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Ispat International N.V.

was a steel producing company with operations in Mexico, Trinidad, Canada, Germany and the United States. The company is specialized in the integrated mini-mill process and has a wide range of flat & long steel products, including slabs & wire rods. Lakshmi Mittal was the founder and chairman of the Ispat Group. Born in Safalpur, India, he is reportedly the richest Indian and a Forbes 100 Billionaire" is the mastermind of the Mittal family empire and new owner of Sparrows Point, has managed to move up from ownership of a single steel plant in Calcutta in 1976 to become the single largest owner of steel properties on the globe, valued at $30 billion. Mittal (who does not discourage westerners from pronouncing his name me-tal, as in The Metal King) accomplished his alchemy by scooping up distressed mills in obscure corners of the world and turning them around through tough management practices. His quest to become the greatest steel tycoon in history hasnt been hurt by his political connections in his adopted land of Britain or by the Wests economic policies that place a premium on privatization and make it easy for clever businessmen to transmute leaden public-sector assets into private gold. Mittal moved to Calcutta when his father bought a small steel mill. Mittal worked at his fathers company, which he inherited. In Calcutta he also met his wife, Usha, the daughter of a moneylender, who would become a key adviser to the nascent tycoon. Ispat was taken public in 1997 and traded on the Amsterdam and New York stock exchanges. Backed by investor cash, the Mittal-controlled company made its first foray into American steel in 1998 by acquiring Inland Steel, the sixth largest U.S. steelmaker. By 2004, the Ispat/LNM empire spanned four continents and included steel works in 14 countries. Among them, Sidbec and Acufil (Canada); Hamburger Stadtwerk, Stadtwerk Ruhr, and Walzdraht Hochfeld (Germany); Unimetal, Trefileurope, and SMR (France); Ispat Shipping (UK); Polska Stal and Czestochowa (Poland); Nova Hut (Czech Republic); Annaba (Algeria); Caribbean Ispat (Trinidad); Ispat Mexicana (Mexico); Ispat Indo (Indonesia), Ispat Petrotub, Ispat Siderurgica, and Ispat Tepro (Romania); BH Steel and Zenica (Bosnia Herzegovina); and Ispat Iscor (a partnership in South Africa). The Ispat Group takes over the Iron & Steel Company of Trinidad and Tobago, Sidemgical Del Balsar SA, Mexico, and additional units in Canada, Germany and Ireland. In 2004, Ispat International merged with LNM to form Mittal Steel. The new company immediately bought International Steel, and merged withArcelor the next year to form ArcelorMittal.

Technological leadership ArcelorMittal is one of the most technologically advanced steel companies in the world, operating a range of modern steel making technologies. These include DRI-EAF, Corex-Midrex-CSP and BF-BOF. Our steel-finishing plants, I/N Tek and I/N Kote (both joint ventures with Nippon Steel), have set new standards for automation, productivity and quality in the production of cold-rolled and galvanised steels. ArcelorMittal has two state-of-the-art research and development centres with global responsibility for process and product development. Our Research and Development centre located in Chicago, USA, is primarily devoted to research on flat products. Our Centre of Research located in Gandrange, France, is engaged principally on long products research. Over the years, we have developed the most comprehensive portfolio of advanced high strength steels for the automotive industry and innovative products for the appliance and electric motor industries (including advanced high-strength steels, stainless substitute steels and fingerprint-resistant steels). ArcelorMittal was among the first steel makers to participate in the customer product design process. We are a leader in process modeling techniques focused on quality improvement, product development and cost reduction. Our global application development team continues to work closely with customers in areas such as crash management systems, weight efficiency, motor design efficiency and global sourcing. Our scientists have been awarded worldwide recognition for their work in these fields. ArcelorMittal is committed to building strong, long-term relationships with customers through timely product development and effective engineering support.
Slide 14: Entry by potential competitors is enormous:- Entry barrier plays an important role. In case of steel industry these are the factors creating very high entry barrier for new entrants. 1) Huge capital investment:- Huge capital investment is required for establishing steel manufacturing facility. 2) Economies of scale:- In case of steel industry economies of scale is achieved at very large scale. Due to its large size ArcelorMittal Steel enjoys high magnitude of economies of scale. It has ownership on factories in many countries(by acquisition ) so uses 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. PORTERS FIVE FORCE MODEL 12/11/2010 NAGABHUSHAN Slide 15: 3) Absolute cost advantage:- Established companies such as ArcelorMittal Steel has absolute cost advantage over new entrants because of its : Superior production It gave lower cost for input materials as it acquired the iron and coal mines 3) Going for low labor cost 4) Government Regulation:-Mittal Steel enjoyed very low tax rate tax for few initial years in few countries 12/11/2010 NAGABHUSHAN Slide 16: Rivalry among established competitors:- 1)By acquiring large number of Steel Companies Mittal Steel became large and powerful and gained more control on price. 2) Large number of steel industries are in government hands. Management of these companies find it difficult to compete with private players such as Mittal Steel. 3)Since Mittal Steel was ready to acquire the sick government units it gave an easy exit barrier to these industries and weakened the competition. 4)Other big players were present in the market. But Mittal Steel 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. 12/11/2010 NAGABHUSHAN

Slide 17: Buyer Power: It buyers are appliance (white goods), automotive (passenger vehicles,trucks, auto components ), building and construction (including housing and infrastructure),fabrication (sheet steel and metal fabricating industry), oil and gas(including pipeline), packaging (tin plate, tin-free and aluminum ), rail transport and marine shipbuilding industries. 1) Building and construction, fabrication, oil and gas and packaging industries are fragmented so they have less bargaining power. Although, some of the buyers are large players but in comparison to large steel industries they are dwarfed in size. Comparatively they have less bargaining power. 12/11/2010 NAGABHUSHAN Slide 18: Supplier Power Since coal and iron mines are large in size and few in number and controlled by large player, their bargaining power can significantly effect the steel industry business. 1) Mittal Steel adopted the strategy ,before acquiring any industries, they first ensured the iron ore and coal supply from mines. 2) Mittal Steel buys a large chunk of supply from its suppliers and retains the bargaining power to itself. Threat of Substitute 1) Steel has currently no substitute at its price level. 2) At some places(utensils, white goods) steel can be substituted by natural fibers and other metals but that is at very small scale. 3) Due to new emerging markets such as China, India, South East Asia consumption of steel have risen sharply in recent decades. 12/11/2010 NAGABHUSHAN

Ranking (2009) 1 2 3 4 5 6 7 8 9

Millions of tonnes(2009)[1] 77.5 31.3 31.1 26.5 25.8 20.5 20.5 20.1 16.7

Millions of Millions of tonnes (2008)[2] tonnes (2007)[2] 103.3 35.4 34.7 37.5 33.0 23.3 24.4 16.0 19.2 116.4 28.6 31.1 35.7 34.0 22.9 26.5 16.2 17.3



ArcelorMittal Luxembourg Baosteel Group POSCO Nippon Steel JFE Jiangsu Shagang Tata Steel Ansteel Severstal China South Korea Japan Japan China India China Russia

1 15.3 17.7 16.2 Evraz Russia 0