Globalization of China vs. United States Research Paper

Globalization of China vs. United States - Research Paper Example US Steel Corporation, established in the year 1901, is one of the biggest integrated domestically owned steel companies of US. The company’s customer base is diversified in global markets including Central Europe and Canada. It was declared as the 13th largest steel producing company in the world in the year 2010. The globalization of industries in US is expected to increase the profitability of the company in future due to growing demands in the emerging economies such as China. Baosteel, established in the year 1978, was declared as the 2nd largest steel producing company in the world in 2011 and has demonstrated excellent performance in recent years irrespective of slowdown in demand in the global market. From the financial statement analysis of the US Steel Corp. it can be said that US Steel’s production capacity exceeds its total sales leading to unsold inventory. Steel sector is already a cyclical sector in the sense that the demand for the steel products vary in every quarter. Globalization in China in expected to help the company in diversifying its products into other economies. In addition, the company’s mass production will help it to reach economies of scale in future that will further help to export steel at cheaper rates making US domestic steel industry more competitive. The study aims to analyze the financial statements of the two companies and provide a comparative analysis by highlighting key areas of concern, impact of globalization in US and China and recommend steps that should be taken to ensure profitability in competitive environment. Introduction The steel industry is one of the most important industries of the economy and is also considered as an important indicator of economy. It plays a major in the development of overall economy and infrastructure. The application of steel is used in many industries such as construction, automobiles, machinery, transportation, and many others. The global steel output was over 15 47 million tons for the year ending 2012. The most important characteristics of the steel industry are that it is cyclical and highly fragmented. The steel industry has experienced superior growth during the last two decades but after the global financial crisis, the industry suffered sluggishness in demand. In order to manage operating risk, many companies have diversified their operations in emerging economies where the demand of steel was not affected by global recession. Company Analysis Baosteel Group Corporation Baosteel Group Corporation (also known as Baosteel) is one of the iron and steel largest company of China. It was established in the year 1978 and its head quarter is in Shanghai, China. It is the world’s 2nd largest steel producer following ArcelorMittal in terms of aggregate output. In the year 2012, the company was awarded 197th rank in Fortunes Global 500 for ninth consecutive year. It was also rated by Fitch, S&P, and Moody’s as A3, A, and A- respect ively in the same year. Baosteel was also identified one of the most admired company in the world. The company primarily operates in the iron and steel industry and produces high quality steel that adds value to other industries. The main products of the company are stainless steel, special steel and carbon steel. The company reported approximately 44.2 million tons that helped it to earn over RMB 18.10 billion. Hence, it was ranked as the