In this and the next post, I would try to give an account as to how the “impossible” Arcelor-

Mittal merger became possible.

With a large number of parties involved, with different cultures in play, and a lot at stake, this
deal promises to give many insights into the negotiation techniques used.

Background
Mr. Lakshmi Mittal founded Mittal Steel in 1976 in India. After a few years, Mr. Mittal found
that it would take him long to grow to a significant size and wanted a way to grow fast. He found
that there were various steel companies around the world, which had been performing badly, due
to cyclical nature of the industry and poor management of the companies. He started acquiring
these companies and turning them around through better management and economies of scale.

In 2005, when Mittal Steel acquired the American steel company, ISG, it overtook Arcelor as the
world’s largest steel maker, in terms of output. Towards the end of 2005, it made up its mind to
acquire Arcelor, the second largest steel producer by output and the largest by turnover. Mittal
Steel was headquartered in Netherlands.

Arcelor was created in 2002 through merger of three major European steel companies, Arbed
(Luxembourg), Aceralia (Spain) and Usinor (France). The idea was to leverage their technical,
industrial, and commercial resources in order to create a global leader in the steel industry. It was
headquartered in Luxembourg and Mr. Guy Dollé was the CEO. Arcelor employed thousands of
people across 60 countries. Most of the employees were from Western Europe and in countries
with a traditionally strong labor union. Arcelor were still in the process of integrating the
business and were neither expecting nor ready for any deal, let alone a takeover offer.

It is important to understand where the main people stood when the deal was proposed. This is
because, finally it is after all these individuals who would consider and negotiate the deal. The
personal interests would play a critical role in the entire process.

Mr. Mittal, aged 55 and Mr. Dollé, aged 63 shared the same vision. They believed that the steel
industry was too fragmented (top 5 companies controlled just 20% business) and was being
exploited by the raw material / commodity producers (top 3 iron ore companies controlled 70%
business) as well as consumer companies (top 5 automobile companies control 70% business).
Consolidation was required and both wanted to emerge as the leader once it gets achieved. Both
had contributed their fair share to this process of consolidation in the industry. Their aim was to
do things in a way that, before they retire, the companies reach a dominating position in the
industry. And that they are considered responsible for that leading position of their companies.

The Offer
On January 27, 2006, Mittal Steel unveiled an unsolicited $22.7 billion bid for Luxembourg-
based Arcelor.

As we have already seen, that both companies had been acquiring others in the industry. Both
thought that it was a competition against each other. They had been part of various bidding fights
for acquisitions of steel companies. But at least one side was not thinking of both going hand in
hand against all others.

In one such typical bidding, the steel company, Kryvorizhstal of Ukraine was on the block. Many
companies entered the fray and the price kept on increasing. Mittal Steel and Arcelor were the
last two remaining in the tussle, and the price increased from $3.5bn (when the last company left
leaving these two) to $4.8bn where Mittal Steel won the bid.

There was clear scope for “saving” money in such context. Mr. Aditya Mittal, son of Lakshmi
Mittal, was of the view that there were a large number of synergies between the two companies –
not to mention getting better valuations while buying different companies. There were
complementary strengths that could be leveraged. After intense internal discussions, they
decided to take the leap, and find ways to make this acquisition possible.

The Process of the Initial Offer

Generally, in such acquisitions, the acquirer company would like to have a co-operative
discussion and settlement. After acquiring, the acquirer is dependent on the target firm for
collaboration – from executives, employees etc. In addition, the acquirer would like to be seen
not as a predator but someone who would make the company achieve greater heights and also
help the employees improve their standard of living – something which makes it preferable to go
for a co-operative process.

As we know that, they finally had to resort to go towards a competitive process but they did that
when it became a necessity. I believe one has to be ready for this as well for the other side’s
rationale might be very different and sometimes there might be seemingly irrational behavior as
well that would necessitate such a process.

Whom to approach – The best foot forward

One important issue is how the discussion with the target should get started. Research suggests
that extroversion, agreeableness and cognitive ability of the negotiators play a major role in the
negotiation. So, a person on the other side with these attributes should be preferred, especially
when it comes to the initial stages. This particular person is the potential harbinger of the
proposed deal in the target.
The Mittals found such a person at Arcelor – Mr. Alain Davezac, Senior Vice-President,
International Business Development, Arcelor (Cognitive Ability). He had been dealing with the
extended Mittal family before (Agreeableness) and was an outgoing person (Extroversion). He
was enchanted with Buddhism and had dealt with Indians & Indian Companies extensively
before in his career.

Mr. Aditya thought that it was important to make Mr. Alain up to terms with what has been
going on at the Mittals side, and show him the benefits of the collaboration between the two
companies. In addition, if everything goes on well, it is Aditya and Alain that would have to do
bulk of the work during integration, and so it was best that they became acquainted with each
other at the earliest.

Where to discuss and the occasion?

Issues such as where do the meetings take place; who all are part of the meeting; how are they
treated etc, though they might seem trivial, play a very important role.

After discussions with Alain for some time and a couple of meets, the Mittals thought that it was
now time to involve the CEO of Arcelor, Mr. Dollé. Instead of having a formal meeting at some
office or hotel, Mr. Dollé and Mr. Alain were invited to a dinner meeting on 13th January, 2006
at the grand Mittal’s home in London (the world’s most expensive house at that time). We
believe that it was a way to show the other party that they would be dealing with someone who is
not less equal in any possible way. It was also to settle any apprehensions regarding the Mittal’s
ability to handle the large company, that might arise once they come to know about their
proposal. The Mittals might also be looking to gain an upper hand (through the venue and the
fact that they are the hosts) before the start of the formal negotiations.

The negotiations before the negotiation – The notorious dinner

When the dinner was planned, little did anyone know that it would become such a quoted event
in the future. The Mittals did not want to indicate on an outright basis that there would be a deal
coming. They wanted to explore the possibility and see the reaction of the other side. As per
Mittal Steel’s prospectus for the Arcelor offer, the issue of the merger was brought up at the
dinner meeting but Mr. Dollé’s reaction was “non-committal” and that he pointed out the issues
that would arise and the risks involved.

The part of the conversation related to the merger was only for 4-5 minutes. Mr Dollé later said
that the conversation was friendly but did not give any details. A week after the dinner, both
sides decided to meet again to discuss about the merger specifically, but the meeting could not
take place as Mr Dollé had to follow-up on their proposed acquisition of the Canadian company,
Dofasco.

Now or Never

This was an inflection point in the whole deal. The Mittals knew that if Arcelor went ahead with
the Dofasco deal, it would get tougher to merge, possibly due to anti-trust conditions and due to
Arcelor becoming a larger company. So that Dofasco can be done away with, they needed to find
an alternate for Dofasco in case they are successful in going ahead with merging with Arcelor.
They signed a binding agreement with ThyssenKrupp AG (that was also involved previously in
bidding for Dofasco) about selling Dofasco to them, after the merger.

Without wasting any more time, the Mittals informed Mr. Dollé (who reportedly hung up on
hearing about the Offer announcement) and Mr. Alain on 26th January, 2006 (after markets
closed) about their plans to announce an Offer on 27th January. The Mittals had gotten the sense
that management at Arcelor, specifically Mr. Dollé would not be too keen on such a proposal.
However, they wanted to do as much as possible that would make them look as if the were on the
“right” side; and it was their counterparts that did not co-operate.

The offer was announced the next day.

This is the second of the two posts detailing the Arcelor Mittal deal. The first post gave the
background of the deal and the process in which the offer was communicated. This post details
the happenings after the offer was made.

Where did they stand?

The offer was rejected almost instantaneously and it was not that it came as a surprise to Mittal
Steel. The offer got instant publicity and became the talk of the business community across the
globe. All stakeholders (which included multiple governments from Europe that have been
known for their pro-worker stance) became active at one go.

Positions vs. Interests

The position taken by everyone on the Arcelor side was that this deal is very aggressive and not
at all beneficial to them. Going into the reasons for this position, gives a better understanding of
the interests involved. The management was opposed since they thought that the price was too
low and there was lack of strategic fit between the two companies. They knew that a takeover
would mean loss of the clout they enjoyed while managing an independent company. The
Arcelor employees thought that this was more of a hostile takeover and in the merged entity,
they would have a lower status as compared to Mittal Steel employees. They were also scared of
the ensuing job cuts that normally follow such large mergers / acquistions. The different
governments with stakes in Arcelor were afraid of workers from their countries losing jobs and
the fact that they were not consulted before the bid.

As is clear, behind the positions of different parties lie specific interests, which sometimes might
not match with the reasons which get stated. Though Mr. Mittal knew that these interests would
have to be addressed and satisfied, he later mentioned that the process went on much longer than
he anticipated.

Pooling Resources

Both sides took a stock of which stakeholders can be on their sides and started talking to them.
Arcelor management found that mostly everyone from the employees to the different
governments were opposed to the deal. So, they focused their attention on these parties to
convince them to oppose any deal from the Mittals.

On the other hand, the Mittals found almost no one on their side initially. They thought that the
investors are the only ones who they can currently manage to get on their sides. They started
contacting them but were not as successful as they would have liked.

Meanwhile, Arcelor management continued doing their bit to remove any possibility of the bid
going through. They kept their aggressive pursuit for Dofasco, declared a huge dividend, laid out
its medium-term aggressive acquisition strategy and promised healthy growth of the company. It
subsequently acquired Dofasco and locked it into an independent Dutch trust making it
impossible for Mittal Steel to part with it (in case Arcelor gets acquired).

Rationale vs. Emotions

The most difficult task before the Mittals was to deal with the emotions of the European
population. There was widespread concern in some of the stakeholder countries about the
increased globalization and how that is leading to jobs moving oversees and is adversely
affecting their economies. These countries had invested heavily in the steel industry and were
worried about the future of the large scale employment provided by the industry.

As a result, before the Mittals could sufficiently communicate their proposal, there was heavy
backlash against them. The Mittals had expected the emotional uproar but were confident that
rational thinking would soon takeover, once the concerns were addressed. What they did not plan
for was the fact that nobody would want to listen to their proposal in the first place.

Working their way through

The Mittals were clearly the disadvanteged side in this process of getting to a deal. Research
shows that the negotiations that seek to neutralize differences among various stakeholders in a
multistakeholder negotiation, pose considerable risks for the disadvantaged groups. They say that
negotiations that involve selective alliance-building, among other things, promise better
outcomes for disadvantaged groups.

As we interpret it, the Mittals decided to do the same and select specific stakeholders with which
an alliance can be built and then branch out.

Selective Alliances

The Mittals believed that investors / shareholders would be willing to agree if the deal is
sweetened in terms of the price. They thought that this can be done sooner or later and so is not
the immediate priority. The main issue was emotions and the different governments personified
these. If the governments can be explained the proposal and their concerns incorporated, a major
fight would be won (though not the war).
So, Mr. Lakshmi Mittal decided to have a round of face-to-face meetings with all the
government representatives. Face-to-face meetings are very critical for there is a large amount of
risk of mis-communication in such cases. Also, such meetings allow for instant responses to
concerns raised. The Mittals had to make concessions ranging from guaranteeing the pension,
healthcare benefits to restraining any kind of job losses. They even had to agree to make
Luxembourg as the headquarters of the merged entity (and not Netherlands in which Mittal Steel
was headquartered nor London where Mr. Mittal has his residence). Slowly but surely, the
governments agreed to the modified agreement and the European Commission gave a nod to the
deal.

Double whammy

As soon as it became clear that the governments would start supporting the deal (or at least they
would be neutral towards it), Mr. Mittal formally launched the hostile takeover and upped the bid
price.

The Arcelor management and board found itself cut short at two ends. On the one hand, the
government no longer was opposed to the deal. On the other hand, the investors starting flocking
towards the Mittals on account of the premium price being offered. The only recourse the
management had would be to convince another player (white knight) to pitch in a more attractive
counter bid.

Counter bid does the trick

In its quest to keep away the Mittals, it had become clear that Arcelor management was not
thinking in the best interest of the shareholders. Arcelor executives, in a way alienated them. The
shareholders also were angry at the outright disinterest shown by the Executives to the Mittal
deal and the lack of thought given to evaluate it. Arcelor management had refused to meet with
the Mittals even after repeated requests.

Arcelor convinced Severstal, a Russian steel company, by May end  to bid for it at a higher price
than Mittal Steel. Though shareholders were not too happy with the management, the better offer
was always welcome.

The actions that followed show how one side can use the trick of the other side and leave them
armless. In negotiations, it is important to realize that one would have to stick by the rules set by
oneself or else your integrity might be lost.

The Mittals started publicizing how the merged entity (Severstal and Arcelor) would be fully
controlled by the Severstal’s Russian CEO, Mr. Aleksei Mordashov. The different governments
started listening and saw how he would be holding a substantial stake. Also, the merger would
lead to a Russian steel company with European operations (rather than it remaining a European
steel company as was the case in the Mittal deal), something that they were very afraid of. They
had opposed the Mittal deal initially on the basis of the harmful effects of globalization and this
was a more severe case of that.
In addition, the Arcelor management kept behaving as if it did not need to take the shareholders
into confidence. It called for a vote on the merger with Severstal and allowed the deal to be
approved unless, the meeting was attended by an unprecedented number of Arcelor shareholders
and they voted it down. This angered the shareholders and investors and even the government
had to stop supporting the Executives seeing this wrath.

Mittal Steel raised the offer again (and increased the cash component %) so that it would be
higher than the Severstal’s offer and there would be no reason why it should not be chosen.

Finally, Arcelor management had to budge and meet the Mittals. Still they opposed their offer
and urged the shareholders to support the Severstal offer. At this point, Mr. Mittal took the case
in the public forum and put in ads in the newspapers. These were directed to the Arcelor
shareholders and asked them to veto the Severstal deal. Severstal did better the offer one more
time, but the intentions of the management supporting the deal came under suspicion. We here
see the cost of losing one’s integrity and once that happens, even better deals are seen
skeptically.

Finally, the Arcelor board had to approve the Mittal offer, which was followed by the
shareholder approval.

The Challenges of Post-Merger Integration

Background
 

     The merger of Arcelor and Mittal into ArcelorMittal in June 2006 resulted in the creation of the
world’s largest steel company.  With 2007 revenue of $105 billion and its steel production accounting
for about 10 percent of global output, the behemoth has 320,000 employees in 60 contries, and it is a
global leader in all of its target markets.

     Arcelor was a product of three European steel companies (Arbed, Aceralia, and Usinor). In contrast,
Mittal resulted from a series of international acquisitions. Despite being competitors, the two firms
exhibited little overlap in terms of their operations. However, their attributes proved to be highly
complementary with Mittal owning much of its raw materials such as iron ore and coal and Arcelor
having extensive distribution and service center operations. Like most mergers, ArcelorMittal faced the
challenge of integrating management teams; sales, marketing, and product functions; production
facilities; and purchasing operations.  Unlike many mergers involving direct competitors, a relatively
small portion of cost savings would come from eliminating duplicate functions and operations.

 
Top Management Sets Expectations

     ArcelorMittal top management set three driving objectives before undertaking the postmerger
integration effort. These included the following: (1) achieve rapid integration; (2) manage
effectively daily operations; and (3) accelerate revenue and profit growth. The third objective
was viewed as the primary motivation for the merger. The goal was to combine what were
viewed as entities having highly complementary assets and skills. This goal was quite different
from the way Mittal had grown historically, which was a result of acquisitions of turnaround
targets focused on cost and productivity improvements.

Developing the Integration Team

     The formal phase of the integration effort was to be completed in six months. Consequently, it
was crucial to agree on the role of the management integration team (MIT), key aspects of the
integration process such as how decisions would be made, and the roles and responsibilities of
team members.

     Activities were undertaken in parallel rather than sequentially. Teams from the two firms
were identified. The teams were then asked to submit a draft organization to the MIT. The
profiles of the people who would occupy the senior positions were defined and selection
committees established. Once the senior managers were selected, they were to build their own
teams to identify the synergies and to create action plans for realizing the synergies. Teams were
formed before the organization was announced and implementation of certain actions began
before detailed plans had been developed fully. Progress was monitored to plan on a weekly
basis, enabling the MIT to identify obstacles facing the 25 decentralized task forces and, when
necessary, to resolve issues. 

     The integration team leader was selected based on their demonstrated ability to be
collaborative and process-oriented, enabling them to manage the weekly reviews and to resolve
issues as they arose. The leader would also have to be sensitive to cultural differences in order to
be able to get people to work together. Finally, the team leader would have to be someone who
had the confidence of the CEO and other top managers.

Developing Communication Plans

     Considerable effort was spent in getting line managers involved in the planning process and
to sell the merger to their respective operating teams. Initial communication efforts included the
launch of a top-mangement “road-show.” The new company also established a Web site and
introduced Web TV. Senior executives provided two-to-three minute interviews on various
topics giving everyone with access to a personal computer the ability to watch the interviews
onscreen.

     Owing to the employee duress resulting from the merger, uncertainty was high as employees with
both firms wondered how the merger would impact them. To address employee concerns, managers
were given a well-structured message about the significance of the merger and the direction of the new
company. Furthermore, the new brand, ArcelorMittal, was launched at a meeting attended by 500 of the
firm’s top managers during the spring of 2007. This meeting marked the end of the formal integration
process.  Finally, all communication of information disseminated throughout the organization was
focused rather than of a general nature.

     External communication was conducted in several ways. Immediately following closing, senior
managers traveled to all the major cities and sites of operations (i.e., the road show) talking to local
management and employees at these locations. Typicallly, media interviews also were conducted
around these visits, providing an opportunity to convey the ArcelorMittal message to the communities
through the press. In March 2007, the new firm held a media day in Brussels, which involved
presentations on the status of the merger. Journalists were invited to go to the different businesses and
review the progress themselves.

     Within the first three months folowing closing, customers were informed about the advantages of the
merger for them, such as enhanced R&D capabilities and wider global coverage. The sales forces of the
two organizations were charged with the task of creating a single "face" to the market.

Achieving Operational and Functional Integration

     ArcelorMittal management set a target for annual cost savings of $1.6 billion annually, based on their
experience with earlier acquisitions. The role of the task forces was first to validate this number from
the bottom up and then to tell the MIT how the synergies would be achieved. As the merger progressed,
it was necessary to get the business units to assume ownership of the process to formulate the
initiatives, timetables, and key performance indicators that could be used to track performance against
objectives. In some cases, synergy potential was larger than anticipated, while smaller in other
situations. The expectation was that the synergy could be realized by mid-2009. The integration
objectives were included in the 2007 annual budget plan. As of  the end of 2007, the combined firms
were on track to realize their goal with annualized cost savings running $1.4 billion.

Concluding Formal Integration Activities

The integration was deemed complete when the new organization, the brand, the “one face to the 
customer” requirement, and the synergies were finalized. This occurred within eight months of the
closing. However, integration would continue for some time to achieve cultural integration. Cultrural
differences within the two firms are significant. In effect, neither company was homogeneious from a
cultural perspective. ArcelorMittal management viewed this diverity as an advantage, since it provided
an opportunity to learn new ideas.

 
This case study relies upon information provided in an interview with Jerome Ganboulan (formerly of
Arcelor) and William A. Scotting (formerly of Mittal), the two executives charged with directing the
postmerger integration effort. See Jan De Mdedt and Michel Van Hoey, "Integrating Steel Giants: An
Interview with the Arcelor Mittal Post-Merger Managers," Mckinsey Quarterly, Februrary, 2008.

corporate mergers and takeovers/case study of LAXMI NIWAS

MITTAL
ABSTRACT

The research paper briefly talks about mergers and take overs at the corporate
world. The merits of mergers and take overs are highlighted. It has taken the case
study of Mr.Laxmi Niwas Mittal, the global steel czar and has focussed the
bottlenecks involved in acquisition of a Luxembourg based Arcelor steel company. It
highlighted the importance of multi-cultural skills for the global business leaders. It
focused at the India’s Competitive Advantages. At the end it has summed up with
the strengths of Indian economy and appealed all Indians to stay in India itself
because the returns outnumber the investments by being in India.

----

“When a piece of a log is subjected to severe pressure becomes charcoal. And if it is

subjected to extreme pressure results in a diamond. Entrepreneurs are made from
men like that”.

INTRODUCTION:

Now days, there is too much talk of Indian companies taking over the companies in
abroad. The Tata Steel’s take over of Corus has hit the headlines. It was a very
bold initiative by Ratan Tata. There was a talk of paying too much price for the
acquisition of Corus by the critics. Over all it has demonstrated and displayed the
leadership capabilities of Indian business leaders.

Once upon a time when Lord Swaraj Paul made an attempt to take over an Indian
company it was treated a hostile bid. It hit national headlines then. Many global
MNCs used to take over Indian companies in the past. During the preliberalisation
era foreign companies were on the offensive mode to take over Indian companies.
In post liberalization, things have changed for better for the Indian industry. The
Indian economy has looked up and is becoming a robust economy. As a result, the
Indian industry changed its stance from being defensive to offensive.

In this context, let us briefly define what is ‘merger’ and ‘take over’. Merger refers
to the process of two business units becoming one. On the other hand, take over
refers to the process of taking over of one unit by a relatively stronger business
unit.

MERITS OF MERGERS AND TAKE OVERS:

Both merger and take over has many merits such as

• Competitive edge in the market. There is synergy in this and one plus one is
three, six or just more than that. The raw material can be purchased in bulk
quantity thereby reducing the cost of production. When the cost of the product or
service is reduced, the company has better chances to have more profits as well as
it can compete with others by slashing down the prices. In a nut shell, there is
'economies of scale' and increased ‘economic efficiency’.
• There is increase in market share in the same segment or sector thereby having
better brand image and good will for the company.
• Increased benefits to the shareholder value. The benefits so gained are passed on
to the shareholders thereby increasing their value.
• There could be tax benefits to the company in few cases.
• Consolidation in the sector wise and it eliminates the unhealthy small time players
who are weak and can not survive in the business.
• Many other strategic advantages.

CASE STUDY OF LAXMI NIWAS MITTAL:

There is one global Indian who thrived in business with a strategy of series of
acquisitions. He is none other than Mr.Laxmi Niwas Mittal. He was born in Sadulpur
village, in the Churu district of Rajasthan, India. He graduated in Commerce from
St.Xavier’s College in Kolkata, India. He was born in Steel family. Due to the
differences with his father and brothers he left India and branched out by doing
business independently across the seas. His first attempt was in Indonesia where
he acquired a steel company which is related to wire rod manufacturing and turned
around and succeeded. One success led to another success and he began acquiring
steel plants all over the world. He can also be called “Take Over Tycoon”.

There are different ways and means by which any company can grow such as
organic growth, mergers, strategic alliances and acquisitions. The secret to success
for Mittal is series of acquisitions. He took over the companies at cheaper price
which are not doing well and developed and turned around the same. Besides, he is
an excellent negotiator, communicator and has deep understanding of cultural
differences across the world. He always believed in his core strength ‘steel’ and
never believed in unrelated diversification. As a result LN Mittal is called as a Steel
Czar and as crowned as the “Carnegie of Steel”.

In Oct 2004 Mittal acquired International Steel Group of the US for $4.5 billion and
became the largest steel producer in the world surpassing the global steel leader
Arcelor. It indicates his business acumen, gut and intuition. And the mother of all
acquisitions is the attempt to acquire Luxembourg-based Arcelor Steel. Mittal Steel
made a daring $ 33 billion offer to take over its rival Arcelor. It was the boldest
offer by any NRI to be made. There were lots of practical problems involved during
acquisition. The French government went to the extent of protecting their company
and adopted various techniques to prevent the acquisition.

Mr. Mittal pursued up to the hilt. He allayed the apprehensions of the employees
and also that of shareholders of Arcelor and after prolonged battle the company
was acquired and the transition has been made smooth. Ultimately he created 100
million tonne steel company. In one situation, the chopper in which LN Mittal was
traveling towards Paris was force landed by telling them that the chopper entered
the restricted area. The captain of the chopper was so upset that he resigned to
avoid such pressures. Then again Arcelor tried to negotiate the deal with a Russian
Steel giant Severstal who was one of its competitors in order to checkmate Mittal
Steel. It was the toughest job for the Mr.Mittal to get the merger process evened
out. Ultimately he succeeded in his bid and has become the President and CEO for
Arcelor Mittal. “In the confrontation between the stream and the rock, the stream
always wins not through strength but by perseverance”, quoted H.Jackson Brown, a
noted Author.

Now LN Mittal is the only Indian who controls any particular sector i.e. Steel sector
in the world. No other Indian in the earth controls any particular sector but it has
been made possible only for Mr.Mittal because of his passion and perseverance to
become number uno steel czar in the world.

MULTI-CULTURAL SKILLS:

The global scenario has changed drastically especially after the liberalization and
privatization in India. The rapid growing technology has made the globe smaller.
People began understanding, respecting and adopting the cultures of other
countries. At the global level it is essential to focus on multicultural skills. The
cultural gap amongst all the countries is getting narrowed down. And there are
more efforts and avenues to grasp various cultural diversities across the world.
Many companies across the world are coming to India and setting up their shops. It
demonstrates and displays the strength of the Indian economy.

In the past we have seen global MNCs and now we are witnessing Indian MNCs
shopping across the globe and acquiring number of strategically significant
companies. In the past Indian companies fell prey to global predators and now
there is a U turn where Indian companies have turned out to be predators.

INDIA’S COMPETITIVE ADVANTAGE:

India has much inherent strength as a result the Indian economy is all set to
conquer the world. Presently Indian economy is impacted by US economy and
whenever there are changes in the American economy the spill over is felt across
Asian markets. And in the near future Indian economy will be independent and will
be shielded from American economy. Below are the few competitive advantages
India has:
• Gateway to international markets in SAARC countries.
• Well developed research and development (R&D) infrastructure.
• Largest resources of untapped natural resources.
• World’s largest democracy.
• Information technology base, in terms of both software and hardware.
• Technical and marketing expertise.
• English as the preferred business language.
• A vibrant capital market with 25 stock exchanges with over 9,000 listed
companies.
• The largest supplier of cost-effective technical and non-technical manpower.
• Conducive environment for foreign investments by providing freedom of entry,
investments, location, choice of technology and import/exports.
• A well-organized judicial system with a hierarchy of courts.
• Legal protection for intellectual property rights.
• A transparent approach for promoting domestic and foreign investment.
• Declining share of agriculture and allied industries in the GDP. The Economic
Survey 2000-01 reveals that the contribution of services sector to the GDP is 40 per
cent whereas agriculture and industry contribute 30 per cent.
• Increased investments in the priority and high growth sectors such as software,
electronics, food processing, oil and gas, power, electronics and
telecommunications, chemicals, electrical equipment, food processing etc.,
• A well organized banking system with a network of 63,000 branches supported by
a number of national and state-level financial institutions.
• Offers a large market (middle class population of over 25 to 35 crore with
increasing purchasing power).
• Current account convertibility and capital account convertibility for foreign
investors.
• Increase in the number of joint ventures or wholly-owned subsidiaries most of the
domestic companies consolidated around their area of core competence by typing
up with foreign companies to acquire new technologies, management expertise and
access to foreign markets.
• Deregulation of interest rates with a greater freedom to banks to assess credit
requirements.
• Large and solid infrastructure throughout the country.
• Simplified systems for administration in government departments.
• Special investment and tax incentives for exports and certain sectors such as
power, electronics and software.
• Lower tariffs for trade.
• A transparent approach for promoting domestic and foreign investment.
• Significantly large manufacturing capabilities through latest technologies.

CONCLUSION:

The Indian economy is bullish with the GDP growing and inflation is within the
healthy limits. Indians need not to go overseas to work. Rather they should work
with in India itself so as to make Indian economy more vibrant. There are plenty of
opportunities with in India itself. The foreign countries are getting more benefits by
making use of Indian talent and expertise. What we get in return is far lesser than
what we Indians invest in terms of abilities and capabilities to other countries. It is
time Indians realized their inherent strengths and stayed in India itself.

India has the highest percentage of young productive population in the world where
as the population of China is ageing. Since there is productive population and
strong and huge reservoir of human resources, India is set to become a developed
country much before 2020 and will become a Super Power in the world by 2050.

“The dream is not what you see in sleep. Dream is the thing which does not let you
sleep”.

References: India’s Competitive Advantage- Source: India Business Opportunities,

Investment and Technology Promotion Division (Ministry of External Affairs,
Government of India) and Arthur Andersen, June 2000