Final Report INT 610 - Final Report Entering the Steel...

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Final Report – Entering the Steel Market in Brazil Group C Dustin Hug Lisa Iodice Kristina Jackson Lindsay Judge Derek Mayo INT-610; Professor Ekern
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Final Report: Entering the Steel Market in Brazil INT-610 Group C I: INTRODUCTION The purpose of this report is to analyze country and industry data and determine whether Tata Steel should enter the steel market in Brazil. This report will provide an overview of Brazil including the economic, financial and political structures and risk, an evaluation of the steel industry including regulatory structure, competition and local financing options, an entry strategy into the industry and a summary recommendation. COUNTRY BASICS Brazilian economic and political history can be segmented into six main periods: The colonial period 1500-1820; the empire period that employed slavery 1821-90; an oligarchic republic utilizing wage labor 1891-1929; the desenvolvimentista (developmental) era 1930-1980; the very high inflation period 1981-93; and the low inflation/adjustment era 1994-2000. From 2001-2015 there is no official term, but Brazil currently is in a very tough recession that is heavily affecting their economy. From the beginning colony period of 1500-1820 until today, Brazil has experienced very dramatic changes to their economy with the transition to each new period. Brazil began producing steel in the 1920’s, with the establishment of companies in the states of Minas Gerais and Rio de Janeiro. The steel industry has been a strong industrial stabilizer in Brazil’s periods of change, as Brazil is home to among the largest reserves of natural iron ore that is used to produce steel in the world. As a result, Brazil is also home to some of the largest steel manufacturers in the world. COMPANY BASICS Tata Steel was established in 1907 as Asia’s first integrated private sector steel company. The company was founded upon Jamsetji Tata’s vision of a successful and independent India, and sought to become the global standard for value creation and corporate citizenship. Jamsetji first went to the U.S. to gain the best and brightest talent and equipment for his plant in India. In 1908 the plant was functional, and the very next year blast furnaces, steel furnaces, coke ovens, powerhouse and machine shops were constructed. The company acquired the land for the site, mines and quarries in 1910. The Indian Page 2 of 21
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Final Report: Entering the Steel Market in Brazil INT-610 Group C Government even assisted Tata Steel by connecting the railway to Gorumahisani (a village and railway station). During World War I, Tata Steel was a major supplier of steel rails to Mesopotamia, which an important factor of the allied victories. The company obtained its first colliery (coal mine) in 1910, and would acquire six more as time went on. As the company continued to grow, Tata Steel undertook the building of a town at the site of the Sakchi plant location in order to provide homes for the growing Tata family. The city and plant grew rapidly, and the city became equipped with modern technology and facilities. Lord Chelmsford visited India to rename Sakchi as Jamshedpur, and the Kalimati railway
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  • Spring '14
  • Iron ore

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