Mittal Steele Case Study (Case Study Sample)

Mittal Steele
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The Closing Case: Lakshmi Mittal Steele and the Growth of Mittal Steele
A number of forces drove Mittal Steel to begin expanding across national borders. Mittal’s major source of motivation was the fact that several steel firms around the world suffered immensely due to poor management. Mittal purchased the poorly run steel firms when they came up for sale, injected them with adequate capital and enhanced their efficiency by ensuring that they adopted modern production technology (Hitt et al, 2007). Incidentally, Mittal’s success having established two major foreign operations in Trinidad and Indonesia after the steel company had been born in India was just the start of several decades of success in global steel manufacturing. Lakshmi (the Company CEO) bought Sibalsa of Mexico in 1992. Sibalsa was a state-owned company undergoing privatization. Apparently, the global industry (steel industry) had experienced a major slump for nearly three decades owing to excess capacity coupled with slow growth in demand. A number of substitute materials replaced steel in several applications (Hitt et al, 2007). However, Lakshmi saw the ghastly development in global steel industry as an opportunity to purchase the assets of troubled companies at comparatively cheaper prices. Similarly, Lakshmi was optimistic that the global steel industry would ultimately turn a corner for the better. The company was keen to purchase more assets of troubled steel makers for purposes of achieving more growth globally in the near future.
Mittal Steel expanded into different national through mergers and acquisitions as opposed to Greenfield Investment. The main reason that motivated or influenced the tendency to expand through mergers and acquisitions was the need to reduce production cost and take advantage of the increasing number of troubled steel companies globally by purchasing them (Hitt et al, 2007). In his Indonesian plant, Lakshmi directly purchased reduced iron pellets rather than smelting iron ore. By purchasing reduced iron pellets, he was able to reduce cost of production. The supplier of the iron pellets was a struggling steel company in Trinidad, owned by the state. Trinidadians asked Lakshmi to turn their steel firm around having been impressed by his immense success in Indonesia (Hitt et al, 2007). Although this took place on contractual basis, Lakshmi successfully managed to run the Trinidad plant by setting up another company to run it. Eventually, Lakshmi purchased the Trinidadian steel plant after recording a successful turnaround.
Mittal Steel brought about a number of benefits to countries that it entered. For instance, offering the company for sale to the public (IPO) through the New York stock exchange and the Amsterdam stock exchange provided the citizens with an opportunity to become part of Mittal ownership. The company also created employment opportunities in countries where it entered, for instance, Netherlands, Indonesia and Trinidad. However, Mittal faced a number of setbacks that constrained his ambition (Hitt et al, 2007). Capital constraint was among the major setbacks that Lakshmi experienced in his attempt to attain global growth. Lakshmi decided to take Mittal Steele public where there was less limitation to the liquidity of the capital markets. India and Indonesia were not preferred destination for this plan because the liquidity of the capital markets was arguably limited. Accordingly, he moved the headquarters of Mittal Steele to Rotterdam, the Netherlands.
Mittal Steel has achieved several benefits from entering different nations. For instance, the company raised a whooping $776 million in sale of Mittal Steele to the public through the two stock exchanges. Mittal Steele purchased two more steel makers in Germany in 1997 with the capital from the Initial Public Offer. He also purchased Inland Steel Company in 1998. Inland Steel Company is a U.S. steel maker (Gaughan, 2013). Meanwhile, more acquisitions followed in the subsequent years in Poland, Algeria, and France among other nations. Mittal purchased International Steel in 2005. International Steel was a company fundamentally established after integration of troubled steel makers in the U.S. Global demand for steel was booming again, driven largely by growing demand for steel in China. Lakshmi steered the family-owned company (Mittal Steele) to become the world’s largest steel company. He started out from a humble beginning in India back in the early 1970s. During this period, the company was facing narrow/limited ...