Arcelor-Mittal: The birth of a giant
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- Microenvironment: Michelin's partners
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- Competitive analysis and Porter's five forces
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Never announce a merger to the impassioned economic and financial world. The case of the Mittal-Arcelor merger can testify for the same. Between the announcement of the merger by Mittal on 27 January, 2006 and the actual merger of the two groups on July 13, 2006, nearly seven months had elapsed.
During this time, the strategy met with resistance from various groups. Mergers and acquisitions have been on the rise in Europe in the last three years. The year 2005 had registered a record number of mergers and acquisitions. These mergers and acquisitions show that certain sectors have reached saturation.
While some companies have vanished due to this saturation and increasing competition, certain other dying companies are being bought over by big names in the industry. The steel industry is no exception.
Mittal Steel is one such company that kept acquiring companies on the verge of collapsing. However, in the case of the Arcelor-Mittal merger, two major international companies with completely opposite strategies faced each other. Another interesting fact here is that Arcelor was not a collapsing company. The European steelmaker, Arcelor, was the number one worldwide in terms of sales with 32 billion euros. Mittal's takeover of Arcelor has only added fuel to the fire.
The industrial logic of Arcelor is based on the production of specialty steel technology intensive, long term partnerships with clients, users rather than aligning with volatile international market prices and the refusal of integration vertical iron mine to the steel sheet.
Mittal Steel on the other hand has engaged in extensive growth with a multi-product strategy of vertical integration from mining to production units.
The history of Mittal and Arcelor is also opposed. The two groups are the result of successive reorganizations, but again the reason is very different.
Mittal Steel established in October 2004 from the merger of LNM Holdings and Ispat International. Mr Mittal bought for a low cost in the former Soviet Republics in Central Europe and factories and companies subsidized by governments. Mittal has set ups in Kazakhastan, Romania, Poland, Algeria and South Africa.
Mittal-Arcelor merger helps both companies in acquiring access to new markets. Arcelor sought for some time to spread into the North American market, evident by the acquisition of Canadian group Dofasco, but this implementation would have taken years, if not for the merger. For Mittal Steel, Arcelor was a great opportunity to establish itself in Western Europe, where Arcelor is dominant and has a factory network.
Thus, both groups show a geographical fit corresponding to the expansion plans of both groups.
Tags: Arcelor, Mittal Steel, merger and strategy of both companies