SWOT AND PESTEL FOR ARCELORMITTAL
ArcelorMittal is the leader in all major global steel markets, including automotive, cons constru truct ctio ion, n, hous househ ehol old d appl applia ianc nces es and and pack packag agin ing, g, with with lead leadin ing g R&D R&D and and technology, as well as sizeable captive supplies of raw materials and outstanding distribution networks !ith an industrial presence in over "# countries spanning four continents, the $ompany covers all of the key steel markets, from emerging to mature %hroug %hrough h its core core value values s of sustai sustaina nabil bility ity,, uality uality and leader leadersh ship, ip, Arcel ArcelorM orMitta ittall commits to operating in a responsible way with respect to the health, safety and well' being of its employees, contractors and the communities in which it operates (t is also also commit committed ted to the sustai sustaina nable ble manage managemen mentt of the enviro environme nment nt (t takes takes a lead leadin ing g role role in the the indu indust stry ry)s )s effo effort rts s to deve develo lop p brea breakt kthr hrou ough gh stee steelm lmak akin ing g technologies and is actively researching and developing steel'based technologies and solutions that contribute to combat climate change (n "##*, ArcelorMittal had revenues of +-. billion and crude steel production of /0" million tonnes, representing appro1imately per cent of world steel output ArcelorMittal is listed on the stock e1changes of 2ew 3ork 4M%5, Amsterdam 4M%5, 4 M%5, 6aris 4M%5, 7russels 4M%5, 8u1embourg 4M%5 and on the 9panish stock e1changes of 7arcelona, 7ilbao, Madrid and :alencia :alencia 4M%95 ArcelorMittal operates across ;- sites in the <= with its head office based in 8u1embourg (ts international revenues in "##; were +.">* billion and its global crude steel production was .#00 million tonnes, representing appro1imately .#? of world steel output ArcelorMittal owns both steel plants, and mines which supply raw materials for steel production PESTLE Framework Political factors
ArcelorMittal operates, or proposes to operate, in a large number of developing countries (n recent years, many of these countries have implemented measures aimed at improving the business environment and providing a stable platform for economic development Risks of widespread insolvency, mass unemployment and the deterioration of various sectors of the economies where ArcelorMittal operates increased during crisis Any slowdown in the development of these economies could have a adverse effect on Arcelor Mittal)s business, financial condition, results of operations @or @or e1am e1ampl ple, e, in Dece Decemb mber er "##; "##; the the @ren @rench ch $omp $ompet etit itio ion n $oun $ounci cill rule ruled d that that subsidiaries of ArcelorMittal had agreed with their competitors to fi1 prices and allocate markets and customers during the .*** to "##> period and imposed a fine of BC0#./; million, although the fine was subseuently reduced on appeal in
anuary "#.# to BC>" million Also, in 9eptember "##;, 9tandard (ron !orks filed a class action complaint in =9 federal court against ArcelorMittal, ArcelorMittal =9A (nc and other steel manufacturers, alleging on behalf of direct purchasers that the defendants conspired since "##- to restrict the output of steel products in order to affect steel prices %he political systems in developing countries are vulnerable to their populations) dissatisfaction with reforms, social and ethnic unrest and changes in governmental policies, any of which could have a material adverse effect on Arcelor Mittal)s business, financial condition, results of operations or prospects and its ability to continue to do business in these countries Economic Factor
Arcelor Mittal)s activities and results are substantially affected by international, national and regional economic conditions ArcelorMittal operates and sells products globally, and, as a result, its business, financial condition, results of operations or prospects could be adversely affected by fluctuations in e1change rates As 9teel prices are volatile, reflecting the highly cyclical nature of the global steel industry, :olatility in the prices of raw materials, energy and transportation, including mismatches between trends in prices for raw materials and steel, as well as limitations on or disruptions in the supply of raw materials, could adversely affect on Arcelor Mittal)s business, financial condition, profitability %he various industries sector in the economy that are substantial consumers of steel products, like automotive industry 4to which Arcelor Mittal shipped appro1imately *; million tonnes of steel in "##* after having shipped .-# million tonnes in "##;5 and the construction industry, and the bankruptcies of large companies in such industries have effected the financial operations of Arcelor Mittal Social Factor
ArcelorMittal has already embedded sustainability principles into its general contracts, and set out clear e1pectations in the areas of safety, health, social dialogue, and environment (t also reuires suppliers to comply with all the relevant laws and regulations @or e1ample, %echnical
#,### training days throughout the year Technoloical Factor
ArcelorMittal is the biggest DR( 4Direct Reduced (ron5 in its
$E" reduction of some 0#? through the reduction of iron ore by hydrogen, and the separation and recovery of $E" from blast'furnace gas & establish the technology by around "#0# industrialize the technology by around "#-# Research and Development plays a key role in Arcelor Mittal)s strategy to lead innovation in the world of steel %he Froup employs .,"## researchers in .0 research centres around the world (n "##, =9+.;- million was spent on research ArcelorMittal have made tremendous progress in recent years in new steel grades with greater strength, better and environmentally'friendly protection against corrosion %he car manufacturers want to reduce the weight of their vehicles by using thinner, but stronger steel ensuring good deformability %hey then have ma1imum freedom in designing strong and elegant bodywork Leal Factor
ArcelorMittal is subject to stringent health and safety laws and regulations that give rise to significant costs and liabilities Despite Arcelor Mittal)s significant efforts to monitor and reduce accidents at its facilities, there remains a risk that health and safety incidents may occur, which may result in costs and liabilities and negatively impact Arcelor Mittal)s reputation or the operations of the affected facility %he legal systems in some of the countries in which ArcelorMittal operates remain less than fully developed, particularly with respect to property rights, t he protection of foreign investment and bankruptcy proceedings, generally resulting in a lower level of legal certainty or security for foreign investment than in more developed countries Assets in certain countries where ArcelorMittal operates could also be at risk of e1propriation or nationalization, and compensation for such assets may be below fair value @or eg, the :enezuelan government has announced a policy of selective nationalization of companies operating in the country, and has effected a number of nationalizations Although ArcelorMittal believes that the long'term growth potential in developing markets is strong, and intends them to be the focus of the majority of its near'term growth capital e1penditures, legal obstacles could have a material adverse effect on the implementation of Arcelor Mittal)s growth plans and its operations in such countries En!ironmental Factor
ArcelorMittal is the biggest DR( 4Direct Reduced (ron5 in its , it has been implicated in unduly
influencing 8iberian politicians with donations of four wheel drive vehicles and now it wants to build at least two mega'steelmills in (ndia, depriving indigenous people of their ancestral land SWOT Anal"sis Strenths
Resource & $apabilities 4people and raw material5' Arcelor Mittal strength is in its people working for the company Making each and every person working on our behalf feel valued More than 0##,### people have been trained since "##/%he world)s largest producer of direct reduced iron 4DR(5 with total production of appro1imately ;. million tonnes in "##; Gigh Research & Development %eam' Ever .,>## full time researchers with 7udget of appro1imately +0## million And has the number one R&D in the industry Distribution 2etwork' 2etwork of more than >-# facilities for more than "##,### customers :alue'added and customised steel solutions through further steel processing to meet specific customer reuirements Weaknesses
Gigh investment cost with low disruption in supplies while 6olitical $onflicts increase as in case when Arcelor Mittal wants to enter into $hina but due to regulations on @D( in 9teel (ndustry, Arcelor Mittal faced many challenges into setting up an business entity in $hina 8ow hanging fruits are gone, we have to deal with huge investments to keep up with ever'growing demand and to cope with years of underinvestment Delayed shifts until weather'related and geo'political events take place and 9tringent regulations emerge to control investment and energy choices %he increasing scarcity and cost of resources, together with tightening environmental regulations, are pressuring steelmakers to improve their operations in two waysJ by decreasing the energy intensity of their processes and by reducing environmental pollution
2ew markets' Arcelor Mittal is in talks with (ndian government over joint venture with 9A(8 49teel Authority of (ndia5 to tap the market of (ndian 9teel Market, by getting ahead from its rival 6E9$E for not getting into joint venture 2ew acuisition' Arcelor Mittal acuired a "*? stake in =ttam Falva 9teels for Rs >"" crore through an open offer, taking its holding in the domestic firm to 0>>"?
"##J !ith Acuisition of Me1ico)s 9icartsa, Arcelor'Mittal 7ecame the Me1ico)s 8argest 9teel 6roducer "##-J Acuisition of a stake in Gunan :alin K (9F Acuisition completed K Mittal 9teel
8arge integrated international metal manufacturers including 6E9$E and Alcan have announced plans for e1pansion in (ndia %ata $orus in
(t has been understand from long time that the steel industry is an static and unprofitable one 6roducers were nationally based, often state owned and freuently unprofitable ' between the late .**#s and "##0, more than -# independent steel producers went into bankruptcy in the =9A %he twenty'first century has seen a revolution @or e1ample, during "##, Mittal 9teel paid +0-bn 4O.*bnH A";bn5 to buy
for +.0bn %hese high prices indicated considerable confidence in being able to turn the industry round
New entrants
(n the last .# years, two powerful groups have entered world steel markets @irst, after a period of privatisation and reorganisation, large Russian producers such as 9everstal and
9teel is a nineteenth'century technology, increasingly substituted for by other materials such as aluminium in cars, plastics and aluminium in packaging and ceramics and composites in many high'tech applications 9teel)s own technological advances sometimes work to reduce needJ thus steel cans have become about one' third thinner over the last few decades ($"er #ower
Iey buyers for steel include the global car manufacturers, such as @ord, %oyota and :olkswagen, and leading can producers such as $rown Goldings, which makes one' third of all food cans produced in 2orth America and
%he key raw material for steel producers is iron ore %he big three ore producers ' $:RD, Rio %into and 7G6 7illiton ' control /# per cent of the international market (n "##-, iron ore producers e1ploited surging demand by increasing prices by /" per centH in "## they increased prices by .* per cent $oncentrated suppliers' !here just a few producers dominate supply, suppliers have more power over buyers %he iron ore industry is now concentrated in the hands of three main producers, leaving the steel companies, relatively fragmented, in a very weak negotiating position for this essential raw material 9upplier competition threat' 9uppliers have increased power where they are able to cut out buyers who are acting as middlemen %hus steel industries have been able to negotiate tough contracts with different companies, governments as the rise of infra'
construction & real estate industry has allowed them to create a direct route to customers %his is called forwards vertical integration, moving up closer to the ultimate customer Most organisations have many suppliers, so it is necessary to concentrate the analysis on the most important ones or types (f their power is high, suppliers can capture all their buyers) own potential profits simply by raising their prices Com#etiti!e ri!alr"
%hese wider competitive forces imply direct competitive rivalry between an organisation and its most immediate rivals %hus low barriers to entry increase the number of rivalsH powerful buyers with low switching costs force their suppliers to high rivalry in order to offer the best deals %he more competitive rivalry there is, the worse it is for incumbents within the industry $ompetitive rivals are organisations with similar products and services aimed at the same customer group 4ie not substitutes5 (n the
7y e1amining trends in the wider 4macro5 environment it is possible to identify product and market opportunities %he need for sustainable construction presents many opportunities for ArcelorMittal to add value, and develop a competitive advantage =sing 6<9%8< analysis is an e1cellent tool to e1amine the macro environment and by linking this tool with future trends it is possible to develop products for future opportunities %hus 6<9%8< is a useful tool for ArcelorMittal to use (t makes sure that factors which may affect it in the future have been taken into account (t helps ArcelorMittal plan more sustainable development over the globe (t can be seen clearly that 6<9% analysis gives an organisation a clear advantage for the future by predicting changes in the e1ternal environment %his gives them the opportunity to prepare for the change and, for e1ample in the event of a high economy, take full advantage and capitalise on this change %he number of macro'environmental factors is virtually unlimited (n practise, an organisation must prioritise and monitor those factors that influence its industry %he future of the global steel industry is in the hands of its key playersJ the companies that produce the world)s steel and the regulatory bodies that govern its trade !e are convinced that the industry has a real opportunity to undertake a radical transformation'one that will render it leaner, more efficient, and more profitable %his transformation will reuire shared insight and understanding, as well as a huge amount of vision, determination, and courage (t will also reuire strong leadership to implement bold new value creation strategies @or the industry to develop in a positive direction, this is the work that must be done
