann
A
Aluminium Industry Life Cycle
Advanced economies
Specialised
Constellation II
Integration Degree
Integrated
Constellation I
Vertical integration
Advanced economies:
present state
Horizontal specialization ?
Economy Life Cycle
Embrionic
Growth
Maturity
Aging
© Bruno G. Ruettimann
A
Aluminium Industry Life Cycle
Emerging economies
Specialised
Constellation II
Integration Degree
Integrated
Constellation I
Vertical integration ?
Emerging economies:
present state
Horizontal specialization ?
Economy Life Cycle
Embrionic
Growth
Maturity
Aging
© Bruno G. Ruettimann
A
Future Evolution of Aluminium Industry Structure
Comparison of alternative business models
Constellation I
Constellation II
Constellation III
Bauxit
Bauxit
Bauxit
Alumina
Alumina
Alumina
Primary Al
Primary Al
Primary Al
Rolled semis
Rolled semis
Rolled semis
Extruded semis
Extruded semis
Extruded semis
Castings
Castings
Castings
Forgings
Components
Systems
Vertical
integration
Forgings
Components
Systems
Horizontal
specialization
Forgings
Components
Systems
Contingent
approach
© Bruno G. Ruettimann
A
Future Evolution of Aluminium Industry Structure
Framework of decision
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)
© Bruno G. Ruettimann
Modeling Economic Globalization
A Post-Neoclassic View on Foreign Trade and Competition
A
© Bruno G. Ruettimann