Within the integrated group of steelmakers, the use of steel service centers to enhance distribution efficiency is used effectively to differentiate their products within the context of service. The general steelmakers depend more on product mix to differentiate themselves from competitors (Katz, 1994a, p. 604).

With respect to the American steel industry, both the integrated and general groups, formidable cost barriers to entry exist with respect to economies of scale production facilities and specialized equipment. Product differentiation costs are not significant as barriers to entry into the American steel market. Environmental protection regulations imposed by government create costs for steelmakers that act as legal barriers to entry into the American steel in

From the mid-1970s through the mid-1980s, corporations began to rely more heavily on externally generated capital. In 1975, as an example, internal sources provided approximately 70 percent of the total capital raised by American corporations, while, by 1982, this proportion had declined to approximately 57.5 percent.

Taggart, P. W., Alexander, R., and Arnold, R. M. Taking Your Company Public. New York: American Management Association, 1991.

A firm participating in the American steel production industry would find it unreasonably costly to exit the industry. On the one hand, prohibitive costs would preclude the relocation of facilities to another market where they might be used profitably by the firm. On the other hand, technological innovation causes steel production facilities to lose value at a significant rate, as they age, causing it to be somewhat unlikely that production facilities could be sold without incurring a significant loss. The steel production industry in the United States, therefore, is not a contestable market because of the high barriers to exit that characterize the industry (Stundza, 1993b, p. B17).

(2) Return on total capital: -1.8 percent.