Mittal Steel in 2006: Changing the Global Steel Game Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Mittal Steel in 2006: Changing the Global Steel Game Case Study Analysis

Advantages

One of the biggest advantage while acquiring this company is that Arcelor is one of the best providers of raw materials. As input prices is the big challenge for the company, so Mittal Steel Co. would be benefited from this acquisition.

Continuous development is another advantage of this acquisition. In addition to this, steel industry has been dramatically transformed because Arcelor is the merger of three steel companies.

Synergy from the existing firm would be another benefit for Mittal Steel Co. because there would be less administrative costs as the company has an already established management and turnaround teams.

Competition would be less ahead as Arcelor was one of the major competitors of Mittal Steel Co.

Market position would be enhanced because after this merger, the company would be enabled to move into more than 20 countries.

Production capacity would be increased and the company can achieve its goal of 80-100 million capacity each.

Disadvantages

High cost is one of the biggest advantage for the Mittal Steel Co. because Arcelor wanted the premium price for its merger with Mittal Steel Co.

Investment rating could be negatively affected if Mittal Steel Co. pays high for Arcelor.

Anti-trust hurdles in the US and Canada could arise as the Mittal did have a merged witha company and Arcelor had also a merger with aCanadian company, named Dofasco.

Swaps/Future/Forward Contracts

Another option (alternative) company has, is to do Swaps/Futures/Forwards contacts in order to hedge the exchange rate risks. Few advantages and disadvantages of the company are discussed below:

Advantages

The risk of fluctuation in the raw materials can be reduced/hedgedthrough the technique of Swaps or Future contracts.

The fear of lower profits would not occur while having future contracts

High liquidity is another advantage of future/forward contracts, mainly in the case of commonly traded currencies.

Disadvantages

Due to hasty instabilities of future contracts; high leverage could turn out to be one of the biggest disadvantages.

Professional expertise is needed for understanding such contracts that might increase some costs in terms of hiring staff.

Market Development

The third alternative that the company can avail is market development. Few of the advantages and disadvantages of this strategy are discussed below:

Advantages

Mittal Steel Co. can go for local strategic alliances where ever new market is being explored, through which local knowledge could be achieved.

New markets would enable the firm to achieve economies of scale and huge product portfolio.

Brand equity and customer base would be increased.

Innovation would be the key advantage of this strategy.

Disadvantages

Costs is associated with fear of beingfailed into the new markets as the improper environmental analysis might fail the business.

Constantly changing markets and customer’s preferences are another disadvantages of this strategy.

WAY FORWARD

This is the last and important component of GROOW’s analysis, because options demand to be converted into final actions, which is called way forward. The way forward of Mittal Steel Co, is discussed below in details:

Mittal Steel Co. is suggested to merge with Arcelor as the company seems to get benefit after this merger but few steps are required to be taken in order to get these benefits.

The company needs to be more focused on Research and Development programs, because both of the companies are leading steel producers so this merger could improve the lacking in R&D.

Mittal company needs to gain the confidence of the shareholders, as the Arcelor merger demands premium prices, whichthe company should divert its focus on.

Issues of anti-trust hurdles needs to be solved once Mittal Arcelor merger occurs. It could be resolved by selling that Canadian company named Dofasco,for the completion of merger.

Mittal Arcelor needs to build a common culture by combining the best of both the companies.

Conclusion

Mittal Steel Co. is a family owned steel company. Over time, the steel industry has been transformed dramatically. The Chairman and CEO of the company:LaxmiNiwas Mittal (LNM) and Aditya Mittal announced to merge with the Arcelor steel company, which is a European based company. Both the companies Mittal Steel Co. and Arcelor were the largest market leaders of producing steel globally. The news had bought surprise in the market as no one had expected such kind of giant merger between the two largest steel companies.

A detailed GROOW’s analysis has been carried out in order to discuss the rationale of this acquisition in recent global trends, the integrated value chain of the steel industry and how Mittal might avail this merger,because the company has been able to increase its customer base globally through mergers and acquisitions. At last, the case analyses how Mittal Steel Co. can get the benefit from the acquisition by strengthening its position in all over the world....................................

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