Mittal Steel.docx - Mittal Steel managing consolidation...

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Mittal Steel : managing consolidation Long seen as ailing, the steel industry is being shaped by new trends which are making it a profitable and attractive business through consolidation, globalisation, cheaper technologies and research and development (R&D). The slow growth in mature markets is being counterbalanced by a strong demand for steel in emerging countries. The main players of the steel industry are also changing; some are becoming global and are ahead in the race for consolidation. LN Mittal, an Indian entrepreneur, envisioned these changes and is now head of the world leader in the steel industry, Mittal Steel. He created this global and multi-cultural steel company through a methodical and successful acquisition strategy, consolidation management and integration process. The second largest group, the European Arcelor followed a different path. Arcelor was created by the merger of three national European champions and differs from Mittal Steel by its capital structure, management style and governance. The case discusses: (1) the characteristics of the steel industry, long seen as unattractive and unprofitable; (2) the prospects for growth in mature and emerging markets with product differentiation and R&D; (3) the logic of consolidation and globalisation in the steel industry; (4) the know-how that Mittal Steel developed in turning sick plants into profitable plants and in integrating acquisitions worldwide to create true synergies; and (5) the business models of Arcelor and Mittal given the changing landscape of the steel industry. Lakshmi N Mittal Steel tycoon Lakshmi Niwas Mittal is the richest Indian in the world, with an estimated wealth of $25 billion. He resides in London, has his company registered in the Netherlands, but still holds an Indian passport. Although Mittal Steel was already the world's biggest steel company, his king-sized ambitions were evident when he took over steel giant Arcelor to create a new steel behemoth -- Arcelor-Mittal. L N Mittal left India in the mid-1970s to start his career. He was sent to Indonesia by his father to shut down the family's ailing steel plant and sell the land. Instead, young Mittal saw an opportunity and turned the plant around. To prove that this was no fluke, Mittal acquired a 1.3 million tonne, Iscot Steel plant in Trinidad & Tobago, which was losing $100,000 a day. One year of Mittal-style management and it was making profits, the LN Mittal legend was born. That move helped him get into America. The Mexican government seeing the success that Mittal made of Iscot, asked him to take over their ailing steel plants in 1992. But it was not all that smooth. In 1994 Mittal had differences with his brothers and father, and went
on to form his own company. The following year Mittal entered the European market, acquiring the 5 million tonne Kazakh steel plant, Karmet.

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