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ARCELORMITTAL

Presented By: Mohd Nizam Roll No. 5107902 Pondicherry University

Type

Subsidiary
Arbed in 1911 Aceralia in 1902 Usinor in 1948 Arcelor on 18 February 2002 Luxembourg City, Luxembourg

Founded

Headquarters Key people


Industry

Guy Dolle
Steel

Products
Revenue

Steel
32.611 billion (2005)

Employees

94,000

Arcelor S.A. 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.

Employing 310,000 employees in over 60 countries, it is 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 produces long steel products, flat steel products and inox-steel.

Type
Founded Headquarters Key people

Industry
Products

Revenue
Operating income Net income Employees

subsidiary of ArcelorMittal 1976 in Calcutta, India, 1989 as Ispat International in Sumatra, Indonesia Rotterdam, Netherlands Lakshmi Mittal, Founder, Chairman and CEO Steel Steel, Flat Steel products, Coated Steel, Tubes and Pipes $28.132 billion USD Year to 31 Dec 2005 $4.746 billion (2005) $3.365 billion (2005) 320,000 (2006)

Mittal Steel Company was formed by the merger of LNM holdings & ISPAT International International Steel Group Inc. CEO Lakshmi Mittals family owned 88% of the company and its headquarter was in Rotterdam, Netherlands The company was the worlds largest steel producer by volume and also the largest in turnover and is now a part of ArcelorMittal It was the major player in Steel, Flat Steel products, Coated Steel, Tubes and Pipes

Type Founded Headquarters Area served Key people Industry Products Revenue Operating income Profit Total assets Total equity Employees

Public 2006 Avenue de la Libert, Luxembourg, Luxembourg Worldwide Lakshmi Mittal (Chairman of the board and CEO) Aditya Mittal (CFO) Steel Steel, flat steel products, long steel products, stainless steel, wire solutions, plates US $124.9 billion (2008) US $12.24 billion (2008) US $9.399 billion (2008) US $133.1 billion (2008) US $59.23 billion (2008) 315,900 (2008)

ARCELOR MITTAL
Arcelor Mittal is now the largest steel

company in the world


ArcelorMittal is the leader in major global markets, including automotive, construction, household appliances & packaging

The company is headquartered in southern Luxembourg City, the former seat of Arcelor Lakshmi Mittal (owner of Mittal Steel), a non-resident Indian is the Chairman and CEO

Headquarters at Luxembourg city

It employs 310,000 employees in more than 60 countries ArcelorMittal key financials for 2007 show revenues of US$ 105.2 billion A crude steel production of 116 million tones, representing around 10% of world steel output As of May 17 2008, the market capitalization of ArcelorMittal was $144.37 billion

BRAND AND PHILOSOPHY


ArcelorMittal's brand promise is 'transforming tomorrow', underpinned by a consistent set of values:

Sustainability Quality Leadership Companys goal is to provide the leadership that will transform tomorrow's steel industry

THE BIG DEAL


In January 2006, Mittal Steel launched a $22.7 billion offer to Arcelors shareholders The deal was split between Mittal Shares (75 percent) and cash (25 percent) Under the offer, Arcelor shareholders would have received 4 Mittal Steel shares and 35 euros for every 5 Arcelor shares they held

THE CONTROVERSY
Arcelor Management
The management was extremely hostile to Mittal Steels bid It believed to have been doing the acquisitions and not the other way around The CEO of Arcelor dismissed Mittal Steel as a company of Indians European governments

The French Government and the government of Luxembourg was against the deal
The European Union approved of the deal

MOVES BY ARCELOR TO COUNTER THE BID


Declaration of dividend

On February 16, Arcelor declared a dividend of 1.2 Euros to convince the shareholders of a positive situation under current management

The Russian Angle To prevent the offer from Mittal Steel, Arcelor released a 13 billion Euro merger plan with Severstal, a Russian company

FINANCIAL ASPECTS
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 The current swap ratio is 1:1
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.


High monetary cost of the target company (Arcelor) which is $32.9 billion

BUSINESS STRATEGY ADOPTED BY MITTALS

Acquisition of sick companies


In the past decade, Indian-born maverick, Lakshmi Mittal, has followed a strategy of growth through acquisition, forging a new industry model of direct foreign investment rather than strategic alliance. By acquiring ailing steel plants at bargain rates in regions such as South Africa, Central Asia and Algeria, and Eastern Europe, Mittal has found a way to build value by restoring rusting steel mills to profitability.

"Each time he buys he has to pay more, making it more expensive to sustain his strategy of growth through acquisition. "It is clear he is running out of low-hanging fruit, and he has found that in the last few major deals, his major competitor was Arcelor,"

Mittal emerged as a smart turnaround player in 1995, when he and his father split Ispat International, Lakshmi's operation, from Ispat Industries, the family's Calcuttabased business and Lakshmi established LNM, a holding company in London.

That year he bought a deteriorated mill in Kazakhstan for $400 million, knowing that through technological investment and lowcost labor at the mill, he could return the plant to profitability.
In Kazakhstan, Mittal also saw an opportunity to set up shop just 400 miles from China--the world's largest emerging market for steel.

Entry by potential competitors is enormous:Entry barrier plays an important role. In case of steel industry these are the factors creating very high entry barrier for new entrants. 1) Huge capital investment:- Huge capital investment is required for establishing steel manufacturing facility.

2) Economies of scale:- In case of steel industry economies of scale is achieved at very large scale. Due to its large size ArcelorMittal Steel enjoys high magnitude of economies of scale. It has ownership on factories in many countries (by acquisition ) so uses the technology and knowledge know how across the borders. So it becomes very difficult for new entrants to enter into the market and compete with an already established large company.

3) Absolute cost advantage:- Established companies such as ArcelorMittal Steel has absolute cost advantage over new entrants because of its : 1)Superior production 2)It gave lower cost for input materials as it acquired the iron and coal mines

3) Going for low labor cost


4) Government Regulation:-Mittal Steel enjoyed very low tax rate tax for few initial years in few countries

Rivalry among established competitors:1)By acquiring large number of Steel Companies Mittal Steel became large and powerful and gained more control on price. 2) Large number of steel industries are in government hands. Management of these companies find it difficult to compete with private players such as Mittal Steel. 3)Since Mittal Steel was ready to acquire the sick government units it gave an easy exit barrier to these industries and weakened the competition.
4)Other big players were present in the market. But Mittal Steel 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.

Buyer Power: Its buyers are appliance (white goods), automotive (passenger vehicles, trucks, auto components ), building and construction (including housing and infrastructure),fabrication (sheet steel and metal fabricating industry), oil and gas(including pipeline), packaging (tin plate, tin-free and aluminum ), rail transport and marine shipbuilding industries.

1) Building and construction, fabrication, oil and gas and packaging industries are fragmented so they have less bargaining power.
2) Although, some of the buyers are large players but in comparison to large steel industries they are dwarfed in size. Comparatively they have less bargaining power.

Supplier Power
Since coal and iron mines are large in size and few in number and controlled by large player, their bargaining power can significantly effect the steel industry business. 1) Mittal Steel adopted the strategy ,before acquiring any industries, they first ensured the iron ore and coal supply from mines. 2) Mittal Steel buys a large chunk of supply from its suppliers and retains the bargaining power to itself.

Threat of Substitute
1) Steel has currently no substitute at its price level. 2) At some places(utensils, white goods) steel can be substituted by natural fibers and other metals but that is at very small scale. 3) Due to new emerging markets such as China, India, South East Asia consumption of steel have risen sharply in recent decades.

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