Case Study Description of Mittal's Pursuit of Arcelor (A)
Lakshmi Mittal, CEO of Mittal Steel, a UK-based company with Indian roots, took advantage of a weakened Arcelor that had successfully won a bidding war for Canadian steel company Dofasco, with an unsolicited bid to buy the company. Mittal's plans for acquiring Arcelor were initially thwarted by concerted opposition from Arcelor's board and several European governments. To Mittal's further surprise, on May 26, Arcelor orchestrated a merger with the Russian steelmaker Severstal. Although the proposed merger did not offer Arcelor shareholders as much value as Mittal's deal, Arcelor had structured the deal in such a way that it did not require shareholders' approval. Mittal wondered how he should respond to the Severstal deal. Did it make sense to continue pursuing Arcelor or should he look for other ways to expand his steel empire?
Swot Analysis of "Mittal's Pursuit of Arcelor (A)" written by Paul M. Healy, Penelope Rossano includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Arcelor Mittal's facing as an external strategic factors. Some of the topics covered in Mittal's Pursuit of Arcelor (A) case study are - Strategic Management Strategies, Corporate governance, Cross-cultural management, Mergers & acquisitions, Negotiations and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Mittal's Pursuit of Arcelor (A) casestudy better are - – cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, increasing energy prices, central banks are concerned over increasing inflation, technology disruption, competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%,
supply chains are disrupted by pandemic , wage bills are increasing, etc
Introduction to SWOT Analysis of Mittal's Pursuit of Arcelor (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Mittal's Pursuit of Arcelor (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Arcelor Mittal's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Arcelor Mittal's operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Mittal's Pursuit of Arcelor (A) can be done for the following purposes –
1. Strategic planning using facts provided in Mittal's Pursuit of Arcelor (A) case study
2. Improving business portfolio management of Arcelor Mittal's
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Arcelor Mittal's
Strengths Mittal's Pursuit of Arcelor (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Arcelor Mittal's in Mittal's Pursuit of Arcelor (A) Harvard Business Review case study are -
Ability to lead change in Finance & Accounting field
– Arcelor Mittal's is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Arcelor Mittal's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Superior customer experience
– The customer experience strategy of Arcelor Mittal's in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy in the Mittal's Pursuit of Arcelor (A) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Low bargaining power of suppliers
– Suppliers of Arcelor Mittal's in the sector have low bargaining power. Mittal's Pursuit of Arcelor (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Arcelor Mittal's to manage not only supply disruptions but also source products at highly competitive prices.
Strong track record of project management
– Arcelor Mittal's is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Arcelor Mittal's is one of the most innovative firm in sector. Manager in Mittal's Pursuit of Arcelor (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Successful track record of launching new products
– Arcelor Mittal's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Arcelor Mittal's has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
High switching costs
– The high switching costs that Arcelor Mittal's has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Effective Research and Development (R&D)
– Arcelor Mittal's has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Mittal's Pursuit of Arcelor (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Arcelor Mittal's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Mittal's Pursuit of Arcelor (A) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Diverse revenue streams
– Arcelor Mittal's is present in almost all the verticals within the industry. This has provided firm in Mittal's Pursuit of Arcelor (A) case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Learning organization
- Arcelor Mittal's is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Arcelor Mittal's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Mittal's Pursuit of Arcelor (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses Mittal's Pursuit of Arcelor (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Mittal's Pursuit of Arcelor (A) are -
Slow decision making process
– As mentioned earlier in the report, Arcelor Mittal's has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Arcelor Mittal's even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Lack of clear differentiation of Arcelor Mittal's products
– To increase the profitability and margins on the products, Arcelor Mittal's needs to provide more differentiated products than what it is currently offering in the marketplace.
Low market penetration in new markets
– Outside its home market of Arcelor Mittal's, firm in the HBR case study Mittal's Pursuit of Arcelor (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Mittal's Pursuit of Arcelor (A), in the dynamic environment Arcelor Mittal's has struggled to respond to the nimble upstart competition. Arcelor Mittal's has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Mittal's Pursuit of Arcelor (A), it seems that the employees of Arcelor Mittal's don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Skills based hiring
– The stress on hiring functional specialists at Arcelor Mittal's has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Aligning sales with marketing
– It come across in the case study Mittal's Pursuit of Arcelor (A) that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Mittal's Pursuit of Arcelor (A) can leverage the sales team experience to cultivate customer relationships as Arcelor Mittal's is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of Arcelor Mittal's is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Arcelor Mittal's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Arcelor Mittal's to focus more on services rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Arcelor Mittal's has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Need for greater diversity
– Arcelor Mittal's has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
No frontier risks strategy
– After analyzing the HBR case study Mittal's Pursuit of Arcelor (A), it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Opportunities Mittal's Pursuit of Arcelor (A) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Mittal's Pursuit of Arcelor (A) are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Arcelor Mittal's can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Mittal's Pursuit of Arcelor (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Arcelor Mittal's can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Finance & Accounting segment.
Creating value in data economy
– The success of analytics program of Arcelor Mittal's has opened avenues for new revenue streams for the organization in the industry. This can help Arcelor Mittal's to build a more holistic ecosystem as suggested in the Mittal's Pursuit of Arcelor (A) case study. Arcelor Mittal's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Arcelor Mittal's can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Arcelor Mittal's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Buying journey improvements
– Arcelor Mittal's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Mittal's Pursuit of Arcelor (A) suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Learning at scale
– Online learning technologies has now opened space for Arcelor Mittal's to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Leveraging digital technologies
– Arcelor Mittal's can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Arcelor Mittal's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Better consumer reach
– The expansion of the 5G network will help Arcelor Mittal's to increase its market reach. Arcelor Mittal's will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Arcelor Mittal's in the consumer business. Now Arcelor Mittal's can target international markets with far fewer capital restrictions requirements than the existing system.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Arcelor Mittal's to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Arcelor Mittal's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Mittal's Pursuit of Arcelor (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Mittal's Pursuit of Arcelor (A) are -
Shortening product life cycle
– it is one of the major threat that Arcelor Mittal's is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Arcelor Mittal's
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Arcelor Mittal's.
Stagnating economy with rate increase
– Arcelor Mittal's can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Technology acceleration in Forth Industrial Revolution
– Arcelor Mittal's has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Arcelor Mittal's needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Regulatory challenges
– Arcelor Mittal's needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Finance & Accounting industry regulations.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Arcelor Mittal's in the Finance & Accounting sector and impact the bottomline of the organization.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Arcelor Mittal's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– Arcelor Mittal's high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Arcelor Mittal's in the Finance & Accounting industry. The Finance & Accounting industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Consumer confidence and its impact on Arcelor Mittal's demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Arcelor Mittal's can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Mittal's Pursuit of Arcelor (A) .
Weighted SWOT Analysis of Mittal's Pursuit of Arcelor (A) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Mittal's Pursuit of Arcelor (A) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Mittal's Pursuit of Arcelor (A) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Mittal's Pursuit of Arcelor (A) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Mittal's Pursuit of Arcelor (A) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Arcelor Mittal's needs to make to build a sustainable competitive advantage.
