Lakshmi Mittal and the Growth of Mittal Steel Essay

432 WordsAug 9, 20122 Pages
1. What forces drove Mittal Steel to start expanding across national borders? In the early 70’s, what was then a family-owned firm was being constrained by limited growth opportunities in its’ native country of India. Further it is identified that government regulations inhibited the company’s ability to spread out and improve expansion opportunities, and finally Mittal faced direct competition from a state-owned and private manufacturing competitors. 2. Mittal Steel expanded into different nations through mergers and acquisitions, as opposed to greenfield investments. Why? To be fair, the first expansion into foreign lands was a greenfield investment, establishing a steel-making plant from scratch in Indonesia in 1975, beyond that initially described FDI it was much more cost effective to purchase the assets of already established distressed companies much more cheaply rather than to invest large sums of capital and time in construction and customer base development in a foreign land as well as providing potential buffers to foreign protectionist pressures. Further many executives see FDI as a way of circumventing future trade barriers, additionally having a footprint in a foreign nation reduces costs of doing business in that country from the perspective of transportation and production costs. 3. What benefits does Mittal Steel bring to the countries that it enters? Are there any drawbacks to a nation when Mittal Steel invests there? To fairly comment on the benefits that Mittal Steel bring to the countries that it enters you first must consider whether it is entering a developed versus underdeveloped country. In underdeveloped countries in many instances there is a lack of technology and large MNE’s (Multi-National Enterprises) such as Mittal Steel had become, can deliver technology required to stimulate economic growth, in that nation where such

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