For a premium representing the cargo cost differentials between shipping iron ore to China from Australia versus Brazil, Australian BHP asked for the same period. This demand was later dropped due to strong resistance from Chinese steelmakers. In the negotiated year 2007/2008, subsequent to the price increases of 65-71% negotiated by the Vale, the other Australian Iron ore giant, Rio Tinto, demanded and got a premium that found the total increase in prices reach 200% from the preceding year.
This case analyses the motivations behind these cost dialogues in the light of BHP's intended hostile takeover of Rio Tinto, which would result not only in a combined market share of almost 40% in the creation of traded iron ore but a control in the supply of Australian iron ores. This case can be used in business classes, negotiation and strategy as will supply students with distinct facets of the dialogue procedure. Issues including pricing, hostile takeovers, market share and business relations are discussed in this case.
Rio Tinto Takeover Fears and Price Negotiations with China case study solution
PUBLICATION DATE: April 02, 2009 PRODUCT #: HKU826-HCB-ENG
This is just an excerpt. This case is about GLOBAL BUSINESS
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