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

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

“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
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Finally, I could also mention that this was a value destroying industry, since the cost pressure was high but with the lower prices of steel, the companies had difficulties to pass the impact of the costs to the customers. So, from my perspective, these are the main trends in the strategic environment that have influenced steel company profits over the past few years. Nevertheless, the fact that most steel companies operate largely within their national or regional markets, adapting their strategies only to them, was, obviously, the primary aspect that contributed for the worsening of the situation.

2. Arcelor Mital, the first largest steel company of the world, on the date the article was written, arose from the merger between the UK/Indian based-company Mital and the French and Luxembourg-based
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