SOPHIE WANGAKASH MATHRANBERRE SIMONSE

DIVYA YADAVRAFAEL ALVAREZ

Lakshmi Mittal and the Growth of Mittal Steel

Content

Summery of the caseAnswers to questions Current events involving Mittal Steel

Summery of the case

1970 - Limited growth opportunities India1975 - New plant in Indonesia1989 - Take-over supplier by Mittal steelGlobal steel industry in a slump Purchase inefficiently run steel companies1992/1994 - Acquired steel companies in Mexico &

Canada1997 - German steel takeover with new capital from

IPO2007 - Approved controversial merger between

European giant Arcelor & Mittal steel. Making ArcelorMittal the largest steel company of the world.

Question 1

What forces drove Mittal Steel to start expanding across national borders?

Limited growth opportunities in India - government regulation - competition (SAIL, Tata Steel)Opportunities in foreign counties - new method to reduce cost - steel industry was about to turn a corner

Question 2

Mittal Steel expanded into different nations through mergers and acquisitions, as opposed to greenfield investments. Why?

Economy was in a slump - Weak companies are cheaper to buyNot having to recruit new skilled employees Time is money

Question 3

What benefits does Mittal Steel brings to the countries that it enters? Are there any drawbacks to a nation when Mittal invests there?

Benefits - New machinery - Job opportunities - Supply of steelDrawbacks - Taking money out of the country - Competition for domestic suppliers - Pollution

Question 4

What are the benefits to Mittal Steel from entering different nations?

Global companyHigh risk and high hope - Prices to rise in the futurePrice setter - Monopoly powerBuying companies cheaper than starting new

ones

Question 5

The acquisition of Arcelor was very acrimonious, with many politicians objecting to it. Why do you think they objected? Were their objections reasonable?

Objections - Nationalistic behavior (not reasonable) - Monopoly power (reasonable)

So what happened after the case?

Lakshimi Narayan Mittal6th richest person in the worldIn top 100 most influential people in the

world10% production of steel in the worldChairman and CEO 40% of shares

ArcelorMittal

Steel bubble in 2007-2008

Current events for ArcelorMittal

June 2010 – European Commission fined 17 steel producers for running a price-fixing cartel.

January 2011 – Board voted to split off the stainless steel division into a new company “Aperam’’

ArcelorMittal’s future

Looks goodExpanding production in Canada doubling

production in QuebecResearch and Development 2-year plan