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Acas Corus Full Study printed from The Times 100 website

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					Corus Full Study printed from The Times 100 website: www.tt100.biz


Corus
Competitive advantage through sustainable product
development in construction
1. Introduction
In the modern business world a company needs to innovate to remain successful. By using sustainable
principles Corus can develop a lasting competitive advantage.

Corus was formed in October 1999 through the merger of British Steel and the Dutch company
Koninklijke Hoogovens. It is a public limited company, headquartered in London and quoted on the
London Stock Exchange and the Amsterdam-Brussels-Paris Euronext Exchange. It manufactures
metals including 17 million tonnes of steel a year in Europe and the USA, and employs around 50,000
people. Corus is listed on the FTSE4Good Index and the Dow Jones sustainability indices.

Corus earns 30% of its revenues from construction and is an important sector for the company. Corus is
a recognised international brand in the construction industry providing innovative metal-based products
not only to the European but also the global construction market.

Embracing sustainable thinking has for a long period played an important role in new product
development. This Case Study shows how Corus has set about evaluating opportunities and developing
products that minimise the use of wasteful resources, whilst meeting the needs of the future.

2. Understanding the external environment
Corus examined its construction strategy in light of the external environment, to identify future market
needs. By linking Corus competencies and technical knowledge to future market needs, Corus aims to
develop products that give the company a competitive advantage in construction. PEST analysis is a
powerful tool that can be used to help analyse the external construction environment. This analysis
involves examining the current situation with regard to the following factors:

 Political
UK Government policy and EU directives, for example, planning and environmental issues including
sustainability affect the construction industry.

 Economic
The health of the economy and interest rates affect demand for commercial and residential property.
The UK government is using taxation as a means to encourage improving environmental performance
e.g. The Climate Change Levy, Aggregates and Landfill taxes. The construction industry is increasingly
interested in whole life costs of the building, which includes initial capital costs, operating and
maintenance costs - understanding how better design can improve all these costs.

 Social
Changes in the birth/divorce rates and the average number of people living in a household affect the
demand for housing. Increasing crime, ageing population, and people’s well-being are part of the social


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dimension – research shows that the highest number of disagreements amongst neighbours is due to car
parking.

 Technology
New construction technologies affect working practices in the building industry, constructing more
component systems in factories rather than on the building site.

 PEST analysis can be extended to SLEPT through the
addition of Legal factors including legislation that regulates industry. This is further extended to
consider environmental factors known as PESTLE.

 Legislation
The UK and European governments believe the construction industry is highly fragmented and the only
way to improve the performance of the industry in terms of safety and environmental performance is to
increase legislation.

 Environmental
Two of the main issues here are meeting the Kyoto Agreement in production of Carbon Dioxide from
the burning of fossil fuels and waste going to land fill.

Note: When using PESTLE as a tool for analysis it is possible to get overlap between an issue which
can be put into two sections. What is more important here is to identify the changes and understand
how those changes will impact on the construction industry.

The factors identified in the analysis are concerned with the current situation. However, to get first
mover advantage it is essential to plan for the future through forecasting events over the next 20 years
using the factors from the PESTLE analysis. This is partly due to the need to have accreditation for
products. This is a testing regime carried out by an independent body against relevant
British/International standards and building regulations. On successful outcomes of the tests, a
performance certification is issued for the specific product in the specific application - generally stating
structural, fire, acoustic, thermal and durability performance of the product. This is important as the
Construction industry is generally very conservative and hence, to introduce a new product, it is
essential to have third party validation that the product will perform as the manufacturer states.
Achieving this accreditation can take up to a couple of years to get, and it then takes a substantial
amount of time to develop the product for today’s construction industry.

The process of forecasting future events is known as Road Mapping to Corus. It allows Corus to
understand changes in PESTLE factors over time, identify how these affect the construction industry
and link product developments to these changes.

Road Mapping allows Corus to identify market opportunities, develop products to meet these and
identify which existing technologies can manufacture them.

3. Conclusions from the analysis of the external environment

   A sustainable building is one that limits energy use and scarce resources. This is vital because 26%
    of the UK's energy use is linked to heating buildings.



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   Governments will use building regulations and planning permission controls to meet the Kyoto
    protocol.
   Outer town developments will be restricted in favour of inner city developments including
    brownfield sites.
   There will be a shortage of housing as demand increases because of more households and increased
    life expectancy.
   Land will be increasingly scarce and therefore expensive especially in the South-East so it will have
    to accommodate more people per acre, through dense development.
   As car ownership increases, there will be a 50% increase in
   car journeys.

4. Sustainability
Sustainability was a key theme in Corus' analysis of the external environment. In 1987 the Bruntland
Commission defined sustainable development as "meeting the needs of the present without
compromising the ability of future generations to meet their own needs".

Most of the energy we consume - whether it is the petrol for cars or the gas that heats our houses -
comes from non-renewable resources like coal, oil and gas. The reduction in energy use is, therefore, a
key objective of Governments. As well as a cost to the environment, energy has a cost to those who buy
it, and it makes good sense to reduce usage from both these perspectives. Fuel poverty affects between
4 to 6 million people of the population in the UK, this is not due to fuel being too expensive, but
because they live in accommodation which has poor thermal insulation.

Efficient use of resources including energy is paramount during the life of a building. Buildings start off
as raw materials like glass, which is used to manufacture components like windows. These are then
assembled into systems like facades, which are constructed to form buildings. At the end of a building's
life the sustainable loop describes how the product life can be extended.

Diagram

Corus is aiming to develop solutions that, as well as being resource efficient, have a flexible and
adaptable design. This means that the usage of a building can be adapted internally without altering the
structure or exterior of the building (re-use). It is not possible to do this with a building whose internal
walls support/act as the structure and support the floors. It is much more difficult to achieve this
without major modifications.

5. Aims, objectives and adding value
Working from its conclusions Corus has set out what it wants to achieve in a vision for sustainable
construction.

“Corus aims to create valued added products and services to promote steel intensive commercially
viable buildings. Through advanced design and technology we will improve the quality of life in society
whilst enhancing the life-cycle credentials of the built environment.”

Corus regards it as important for all staff to know the direction towards which they should be going,
and vision statements are used as an effective way of communicating this.


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Added value is a key part of this vision statement. Corus' potential customers in the construction sector
include businesses which own offices and other commercial property. These customers want, like
Corus, to increase profit and therefore returns to shareholders. They can do this by:

   extending the life of the building so they can earn revenue from it longer. The average life of a
    commercial property is currently only 20 years
   reducing the costs incurred over the life of the building especially energy costs
   earning more revenue from a workforce which is more content because of a better working
    environment.

Corus is developing solutions to add value for customers by helping them in all these three areas. By
examining the energy costs incurred over the life of an office block, Corus has identified larger
opportunities for saving costs. This understanding will hopefully provide Corus with a competitive
advantage.

The environmental impacts of the different phases of an office building's life cycle are:
Corus is also trying to concentrate on solutions for reducing energy impacts during the 'use' phase of the
life-cycle.

Diagram

6. Products and solutions from Corus
This section explains two of the product areas where Corus is developing systems in response to the
findings of the external analysis.

 Residential solutions
Steel frames for homes and modular residential systems for flats, constructed off-site in a controlled
environment to precise specifications (reducing waste), ensuring improved insulation (reducing energy
consumption) and air tightness (reducing energy loss). These homes are being produced to the highest
comfort and energy efficiency standards that traditional building technology struggles to achieve.

 Modular railways platforms
Rail traffic is growing, passenger numbers increased by 30% in the last 5 years. The number of trains
increased by 20% but the network is congested and needs to be used more efficiently as mass transit is
more environmentally friendly than cars. To raise capacity on the rail network, the train operating
companies are planning to introduce longer trains. However, many station platforms on the existing rail
network are too short, resulting in travellers having to walk down the carriage to exit the train. Corus
has developed a system for the rapid construction of new/extended platforms. This allows for the
implementation of the longer trains and does not tie up the track for long periods whilst the platform is
being installed.

7. Conclusion
By examining trends in the wider (macro) environment it is possible to identify product and market
opportunities. The need for sustainable construction presents many opportunities for Corus to add
value,


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and develop a competitive advantage. Using PESTLE analysis is an excellent tool to examine the
macro environment and by linking this tool with future trends it is possible to develop products for
future opportunities.




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