Case Study: Alusaf hillside project

Title
Alusaf hillside project 

Author
Corts, K; Wells, J 

Pages
11 

Product Type
 

Reference #
9-704-458 

Teaching Note
 

Institute
Harvard Business School 

Setting
South Africa 

Year
2003 

Keywords
Aluminum; Aluminum industry; Capacity analysis; Decision making; Economic analysis; Industry structure; Prices; Profitability; Strategy formulation; Supply and demand



Summary/
Abstract
The aluminum industry has suffered from long periods of depressed prices and profits interspersed with relatively short-lived price and profit peaks. The case investigates why, this has occured, focusing on the decision Alusaf must make on whether to invest in a major new facility in the face of depressed aluminum prices. Courseware provides cost data on all the facilities in the industry to develop a supply curve. It also provides a supply and demand model that allows students to investigate: the drivers of average industry profitability and relative profitability of individual players in it; the impact of changes in demand over the economic cycle on the price of metal; the impact of different elasticities of demand on price and profitability; the impact of oligopolistic pricing on industry profitability; the impact of adding capacity on industry profitability; and the ability of a firm to preempt the aluminum market. A rewritten version of an earlier case.

 

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