Chapter 2   Literature Review

　　At present, small and medium sized iron and steel enterprises in China are faced up with harsh situations. Many problems exit, such as cost inflation, bad financing, Outmoded technology, strict national policies and serious overstock. Many domestic and foreign researchers have been paying attention to these problems.

　Steel industry has had problems of overstock in recent years, Bain(1959,) proposed the concept of excessive competition, Competition is "in part the presence of low concentration of persistent oversupply or excess production capacity and cost performance ratio. He believed that slow adjustment of supply and demand was the root causes of excessive competition in the continued production capacity. New plants could access easily but they couldn’t survive easily.