Rebar was the lowest quality of steel.
It was the worst,
the simplest form of steel that customers needed for construction.
And it was also the smallest percent of the market.
It was only 4% of the entire market of steel produced and demanded.
So, the rest of the market was 96% and
it had the lowest profit margins for the existing, or traditional, steel companies.
In other words, they made the lowest percentage on this type of steel.
So, it was the smallest market and the least profitable.
It was the worst market for them.
So when the mini mill technology came out and
was only able to produce rebar, what the existing or
traditional companies, or the incumbents did, was actually celebrate.
Wow, we can get rid of this part of the market and use that
percentage of our production to make higher quality and more profitable steel.
We have limited resources, we can't make everything for everybody.
Rebar is not making us much money at all.
Let somebody else make it and we'll be happy.
Somebody has to make it because rebar is demanded for
the construction process, but let somebody else do it.
And so that's why at the top of this slide,
it says there were asymmetric motivations.
And that's what's going on when disruption occurs.
There's a difference in motivations, that's all asymmetric means.
One company has one type of motivation and the other company or
other set of companies has another sets of motivations.
Mini mills, what their motivation was to break into the market, which for
them at the time, was zero.
They had 0% of the market.
If they could gain access to the rebar market,
rebar would be 100% of their market, right, whereas it would only be 4% or
only was 4% of the traditional company's market.
And the other difference in motivation between the two sets of companies,
the mini mills and the traditional, is the profit margin.
It's not shown here on this slide, but all along this line, the traditional companies
had about half of the profit margins that the mini mills did.
So, for example, at the point where it says 7%, the mini mills,
and this is now in the late 1970s, had a 7% profit margin
on the rebar market, which was a 100% of their market.
And the traditional companies only made 3.5% profit margins on rebar made.
And it was only 4% of their total market share.
So, again, they had differing motivations.
The mini mills had double the motivation from a profit margin
perspective to make rebar work, and so they did.
And they eventually, by the late 1970's, early 1980's,
overtook completely, the traditional companies.
They moved up the green line on our previous slide.
