Due to globalization, companies around the world are forced to change their strategies so as to compete in the global market. The most common way to survive the increasing competition is through internal expansion. However, over century, mergers and acquisition has challenged this tradition especially in steel industries. Despite the steel industry has experienced low pressure towards globalization in the past, there has been the need to make small movements of reorganization to increase competitiveness such as the gradual changes that marked the turning point of Mittal Company in 2006. The company claimed number one spot through mergers and acquisition, after successfully acquiring Arcelor. The case of Mittal and Arcelor can help to analyze the current scenario of mergers in steel industry. In 2005, Mittal was formed as a result of combining American Steel Industry, ISG. The company is based in London with its headquarter in Netherlands making 45 percent sale of steel in Europe. The company was formed by Mr. Lakshmi Niwas Mittal, a businessman whose success was built on purchasing loss-making state owned mills and making them into useful products in 1976. His success was notable when he entered U.S market when he became an important flat product maker and an automotive supplier. As a result, Mittal Company is the largest producer of steel in America, Europe and Africa and, has been expanding its presence in Asia (Hill, 2011).

In terms of merger issue and expansion of the steel industry in different countries, Mittal Company was able to establish itself as compared to Greenfield Company. Mittal decided to branch out with select stakeholders that they could build alliance with. The major concern for Mittal Company was with the governments of different countries and Mittal had to agree to a numbe of issues. These issues included guaranteeing healthcare benefits and pensions, as well as ensuring restraining any kind of job losses. In addition, Mittal Company opted for horizontal merger between itself and the Arcelor Company. The rationale behind such mergers was to hold the two top market positions in the global competition; a combination that created a vast enterprise controlling almost 10 percent of the world steel market. Conversely, Greenfield Company had to deal with innumerable problems including land acquisition and the rehabilitation for displaced persons for the Greenfield projects. As a result, this somewhat affected Greenfield’s growth plans. There were several upcoming challenges that affected the upcoming of Greenfield Company which included the Environmental Clearances in different countries. All these problems made Greenfield Company’s global slowdown (Hill, 2011).

Mittal Company had some benefits that it brought into every country which it expanded its business. Mittal company has had a reputation of creating many jobs annually. For instance, it employs over 254,000 people annually with 90,000 employees in Europe. In particular, Mittal industry has created a lot of employment opportunities in France where it has 50 industrial activities which have provided employment opportunities for about 20,000 people directly. Mittal industry also invests in research and development site such as in France, it had employed 800 strong research teams in Lorraine region (Morrison, 2008).

The business of manufacturing steel in different countries by Mittal has unfortunately been associated with pollution of air, water and land. For example, in 2006, Mittal Company had been blamed for the increased cases of cancer problems in Cleveland. Pollutants from Mittal Cleveland had worsened the asthma problems for over 390, 000 residents who were living within five miles of the plant. The residents of Cleveland inhaled plant’s emissions such as sulphur dioxide that triggered asthma (Morrison, 2008).

Arcelor offer to form a merger with Mittal was perceived with aggression. The managers of the two companies were on the opposite sides of the offer. They felt that the offer did not provide a strategic fit between the two companies and that the price offered was too low. For them, the takeover meant that they would lose power that they enjoyed when the companies were operating independently. Arcelor employees were scared that the takeover would result in their salaries being cut down. Additionally, the employees assumed that the formation of the larger merger was hostile and would make them have a lower status than the employees of the Mittal Company. The merger issue not only scared the employees of Arcelor, but it also to the different governments with stakes in Arcelor. They were afraid that the employees from different countries would lose their jobs because they were not consulted before the bid. However, these objections by different governments were not reasonable since Mittal was ready to modify agreements so that it could incorporate the concerns that were raised such as the loss of jobs for the employees. In that regard, they even agreed to provide pensions and healthcare benefits and restrained any kind of job losses. Arcerol Company had even tried to raise the bid for other steel companies such as Severstal Russian Steel Company. Mittal company agreed to make Luxembourg as headquarter of the newly formed company and passed the merged body to be controlled by CEO, Mr. Aleksei Mordashov of the Russian company rather than remaining a European company (Morrison, 2008).

References

Hill, C.W.L. (2011). International business: Competing in the global marketplace (8th Ed). New

York, NY: McGraw-Hill/Irwin

Morrison, J. (2008). International business: Challenges in a changing world. New York, NY:

Palgrave Macmillan