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.
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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 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
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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.
• 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.

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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.

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
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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.
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:

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Corus is also trying to concentrate on solutions for reducing energy impacts during
the 'use' phase of thelife-cycle.

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 30in the last 5 years. The
number of trains increased by 20but 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, and develop a competitive advantage.
Using PESTLE analysis is an excellent tool to examine the macro environment and

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by linking this tool with future trends it is possible to develop products for future
opportunities.