MITTAL STEEL(ARCELOR MITTAL)

STRATEGIC ANALYSIS OF MITTAL STEEL(ARCELOR MITTAL STEEL)

STRATEGIC MANAGEMENT - 2
4/1/2014

SUBMITTED TO: PROF. VIVEK RAINA SUBMITTED BY: NIRALI MEHTA(M00144) HARSH DESAI(M00148)

Q1. Understand and explain the companys major competitors in the market. Also explain companies own internal condition with respect to the global scenario in that field.
Competitors in the market:
Nippon Steel JFE POSCO Baosteel Tata Steel Anshan Benxi Jiangsu Shagang Tangshan U.S. Steel

(Manufacture of basic iron and steel and of ferro-alloys (ECSC); manufacture of tubes; other first processing of iron and steel and production of non-ECSC ferro-alloys largest global steel producing enterprise (groups) (million tonnes of crude steel output)

SOURCES OF COMPETITIVE ADVANTAGE IN THE INDUSTRY 1. Length of production time, i.e., technology used in production process. 2. The cost of production, especially since the steel market is highlypricesensitive. Low-cost, high-quality imports pose a significant threatto the domestic industry and hence, competitive pricing is essential tobe ahead. 3. Dependable delivery, i.e., lower delivery time to consumers. 4. Quality of steel produced and distributed. 5. People High productivity of labour at its plants/production facilities. High performance orientation through performance linked compensation plans for employees. Dedicated workforce indicated by lower turnover (only 5%) than the industry average (10%-12%). This could be attributed to the equality of treatment among workers at the production facilities (same colour jackets). 6. Firm level capabilities 7. Simple and flat organization structure with only about 5 layers.

Companys internal analysis

Internal Analysis includes the analysis of factors which are within the industry such as distinctive competencies, competitive advantage, profitability. Internal properties of a company can be categorized into two parts strengths and weaknesses. 1. STRENGTHS 1. Position as the world's largest, most diversified steel group 2. Strong profitability and free cash flow generation through the recycle, supported by low cost operations and upstream vertical integration. 3. Learning curve benefit due operation experience of long time. 4. Acquisition experience of acquiring industries from different countries. 5. Compared with peers, Mittal has higher exposure to spot markets. Most of the shipments outside North America are spot sales. 6. The government offers a wide range of concessions to investors in India, engaged in steel industry. The main concessions include, inter alia:

 Steel in specified backward districts is eligible for a complete tax holiday for a period of 5 years from commencement of production and a 30 percent tax holiday for 5 years thereafter. Environment protection equipment, pollution control equipment, energy saving equipment and certain other equipment eligible for 100 percent depreciation. One tenth of the expenditure on prospecting or extracting or production of certain minerals during five years ending with the first year of commercial production is allowed as a deduction from the total income. Export profits from specified minerals and ores are eligible for certain concessions under the Income tax Act. Minerals in their finished form exempt from excise duty. Low customs duty on capital equipment used for minerals; on nickel, tin, pig iron, unwrought aluminium. Capital goods imported for steel under EPCG scheme qualify for concessional customs duty subject to certain export obligation. 7. Labours easily available 8. Low labour and conversion costs. 9. Large quantity of high quality reserves. 10.Exports iron-ore to China and Japan on a large scale 2. WEAKNESSES 1. Ambitious grow the strategy that implies integration challenges and uncertainties for the company's future financial profile Exposure to operating in emerging markets. 2. Different acquisition can lead to cultural mismatch among different units. 3. Exposure to those countries weak legal and regulatory systems, as well as the integration of ne was sets into the group structure (for example, establishing appropriate control procedures, achieving operational synergies, and turning around former state-owned and often inefficient plants)

Q2. Look into various strategic management applications which company tried out in their survival of the competition.
Strategic management application by the company to survival in the competition

1) By acquiring large number of Steel Companies Mittal Steel became behemoth and gained the more control on price. 2) Large numbers 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.

Evolution of Growth strategy - Mittal Steel

1986 - Mr Lakshmi N Mittal establishes PT Ispat Indo (as greenfield steel project) in Indonesia.

1989 - The company, as Caribbean Ispat, operates Iron and Steel Company of Trinidad and Tobago (Iscott). 1994 - Caribbean Ispat exercises its option to acquire Iscott.

1995 - Ispat International Ltd and Ispat Shipping are set up in the UK 1997 - Ispat International N.V. goes public and acquires Germanys Thyssen Duisburg

2002 - Arcelor is created through the merger of Arbed (Luxembourg), Aceralia (Spain) and Usinor (France) to create a global leader in the steel industry.

2003 - Membership of the United Nations Global Compact, joining more than 1,250 enterprises from around the world. 2004 - Ispat International N.V. acquires LNM Holdings and merges with International Steel Group creating Mittal Steel. 2005 - Arcelor becomes the worlds first steel company to sign a Worldwide Agreement on Principles of Corporate Social Responsibility. Mittal Steel makes the Fortune 500 list of top companies.

2006 Jun -

- Arcelor appears in the Global 100 Most Sustainable Corporations in the World list

Mittal Steel and Arcelor reach an agreement to combine the two companies in a merger of equals, creating the worlds largest steel company. ArcelorMittal acquires Sicartsa, the leading Mexican long steel producer. Sicartsa has an annual production capacity of about 2.7 million tonnes, and has production facilities in Mexico and Texas.

2007 Builds a new steel service centre in Krakow, Poland, with a processing capacity of around 450,000 tonnes a year o ArcelorMittal launches its new global brand. Reflecting the companys aspirations, the brands vision transforming tomorrow is supported by three main values: sustainability, quality and leadership o ArcelorMittal acquires two steel tube businesses from Vallourec, France. o ArcelorMittal completes the acquisition of Arcelor Brasil, taking ownership of 100% of its shares o Merger process between Mittal Steel and Arcelor is completed, and the company is renamed ArcelorMittal. o ArcelorMittal purchases Cinter in Uruguay to strengthen its stainless steel business in South America o ArcelorMittal acquires 100% of the shares of steel distribution company Eisen Wagner. With sales of 60,000 tonnes of steel products in 2007, Eisen Wagner is one of the leading steel distribution companies in Austria. o ArcelorMittal acquires MT Majdalani y Cia, the leading stainless steel service centre and distributor in Argentina. o ArcelorMittal acquires NSD Ltd, a leading UK steel distribution company

2008 ArcelorMittal acquires Unicon, the leading manufacturer of welded steel pipes in Venezuela ArcelorMittal acquires three coal mines and associated assets in Russia for US$720m ArcelorMittal acquires Brazilian iron ore company London Mining South America Ltd ArcelorMittal acquires Koppers Monessen coke plant near Pittsburgh, Pennsylvania, US, for US$170m ArcelorMittal begins trading in Paris, Amsterdam and Brussels, under the symbol MT. 2009 - Arcelor Mittal begins trading in Paris, Amsterdam and Brussels, under the symbol MT.

2010 Arcelor Mittal is confirmed as a sponsor for the London 2012 Olympic and Par Olympic Games and supports the construction of the Arcelor Mittal Orbit in the Olympic Park. ArcelorMittal secures its entry to the 2010 Dow Jones Sustainability World Index,

2011 - ArcelorMittal officially starts production of commercial iron ore from our mining operations in Liberia. 2012 ArcelorMittal sells 25% of its 75% stake of Baffinland Iron Mines Corporation and becomes equal partners with Nunavut Iron Ore Baffinland Iron Mines Mary River project is given the green light by the Nunavut Impact Review Board. The project is the largest mining development in the Arctic.

strategy of mittal steel

Consideration before an acqusition

oerational strategy

Bid for arcelor

Financial risk profile

CONSIDERATIONS BEFORE AN ACQUISITION When Mittal Steel considers an acquisition, it seeks not only low-cost inputs and an expanding market, but also inexpensive labor. But it will bend its criteria if an opportunity looks promising enough. Its Algerian plant, for example, had no obvious source of iron ore. When Mittal staffers discovered that the country had ore deposits, the company secured a license to open a mine. Similarly, its purchase of International Steel Group did not seem to fit its requirement for low cost labor; U.S. wages are among the highest in the world. But ISG had been cobbled together out of such storied American steel names as Bethlehem and LTV by U.S. turnaround specialist Wilbur Ross, and Ross had streamlined the companies while reorganizing them. He lay off employees and jettisoned pension plans, giving ISG a cost edge over U.S. competitors. Although the company has a blueprint for acquisitions, each of its deals presents unusual challenges. In the former Eastern Bloc, for example, financial statements have proven unreliable because plants often did business via barter. In Romania, they had a central computer which would track all of the barter transactions. In Kazakhstan, where it opened a warehouse and found 50,000 bottles of Romanian red wine. They had traded steel for wine. And they had created their own currency -- IOU notes. You would go to the hospital or the grocery store, and there were these IOU notes.

OPERATIONAL STRATEGY Mittal acts as a consolidator in the global steel industry, focusing on growth through acquisitions, and has a successful acquisition and integration track record. Operationally, Mittal has a highly diversified asset base, with plants of different types, including both integrated and mini mills. Mittal's base capital-expenditure requirements are lower compared with those of peers, because of its lower cost base in emerging markets (for example, Romania and Kazakhstan), where comparable types of work can be performed at a lower cost. Mittal may invest in new projects to strengthen its upstream integration. For example, thegroup is considering new projects in iron ore mining in Liberia and expansion of its Ukrainian production.

BID FOR ARCELOR Mittal Steel & Arcelor complemented each other in terms of geographical coverage and product mix, as there is no significant overlap. Mittal has strong positions in the U.S. market; low-cost operations in Central and Eastern Europe, Asia and Africa; and vertical raw-material integration. Arcelor is the leader in higher valueadded products in Western Europe, low-cost slab manufacturing in Brazil, and has a successful distribution system. As the largest player in the steel industry-globally and in the key markets--the combined group enjoys significant bargaining power. The merger was expected also yield synergies in procurement, marketing, and optimization of production processes and capital expenditures. The bid significantly increased Mittal's leverage.

FINANCIAL RISK PROFILE Acquisitions introduce risks, but the group has a good track record of turning around underperforming steel acquisitions, particularly in less-developed countries, through LNM Holdings, which implemented this strategy since 1995.The advantages of Mittal's strategy of expanding into emerging markets include low cost bases for steel production and capital construction. In most cases, asets the group acquired in emerging markets like Romania or Kazakhstan were low priced,

and the plants enjoyed sizable, albeit temporary, tax breaks. The key risks of Mittal's emerging-market expansion strategy include exposure to those countries weak legal and regulatory systems, as well as the integration of new assets into the group structure (for example, establishing appropriate control procedures, achieving operational synergies, and turning around former state-owned and often inefficient plants). But Mittal has a track record of successfully integrating and restructuring previously underperforming state-owned assets. Vast geographical diversification also mitigates risk in each particular emerging market, as the group is no longer markedly dependent on any single asset or market. In the medium to long term, the main issue for the group is its success in integrating recently acquired assets and maintaining long-term, stable relationships with the governments of host countries. The Mittal group has a complex structure and has only majority control, but not full control, over some of its cash-generative and cash-rich subsidiaries. For example, Mittal owns only 51%of the South African plant, 70% of the Algerian plants (30% is state-owned), and 76% of theCzech plant. This constrains cash flow circulation within the group and may lead to significant spending to buy out minority interests (although no such requirements are currently effective).

Q3. After looking into the financial statement and annual report, please identify their growth trajectory with respect to the competitors.
2008 Health and safety Lost time injury frequency rate (LTIF) 1 Arcelor Mittal steel operations (millions of metric tonnes) Production of steel products Change year/year Shipments of steel products2 Change year/year Arcelor Mittal mining operations (millions of metric tonnes) Mining production Iron ore: Own production Long-term contract Total iron ore production Coal: Own production Long-term contract Total coal production Mining shipments Iron ore: External sales - Third party Internal sales - Market-priced Internal sales - Cost-plus basis Strategic contracts Total iron ore shipments Coal: External sales - Third party Internal sales - Market-priced 2009 2010 2011 2012

2.5

1.9

1.8

1.4

1.0

101.1 -11.4% 99.7 -7.5%

71.6 -29.2% 69.6 -30.2%

90.6 26.5% 85.0 22.0%

91.9 1.4% 85.8 1.0%

88.2 -4.0% 83.8 -2.3%

43.8 20.9 64.7 5.9 0.5 6.4

37.7 15.1 52.7 7.1 0.5 7.6

48.9 19.6 68.5 7.0 0.4 7.4

54.1 11.1 65.2 8.3 0.6 8.9

55.9 12.3 68.1 8.2 0.7 8.9

6.4 12.4 21.6 20.9 61.4 1.4 1.5

5.4 17.2 17.1 15.1 55.0 2.0 1.8

7.0 18.2 21.5 19.6 66.3 2.1 1.3

9.0 19.0 23.6 11.1 62.7 3.5 1.4

10.4 18.4 25.6 12.3 66.7 3.3 1.8

Internal sales - Cost-plus basis Strategic contracts Total coal shipments Arcelor Mittal financials (US$ millions) Sales Change year/year EBITDA Change year/year Operating income (loss) Change year/year Net income (loss) attributable to equity holders of the parent Change year/year Net cash provided by operating activities Net cash used in investing activities Net cash used in financing activities Cash and cash equivalents and restricted cash Property, plant and equipment Total assets Short-term debt and current portion of long-term debt Long-term debt, net of current portion Equity attributable to the equity holders of the parent Net debt Arcelor Mittal financials per share (US$) Arcelor Mittal average share price Book value per share Basic earnings per share Change year/year Arcelor Mittal ratios

3.4 0.5 6.9

3.3 0.4 7.5

3.2 0.4 7.0

3.3 0.6 8.9

3.1 0.7 9.0

116,942 21.4% 23,652 21.9% 11,960 -14.4% 9,466 -8.7% 14,652 (12,428) (2,132) 7,587 60,251 133,155 8,409 25,667 55,258 26,489

61,021 -47.8% 5,600 -76.3% (1,470) -112.3% 157 -98.3% 7,278 (2,784) (6,347) 6,009 60,385 127,697 4,135 20,677 61,084 18,803

78,025 27.9% 8,525 52.2% 3,605 NA 2,916 NA 4,015 (3,438) (7) 6,289 54,344 130,904 6,716 19,292 62,430 19,719

93,973 20.4% 10,117 18.7% 4,898 35.9% 2,263 -22.4% 1,777 (3,678) (540) 3,905 54,251 121,880 2,784 23,634 56,690 22,513

84,213 -10.4% 7,080 -30.0% (3,226) NA (3,726) NA 5,294 (3,660) (1,044) 4,536 53,834 114,573 4,339 21,965 51,723 21,768

66.52 39.96 6.84 -7.7%

31.86 42.27 0.11 -98.4%

35.79 41.29 1.93 NA

28.24 36.60 1.46 -24.4%

16.41 33.39 (2.41) NA

EBITDA margin Operating margin EBITDA per tonne No Year 1 2008 2 2009

20.2% 10.2% 237.2 3 2010

9.2% -2.4% 80.4

10.9% 4.6% 100.4 4 2011

10.8% 5.2% 117.9 5 2012

8.4% -3.8% 84.5

Lost time injury frequency rate (LTIF) 1

2.5 2 Axis Title 1.5 1 0.5 0 Lost time injury frequency rate (LTIF) 1 1 2.5 2 1.9 3 1.8 4 1.4 5 1

If we see in above graph than we can see that the LTF is being decrease year by year. This is good for the company.

Production of steel products

Axis Title

1 Production of steel products 101.1

2 71.6

3 90.6

4 91.9

5 88.2

 In above graph we can see that the production of the company was decreased in 2009 as compare to 2008. It was decrease from 101% to 71.6%. But after this happen company had started to develop efficiency and trying to increase the production till 2011. And then again production were decreased.

Shipments of steel products2

100 80 Axis Title 60 40 20 0 Shipments of steel products2 1 99.7 2 69.6 3 85 4 85.8 5 83.8

Shipment of steel was decreased in 2009 and it was again decreased in 2012. If we see in 2008 then we can analysed that the shipment of steel was highest in 2008 in over five years periods.

MINING PRODUCTION
Own production Long-term contract 54.1 55.9

43.8 37.7 20.9 15.1

48.9

19.6 11.1 12.3

 In mining production company is more depended on its own production and it is increasing year by year at good level. By this we can also say that long term contract based production is decreasing.

COAL PRODUCTION
Own production Long-term contract

8.3 7.1 5.9 7

8.2

0.5 1 2

0.5 3

0.4 4

0.6 5

0.7

In coal production also company dont wants to be depended other contract base production line.

MINING SHIPMENT
Axis Title

External sales - Third party Internal sales - Market-priced Internal sales - Cost-plus basis Strategic contracts

1 6.4 12.4 21.6 20.9

2 5.4 17.2 17.1 15.1

3 7 18.2 21.5 19.6

4 9 19 23.6 11.1

5 10.4 18.4 25.6 12.3

In mining shipment company is more successful in internal-cost plus basis sales. Because it is higher than other shipments.

COAL SHIPMENT

Axis Title

External sales - Third party Internal sales - Market-priced Internal sales - Cost-plus basis Strategic contracts

1 1.4 1.5 3.4 0.5

2 2 1.8 3.3 0.4

3 2.1 1.3 3.2 0.4

4 3.5 1.4 3.3 0.6

5 3.3 1.8 3.1 0.7

In coal shipment external-third party sales is growing at very fast level. In coal shipment internal-cost plus basis sale is stable there is no high fluctuation in coal shipment in internal sales but strategic contracts base shipments are not so popular.

FINANCIALS

Axis Title

Sales EBITDA Operating income (loss) Net income (loss) attributable to equity holders of the parent

1 116,942 23,652 11,960 9,466

2 61,021 5,600 -1,470 157

3 78,025 8,525 3,605 2,916

4 93,973 10,117 4,898 2,263

5 84,213 7,080 -3,226 -3,726

 In this graph we can see there is a high level of fluctuation in sales, operating income, EBITDA and net income. This shows that company is not performing at efficient level and it is including more Expences than income. Means demand of steel is being decreasing so that sale is decreasing.

cash flow
15,000 10,000 Axis Title 5,000 0 -5,000 -10,000 -15,000 Net cash provided by operating activities Net cash used in investing activities Net cash used in financing activities 1 14,652 -12,428 -2,132 2 7,278 -2,784 -6,347 3 4,015 -3,438 -7 4 1,777 -3,678 -540 5 5,294 -3,660 -1,044

FNANCIAL PER SHARE

70 60 50 Axis Title 40 30 20 10 0 -10 Arcelor Mittal average share price Book value per share Basic earnings per share 1 66.52 39.96 6.84 2 31.86 42.27 0.11 3 35.79 41.29 1.93 4 28.24 36.6 1.46 5 16.41 33.39 -2.41

RATIOS OF ARCELOR MITTAL

250.00% 200.00% Axis Title 150.00% 100.00% 50.00% 0.00% -50.00% EBITDA margin Operating margin EBITDA per tonne 1 20.20% 10.20% 237.20% 2 9.20% -2.40% 80.40% 3 10.90% 4.60% 100.40% 4 10.80% 5.20% 117.90% 5 8.40% -3.80% 84.50%

2013 Strategic Report Card 2013 Investor Targets Medium term $150/t Day 2013 Performance target Medium Term Update Underlying EBITDA up Medium term 10.7% 2013 EBITDA/t = $150/t $82 Q413 EBITDA/t = $91 Shipments increased 0.6% Increase to 95Mt due to term contraction of core markets (5yr CAGR 2.5%) Midyear 2013 NFD = Medium term $16.2bn $15bn Year end NFD = $16.1bn $1.1bn achieved at end 2013 Capacity expanded 10Mt in 2013 Target remains

EBITDA

Shipments Increase to 95Mt medium term (5yr CAGR 2.5%) Net debt Midyear 2013 target $17bn Medium term target $15bn Mgt 2013-15 target $3bn Gains Iron Ore Expand capacity to 84Mtpa by end 2015

medium

remains

2013-15 target remains $3bn Medium term capacity target now >84Mt given stretch potential at Liberia and AMMC

Global scale, regional leadership Revenues ($bn) % Group EBITDA ($bn) % Group Shipments (M mt) % Group NAFTA BRAZIL EUROPE MINING ACIS 20.6 10.2 40.1 5.8 8.3 26% 13% 50% 7% 10% 1.4 20% 23.3 28% 1.9 28% 9.8 12% 1.6 24% 38.4 45% 2 29% 59.7 0.3 4% 12.3 15%

Critical strategic enablers

Strong balance sheet A sustainable Through-the-cycle approach required Ensures balance sheet flexibility for funding organic growth and executing options at all points of the cycle Acquisitions typically more attractive than greenfield investment but the Company is also willing to dispose of businesses that cannot meet its performance standards or that have more value to others Global scale and scope is a competitive advantage that also introduces complexity and the risks of inefficiency Decentralized structure with BU autonomy drives optimal behaviour Success depends on the quality of and our ability to engage, motivate and reward our people Continuous processes to attract, develop and retain the best talent

Active portfolio management

Decentralized organizational structure

The best talent

Strong balance sheet Net debt progression ($bn)

Lowest level of net debt since the merger in 2006 Medium term net debt target of $15bn remains Pension/OPEB net liability ($bn) reduced >20% in 2013

 Pension/OPEB liability is sensitive to long term interest rates A 1% increase in the discount rate reduces the liability by $1.8bn Active portfolio management Including: MacArthur Coal stake BNA stake Erdemir ( of interest sold) Skyline Enovos Paul Wurth AMMC stake

$3.6bn
Cash rose from asset sales since 3Q 2011
Additionally:

Reduced ownership of Baffinland to 50% with Nunavut Iron ore increasing its share of funding Annaba: diluted stake to 49% to facilitate expansion of capacity

Comparison of Arcelor Mittal's Performance with Industry Competitors

However to gauge the true picture of the merged companies, a comparison is done with its competitors in the same field. Mittal's performance if considered in isolation might be is leading so a comparison of the company's performance with its main competitors Pasco and United States steel corporation. In this comparative analysis the acquiring company, Mittal steel has been taken for comparison to measure the impact of the merger on the acquirers. Posco steel, a well-known Korean steel company was established on April 1, 1968. It has secured the highest competitive level in the global steel technologies since 2006. It manufactures a wide portfolio of products amongst which they are the leading manufacturers of automotive steel. In addition to this, the company deals in high carbon steel; strip casting and tire cord wire rod .This Company has been supporting the use of various environment-friendly materials with the development of graphite and tin free cutting steel components. In the year 2012, they recorded a spectacular 4.36 million tonnes of total sales, making it world-class automotive steelmakers

in the world. The company holds a massive export market, with Japan being on the top, followed by China, Thailand, Indonesia and Asia. The U.S Steel Corporation was founded in 1901, launched with an authorized capitalized value of $1.4 billion. Headquartered in Pittsburg in the United States, it manufactures a wide variety of steel sheet; coke and taconite pellets; tabular and tin products; and possesses a worldwide annual raw steel capability of 26.8 million tonnes. It is the sixth largest producer of steel in the world and second largest integrated steel producer in North America. The company has significant operations all around the central Europe as US steel Kosice, established in Slovakia, and US steel Balkan, located in Serbia.

Q4. Prepare a detailed analysis of the various tools and techniques that can be applied in the companys case
Layers of business environment

The macro envirnment Industry (Sector) Competitors

The highest-level layer. This consists of broad environmental factors that impact to a greater or lesser extent on almost all organisations. PESTEL o Political, o Economic, o Social, o Technological, o Environmental(green) and o Legal environments

The organization

Markets

Forms the next layer with this broad general environment. This is made up of organisations producing the same products or services. Here the ve forces framework is particularly useful in understanding theatre activeness of particular industries or sectors and potential threats from outside the present set of competitors.

The most immediate layer surrounding organisations. Within most industries or sectors there will be many different organisations with different characteristics and competing on different bases, some closer to a particular organisation, some more remote. The concept of strategic groups can help identify close and more remote competitors. Similarly, in the marketplace, customers expectations are not all the same. They have a range of different requirements the importance of which can be understood through the concepts of market segments and critical success factors

PESTEL ANALYSIS
Political analysis Political analysis includes the factors which can influence the business. It is included the political factor which includes the policy offered by the government to the specific sector. Here for this sector government introduces the National Steel Policy. The main aim for the introduction of this policy is to fill the gap between the demand and supply of the steel. To maximize the production is also main activity is designed under this policy. To increase the production up to million ton is also the main objective of the policy. Under this policy the special incentives are designed for the steel sector. Incentives like the cut in the duty, zero duty on imports, provision of the land and other infrastructural facilities are the facilities provided for the steel sector. Under this policy the government is encourage to the use the full opportunities available in the PUBLIC AND PRIVATE PATNERSHIP (PPP). With the growing industry the government is increased the sales tax from the 15%to 20% where as 75% FDI (foreign direct investment) is allowed in the industry this scheme also provides the various concessions in the custom duties. Though there is a rise in the infrastructure facilities in the country but considering the steel industry the present condition of the infrastructure is not sufficient in the nature. because of the lack in infrastructure steel industry is facing many problems Economic Analysis STEEL industry is concern to be a very booming industry from past decades. Opening up with the various economies the foreign direct investment is the happened in this sector the various foreign players are interested to invest in the country. Under the various economies schemes there is permission in advance licensing scheme which allows the duty free imports of raw material for exports. But, with the boom in the industry GDP is rising at very slow rate. The steel industry is also facing the problem of the subprime crisis occurs in the united states before 15 months. Because of the subprime crisis there is ill effect occurs in the automobile industry, infrastructure and other business which are related with the steel industry. There is huge gap between the demand and the supply of the steel in the society. The socio culture is one of the important aspect in the analysis of the industry it describes the impact of the particular industry on the society. Likewise the steel industry also give the encouragement to the permanent employment to the people but on the other hand it divides the area in to the rural and urban sector because the industry is only in the particular area only which leads to the particular development of that area only and not overall the development . because of the working conditions the people which are employed in the steel industry faced many health

Sociological Analysis

problems which are incurable in the nature and many industries are not paying the attention on the health of the employees. Any kind of the allowances are not given to the employees. Steel industry is also responsible for the development in the rural sector which leads to the rise in the standard of the living of the people. Technological Analysis The traditional technologies are being used from many years in the industry. There is no innovation in the use of the technique in the production process. The Tata steel is developing the same technique is by which the encouragement is given to the trading of the steel. Tata and sail introduces the online trading of the steel. Only the electric furnace is being used now days in the production process but because of the fluctuations in the energy there is wastage in the raw material. The basic technologies are used in the production process are basic arc, induction furnace and electric furnace which are outdated in the nature. Sail the one of the leading steel industry India is planning to set up a plan with PASCO for using the latest technology named FINEX. Though the steel industry is encouraging the many sectors and the encouraging the development it is creating the unfavorable environment in the nature. The all leading industries are following the environmental acts which are declared by the governments, though it is creating very bad impact on the environment. Many industries are using the pollution control equipment and energy saving equipment but that is not sufficient in the nature. The least importance is given to the environmental aspect. But the Tata steel is encouraging the ecofriendly system, to reduce the emission the co2 gas during the production process. Tata is developing the Ultra-Low Carbon steel making where there will be reduction in the environmental loss. Government is introducing the various rules and regulations of this particular industry. The government is about to paying the more attention in the health policies of the employees which are working with the steel industry. Special health incentives and rules are introduced in the steel industry.

Environmental Analysis

Legal Analysis

From above discussion and surveys we come to know about how the pestel analysis is done in the industry we also come to know about the political, economic, and technical aspect are important for the development of the particular industry if these factors are not in the supporting in the favor of the industry then the industry may face some consequences.

PORTERS FIVE FORCES

New entrents
1. Huge capital investment - low 2. Economies of scale - very low 3. Absolute cost advantage very low 4. Customer switching cost - low 5. Government Regulation - low Supplier Power:1. Mittal Steel adopted the strategy of back ward vertical integration. Before acquiring any industries, they first ensured the iron ore and coal supply from mines. - low 2. Mittal Steel buys a large chunk of supply from its suppliers and retains the bargaining power to itself. very low

Rivalry among established competitors 1. By acquiring large number of Steel Companies Mittal Steel became behemoth and gained the more control on price. - medium 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. - very low 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. - very low 4. Other big players were present in the market. But Mittal Steel concentrated on its low price strategy while many of its competitors competed for higher quality and better distribution channel. - high

Threat of Substitute:-

1)Steel has currently no substitute at its price level. very low

2)At some places steel can be substituted by natural fibers and other metals but that is at very small scale. - low

Buyer Power:-It buyers areappliance, automotive, building and construction, fabrication, oil and gas, packaging, rail ransport and maritime / ship building industries 1. Building and construction, fabrication, oil and gas and packaging industries are fragmented so they have less bargaining power. - low 2. Although, some of the buyers are large players but in comparison to behemoth steel industries they are dwarfed in size. Comparatively they have less bargaining power. - very low 3. Since steel making industries are less in number so they enjoy more bargaining power than its buyers. - low

new entrents 1 2 3 4 5 2 1 1 2 2 1.6

substitute competitors buyer supplier 1 3 2 2 2 1 1 1 1 2 4 1.5 2.25 1.666667 1.5

1 2.5 2 1.5 5 1 0.5 0 Series1 2

Perceptual Maping S

By this perceptual mapping we can see that Nippon steel is highest volume and highest profit owned company in the industry. In Insustry no company is there with lower volume. If they wants to survive in steel industry than they need to play with high volume. Because there is no differentiation in the products so buyer can easily switch to another supplier or towards competitor for satisfy their need

SWOT ANALYSIS