Evaluation Essay on USG Corporation

Introduction

USG being the world's greatest gypsum producer has in its operation approved a plan that will work on recapitalizing the company and putting the focus on their major goal of maximizing the company's value for shareholders. However, this is not the only option that USG is adopting. To attain great success, the company has put in place offensive and defensive strategies, strategic alliances, and vertical integration to ensure that it's achieving a competitive advantage and expanding its market share.

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Bringing together the game-changing expertise and technologies, USG corporation got into a strategic alliance with Boral company which is the leading distribution and manufacturing in the region to come up with a vehicle that will deliver a greater offering to the fastest progressing plasterboard areas globally(Smythe et al, 2012). Through this combination, the company is expected to achieve an important competitive advantage and gain the market leadership position for a long-term performance.

Offensive Strategy

USG Corporation has adopted the offensive strategy in attacking the market by targeting the general weakness of other competitors who are existing in the market and making emphasis on its strength. Being that USG is possessing the leading shares position in most of the markets, this has given the company advantage of uniquely positioning USG for synergistic expansion. To gain more market share, the USG has strategically managed to spend more than USD $1.7 billion to conduct a fifty to fifty percent joint venture with the operation of more than 11 countries in Australia, Middle East and Asia in general(Houk, 2011). Additionally, just to stay ahead of its competitors USG corporation has made an upfront cash payment to Boral of five million dollars upon its completion with a maximum additional earn-out payment of seventy-five million to Boral.

Defensive Strategy

Since USG corporation is one of the established company with the greater customer base, it has used defensive strategy to achieve greater market share. Being the world 's greatest gypsum producer, the company has achieved a greater market share and has been enjoying low operating costs, steady cash flow throughout. The company is also experiencing a scale advantage in transportation and manufacturing which in the long run has led to low pricing. Even during the recession when other companies experienced great losses, USG managed to handle its operation through the Great Recession which hit the commercial and the residential construction markets during this period. USG managed to go through this by a proper financial management, it happened through less efficient operations, closing older and through cost-cutting

Vertical Integration

USG Corporation has incorporated vertical integration in the merging of the companies supply chain With the introduction of new high-speed plants that started in 1999 to 2000, it made the cross region shipments to pursue cost effectiveness. In terms of meeting the growing demand and building products in the market, USG is open to new opportunities for various groups like Zawawi Group and other groups in the Middle East and India in general(Hamma,2007). Through this, the broader market has been achieved by offering local projects a better access to USG's industry.USG ended up procuring the Sackett Plaster Board company, which was an inventor of Sackett Board. This was one of the panels that were made of multiple layers of paper and plaster in general. Progress was recorded and in the year 1917, what transpired was that a new manufacturing process produces boards with a single layer of paper and plaster the could be connected flush along a wall with a surface which was relatively smooth

Strategic Alliance

The background of USG company explains the success of the corporation creating an overview on how it has been restructured to facilitate the general improvement. In 1901, USG was established after 35 gypsum companies came together. Currently, the new company developed a scale advantage and took control of fifty percent of the gypsum market. This has made the company to take great steps in making sure that everything is moving efficiently and from 1940 to the period 1980, USG is making an expansion on the existing business while operating to acquire new ones (Foley,1995)

Notably, USG Corporation is globally recognized as the largest gypsum manufacturer with the sales accounting for more than fifty-one percent of their overall sales, the company worked on diversifying and making provision of other products in order to remain in the market and stand out as the market leader. USG is carrying three other division which includes word fiber, interior systems, a group titled other building products and wood fiber. All the division are playing a significant role in the primary market.

Reference

Foley, Thomas W. (1995). United States Gypsum: a company history, 1902-1994. Chicago: USG Corporation. p. 218. OCLC 33139629.

Hamma, Matt (2007). Disturbances at the mills: the 1921 gypsum workers' strike. The University of Iowa. p. 90. OCLC 159940606 Houk, Randy (11 January 2011). HYPERLINK "http://www.sdrm.org/roster/freight/hopprusg/" "U.S. Gypsum Company-Hopper Car". San Diego Railway Museum. Retrieved 2011-05-12.

Smythe, Christie; Harris, Andrew (December 17, 2012). "USG Accused in Lawsuit of Fixing Drywall Prices". Bloomberg L.P. Retrieved January 18, 2013.