Since its inception, ArcelorMittal has rapidly grown through a successful consolidation strategy with a number of significant acquisitions. According to ArcelorMittal (2012), the company is the successor to Mittall Steel, a business originally set up in 1976 by Lakshmi N. Mittal, CEO and chairman of the board of directors (paras 1-2).
ArcelorMittal moved the company’s headquarters to Rotterdam in 1997 (Hill, 2011, p. 261). The company currently has 260,000 employees across 60 countries and is the world’s leading steel and mining company (ArcelorMittal, 2013, para 1).
In addition to the information above, a brief timeline of ArcelorMittal acquisitions may be reviewed below (Steelonthenet.
com, 2013, para 2). The company has been quite successful.
In respect to the information above, I will begin to discuss the case study questions in the next section.
According to Hill (2011), one of the major forces that drove Mittal to start expanding across national borders were the limited growth and expansion opportunities because of weak market conditions primarily due to competition from SAIL, a state-owned rival, and a private national champion, Tata Steel (para 1). Thus, Mittal began to look for opportunities across national borders because the market was not good enough for Mittal Steel to grow.
Greenfield investments is one form of federal direct investment (FDI) which involves establishing a new operation in a foreign country (Hill, 2011, p. 232). The second FDI is acquiring or merging with a company in a foreign country (Hill, 2011, p. 232).
Thus, Mittal Steel was heavily involved in acquisitions and mergers because the economy had been in a slump for a quarter century due to access capacity and slow demand for steel and a higher demand for substitute materials (Hill, 2011, p. 261). Mittal had a successful business, expertise, and capital to help struggling businesses. In addition, he saw an opportunity to purchase the assets of struggling businesses for cheap (Hill, 2011, p. 261). According to Hill (2011), Mittal believed that eventually the economy will turn around (p. 261).
The benefits that Mittal Steel bring to the countries that it enters are the increases in revenue, employment, resources, business expertise, etc. (Hill, 2011, p. 249). One drawback may be that the ownership is held by a foreign business.
The business becomes a global business. Its assets increased by acquiring other businesses that were having problems. In addition, this allowed Mittal to diversify itself. For example, it was able to make an Initial Public Offering (IPO) to the public in Amsterdam and New York stock exchanges as an effort to raise capital (Hill, 2011, p. 261). This increased its buying power to acquire additional struggling businesses. The ultimate benefit is that it is now the leading steel and mining company.
I believe the objection was mainly due to the fact that a European business was acquired by a foreign entity – Indian, now legally Dutch (Hill, 2011, p. 261).
This an interesting and thought provoking case concerning mergers and/or acquisitions.
ArcelorMittal (2013). ArcelorMittal-transforming tomorrow. Our history. Retrieved on January 23, 2013 from http://www.arcelormittal.com/corp/who-we-are/our-history
ArcelorMittal (2013). ArcelorMittal-who we are at a glance. Retrieved on January 23, 2013 from http://www.arcelormittal.com/corp/who-we-are/at-a-glance
Hill, C. (2011). International Business: Competing in the Global Marketplace. McGraw-Hill/Irwin, New York.
Steelonthenet.com (2013). History of ArcelorMittal. Retrieved on January 23, 2013 from http://www.steelonthenet.com/kb/history-arcelor-mittal.html
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