Companhia Vale do Rio Doce


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Comparative Analysis of the International Business Environment

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Companhia Vale do Rio Doce

  1. 1. Companhia Vale do Rio Doce Marco Fogato David Mixter Angel Alvarado Jose Bellosta
  2. 2. Vale: Overview <ul><li>2 nd largest metals and mining company in the world. </li></ul><ul><li>Five major lines of business. </li></ul><ul><li>Largest publicly traded company in Latin America. </li></ul><ul><li>Market Capitalization Value of $71.16 billion. </li></ul><ul><li>Over 100,000 employees. </li></ul><ul><li>Organization: Global Functional </li></ul>David Mixter
  3. 3. Geographic Markets <ul><li>Headquartered in Rio de Janeiro, Brazil. </li></ul><ul><li>Vale conducts business in all continents. </li></ul><ul><li>Their Business includes: </li></ul><ul><ul><li>Mining operations </li></ul></ul><ul><ul><li>Exploration offices </li></ul></ul><ul><ul><li>Joint Ventures </li></ul></ul><ul><ul><li>Logistics </li></ul></ul>David Mixter Gross Revenues by Geographic Market
  4. 4. General Strategy Pressures towards Local Responsiveness Pressures towards Global Integration HIGH LOW LOW HIGH Global strategy Multi-domestic strategy Transnational strategy International strategy Vale David Mixter
  5. 5. Breakdown of Vale’s main products David Mixter Iron Ore is the most profitable product, it generates 68% of Operating Income
  6. 6. Forecasting Demand & Market Share David Mixter <ul><li>The Demand has decreased due to the slowdown of the global economy </li></ul><ul><li>The global steel industry is cyclical, we expect a rebound in demand </li></ul>
  7. 7. Location Analysis Marco Fogato Individual countries Iron Ore production as a percentage of Total global production Source:
  8. 8. Location Analysis Largest Producers Source: U.S. Geological Survey Vale no-presence WTO Members Marco Fogato
  9. 9. Matrix Process Construction Energy Political Risk Assessment Economic Analysis Logistics Final Matrix Marco Fogato
  10. 10. Political Risk Assessment Weight = Score / Score Range Source: Political Risk Insurance Center Marco Fogato
  11. 11. Economy Evaluation Source: CIA Marco Fogato
  12. 12. Economy Evaluation DATA NORMALIZATION & WEIGHING Marco Fogato
  13. 13. Logistics Logistic structure and Energy availability are key- factor s for Control of Operating Costs Energy Marco Fogato
  14. 14. DATA NORMALIZATION & WEIGHING Final Matrix Marco Fogato
  15. 15. Marco Fogato SWEDEN Political stability Economic: low inflation, active trade with EU countries, good industrial growth Infrastructure: high ratio of roadways and railways to land area Energy: high and efficient production of electricity Responsible for 90% of Iron ore output in EU
  16. 16. Angel Alvarado Entry Mode Vale has experience with both entry modes, in the past we passed from a Joint venture to an Acquisition (INCO Canada, 2006)
  17. 17. Why Acquisition? The Bloomberg World Mining Index Freedom to pursue a Global Strategy To avoid Appropriability issues – Reluctance of partner company to transfer resources to another organization Internalization – Control trough self-handling of operations As a response to Vale’s competitors Falling share prices – In the last five months the Mining Index has shown a declining trend Angel Alvarado
  18. 18. LKAB is a Swedish mining company. The company is mining iron ore in mines. The company was established in 1890, and it is 100% state-owned since the 1950 Northland Resources, Inc. (&quot;Northland&quot;) is an exploration and development company publicly traded Lundin Mining Corporation is a diversified base metals mining company with operations in Portugal, Spain and Sweden. The company is publicly traded Selection of Company Angel Alvarado
  19. 19. High quality of iron ore concentrate to be delivered to steel mills and pellet plants Mining is key driver in the region; local and national support Publicly traded Concessions for metal and mineral extraction in Sweden and Finland Timeline (2-5 years) to become fully operational with three major projects Expected to become II largest Iron ore producer after LKAB Price per share extremely favorable (June 2008 C$4 , March 2009 C$0.8) Angel Alvarado Why?
  20. 20. EU is the main market EU Import: 146 Mt (Millions of tonnes) Total EU Production: 27 Mt Current Production in Sweden: 23 Mt out of 27Mt Northland’s expected annual average production will be 26 Mt Market share prospectus Angel Alvarado
  21. 21. Plan of Attack Step 1: Negotiation for acquisition Step 2: Merge Vale’s managerial team with Northland’s Step 3: Getting familiar with culture/environment Step 4: Develop contractual agreements with suppliers Step 5: Start mining operations in Tapuli Step 6: Start mining operations in Stora Sahavaara Step 7: Start mining operations in Hannukainen Jose Bellosta
  22. 22. Timetable Jose Bellosta
  23. 23. Northland Market Cap: US$ 54 M Vale is willing to pay a 25% premium price per share Financial highlights Jose Bellosta
  24. 24. Three main Projects Activity period: 11 Years Total Iron ore: 285.9 Mt Total Revenue generated: €11.5 Billion Total Operating cost: €5 Billion Source: Nothland – Annual Report Jose Bellosta
  25. 25. <ul><li>Questions? </li></ul><ul><li>Thank you! </li></ul><ul><li>The Vale Team </li></ul>