Lakshmi Mittal and the Growth of Mittal Steel Assignment

Lakshmi Mittal and the Growth of Mittal Steel - Assignment Example This paper discusses the consistent growth of Lakshmi Mittal and all the issues it met, including in the final stages before merging with Arcelor. The strategy it undertook concerning foreign direct investment (merging and acquisition) undoubtedly enabled it reach greater heights. Arcelor Mittal Steel Company is a company that was started as a result of a merger between two steel companies namely Mittal Steel and Arcelor. The origin of the company was in India with Mittal being started in the early 1970s. The company, just like any other investment, faced some key issues and challenges as it developed. However, all these challenges have to be overcome by identifying available opportunities and making use of them. Competition in India was very stiff leading to limited growth opportunities. The main competition came from state and the privately owned companies. This led to the decision of Mittal to expand its borders to other countries, beginning with Indonesia. It is evident that Mittal in its foreign direct investment chose to use the method of merger and acquisition, rather than Greenfield investment. This is so because the merger method offers a lot of advantages. The local companies to be merged to or acquired are already conversant with the local customs and the institutions associated to the acquired firms. Furthermore, there is an advantage of easy access and relations with distribution systems. Mittal company only had to make improvements on what the merged firms had done, so as to establish itself in a competitive position and eliminate the potential competitors. Marinescu and Constantin (2008) say that â€Å"from financial point of view, the acquisition necessitates a smaller initi al investment. Capital is injected step by step, leading to lower market risk as opposed to a Greenfield† (n.p.). In as many countries that Mittal developed, there are a lot of advantages that are achieved by the host nations. Apart