Case Study 2 – ‘Will the steel companies develop global strategies?’

Questions
1.
“In the 20 years to 2000, the world’s 40 largest steel companies made cumulative losses before tax of US$10 billion, in spite of investing around US$75 billion in new capital equipment. In the following five years, profitability increased but the return on capital was still low (…)”. What were the reasons for this trend? The first factor that I will appoint is a political/legal issue, according to PESTLE analysis, and consists in the fact of some of the steel companies were subsidised by their respective governments, which are not worried about making profits. Besides this, individual nations or groups of nations had set up trade barriers to …show more content…

Since it has a wider geographical base than any other steel company, growing by a series of acquisitions with companies all over the world, I think it has all the crucial tools to pursue a global strategy. The proof of this is that already in 2002, the giant European Ancelor, achieved great cost savings by moving workers and reorganizing its joint plant capacity, supporting the share of information among the many subsidiary companies around the world. Relatively to the Chinese company Baosteel, I can refer that this company occupied, in 2006, the 5th position in the ranking of the world’s top 20 steel companies (output of 22.7 million tones crude steel), having risen 13 positions for the year 1997. This was most likely due to the increase of production capacity, taking into account that the production of steel in China, according to Table 3.5, recorded the highest increase (20%) when compared to the another regions of the world. That growth was, unlike the trend, accompanied by a large increase in the consumption (16%), taking into account the same period reference. So, looking at this reality, I think it would be smart of both companies the bet on a global strategy (as I had already referred about Arcelor). Given that Arcelor acts not only in China and Russia, would also be a good opportunity to merge both, for the transformation of this industry in a single market worldwide (or at least more