The Business Environment Of Mittal Steel Commerce Essay

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CEO Lakshmi Mittals family owned 88% of the company. Mittal Steel was based in Rotterdam but, managed from London by Mittal and his son Aditya. It was formed when Ispat International N.V. acquired LNM Holdings N.V. (both were already controlled by Lakshmi Mittal) and merged with International Steel Group Inc. (the remnants of Bethlehem Steel, Republic Steel and LTV Steel) in 2004. On 25 June 2006, Mittal Steel decided to merge with Arcelor, with the new company to be called Arcelor Mittal. The merger has been successfully approved by shareholders and directors of Arcelor making L.N. Mittal the largest steel maker in the world.

Environment refers to the surroundings. The organisation is surrounded by various challenging factors. These factors stand as the fencing wall to the business or the organization. All the organizations irrespective of their size, and the type of the product manufactured by them are surrounded by such factors. Thus business environment refers to the environment by which a business is surrounded.

Business environment is defined as the factors exogenous to the home environment of the organization influencing decision making on resource use and capabilities. These factors include the political, social, economic and technological environments.

All the organizations possess an internal as well as the external environment. An organization cannot have control over the external environment their success depends upon how well they adapt themselves to their external environment. The internal environment is in the hands of the organization and can be controlled. But many a times the internal environment poses serious problems to the organizations when the organization does not concentrate on all the internal factors.

The sum of all the activities right from the procurement of raw material to the delivery of the finished product is called as business. The business activities include production, finance, insurance, marketing , etc., the legal aspects regarding compliance with the government regulations and the discharge of the obligations to individuals or groups is also addressed because business is for the people.

The study of the business environmental factors is important for all the organizations. This is because if the organization formulates the strategy without having a clear picture of the environmental factors then it is sure that the strategy thus formulated may fail.

An organization is surrounded by both the internal business environment and the external business environment.


The internal environment refers to the conditions, events, and the factors within an organization which influence the business activities, particularly those of the employees.

The goals and objectives, management structure, relationship among the various constituents, physical assets, technology, and the resources form the internal environment of an organization.

Goals are often referred to as the statements that describe what the project is ought to achieve.

Objectives are lower level statements that describe the specific, tangible products and deliverables that the project will deliver.

Physical assets refer to the machinery that is used to manufacture the planned products. The other types of the physical assets are the buildings. It means that there should be some area where the activities are performed i.e., transforming the raw materials into the finished goods form.

Technology is the mode which helps an organization to carry out its operations at a faster pace. The technology may be implemented in the various resources of an organization at various levels.

Resources are the raw material, or the labour which contribute to the practical implication of the strategy in help in achieving the set goals and objectives.


The external environment is a combination of both the micro and the macro business environments. The micro environment is that environment which includes the various factors such as the suppliers, workers, customers, intermediaries, competitors and the general public.

The macro environment is divided into economic and non-economic activities. The economic activities are further divided into national and global environment. It is very essential to view all the activities into global picturesque because of the global participation. Those organizations which are planning to make investments in foreign countries should properly understand the global scenarios effectively and efficiently and therefore this should be implemented for their strategy formulation. The non economic environment includes various factors such as the political, social, economic and technological factors.

The macro environment refers to all those factors which exercise their influence on the business activity. The role of micro environment may be either positive or negative. This proves that the larger forces in the company's environment do not always provide wider space for business activities.

The political factors are those factors which arise from the political structure in an economy. The political factors pose challenges to an organization because the political policies keep changing when a new government is formed. So, the organization should be capable enough to cope with those political policies and formulate their strategies according to those policies. Business growth depends on the political environmental factors. If the environment is conducive then only the business will flourish. There is always an element of risk associated with these political factors. Risk could be in terms of the type of the government in power and its business policies, perception in matters of foreign investment and how it regulates the market. The business organization therefore has to keep in mind the political aspect while making a foray into the market or it has to face the political risks.

Social factors are those factors which arise because of the society. An organization becomes a part of the society as it serves and manufactures the products and services that are required by the society. The organization should carry out various welfare activities which prove beneficial to the society. The organization should forego the concept of solely concentrating on profit maximization. Both the society and the organization get benefitted from each other .the business possesses a social responsibility. The various social factors are the culture, values, tastes, preferences and so on and all of these must be addressed by the business organization as business is for the people.

The economic factors are those factors that determine the purchasing power, the living standards, the economic conditions such as recession, inflation and various factors which have an impact on the purchasing capacity of the consumers.

The Technological factor : Each day brings a new technology, and the old ones become obsolete. Technology makes the business simple. The government has realised the importance and so policies concerning different aspects of the technology have been formed. Business managers should keep abreast of the rapid changing technological changes, because this information is vital for its functioning.


The various strategic management tools that are available to formulate an effective and efficient strategy are as follows:

Critical Question Analysis

SWOT Analysis

Business Portfolio Analysis

Porter's model For Business Analysis

Resource based Model.

Of these all the SWOT ANALYSIS is the mostly used strategic formulation tool.

Many organizations have implemented the SWOT analysis and achieved the success and reaped the benefits of the SWOT analysis.


The term swot stands for strength, weakness, opportunity and threat. The swot analysis is the important strategic tool that is used to formulate the strategy in an organization. This analysis helps the organization to identify its strengths. The strengths of an organization are the success that the organization has tasted earlier. An organization's strength may be its management, its employees or its resources. It is thus considered that the successful organizations identify their strengths correct their weaknesses, grab the opportunities that are available and pose a challenge to the threats. The organization should have the resources to surpass their failures or the weaknesses. The weakness of an organization may be because of various factors such as the improper management, non- availability of the resources, etc., the organization should be able to implement stringent rules which should help in carrying out the proper activities all through the organization and complete the vision tasks. the opportunities for an organization help them to make a mark for them in the market. Mostly the weaknesses of an organization's competitors are its opportunities. The organization should identify its competitor's weakness and transform those weakness into their strengths by solving those weaknesses. The threats that arise in the business environment may be because of various political, social, economic and technological factors. If the organization uses the outdated technology then it lacks back and here comes the chances for its competitors to suppress them. The swot analysis helps to identify the strengths, weaknesses, opportunities and the threats and satisfy the needs of the markets and meet the expectations of their stakeholders.


Strategy is defined as the tool by which the objectives consciously and systematically pursued and obtained over time. The word strategy is derived from the Greek word STRATOS- meaning army and AGO- meaning guiding. It is referred to as the art of analysing and directing. Strategy is not the act of planning it deals with dealing with the uncontrollable factors. The five key elements that have to be considered while formulating the strategy are mission, climate, ground, leadership and the methods. The strategy technique is used in all the fields. It attracts a concentrate in the business field because strategy acts as the guide to organization in the process of achieving the set goals and the objectives. It will be very much impossible for the organization straightaway start the process of achieving the organizational goals and objectives without a proper methodology. The strategy helps the organization and prescribes the various ways through which the organization can achieve the goals and the objectives. The business activities are always viewed as a group task but not as an individual task. Group work is considered to be the efficient one rather than the individual one as the ideas generated in a group are more when compared to individual one. The group task also helps to create the concept of specialisation. This helps to achieve the set goals at a faster pace rather than slowing down the whole process. The organizations in these days are trying to deliver the goods to customers before the proposed time. This is making a large percentage of customers to rely on the organization to satisfy their needs. There are various events that disturb the strategy after it is formulated and put into practice. So the organization should keep this concept in mind and embrace these factors at the time of designing of the organization's strategy.

All these tasks are possible only when the organization's management possesses the managerial functions of planning, organising, staffing, leading, and controlling.

The concept of strategic management has evolved to make the strategic formulation process an easier one. Strategic management may be defined as the conduct of drafting, implementing, and evaluating cross functional decisions that will enable an organization to achieve its long term objectives. Generally the organizations opt for long term objectives than the shorter ones as they can sustain in the market by providing innovative products and services to the people by satisfying the needs of the markets. This way they can expand their activities by setting up various branches which offers them to participate in the primary and the secondary capital markets which helps them to meet the expectations of their stakeholders.

What is a market?

Market is defined as the group of consumers or organizations that are interested in the product , has the resources to purchase the product , and is permitted by the law and other regulations to acquire the product .


The outermost most rings refer to the potential market. This potential market consists of that population who show interest towards buying a product. The inner ring in side the potential market consists of that population who have the currency to buy the particular product available in the market. The qualified available market is that market in which the consumers are quailed to purchase the product. Here the customers should possess the legality to buy a product. For example if a customer is interested in buying arms and ammunition first he should have enough money to buy those arms and ammunition and he can attain the legality to by the same by possessing an arms and ammunition license. The target market is that place which an organization has selected and has produced the products and services which are preferred by the consumers in that area. This segmentation is done because of the availability of various products and services in the market which are used for various purposes. The innermost circle or the layer is the penetrated market where the customer buys the products and the services.

It proves healthy for the organization to concentrate on the target markets rather than one as there are chances of risk arising in the future. If the organization concentrates on various markets it will become easier for the organization to spread or share the risk burden.

Who are stakeholders?

Stakeholders are the people or the groups that have an investment, share, or interest in a business or industry. Stakeholders of a company or an organization include stockholders, bondholders, customers, suppliers, employees


Stockholders or the shareholders are the one who own stock in an organization. There are different types of share holders such as equity, preference or a combination of both. The shareholders own few share of the organization and are eligible to get paid certain amount of the interest on at the agreed intervals. Usually, the interest is paid out of the profit earned by the organization.

Bond holders

In financial concept a bond is defined as a financial security. A bond is like a loan. On the maturity of the bond the principle amount is paid. The bond issuer is also liable to pay some interest to the issue. The features of a bond are that it possess some monetary value .the principle amount of the bond reflects its monetary value. The bond possesses a maturity date; the bond holder is liable to receive some interest based on the interest rate or the coupon rate.


Customers are those who buy the products and services of the organization. The customer plays a very vital role as they are the purpose of the business. If there are no customers for a particular product then it is a loss to the organization which produces such product. Thus the organization should conduct various activities to know the preferences and the needs if the customers and they should also try to achieve customer satisfaction by introducing innovative features to the already existing product or try to introduce new products. The organizations should give much importance to customer retention too.


Suppliers are the people or the organizations that supply or sell the various raw materials required by the organization for the manufacturing process. It is very much important to meet the expectations of the suppliers as they supply the resources which are essential to achieve the set objectives. The organization should pay the amount to their creditors on time so that they provide the credit to but the required raw materials from their suppliers.


Employees are the people who work in an organization. These are the people who apply their skills to execute the strategy thus formulated to achieve the set goals. The organizations should always strive for betterment to create an environment for its employees which inculcates some interest in them to do some work. They should pay extra to the employees who have spent extra hours of production. The organization should train the employees and encourage the employees by rewarding them. Few organizations give some shares to the employees who are gems and try many ways to retain them.


The organizations should follow the strategic management policies for the formulation of an effective and efficient strategy and should also possess all the resources which are required in executing the strategy for the achievement of the set goals and objectives which have been formulated based on the vision and the mission of an organization.

The various strategic formulation tools helps an organization to formulate a strategy which have the chances of less flaws and which minimizes the risk that an organization is ought to face. The market risk is the risk which crops up with the improper strategic formulation. Moreover, the organization should clearly understand all the business environmental factors which disturb the organization. All these factors do not remain stagnant as there is possibility of the changes that occur every day. So, the organization should and must keep all the changes that may take place in future or in that time which is taken to execute the formulated strategy. The political, social, economic and the technological factors differ from country and country and there is a need for all the organizations to understand these factors not only at a domestic level but also at the global level if they are planning to expand and establish themselves into the global market and to cater the needs of the global markets and meet the expectations of their stakeholders. So all these tools help the organization to build a strong strategy and create a niche by existing for long run in the market.

All these factors transform into posing challenge to all the organizations is only because of one concept i.e., CHANGE. The change is the concept that makes the organizations to introduce innovative strategic formulation techniques. This is that major concept which makes the organizations to produce new products and services by satisfying the customers and retain them. The change concept is natural and nothing can stop it. The change factor is controllable only at certain level; beyond that level nothing can stop it. The change is the factor driven by we the PEOPLE. Because of the temporary concept. Nothing is permanent in this world. The change concept arises because of the weakness, the disadvantage or the demerits of a product. So the organization should inculcate the features that are taking place in an organization's strategy formulating process. Moreover the organization's strategy formulation policy should inculcate the flexible characteristics. All the organizations should inculcate the adaptability feature in them. This helps them to easily understand the changes that takes place around them and formulate a strategy by keeping in mind all those changing and challenging business environment factors.