ArcelorMittal S.A is a manufacturing steel multinational corporation. The company is headquartered in a Luxembourg City. The company was established in 2006 after a merger by Indian Mittal Steel. ArcelorMittal is known as one of the biggest steel producers across the globe. The company produces almost 92.5 million tonnes of annual crude steel in 2018. The company is listed in the Fortune Global 500 under world’s largest corporations (Reuters, 2016). The company is successful in maintain managerial and technical expertise carefully. The company has maintained a reputation in the consumer for sharply defined business and reliability of products. This has made the company highly competitive in both global and steel market (ArcelorMittal, 2019).
The company has to understand the industrial and competitive analysis. Porter five forces analysis helps the companies in the industrial analysis. It helps in determining the external factors of the company. This helps in identifying the opportunities and make the decision-making process easy. Here is the detailed Porter five forces analysis of ArcelorMittal;
Bargaining Power of Buyers
The buyer bargaining power in the steel industry is moderate. This is mainly because of few suppliers of steel in the market as compare to buyers. Steel is used a major raw material in many industries. The consumers thus have less bargaining power. However, Arcelor Mittal try to set prices according the to the affordability of the consumers. The company also work hard to increase its customer base to gain more benefits. It is necessary for the company to set the reasonable prices because consumers can switch to substitute product if they cannot afford steel (UK essay, 2018).
Bargaining Power of Suppliers
The suppliers bargaining power is high in the steel industry. This is mainly because of the fact that major producer of steel is the iron ore reserves. Iron ore reserves are mainly controlled by the government. Strict rules, regulations and costs increase the power of the suppliers. There are few suppliers who are the man suppliers in the industry. However, Arcelor Mittal itself is involves in the production of the steel, which increases its own bargaining power as the supplier. For the company itself, there are no such supplier power, as company itself produces the min raw material (Lahti, 2016).
Threats of New Entrants
Threats form the new entrants are moderate in the Steel industry. This is mainly because of the high capitalisation cost require for start-up. New entrants have to achieve the economies of scale in order to gain more cost advantages, which is a difficult task. This is mainly because of the presence of big companies capturing the major portion of industry. New firms also have to build strong network channels for the distribution of goods. The companies require high cost for R&D and marketing, in order to make itself prominent in the market. These factors limit the entry of the new firms in the industry (Murphy, 2018).
Threats from the Substitute Products
Threats from the substitute products in the Steel industry is high. This is mainly because of changing demands of the consumers. The increase use of aluminium becomes the reason. Many automobile manufacturers prefer aluminium over steel for car manufacturing. Moreover, consumers prefer plastic over steel items because of the weight. People are switching from steels to substitute items. Hence, it is necessary for Arcelor Mittal to diversify itself in other markets or business line. The company should adopt aggressive marketing strategies in order to gain consumers or retain them. The company should produce more differentiated items in order to retain the market share. Or diversify itself in the substitute market (Lahti, 2016).
Rivalry of Existing Players
The competitiveness in the steel industry is very high. Arcelor Mittal is ranked number 1 in the steel industry at global level. However, there are many other companies like Nucor Corporation, US Steel corporation, etc are giving tough competition to the company. Increment in the global competition also comes from the global exporters like Chines steel producers. These companies provide the goods to local markets and fulfil the needs. It is necessary for the Arcelor Mittal to make sure that it distributes the products in boh local and international steel market to maintain the market share. The company has to adopt marketing strategies to maintain its market share (Craft, 2019).
References
Arcelormittalsa, 2019. Who we are? [Online], Available at: https://arcelormittalsa.com/Whoweare.aspx, [Accessed on: 5th December, 2019].
Craft, 2019. Competitors of ArcelorMittal. [Online], Available at: https://craft.co/arcelormittal/competitors, [Accessed on: 5th December, 2019].
Lahti, 2016. Application to Porter analysis to steel industry. [Online], Available at: https://www.slideshare.net/naveejthapa/application-of-porter-analysis-to-steel-industry-jeet, [Accessed on: 5th December, 2019].
Murphy, E. 2018. ArcelorMittal Porter Five Forces Analysis. [Online], Available at: https://www.essay48.com/term-paper/2505-ArcelorMittal-Porter-Five-Forces, [Accessed on: 5th December, 2019].
Reuters, 2016. World’s Biggest Steelmaker Raising $3 Billion As Profits Plunge. [Online], Available at: https://fortune.com/2016/02/05/arcelormittal-profits-plunge/, [Accessed on: 5th December, 2019].
UKEssays. 2018. Industry Scenario Analysis Of Arcelormittal Economics Essay. [Online]. Available at: https://www.ukessays.com/essays/economics/industry-scenario-analysis-of-arcelormittal-economics-essay.php?vref=1, [Accessed on: 5th December, 2019].