Global Impact of Indian Management:

A story of Mittal Steel

SABYASACHI G. DASTIDAR and SHUBHAM MAHESHWARI
Department of Mechanical Engineering, Malaviya National Institute of Technology, Jaipur.

Abstract:
In the recent decades, a large number of Indias leading corporate houses have expanded
internationally and have made their presence felt in the global market. They have been
consistently growing and have proved their mettle in a tough and competitive marketplace. A
company that emerged as the leader in the steel industry globally was Mittal Steel. A very young
company, Mittal Steel was formed in 2004 after a $4.5bn takeover of International Steel Group
of the US, and a merger of Mittals existing assets LNM and Ispat International. This company
has proved its dominance in the global market by merging with Arcelor in 2006 to become the
leading steel manufacturing company in the world, ArcelorMittal thus making it an ideal
example for the other emerging Indian companies by becoming the first truly global steel
company.
Keywords:
Mittal Steel, ArcelorMittal, Globalisation, Merger, Indian management, LN Mittal
Research Objective:
Mittal Steel has set the pace for the consolidation and globalisation of the world steel industry.
They have taken on a range of acquisitions, many of them formerly public sector-owned
companies, and transformed them into successful projects. In the process they have spread best
practice and modern production techniques throughout their plants. Their capital investment
programme is unmatched in the industry. So there was a need of detailed study on the policies
and strategy of the company which has resulted into its unmatchable success today.

Address for correspondence:

SABYASACHI G. DASTIDAR
52-A, Pocket A, Mayur Vihar phase-II.
New Delhi 110091, India.
E-mail: sgdmnit@gmail.com
SHUBHAM MAHESHWARI
B-27, Path No.5, Jamna Nagar, Ajmer Road, Sodala.
Jaipur-302006, Rajasthan, India.
E-mail: maheshwarishubh.2007@gmail.com

INTRODUCTION:
The aim of the study is to do an analysis of the growth strategy of Mittal Steel, which is one of
the most diversified steel companies in the world in terms of asset location and market presence
across all regions. As such, Mittal is not overly dependent on any single region, product, or end
market. In this work, attempts have been made to understand how a man who had his roots from
a small village in Rajasthan, India planned his mind and made his short and long term goals,
resulting in the formation of a globally successful empire which is in front of everyone.
On January 27, 2006, Mittal Steel unveiled an unsolicited $22.7 billion bid for Luxembourg
based Arcelor. This step was the benchmark for Mittal steel. Through this step they impacted the
management globally and thus proved that Indian Entrepreneurs are the best in world. This is the
motive behind the study of Mittal steel in the reference to the subject GLOBAL IMPACT OF
INDIAN MANAGMENT.

COMPANY PROFILE:
Mittal Steel Company was one of the worlds largest steel producers by volume, and also the
largest in turnover. The company merged with Arcelor on 25 June 2006 to form a new company
ArcelorMittal which is now the worlds leading steel company, operating in more than 60
countries.
CEO of Mittal Steel, Lakshmi Mittal's family owned 88% of the company. Mittal Steel was
based in Rotterdam but, managed from London by Mittal and his son Aditya Mittal. It was
formed when Ispat International acquired LNM Holdings (both were already controlled by
Lakshmi Mittal) and merged with International Steel Group Inc. (the remnants of Bethlehem
Steel, Republic Steel and LTV Steel) in 2004. The merger with Arcelor in 2006 has been
successfully approved by shareholders and directors of Arcelor making L.N. Mittal the largest
steel maker in the world.
All the major global steel markets are spearheaded by ArcelorMittal, including automotive,
construction, household appliances and packaging, with leading R&D and technology, as well as
sizeable captive supplies of raw materials and outstanding distribution networks which cover all
the key steel markets present in over 20 countries spanning four continents.
Through its core values of Sustainability, Quality and Leadership, ArcelorMittal commits to
operating in a responsible way with respect to the health, safety and wellbeing of its employees,
contractors and the communities in which it operates. It is also committed to the sustainable
management of the environment and of finite resources.
Page 2 of 16

During the year ended December 31, 2010, ArcelorMittal had steel shipments of approximately
85 million tonnes and crude steel production of approximately 90.6 million tonnes, earning
revenues of $78 billion, representing approximately 8 percent of world steel output.
ArcelorMittal is also listed on the stock exchanges of New York (MT), Amsterdam (MT), Paris
(MT), Brussels (MT), Luxembourg (MT) and on the Spanish stock exchanges of Barcelona,
Bilbao, Madrid and Valencia (MTS).
ArcelorMittal produces a range of finished and semi-finished products. ArcelorMittal produces
flat products, including sheet and plate, long products, including bars, rods and structural shapes,
and stainless steel products. The Company operates in five segments: Flat Carbon Americas; Flat
Carbon Europe; Long Carbon Americas and Europe; Asia, Africa and Commonwealth of
Independent States (CIS) (AACIS), and Distribution Solutions. On February 18, 2011
ArcelorMittal and Nunavut Iron Acquisition Inc. announced they had taken up over 93% of the
Baffinland Iron Mines Corporation (Baffinland) under their joint offer. On January 25, 2011,
ArcelorMittal approved the spin-off of ArcelorMittal's stainless and specialty steels business into
Aperam.

EVOLUTION OF MITTAL STEEL:

The history of the Mittal Group can be traced back to the 1950s when Mohan Mittal, the father
of L.N. Mittal, the head of Mittal Steel laid the foundation of Ispat Group in India. In 1976, L.N
Mittal moved to Indonesia and acquired a steel plant Ispat Indo. Adopting innovative practices
and cutting edge technology, the Mittals managed to bring a turnaround at Iscott, a loss-making
government owned steel firm in Trinidad and Tobago, and within a year. This set the stage for
further expansions.
The Mittal Steel group was formed when two sister companies in the Mittal family, LNM
Holdings and ISPAT International, were merged to form Mittal Steel in 2004. Mittal Steels
growth was founded on a consistent philosophy: that to be able to deliver the range and quality
of products customers demand the modern steel maker must have the scale and worldwide
presence to do so competitively.
The growth of Mittal Steel in the last two decades can be categorized as:

1989: Acquisition of Iron and Steel Company of Trinidad and Tobago

1992: Acquisition of Sibalsa
1994: Acquisition of Sidbec-Dosco
1995: Acquisition of Hamburger Stahlwerke

Page 3 of 16

Ispat International Ltd. And Ispat Shipping formed

Acquisition of Karmet.
1997: Ispat International NV goes public
1998: Acquisition of Inland Steel Company
1999: Acquisition of Unimetal
2001: Acquisition of ALFASID
Acquisition of Sidex
2002: Business assistance agreement signed with Iscor
2003: Acquisition of Nova Hut
2004: Acquisition of Polski Huty Stali
Acquisition of BH steel
Acquisition of Macedonian facilities from Balkan Steel
Creation of Mittal Steel and proposed acquisition of International Steel
2005: Acquisition of a stake in Hunan Valin
ISG Acquisition completed
Mittal Steel Europe created
Mittal Steel makes Fortune 500 list of top companies
MDA with Liberian government
Acquisition of Kryvorizhstal
MoU with State of Jharkhand, India
Acquisition of Stelco subsidiaries
Stake lifted in Mittal Steel Zenica
2006: January: Historic moment for Global Steel Industry (Mittal Steel bids for Arcelor)
February: Expansion and strong results
April: Renewal after Hurricane Katrina and new galvanized line
May: US clears the way for bid
June: Historic agreement to create the No.1 Global Steel Company

FINANCIAL STATEMENT:
Income statement after its merger with Arcelor (US $ in millions)
DECEMBER 31st

Sales
Cost of sales
Gross margin
Selling, general and administrative
Operating income (loss)
Other income, net
Page 4 of 16

2010
78,025
(71,084)
6,941
(3,336)
3,605

2009
65,110
(62,913)
2,197
(3,875)
(1,678)

2008
124,936
(106,110)
18,826
(6,590)
12,236

2007
105,216
(84,953)
20,263
(5,433)
14,830

2006
58,870
(48,411)
10,459
(2,960)
7,499
49

Income from investments in associates

and joint ventures
Interest expense
Interest income
Fair value adjustment on Convertible
Bonds and call options on Arcelor
Mittal shares
Net gain (loss) on other derivative
instruments
Net foreign exchange result and others
Financing costs, net
Income (loss) before taxes
Income tax (expense) benefit
Net
income from continuing
operations
(including
noncontrolling interests)
Discontinued operations, net of tax
Net
income
(including
noncontrolling interests)
Net income attributable to noncontrolling interests
Net income attributable to equity
holders of the parent

451

58

1,653

985

301

(1,578)
133

(1,696)
190

(2,516)
497

(1,839)
577

(1,124)
251

427

(897)

43

(28)

(177)

423

(11)

(1,225)
(2,200)

(386)
(2,817)

(156)
(2,352)

(88)
(927)

230
(654)

1,856
1,479

(4,437)
4,512

11,537
(1,098)

14,888
(3,038)

7,195
(1,109)

3,335

75

10,439

11,850

6,086

(330)

3,005

75

10,439

11,850

6,086

(89)

43

(1,040)

(1,482)

(860)

2,916

118

9,399

10,368

5,226

(Source: www.arcelormittal.com)

Brief of the income statement:The income statement presents information on the financial results of a company's business
activities over a time period. It communicates how much revenue the company generated during
a period and what cost it incurred in connection with generating that revenue.
Following points were noticed in ArcelorMittals Income statement:

ArcelorMittal's sales and operating income declined sharply from 2008 to 2009 but then
slightly increased from 2009 to 2010.
ArcelorMittal's net income from continuing operations (including non-controlling interests)
declined sharply from 2008 to 2009 but then slightly increased from 2009 to 2010.
ArcelorMittal's net income attributable to equity holders of the parent declined sharply from
2008 to 2009 but then slightly increased from 2009 to 2010.

Page 5 of 16

Statement of Financial Position, Liabilities, & Stockholder Equity

DECEMBER 31st

Short-term debt and current portion

of long-term debt
Trade accounts payable and other
Short-term provisions
Accrued payroll and employee related
expenses
Other payables
Other creditors
Revaluation of derivative instruments
Other amounts due to public
authorities
Unearned revenue and accrued
payables
Accrued expenses and other liabilities
Income tax liabilities
Liabilities held for sale and
distribution
Current liabilities
Long-term debt, net of current portion
Deferred tax liabilities
Deferred employee benefits
Long-term provisions
Other long-term obligations
Non-current liabilities
Total liabilities
Common shares, no par value
Treasury shares, at cost
Additional paid-in capital

2010

2009

2008

2007

2006

6,716

4,135

8,409

8,542

4,922

13,256
1,343

10,676
1,433

10,501
3,292

13,991
1,144

10,717
569

1,933

1,949

1,949

2,008

2,238

2,090
1,526
402

1,810
1,349
905

1,942
1,320
1,094

1,703
1,535
549

284
3,038
501

828

731

791

909

893

121

217

317

571

625

6,900
471

6,961
314

7,413
775

7,275
991

7,579
534

2,037

11

370

266

239

30,723
19,292
4,006
7,180
1,738
1,865
34,081
64,804
9,950
(427)

23,530
20,677
5,144
7,583
2,121
3,244
38,769
62,299
9,950
(2,823)

30,760
25,667
6,395
7,111
2,343
1,582
43,098
73,858
9,269
(5,800)

32,209
22,085
7,927
6,244
2,456
1,169
39,881
72,090
9,269
(1,552)

24,560
21,645
7,274
5,285
1,880
1,331
37,415
61,975

(84)

20,198

20,808

20,575

20,309

25,566

29,738
3,372

30,403
751

23,552
5,107

14,974
1,654

61,045

55,198

56,685

42,127

4,353
65,398
127,697

4,032
59,230
133,088

4,850
61,535
133,625

8,064
50,191
112,166

Retained earnings
31,647
Reserves
1,062
Equity attributable to the equity
62,430
holders of the parent
Non-controlling interests
3,670
Total equity
66,100
Total liabilities and equity
130,904
(Source: www.arcelormittal.com)
Page 6 of 16

A Brief of the financial position, liabilities and stockholders equity statement:The statement of financial position provides creditors, investors, and analysts with information
on company's resources (assets) and its sources of capital (its equity and liabilities). It normally
also provides information about the future earnings capacity of a company's assets as well as an
indication of cash flows that may come from receivables and inventories.
Liabilities represent obligations of a company arising from past events, the settlement of which is
expected to result in an outflow of economic benefits from the entity. Following points were
noticed in case of ArcelorMittals :

ArcelorMittal's trade accounts payable and other increased from 2008 to 2009 and from 2009
to 2010.
ArcelorMittal's current liabilities and total liabilities declined from 2008 to 2009 but then
increased from 2009 to 2010 not reaching 2008 level.
ArcelorMittal's total equity increased remarkably from 2008 to 2009 and slightly from 2009
to 2010.

(Source: www.arcelormittal.com)

The above graph shows the steep rise in the total sales and the net income after the merger but at
the same time, a slowdown has been observed in the percentage of profit margin but the margin
has increased significantly.

Page 7 of 16

PRODUCTS and SERVICES:

ArcelorMittal is the only producer offering the full range of steel products and services. From
commodity steel to value-added products, from long products to flat, from standard to specialty
products, from carbon steel to stainless steel and alloys, ArcelorMittal offers a complete
spectrum of steel products - and supports it with continuous investment in process and product
research. Its products are:

Automotive Products:
It serves automotive manufacturers, sub-contractors and equipment suppliers. ArcelorMittal
has a recognized global technological edge in galvanized steels for exposed parts and coated
steels for hot stamping.

Mining:
ArcelorMittal is focusing on its mining activities, in accordance with its integrated business
model. This is part of a strategy to actively develop the raw material base, thereby raising
the level of iron ore self-sufficiency to 75%.

Tubular Products:
The Tubular Products Division of ArcelorMittal is one of the world's largest and most
diversified producers of pipe and tube products, servicing markets around the world from 24
different operating locations in 13 countries.

Distribution Solutions:
It handles processing, finishing and distribution of steel mainly made by the ArcelorMittal
Group and serves customers from a variety of other industries.

Shared Service Centres:

The Shared Service Centres (or more specifically Finance or Accounting Shared Service
Centres) are a network of entities worldwide, which operations are to provide financial
services for its controlled companies, at a support 'shared service' platform.

Flat Steel:
-Hot Rolled
-Cold Rolled
-Electrical Steel

Other Activities:
ArcelorMittal Logistics offers quality door-to-door services throughout the entire logistic
chain. Its continuously expanding network is already present in three continents.
-Real Estate France
-Circuit Foil
-Industeel

Page 8 of 16

R&D:
The important technologies proprietary/patented technologies used by ArcelorMittal:
-Method for coating a substrate, Equipment for implementing said method and metal supply
device for such equipment.
(European Patent EP 2 111 477 2009)
-Rolling mill with cooling device and rolling process.
(European Patent EP 2 164 651 2010)
-Low density steel with good stamping capability.
(European Patent EP 2 155 916 2010)
-Method for rolling metal strip with adjustment of the side position of the strip and adapted
rolling mill.
(European Patent EP 2 167 2010)
-Steel plate for producing light structures and method for producing said plate.
(European Patent EP 2 064 360 2009)
-Process for manufacturing cold rolled and annealed steel sheets with very high strength and
sheets thus produced.
(European Patent EP 2 155 915 2010)
-Method for coating a substrate and metal alloy vacuum deposition facility.
(European Patent EP 2 129 810 2009 )

OPERATIONAL STRATEGY OF MITTAL STEEL:

Mittal Steel is among the most efficient steel producers in the world. They encompass all aspects
of modern steelmaking, combining both integrated and mini-mill facilities and producing much
of the iron ore and coking coal used in their furnaces. They are also among the most advanced
steel makers, operating a range of modern technologies. They have pioneered the use of direct
reduced iron (DRI) as a raw material source and are now the worlds biggest producer of DRI.
With two technical research facilities, their product development teams are ready to meet the
needs of the most demanding customers.
Mittal steels strategy formulation begins with an analysis of the forces that shape competition in
the industry in which a company is based. The factors creating very high entry barrier for new
entrants are:

Page 9 of 16

Huge capital investment:

Huge capital investment is required for establishing steel manufacturing facility and Mittal steel
has been making investments in many parts of the world in the last few decades, including
Indonesia, Trinidad and Tobago, Kazakhstan, Poland, Czech Republic, Romania and Canada to
name a few.
Economies of scale:
In case of steel industry economies of scale is achieved at very large scale. Due to its large size
Mittal steel enjoys high magnitude of economies of scale. It has ownership on factories in many
countries (by acquisition) and thus, it has the advantage of using the technology and knowledge
knowhow across the borders. So it becomes very difficult for new entrants to enter into the
market and compete with an already established large company.
Absolute cost advantage:
Established companies such as Mittal Steel has absolute cost advantage over new entrants
because of its:
-Superior production operations and processes because of accumulated experience, patents and
secret processes.
-By vertical backward integration Mittal steel acquired coal and iron mines. It gave lower cost
for input materials.
-Going for low labor cost regions allowed Mittal Steel to have more cost advantage which is
very difficult for a new entrant.
Customer switching cost:
Steel is a product for which buyer industries have to establish very well structured
transportation facility with the producers. It becomes difficult for a buyer to establish a new
transportation channel when it wants to switch the seller.
Government regulation:
In some countries Mittal Steel enjoyed very low tax rate or zero tax for few initial years after it
bought the loss making government units.
All these factors conclude that the entry barrier plays an important role in strategizing i.e.,
Entry by potential competitors is enormous.
Mittal Steel also survived stiff rivalry among established competitors like Nippon Steel, JFE
Japan, Posco, US Steel, Corus, etc.
By acquiring large number of steel companies Mittal steel became behemoth and gained the
more control on price. Because of this, the management of large number of steel companies
which were in government hands found it difficult to compete with Mittal steel. Since Mittal was
ready to acquire the sick government units it gave an easy exit barrier to these industries and
weakened the competition. Other big players were present in the market, but Mittal Steel
Page 10 of 16

concentrated on its low price strategy (mostly in Asia and Africa) while many of its competitors
competed for higher quality (mostly in Europe) and better distribution channel.
Since coal and iron mines are large in size and few in number and controlled by large players,
their bargaining power can significantly affect the steel industry business.
But Mittal Steel adopted the strategy of backward vertical integration. Before acquiring any
industries, they first ensured the iron ore and coal supply from mines. Mittal Steel buys a large
chunk of supply from its suppliers and retains the bargaining power to itself.
Opportunities arise when a company can take advantage of conditions in its environment to
formulate and implement strategy that enable it to become more profitable. Some opportunities
for Mittal steel were:

After its merger with Arcelor it could use its low cost technology in the countries of Europe
and South America where Arcelor was operating.
After its merger with Arcelor it could use Arcelors good distribution channel and high
quality product technology in Asia, Africa and North America.
Many new emerging markets are following policy of globalization, privatization and
liberalization. These countries are primarily focusing on infrastructure development. These
will lead to significant growth in the steel demand.
In many developing countries resources and raw material are available in good amount
which can be exploited for further growth.
Cheap labor in developing countries can give absolute cost advantage to Mittal Steel.

Threats arise when conditions in the external environment endangers the integrity and
profitability of the company business. Threats for Mittal Steel were:

Anti globalization protest in many countries. Mittal Steel, which had headquarters in
Rotterdam, had met ferocious opposition in France and Luxembourg, where Arcelor was
based and was the biggest private employer of some 5,900 people.
Before the merger of Arcelor and Mittal steel, the Arcelor management was extremely
hostile to Mittal Steels bid. The French Government and the government of Luxembourg
were against the deal.
Recession and falling demand in developing countries.
Unstable political condition in many developing countries.

Core business strategy:

Mittal Steel acts as a consolidator in the global steel industry, focusing on growth through
acquisitions, and has a successful acquisition and integration track record.
Page 11 of 16

Operationally, Mittal Steel has a highly diversified asset base, with plants of different types,
including both integrated and minimills. Mittal Steels base capital-expenditure requirements are
lower compared with those of peers, because of its lower cost base in emerging markets (for
example, Romania and Kazakhstan), where comparable types of work can be performed at a
lower cost. Mittal Steel also invested in new projects to strengthen its upstream integration.
The considerations before Mittal Steels acquisition of Arcelor:When Mittal Steel considers an acquisition, it seeks not only low-cost inputs and an expanding
market, but also inexpensive labor. But it will bend its criteria if an opportunity looks promising
enough. Its Algerian plant, for example, had no obvious source of iron ore. When Mittal staffers
discovered that the country had ore deposits, the company secured a license to open a mine.
Similarly, its purchase of International Steel Group did not seem to fit its requirement for lowcost labor; US wages are among the highest in the world.
Acquisitions introduce risks, but the group has a good track record of turning around
underperforming steel acquisitions, particularly in less-developing countries, through LNM
Holdings, which implemented this strategy since 1995.
The advantages of Mittals strategy of expanding into emerging markets include low cost bases
for steel production and capital construction. In most cases, assets the group acquired in
emerging markets like Romania or Kazakhstan were low priced, and the plants enjoyed sizable,
albeit temporary, tax breaks.
The key risks of Mittals emerging-market expansion strategy include exposure to those
countries weak legal and regulatory systems, as well as the integration of new assets into the
group structure (for example, establishing appropriate control procedures, achieving operational
synergies, and turning around former state-owned and often inefficient plants). But Mittal has a
track record of successfully integrating and restructuring previously underperforming stateowned assets. Vast geographical diversification also mitigates risk in each particular emerging
market, as the group is no longer markedly dependent on any single asset or market.
In the medium to long term, the main issue for the group is its success in integrating recently
acquired assets and maintaining long-term, stable relationships with the governments of host
countries.
But the main reason for merging Mittals operations with Arcelor was that there were more
synergies expected on the sales side, that were not quantified yet.
More than immediate synergies, Mittal perhaps wanted to merge because he, as had others in the
steel business, had sensed the underlying consolidation phase of the industry and did not want to
lose the position of control he enjoyed as the biggest steel manufacturer. By merging with the
Page 12 of 16

second biggest he was ensuring that the new second biggest will be less than a third of the size of
the new biggest (Arcelor, Mittal combine).
Bid for Arcelor:
Mittal Steel & Arcelor complemented each other in terms of geographical coverage and product
mix, as there is no significant overlap. Mittal Steel had strong positions in the U.S. markets; lowcost operations in Central and Eastern Europe, Asia and Africa; and vertical raw-material
integration whereas, Arcelor was the leader in higher value-added products in Western Europe,
low-cost slab manufacturing in Brazil, and had a successful distribution system.
Arcelor was the world's largest steel producer in terms of turnover and the second largest in
terms of steel output, with a turnover of 30.2 billion and shipments of 45 million metric tons of
steel in 2004. The company was created by a merger of the former companies Aceralia (Spain),
Usinor (France) and Arbed (Luxembourg) in 2002. Employing 310,000 employees in over 60
countries, it was a major player in all its main markets: automotive, construction, metal
processing, primary transformation, household appliances, and packaging, as well as general
industry. With total sales of over 30 billion, Arcelor was the world's largest steel manufacturer
in terms of turnover. It produced long steel products, flat steel products and inox-steel. In
January 2006 Arcelor announced the acquisition of Dofasco, Canada's largest steel producer with
an annual output of 4.4 million tons. After an intense bidding war against the German
ThyssenKrupp, Arcelor had finally bid 5.6 billion Canadian dollars. The high bid proved the
importance of Arcelor's improving presence in the North American market.
On January 27, 2006, Mittal Steel unveiled an unsolicited $22.7 billion bid for Luxembourg
based Arcelor. This step was the benchmark for Mittal steel.
As the largest player in the steel industry - globally and in the key markets - the combined group
enjoys significant bargaining power. The merger was expected to yield synergies in the
procurement, marketing, and optimization of production processes and capital expenditures.
On 25th June 2006 the deal finally clinched when the shareholders of Arcelor agreed to Mittal
Steels offer. The bid significantly increased Mittals leverage. Mittal had to considerably elevate
the initial offer by raising its valuation of Arcelor to $32.9 billion. The Mittal family holds 43
percent of the combined group. The combined company holds 10 percent of the global market
for steel.
The Mittal group has a complex structure and has only majority control, but not full control, over
some of its cash-generative and cash-rich subsidiaries. For example, Mittal owns 51% of the
South African plant, 70% of the Algerian plants (30% is state-owned), and 76% of the Czech
Page 13 of 16

plant. This constraints cash flow circulation within the group and may lead to significant
spending to buy out minority interests (although no such requirements are currently effective).
Consequences of the merger on Mittal steel:According to the research, it was observed that the deal has been in favor of both the companies.
This can be suggested by the following observations about the deal

Increase in revenue of the company from $28.123 billion to $105.2 billion and operating
income from $4.746 billion to $14.83 billion

Venture into new businesses and market like Luxembourg, Senegal, Liberia and looking to
develop positions in the high-growth Chinese and Indian markets

Profit of the company has risen from $3.36 billion to $10.36 billion

Decreased competition and increased market share

Enlarged brand portfolio

Increase in economies of scale and share value

But it also has a negative aspect to it which was the high monetary cost of the target company
(Arcelor) which is $32.9 billion.
As the pros of the deal completely outweigh the cons involved, it is finally concluded that the
deal has been a successful one for both the companies, its people and the world.
AMERICA

EUROPE

RoW

TOTAL

6.6
12.5

9.9
7.7

7.6
9.8

24.1
30.0

4.4
6.5

23.4
23.2

2.4
2.9

30.2
32.6

19.0

30.9

12.7

ARCELOR
2004
2005

MITTAL STEEL
2004
2005

ARCELOR MITTAL
2005

(Source: www.arcelormittal.com)

62.6
(All figures in $ Billion)

The Table shows that the merger made the new entity the biggest player in Americas.

Page 14 of 16

HIGHLIGHTS OF ITS OPERATION:

The groups vertical integration in mining and low cost position in emerging market
operations support profitability through the cycle and help reduce capital-expenditure needs.

These factors are tempered by the groups ambitious plans to grow through acquisitions;
Institutional risks associated with emerging markets; and uncertainties regarding the
integration of newly acquired assets, although Mittals integration record has been
successful to date.

The companys overall low cost position is buttressed by vertical integration and low wage
costs in its Kazakhstan, Romania, Poland, Algeria, and South African locations. The
acquisition of U.S.-based International Steel Group Inc. (ISG) in early 2005 moved the
group into a high cost-base market, but bettered geographical market diversification.
Moreover, Mittals cost advantages are expected to strengthen further since acquiring Mittal
Steel Kryvly Rih in late 2005.

In cyclical businesses, such as steel, volatile margins depend on changes in raw-material and
finished-product prices. Compared with peers, Mittal has higher exposure to spot markets.
Most of the shipments outside North America are spot sales. Although a significant part of
sales in North America are under long-term contracts, most of these contracts are annual and
carry surcharge provisions, and there is significant exposure to automotive customers.

Upstream integration into iron ore and coking coal provides Mittal with a competitive
advantage throughout the cycle.

As one of the largest players in any of its markets, Mittal has major negotiating power.

Mittal takes advantage of its diversified asset base to achieve operating synergies.

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CONCLUSION:
If we look at the merged entitys operations from L N Mittals past operations, the most striking
thing, it seemed, was his willingness to concede more than 50% ownership to others. Mittal had
all through ensured that he retained a very clear majority as much as could be had while still
keeping the company publicly listed.
The company offers its products to a wide range of customers across all steel-consuming
industries, which include the automotive, appliance, engineering, construction, energy and
machinery industries thus covering the market all over the world which in turn is reflected in the
success of the company.
The company has reached at this landmark due to the hard work of its workers and the
management board; outstanding vision, convincing, motivating and guiding nature of Mr. L N
Mittal. He is a transactional leader who guides his followers in the direction of established goals
by clarifying role and task requirements. His success has largely been built on buying up loss
making steel owned mills and quickly turning them around.
Mittal steel started the trend of merger all around the world and thus, is the perfect example of
Global Impact of Indian Management.

REFERENCES:
Becker.Gary (June 2007) Economic Theory
Schaan.Jean-Louis, Chandrasekhar .Ramasastry (Feb 19, 2010) ArcelorMittal case
study
www.arcelormittal.com
www.stock-analysis-on.net
www.4-traders.com
www.highbeam.com
Singh.Sachidanand (March 2008) Birth of ArcelorMittal & After
Sukhasare.Vishwanath (April 2010) Arcelor-Mittal Merger Report
ArcelorMittal Annual Report 2009 Management Report

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