International business

Lakshmi mittal and the growth of mittal steel

Class / Group : Ax / 2 Lecturer Group Members : : PROF NIZAM JIM WIRYAWAN Ph.D Anton.T Stefanus.H.B Irvin Carlo Andry Ivan Adhi Tjahyadi Denny Rionardi Denny Michael.S Stefan.D Andrew.D 115090011 115090009 115090074 115080217 115090032 115090050 115090365 115090441 115090124 115090088 115090246 115080074 DEPARTMENT OF MANAGEMENT FACULTY OF ECONOMY TARUMANAGARA UNIVERSITY 2012

This makes some people. then purchasing a midsized German steel maker and Kazaksthan’s largest steel company. but it doesn’t matter. Nevertheless. since many of Acelor’s managers thought handing over a European company to an Indian company was a joke. . Over the next few years. the demand of steel will rise again. Mittal company offer a staggering amount of $32 million to acquire Acelor. His predictions were based by china. india and several other countries that were developing their industrialization sector. Mittal Steel company has stated itself as the largest steel company in the world. Lakshmi made his next move in 1990s. Then he bought the fourth-largest Canadian steel maker from the government. France and Spain. so that they could enter the capital market with full liquidity system. Mittal stand still on his belief that in near future. They set up a steel – making plant from scratch in Indonesia in 1975.2 million. We must track back to mid 70’s. Lakshmi’s obsession of growth has led the company into constrained capital situation. his steps didn’t stop there. through FDI (Foreign Direct Investment). The negotiations didn’t go well at first. receiving $776 million through New York and Amsterdam stock exchanges. with $110 million sales and net income of $10. Mittal steel company bought some more steel makers all over the world. he acquired Sibalsa of Mexico (owned previously by state). Eventhough the global steel industry had been in a slump due to excess capacity for the last 25 years. he managed to enter the stock market. Lakshmi Mittal also did some interesting tactics that leads him to acquire Trinidad steel firm which used to be their supplier for iron pellets. Because at 2007.CASE 2 Lakshmi mittal and the growth of mittal steel Case summary : The Mittal steel company. Furthermore. These steps took more than 30 years to complete. Mittal company’s headquarter was also moved to rotterdam. one of the most successful steel company in India in early 70’s. a year that prove that the global demand ofsteel boomed once more time. Because of their spectacular earnings. However. At this stage. The Mittals thought of an opportunity to expand their business. who haven’t even heard about how could they managed to grow only from a local company to enormous world’s scale company. At first. has became the world largest steel company in 2007. And Lakshmi’s predictions became true in 2005. a time when Mittal corp has been through various type of tough situations such as limitations for their growth in india (because of governmental regulations) and also two competitors which are SAIL (state owned) and Tata Steel ( private national champion ). a European firm that formed from the mergers from the steel makers from Luxembourg. and agreed to sign the deal. Acelor’s shareholders saw value of the deal.

2. higher market power and higher competitive advantage among other company.Helps the countries to develop their economics growth. . because the consumer tend to buy cheaper goods. - . What benefits does mittal steel brings to the countries that it enters? Are there any drawbacks to a nations when mittal steel invest there? 4. with many politicians objecting to it. and help people in their host country to have a better living. Mittal steel was forced by 3 things.Helps the countries to increase their total exports and also reducing their imports. Other local steel company would probably suffer some loss. and also stimulating other investor to invest at those countries.Supplying capital.Competition that Mittal faced from both a state owned rival. which is tax paid by those who works at Mittal steel. Why do you think they objected? Were their objections reasonable? Case Discussion Answers: 1. which are : .Limited growth opportunities in India . This also means the country itself also gets a benefit. Mittal steel’s investment also brings a few minor drawbacks to the countries where they invested. 3. and large company like Mittal corp usually offers better price than the competitors. so that their balance –of-payment accounts and current account will be equal or even surplus. such as : . because mergers and acquisitions have lower risk than greenfield investment. Mittal steel expanded into different nations through mergers and acquisitions.Mittal steel provides jobs to the host countries. The acquisitions of arcelor was very acrimonious. for example: Some countries that sold their governmental company lost a littleof pride because people will get the sense that the government agent can’t run state company properly. Mittal steel’s FDI brings many benefits to countries it enters. These things are totally different in greenfields investment. These things boost the host countries’ economic growth rate . SAIL and Tata Steel. where the newly established company must start from the lowest point and gamble all their capital to win the market. . as opposed to Greenfield investments. What are the benefits to mittal steel from entering different nations? 5.Regulations which constrained (limited) expansion opportunities . Why? 3. The benefits are quick access to enter foreign market. technology and managenement resources that would not be available otherwise. and that decrease the government’s reputation among their citizens. What forces drove mittal steel to start expanding across national borders? 2.Case discussions question 1. Mittal company expanded through mergers and not with greenfield investments.

they would feel like they are losing to that country. The India’s government has no rights to stop the growth of Mittal steel’s company. However. since they opens their branch in other countries. . One thing that they can’t get in India. They object the acquistions because in their opinion. the acquisitions will affect their image negatively in front of the public.4.Lower labour rate in some countries . the liquidity of capital markets is limited. Emotional way of thinking isn’t eligible in economic world. so when a foreign asian company is buying their company. Mittal steel’s output has been massively grown since they open their factories all over the world. their objections aren’t reasonable at all. therefore the shareholders decide to follow their logical thoughts and decide to approve the negotiations. Europeans are tend to be proud of their own country / homeland and their own products. This helps them to provide the demand of steel when it boomed in 2005. And for politicians. . The acquisitions of arcelor was very hard. because in india. with many politicians objecting to it. Mittal Steel’s benefits from entering different nations are : . . 5.Posssibility to go public / enter the stock market with full liquidity. because the company can ship the orders from the nearest country from the customer.No limitation of growth an no constrained expansion opportunities.Higher productivity. Mittal Steel’s acquisitions offer so many benefits for the shareholders. they will lose their pride if a european company (and a large one too) is sold to an Indian company.Lower exporting cost. .

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