Address for correspondence:

SABYASACHI G. DASTIDAR

52-A, Pocket A, Mayur Vihar phase-II.

New Delhi 110091, India.

E-mail: sgdmnit@gmail.com

SHUBHAM MAHESHWARI

B-27, Path No.5, Jamna Nagar, Ajmer Road, Sodala.

Jaipur-302006, Rajasthan, India.

E-mail: maheshwarishubh.2007@gmail.com

Global Impact of Indian Management:

A story of Mittal Steel

SABYASACHI G. DASTIDAR and SHUBHAM MAHESHWARI

Department of Mechanical Engineering, Malaviya National Institute of Technology, Jaipur.

Abstract:

In the recent decades, a large number of India‟s leading corporate houses have expanded

internationally and have made their presence felt in the global market. They have been

consistently growing and have proved their mettle in a tough and competitive marketplace. A

company that emerged as the leader in the steel industry globally was Mittal Steel. A very young

company, Mittal Steel was formed in 2004 after a $4.5bn takeover of International Steel Group

of the US, and a merger of Mittal‟s existing assets LNM and Ispat International. This company

has proved its dominance in the global market by merging with Arcelor in 2006 to become the

leading steel manufacturing company in the world, ArcelorMittal thus making it an ideal

example for the other emerging Indian companies by becoming the first truly global steel

company.

Keywords:

Mittal Steel, ArcelorMittal, Globalisation, Merger, Indian management, LN Mittal

Research Objective:

Mittal Steel has set the pace for the consolidation and globalisation of the world steel industry.

They have taken on a range of acquisitions, many of them formerly public sector-owned

companies, and transformed them into successful projects. In the process they have spread best

practice and modern production techniques throughout their plants. Their capital investment

programme is unmatched in the industry. So there was a need of detailed study on the policies

and strategy of the company which has resulted into its unmatchable success today.

Page 2 of 16

INTRODUCTION:

The aim of the study is to do an analysis of the growth strategy of Mittal Steel, which is one of

the most diversified steel companies in the world in terms of asset location and market presence

across all regions. As such, Mittal is not overly dependent on any single region, product, or end

market. In this work, attempts have been made to understand how a man who had his roots from

a small village in Rajasthan, India planned his mind and made his short and long term goals,

resulting in the formation of a globally successful empire which is in front of everyone.

On January 27, 2006, Mittal Steel unveiled an unsolicited $22.7 billion bid for Luxembourg

based Arcelor. This step was the benchmark for Mittal steel. Through this step they impacted the

management globally and thus proved that Indian Entrepreneurs are the best in world. This is the

motive behind the study of „Mittal steel‟ in the reference to the subject “GLOBAL IMPACT OF

INDIAN MANAGMENT”.

COMPANY PROFILE:

Mittal Steel Company was one of the world‟s largest steel producers by volume, and also the

largest in turnover. The company merged with Arcelor on 25 June 2006 to form a new company

“ArcelorMittal” which is now the world‟s leading steel company, operating in more than 60

countries.

CEO of Mittal Steel, Lakshmi Mittal's family owned 88% of the company. Mittal Steel was

based in Rotterdam but, managed from London by Mittal and his son Aditya Mittal. It was

formed when Ispat International acquired LNM Holdings (both were already controlled by

Lakshmi Mittal) and merged with International Steel Group Inc. (the remnants of Bethlehem

Steel, Republic Steel and LTV Steel) in 2004. The merger with Arcelor in 2006 has been

successfully approved by shareholders and directors of Arcelor making L.N. Mittal the largest

steel maker in the world.

All the major global steel markets are spearheaded by ArcelorMittal, including automotive,

construction, household appliances and packaging, with leading R&D and technology, as well as

sizeable captive supplies of raw materials and outstanding distribution networks which cover all

the key steel markets present in over 20 countries spanning four continents.

Through its core values of Sustainability, Quality and Leadership, ArcelorMittal commits to

operating in a responsible way with respect to the health, safety and wellbeing of its employees,

contractors and the communities in which it operates. It is also committed to the sustainable

management of the environment and of finite resources.

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During the year ended December 31, 2010, ArcelorMittal had steel shipments of approximately

85 million tonnes and crude steel production of approximately 90.6 million tonnes, earning

revenues of $78 billion, representing approximately 8 percent of world steel output.

ArcelorMittal is also listed on the stock exchanges of New York (MT), Amsterdam (MT), Paris

(MT), Brussels (MT), Luxembourg (MT) and on the Spanish stock exchanges of Barcelona,

Bilbao, Madrid and Valencia (MTS).

ArcelorMittal produces a range of finished and semi-finished products. ArcelorMittal produces

flat products, including sheet and plate, long products, including bars, rods and structural shapes,

and stainless steel products. The Company operates in five segments: Flat Carbon Americas; Flat

Carbon Europe; Long Carbon Americas and Europe; Asia, Africa and Commonwealth of

Independent States (CIS) (AACIS), and Distribution Solutions. On February 18, 2011

ArcelorMittal and Nunavut Iron Acquisition Inc. announced they had taken up over 93% of the

Baffinland Iron Mines Corporation (Baffinland) under their joint offer. On January 25, 2011,

ArcelorMittal approved the spin-off of ArcelorMittal's stainless and specialty steels business into

Aperam.

EVOLUTION OF MITTAL STEEL:

The history of the Mittal Group can be traced back to the 1950‟s when Mohan Mittal, the father

of L.N. Mittal, the head of Mittal Steel laid the foundation of Ispat Group in India. In 1976, L.N

Mittal moved to Indonesia and acquired a steel plant Ispat Indo. Adopting innovative practices

and cutting edge technology, the Mittals managed to bring a turnaround at Iscott, a loss-making

government owned steel firm in Trinidad and Tobago, and within a year. This set the stage for

further expansions.

The Mittal Steel group was formed when two sister companies in the Mittal family, LNM

Holdings and ISPAT International, were merged to form Mittal Steel in 2004. Mittal Steel‟s

growth was founded on a consistent philosophy: that to be able to deliver the range and quality

of products customers demand the modern steel maker must have the scale and worldwide

presence to do so competitively.

The growth of Mittal Steel in the last two decades can be categorized as:

1989: Acquisition of Iron and Steel Company of Trinidad and Tobago

1992: Acquisition of Sibalsa

1994: Acquisition of Sidbec-Dosco

1995: Acquisition of Hamburger Stahlwerke

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Ispat International Ltd. And Ispat Shipping formed

Acquisition of Karmet.

1997: Ispat International NV goes public

1998: Acquisition of Inland Steel Company

1999: Acquisition of Unimetal

2001: Acquisition of ALFASID

Acquisition of Sidex

2002: Business assistance agreement signed with Iscor

2003: Acquisition of Nova Hut

2004: Acquisition of Polski Huty Stali

Acquisition of BH steel

Acquisition of Macedonian facilities from Balkan Steel

Creation of Mittal Steel and proposed acquisition of International Steel

2005: Acquisition of a stake in Hunan Valin

ISG Acquisition completed

Mittal Steel Europe created

Mittal Steel makes Fortune 500 list of top companies

MDA with Liberian government

Acquisition of Kryvorizhstal

MoU with State of Jharkhand, India

Acquisition of Stelco subsidiaries

Stake lifted in Mittal Steel Zenica

2006: January: Historic moment for Global Steel Industry (Mittal Steel bids for Arcelor)

February: Expansion and strong results

April: Renewal after Hurricane Katrina and new galvanized line

May: US clears the way for bid

June: Historic agreement to create the No.1 Global Steel Company

FINANCIAL STATEMENT:

Income statement after its merger with Arcelor (US $ in millions)

DECEMBER 31st

2010 2009 2008 2007 2006

Sales 78,025 65,110 124,936 105,216 58,870

Cost of sales (71,084) (62,913) (106,110) (84,953) (48,411)

Gross margin 6,941 2,197 18,826 20,263 10,459

Selling, general and administrative (3,336) (3,875) (6,590) (5,433) (2,960)

Operating income (loss) 3,605 (1,678) 12,236 14,830 7,499

Other income, net – – – – 49

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Income from investments in associates

and joint ventures 451 58 1,653 985 301

Interest expense (1,578) (1,696) (2,516) (1,839) (1,124)

Interest income 133 190 497 577 251

Fair value adjustment on Convertible

Bonds and call options on Arcelor

Mittal shares

427 (897) – – –

Net gain (loss) on other derivative

instruments 43 (28) (177) 423 (11)

Net foreign exchange result and others (1,225) (386) (156) (88) 230

Financing costs, net (2,200) (2,817) (2,352) (927) (654)

Income (loss) before taxes

1,856

(4,437)

11,537

14,888

7,195

Income tax (expense) benefit 1,479 4,512 (1,098) (3,038) (1,109)

Net income from continuing

operations (including non-

controlling interests)

3,335 75 10,439 11,850 6,086

Discontinued operations, net of tax (330) – – – –

Net income (including non-

controlling interests) 3,005 75 10,439 11,850 6,086

Net income attributable to non-

controlling interests (89) 43 (1,040) (1,482) (860)

Net income attributable to equity

holders of the parent 2,916 118 9,399 10,368 5,226

(Source: www.arcelormittal.com)

Brief of the income statement:-

The income statement presents information on the financial results of a company's business

activities over a time period. It communicates how much revenue the company generated during

a period and what cost it incurred in connection with generating that revenue.

Following points were noticed in ArcelorMittal’s Income statement:-

ArcelorMittal's sales and operating income declined sharply from 2008 to 2009 but then

slightly increased from 2009 to 2010.

ArcelorMittal's net income from continuing operations (including non-controlling interests)

declined sharply from 2008 to 2009 but then slightly increased from 2009 to 2010.

ArcelorMittal's net income attributable to equity holders of the parent declined sharply from

2008 to 2009 but then slightly increased from 2009 to 2010.

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Statement of Financial Position, Liabilities, & Stockholder Equity

DECEMBER 31st

2010 2009 2008 2007 2006

Short-term debt and current portion

of long-term debt 6,716 4,135 8,409 8,542 4,922

Trade accounts payable and other 13,256 10,676 10,501 13,991 10,717

Short-term provisions 1,343 1,433 3,292 1,144 569

Accrued payroll and employee related

expenses 1,933 1,949 1,949 2,008 2,238

Other payables 2,090 1,810 1,942 1,703 284

Other creditors 1,526 1,349 1,320 1,535 3,038

Revaluation of derivative instruments 402 905 1,094 549 501

Other amounts due to public

authorities 828 731 791 909 893

Unearned revenue and accrued

payables 121 217 317 571 625

Accrued expenses and other liabilities 6,900 6,961 7,413 7,275 7,579

Income tax liabilities 471 314 775 991 534

Liabilities held for sale and

distribution 2,037 11 370 266 239

Current liabilities 30,723 23,530 30,760 32,209 24,560

Long-term debt, net of current portion 19,292 20,677 25,667 22,085 21,645

Deferred tax liabilities 4,006 5,144 6,395 7,927 7,274

Deferred employee benefits 7,180 7,583 7,111 6,244 5,285

Long-term provisions 1,738 2,121 2,343 2,456 1,880

Other long-term obligations 1,865 3,244 1,582 1,169 1,331

Non-current liabilities 34,081 38,769 43,098 39,881 37,415

Total liabilities 64,804 62,299 73,858 72,090 61,975

Common shares, no par value 9,950 9,950 9,269 9,269 –

Treasury shares, at cost (427) (2,823) (5,800) (1,552) (84)

Additional paid-in capital 20,198 20,808 20,575 20,309 25,566

Retained earnings 31,647 29,738 30,403 23,552 14,974

Reserves 1,062 3,372 751 5,107 1,654

Equity attributable to the equity

holders of the parent 62,430 61,045 55,198 56,685 42,127

Non-controlling interests 3,670 4,353 4,032 4,850 8,064

Total equity 66,100 65,398 59,230 61,535 50,191

Total liabilities and equity 130,904 127,697 133,088 133,625 112,166 (Source: www.arcelormittal.com)

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A Brief of the financial position, liabilities and stockholder’s equity statement:-

The statement of financial position provides creditors, investors, and analysts with information

on company's resources (assets) and its sources of capital (its equity and liabilities). It normally

also provides information about the future earnings capacity of a company's assets as well as an

indication of cash flows that may come from receivables and inventories.

Liabilities represent obligations of a company arising from past events, the settlement of which is

expected to result in an outflow of economic benefits from the entity. Following points were

noticed in case of ArcelorMittal‟s :

ArcelorMittal's trade accounts payable and other increased from 2008 to 2009 and from 2009

to 2010.

ArcelorMittal's current liabilities and total liabilities declined from 2008 to 2009 but then

increased from 2009 to 2010 not reaching 2008 level.

ArcelorMittal's total equity increased remarkably from 2008 to 2009 and slightly from 2009

to 2010.

(Source: www.arcelormittal.com)

The above graph shows the steep rise in the total sales and the net income after the merger but at

the same time, a slowdown has been observed in the percentage of profit margin but the margin

has increased significantly.

Page 8 of 16

PRODUCTS and SERVICES:

ArcelorMittal is the only producer offering the full range of steel products and services. From

commodity steel to value-added products, from long products to flat, from standard to specialty

products, from carbon steel to stainless steel and alloys, ArcelorMittal offers a complete

spectrum of steel products - and supports it with continuous investment in process and product

research. Its products are:

Automotive Products:

It serves automotive manufacturers, sub-contractors and equipment suppliers. ArcelorMittal

has a recognized global technological edge in galvanized steels for exposed parts and coated

steels for hot stamping.

Mining:

ArcelorMittal is focusing on its mining activities, in accordance with its integrated business

model. This is part of a strategy to actively develop the raw material base, thereby raising

the level of iron ore self-sufficiency to 75%.

Tubular Products:

The Tubular Products Division of ArcelorMittal is one of the world's largest and most

diversified producers of pipe and tube products, servicing markets around the world from 24

different operating locations in 13 countries.

Distribution Solutions:

It handles processing, finishing and distribution of steel mainly made by the ArcelorMittal

Group and serves customers from a variety of other industries.

Shared Service Centres:

The Shared Service Centres (or more specifically Finance or Accounting Shared Service

Centres) are a network of entities worldwide, which operations are to provide financial

services for its controlled companies, at a support 'shared service' platform.

Flat Steel:

-Hot Rolled

-Cold Rolled

-Electrical Steel

Other Activities:

ArcelorMittal Logistics offers quality door-to-door services throughout the entire logistic

chain. Its continuously expanding network is already present in three continents.

-Real Estate France

-Circuit Foil

-Industeel

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R&D:

The important technologies proprietary/patented technologies used by ArcelorMittal:

-Method for coating a substrate, Equipment for implementing said method and metal supply

device for such equipment.

(European Patent EP 2 111 477 2009)

-Rolling mill with cooling device and rolling process.

(European Patent EP 2 164 651 2010)

-Low density steel with good stamping capability.

(European Patent EP 2 155 916 2010)

-Method for rolling metal strip with adjustment of the side position of the strip and adapted

rolling mill.

(European Patent EP 2 167 2010)

-Steel plate for producing light structures and method for producing said plate.

(European Patent EP 2 064 360 2009)

-Process for manufacturing cold rolled and annealed steel sheets with very high strength and

sheets thus produced.

(European Patent EP 2 155 915 2010)

-Method for coating a substrate and metal alloy vacuum deposition facility.

(European Patent EP 2 129 810 2009 )

OPERATIONAL STRATEGY OF MITTAL STEEL:

Mittal Steel is among the most efficient steel producers in the world. They encompass all aspects

of modern steelmaking, combining both integrated and mini-mill facilities and producing much

of the iron ore and coking coal used in their furnaces. They are also among the most advanced

steel makers, operating a range of modern technologies. They have pioneered the use of direct

reduced iron (DRI) as a raw material source and are now the world‟s biggest producer of DRI.

With two technical research facilities, their product development teams are ready to meet the

needs of the most demanding customers.

Mittal steel„s strategy formulation begins with an analysis of the forces that shape competition in

the industry in which a company is based. The factors creating very high entry barrier for new

entrants are:

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Huge capital investment:

Huge capital investment is required for establishing steel manufacturing facility and Mittal steel

has been making investments in many parts of the world in the last few decades, including

Indonesia, Trinidad and Tobago, Kazakhstan, Poland, Czech Republic, Romania and Canada to

name a few.

Economies of scale:

In case of steel industry economies of scale is achieved at very large scale. Due to its large size

Mittal steel enjoys high magnitude of economies of scale. It has ownership on factories in many

countries (by acquisition) and thus, it has the advantage of using the technology and knowledge

knowhow across the borders. So it becomes very difficult for new entrants to enter into the

market and compete with an already established large company.

Absolute cost advantage:

Established companies such as Mittal Steel has absolute cost advantage over new entrants

because of its:

-Superior production operations and processes because of accumulated experience, patents and

secret processes.

-By vertical backward integration Mittal steel acquired coal and iron mines. It gave lower cost

for input materials.

-Going for low labor cost regions allowed Mittal Steel to have more cost advantage which is

very difficult for a new entrant.

Customer switching cost:

Steel is a product for which buyer industries have to establish very well structured

transportation facility with the producers. It becomes difficult for a buyer to establish a new

transportation channel when it wants to switch the seller.

Government regulation:

In some countries Mittal Steel enjoyed very low tax rate or zero tax for few initial years after it

bought the loss making government units.

All these factors conclude that the entry barrier plays an important role in strategizing i.e.,

Entry by potential competitors is enormous.

Mittal Steel also survived stiff rivalry among established competitors like Nippon Steel, JFE

Japan, Posco, US Steel, Corus, etc.

By acquiring large number of steel companies Mittal steel became behemoth and gained the

more control on price. Because of this, the management of large number of steel companies

which were in government hands found it difficult to compete with Mittal steel. Since Mittal was

ready to acquire the sick government units it gave an easy exit barrier to these industries and

weakened the competition. Other big players were present in the market, but Mittal Steel

Page 11 of 16

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.

Since coal and iron mines are large in size and few in number and controlled by large players,

their bargaining power can significantly affect the steel industry business.

But Mittal Steel adopted the strategy of backward vertical integration. Before acquiring any

industries, they first ensured the iron ore and coal supply from mines. Mittal Steel buys a large

chunk of supply from its suppliers and retains the bargaining power to itself.

Opportunities arise when a company can take advantage of conditions in its environment to

formulate and implement strategy that enable it to become more profitable. Some opportunities

for Mittal steel were:

After its merger with Arcelor it could use its low cost technology in the countries of Europe

and South America where Arcelor was operating.

After its merger with Arcelor it could use Arcelor‟s good distribution channel and high

quality product technology in Asia, Africa and North America.

Many new emerging markets are following policy of globalization, privatization and

liberalization. These countries are primarily focusing on infrastructure development. These

will lead to significant growth in the steel demand.

In many developing countries resources and raw material are available in good amount

which can be exploited for further growth.

Cheap labor in developing countries can give absolute cost advantage to Mittal Steel.

Threats arise when conditions in the external environment endangers the integrity and

profitability of the company business. Threats for Mittal Steel were:

Anti globalization protest in many countries. Mittal Steel, which had headquarters in

Rotterdam, had met ferocious opposition in France and Luxembourg, where Arcelor was

based and was the biggest private employer of some 5,900 people.

Before the merger of Arcelor and Mittal steel, the Arcelor management was extremely

hostile to Mittal Steel‟s bid. The French Government and the government of Luxembourg

were against the deal.

Recession and falling demand in developing countries.

Unstable political condition in many developing countries.

Core business strategy:

Mittal Steel acts as a consolidator in the global steel industry, focusing on growth through

acquisitions, and has a successful acquisition and integration track record.

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Operationally, Mittal Steel has a highly diversified asset base, with plants of different types,

including both integrated and minimills. Mittal Steel‟s base capital-expenditure requirements are

lower compared with those of peers, because of its lower cost base in emerging markets (for

example, Romania and Kazakhstan), where comparable types of work can be performed at a

lower cost. Mittal Steel also invested in new projects to strengthen its upstream integration.

The considerations before Mittal Steel’s acquisition of Arcelor:-

When Mittal Steel considers an acquisition, it seeks not only low-cost inputs and an expanding

market, but also inexpensive labor. But it will bend its criteria if an opportunity looks promising

enough. Its Algerian plant, for example, had no obvious source of iron ore. When Mittal staffers

discovered that the country had ore deposits, the company secured a license to open a mine.

Similarly, its purchase of International Steel Group did not seem to fit its requirement for low-

cost labor; US wages are among the highest in the world.

Acquisitions introduce risks, but the group has a good track record of turning around

underperforming steel acquisitions, particularly in less-developing countries, through LNM

Holdings, which implemented this strategy since 1995.

The advantages of Mittal‟s strategy of expanding into emerging markets include low cost bases

for steel production and capital construction. In most cases, assets the group acquired in

emerging markets like Romania or Kazakhstan were low priced, and the plants enjoyed sizable,

albeit temporary, tax breaks.

The key risks of Mittal‟s emerging-market expansion strategy include exposure to those

countries‟ weak legal and regulatory systems, as well as the integration of new assets into the

group structure (for example, establishing appropriate control procedures, achieving operational

synergies, and turning around former state-owned and often inefficient plants). But Mittal has a

track record of successfully integrating and restructuring previously underperforming state-

owned assets. Vast geographical diversification also mitigates risk in each particular emerging

market, as the group is no longer markedly dependent on any single asset or market.

In the medium to long term, the main issue for the group is its success in integrating recently

acquired assets and maintaining long-term, stable relationships with the governments of host

countries.

But the main reason for merging Mittal‟s operations with Arcelor was that there were more

synergies expected on the sales side, that were not quantified yet.

More than immediate synergies, Mittal perhaps wanted to merge because he, as had others in the

steel business, had sensed the underlying consolidation phase of the industry and did not want to

lose the position of control he enjoyed as the biggest steel manufacturer. By merging with the

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second biggest he was ensuring that the new second biggest will be less than a third of the size of

the new biggest (Arcelor, Mittal combine).

Bid for Arcelor:

Mittal Steel & Arcelor complemented each other in terms of geographical coverage and product

mix, as there is no significant overlap. Mittal Steel had strong positions in the U.S. markets; low-

cost operations in Central and Eastern Europe, Asia and Africa; and vertical raw-material

integration whereas, Arcelor was the leader in higher value-added products in Western Europe,

low-cost slab manufacturing in Brazil, and had a successful distribution system.

Arcelor 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. The company was created by a merger of the former companies Aceralia (Spain),

Usinor (France) and Arbed (Luxembourg) in 2002. Employing 310,000 employees in over 60

countries, it was 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 produced long steel products, flat steel products and inox-steel. In

January 2006 Arcelor announced the acquisition of Dofasco, Canada's largest steel producer with

an annual output of 4.4 million tons. After an intense bidding war against the German

ThyssenKrupp, Arcelor had finally bid 5.6 billion Canadian dollars. The high bid proved the

importance of Arcelor's improving presence in the North American market.

On January 27, 2006, Mittal Steel unveiled an unsolicited $22.7 billion bid for Luxembourg

based Arcelor. This step was the benchmark for Mittal steel.

As the largest player in the steel industry - globally and in the key markets - the combined group

enjoys significant bargaining power. The merger was expected to yield synergies in the

procurement, marketing, and optimization of production processes and capital expenditures.

On 25th

June 2006 the deal finally clinched when the shareholders of Arcelor agreed to Mittal

Steel‟s offer. The bid significantly increased Mittal‟s leverage. Mittal had to considerably elevate

the initial offer by raising its valuation of Arcelor to $32.9 billion. The Mittal family holds 43

percent of the combined group. The combined company holds 10 percent of the global market

for steel.

The Mittal group has a complex structure and has only majority control, but not full control, over

some of its cash-generative and cash-rich subsidiaries. For example, Mittal owns 51% of the

South African plant, 70% of the Algerian plants (30% is state-owned), and 76% of the Czech

Page 14 of 16

plant. This constraints cash flow circulation within the group and may lead to significant

spending to buy out minority interests (although no such requirements are currently effective).

Consequences of the merger on Mittal steel:-

According to the research, it was observed that the deal has been in favor of both the companies.

This can be suggested by the following observations about the deal –

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

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

But it also has a negative aspect to it which was the high monetary cost of the target company

(Arcelor) which is $32.9 billion.

As the pros of the deal completely outweigh the cons involved, it is finally concluded that the

deal has been a successful one for both the companies, its people and the world.

AMERICA EUROPE RoW TOTAL

ARCELOR

2004 6.6 9.9 7.6 24.1

2005 12.5 7.7 9.8 30.0

MITTAL STEEL

2004 4.4 23.4 2.4 30.2

2005 6.5 23.2 2.9 32.6

ARCELOR MITTAL

2005 19.0 30.9 12.7 62.6 (Source: www.arcelormittal.com) (All figures in $ Billion)

The Table shows that the merger made the new entity the biggest player in Americas.

Page 15 of 16

HIGHLIGHTS OF ITS OPERATION:

The group‟s vertical integration in mining and low cost position in emerging market

operations support profitability through the cycle and help reduce capital-expenditure needs.

These factors are tempered by the group‟s ambitious plans to grow through acquisitions;

Institutional risks associated with emerging markets; and uncertainties regarding the

integration of newly acquired assets, although Mittal‟s integration record has been

successful to date.

The company‟s overall low cost position is buttressed by vertical integration and low wage

costs in its Kazakhstan, Romania, Poland, Algeria, and South African locations. The

acquisition of U.S.-based International Steel Group Inc. (ISG) in early 2005 moved the

group into a high cost-base market, but bettered geographical market diversification.

Moreover, Mittal‟s cost advantages are expected to strengthen further since acquiring Mittal

Steel Kryvly Rih in late 2005.

In cyclical businesses, such as steel, volatile margins depend on changes in raw-material and

finished-product prices. Compared with peers, Mittal has higher exposure to spot markets.

Most of the shipments outside North America are spot sales. Although a significant part of

sales in North America are under long-term contracts, most of these contracts are annual and

carry surcharge provisions, and there is significant exposure to automotive customers.

Upstream integration into iron ore and coking coal provides Mittal with a competitive

advantage throughout the cycle.

As one of the largest players in any of its markets, Mittal has major negotiating power.

Mittal takes advantage of its diversified asset base to achieve operating synergies.

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CONCLUSION:

If we look at the merged entity‟s operations from L N Mittal‟s past operations, the most striking

thing, it seemed, was his willingness to concede more than 50% ownership to others. Mittal had

all through ensured that he retained a very clear majority – as much as could be had while still

keeping the company publicly listed.

The company offers its products to a wide range of customers across all steel-consuming

industries, which include the automotive, appliance, engineering, construction, energy and

machinery industries thus covering the market all over the world which in turn is reflected in the

success of the company.

The company has reached at this landmark due to the hard work of its workers and the

management board; outstanding vision, convincing, motivating and guiding nature of Mr. L N

Mittal. He is a transactional leader who guides his followers in the direction of established goals

by clarifying role and task requirements. His success has largely been built on buying up loss

making steel owned mills and quickly turning them around.

Mittal steel started the trend of merger all around the world and thus, is the perfect example of

Global Impact of Indian Management.

REFERENCES:

Becker.Gary (June 2007) “Economic Theory”

Schaan.Jean-Louis, Chandrasekhar .Ramasastry (Feb 19, 2010) “ArcelorMittal case

study”

www.arcelormittal.com

www.stock-analysis-on.net

www.4-traders.com

www.highbeam.com

Singh.Sachidanand (March 2008) “Birth of ArcelorMittal & After”

Sukhasare.Vishwanath (April 2010) “Arcelor-Mittal Merger Report”

ArcelorMittal “Annual Report 2009 Management Report”