Issues Paper

Introduction

In present world, overall contribution of steel industry to the construction activities is a big deal in business field. Arcelor Mittal is such kind of company which is leading in all these activities. Their organization size, annual revenue, type of business, service or products as well as the constraints to removing the problems are to be considered as very important. In addition to this, it is also important to analyze the strategy of Arcelor Mittal Steel industry used to expand into markets on the basis of evaluation of competitor environment from the perspective of demographic, economic, socio-cultural, technological, global, and political factors.

General description of Arcelor-Mittal

Size

Arcelor Mittal is now leading as the world’s largest and most global steel company, which comprises 32 million personnel in more than 60 countries. Arcelor Mittal is the result of merger from the agreement to combine both Arcelor and Mittal steel. “The merger of Arcelor and Mittal into ArcelorMittal in June 2006 resulted in the creation of the world’s largest steel company. With 2007 revenues of $105 billion and its steel production accounting for about 10 percent of global output, the behemoth has 320,000 employees in 60 countries, and it is a global leader in all its target markets” (DePamphilis, 2009, p. 1). In 2006, the two companies reach an agreement to combine in a merger of equals. Consequently, it is three times the size of its nearest competitor and maintaining their business activities in more than 60 countries.

Annual revenue

The market capitalism of Arcelor Mittal was $61.25B as of 10 December 2009. “Arcelor Mittal is the leader in every major global area of automotive, construction, household appliances and packaging, R&D and technology as well as suppliers of sizeable captive raw materials and outstanding distribution networks” (Nibbe, 2006, p. 47).

This industry is now in a better position because of the global demand growth and the certainty of consolidated industry. The industry is capital-intensive: average annual revenue per worker is close to $300,000 which was taken from the financial statements of Arcelor Mittal and it is said that a firm sells for $300000, on account, merchandise inventory costing $240000 (Stickney. Roman and Katherine, 2009, p. 225). The share price of Arcelor Mittal which will help to understand its financial position is given below-

Share price

Time

Price

D/D-1

Amsterdam

12/09

€ 27.15

0.74%

Brussels

12/09

€ 27.15

0.74%

Luxembourg

12/09

€ 27.05

0.00%

Madrid

12/09

€ 27.20

1.08%

New York

12/09

$ 40.62

3.33%

Paris

12/09

€ 27.15

0.74%

(source: ArcelorMittal, 2009)

Product of Arcelor Mittal

In the discussion of steel industry, one company, Arcelor Mittal should be named. Steel industry is to be said as the key element to improve and maintain the construction activities of a country.  The success of Arcelor Mittal rely on gathering and analyzing the general industry and competitor environment to assess their potential for global growth and construct strategies for profitability.

Competitor

JFE holding, Nippon, TATA steel, United States steel are considered as the main competitor of Arcelor Mittal steel industry. The five forces model of porter is a strategy to make the analysis of attractiveness of an industry structure.

Buyers’ power

It is to be said that buyers have higher power when they have more choices. In the steel industry a huge number of steelmakers are now in the market. So the Arcelor Mittal has no way to ignore the buyer’s expectation. Moreover, the market is now more competitive and complex than it was before.

Suppliers’ power

It is the opposition of buyers’ power. When there is a fewer number of supplier that means when the buyers have fewer number of choices from whom to buy, then the suppliers’ power is to be said higher. Supply provides the services that help managing supplies. The Arcelor Mittal industry gets their raw materials from various sources. It depends on the supply from Germany, Italy, Belgium, Spain and France.

Threat of substitute

Availability of alternatives product makes threat of substitute products or services high. When the same or better product or services at reasonable price is available, then the buyer would turn to that product or services. The Arcelor Mittal is such type of company that is out of this kind of threat. It is because the all possible substitute or alternatives are not competitive with the products of Arcelor Mittal.

Threat of new entrants

When it is easy for new competition to enter the market then without question it can be said that the threat of new entrants is high. A small company may run their business happily if they earn a very little amount comparatively to the existed company. Such type of example is to be considered as the threat of new entrants.

Rivalry

The rivalry can be said high when the industry is considered to be undisciplined. The background of the industry is very vital which determine the level of rivalry among the company. The Arcelor Mittal Steel industry has controlled all of its rivalry issues and that’s why they are now in such a position.

The constraint issues

The Arcelor Mittal Company recognizes their success depends on maintenance and continuation of “license to operate”. The management system of the company emphasizes to maximize the opportunities and minimize risks for better social development and improve competitive advantages. The company generally evaluates their market position and then tries to segment. Now they are launching their activities worldwide and all of them are succeed. The company has focused mainly on the steel production facilities and their operations in Mexico, Ukraine, USA, Poland, Spain, Romania, Algeria, Canada and the Kazakhstan. In future they will seek to increase the production facilities and then to their largest mining operations. The most crucial move from the Arcelor Mittal merger is in the consolidation of the world steel industry. ArcelorMittal’s management viewed the merger as an opportunity to conduct interviews and surveys with employees to gain an understanding of their views about the two companies (DePamphilis, 2009, p. 1). In 2006 Mittal and Arcelor merged their laser-welding steel activities with Noble International, a leader in the niche industry (Hoover, 2007, p.221). As a result, this company is leading the consolidation process in the steel industry of the world. “In the end and after a bitter fight, pragmatic shareholder interests won out and the merger proceeded. Arcelor-Mittal is now the world's leading steel company and operates 61 plants across 27 countries (Moral and Abbott, 2009, p. 260).

The Arcelor Mittal has established and committed a 12 board commitment. The 12 broad commitment topics have been developed and these commitments address specific areas of performance, such as reducing greenhouse gas emissions. They also focus on licensure, regulatory, financial as well as corporate governance, social dialogue and labor standards.

The R&D is the most important tool for distributing Arcelor Mittal’s goals in technological innovation and supporting its prospect growth. It emphasizes to face the forthcoming technological challenges and match them with the existing technology. The R&D mission is to:-

  1. To invent the steels and related solutions of tomorrow
  2. To Improve and develop the competitiveness of the company
  3. Contribute to sustainable development by reducing environmental impact.
  4. Upgrade the scientific knowledge

Other issues

Political and legal environment has a major impact on the Marketing decision of a company and Arcelor Mittal is not out of this. In many cases, it has been seen that the government does not allow the equal facilities because of the relation with the company’s origin country. The political relations such as Russia-U.S.A, China-U.S.A. or China-India or so on, have a direct impact in the business activities. It influence and limits the boundaries of business. On the other hand, political issues also create new opportunities. For instance, obligatory recycling rules and regulations have provided the recycling industry a major boost and spurred the formation of dozens of new companies making new products from recycled materials.

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