Evolutionary Analysis of Supply Chain Integration Strategy on Chinese Steel-Producing Firms considering Policy Risk Cost Factor

Abstract

Despite a number of adverse factors, China’s steel industry has maintained a rapid growth trend. China continues to consume two-thirds of the world’s iron ore, the majority of which is imported. In this context, Chinese steel companies have begun to consider integrating their supply chains to increase efficiency and lower costs. However, the increasingly volatile international environment makes this an extremely risky proposition. As a result, the issue of how Chinese steel producers should participate in global supply chain integration has emerged as a critical research question that requires investigation. In this paper, we examine the supply chain integration problem using a typical China–Australia steel trade as an example. Specifically, we discuss in detail whether relevant firms should continue to promote supply chain integration in the Chinese–Australian steel industry, as well as the decision boundary of influence, using evolutionary game theory and policy risk cost factors. The empirical analysis demonstrates that policy risk has a range of effects on different types of steel firms. Even when international tensions are considered, smaller steel companies may retain a greater willingness to integrate their supply chains. Overall, the above findings can provide necessary decision support for enterprises to formulate supply chain management strategies.