ILLUSTRATION MARKET SELECTION AND ENTRY 277 ILLUSTRATION 8.4 Vale - a Brazilian giant in different cultures...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
ILLUSTRATION MARKET SELECTION AND ENTRY 277 ILLUSTRATION 8.4 Vale - a Brazilian giant in different cultures Rapid overseas expansion brings this Brazilian multinational some contrasting experiences. Until the late 1990s, Brazil's Vale mining company was a state-owned sleeping giant. Vale, the world's largest iron-ore producer and the second-largest miner overall by volume and market value, was privatised in 1997. Since then the company has transformed itself into a dynamic conglomerate and expanded globally. As the former CEO Roger Agnelli commented in 2010: 'Vale used to be fundamentally an iron-ore company. We used to operate essentially in Brazil. Now we are in 36 countries.' Although Vale has been described as 'one of the world's most power- ful and aggressive mining companies' its international experiences have been mixed as shown in the exam- ples below and consequently the new CEO Murilo Ferreira has somewhat slowed down Vale's global expansion. Vale's $17.6 bn (13.2 bn or 10.5 bn) takeover in 2006 of Inco, the world's largest nickel producer, was its first major overseas acquisition. Canada's largest national newspaper, the Globe and Mail, described Vale's arrival as 'The great Canadian mining disaster.' Many Canadians resented this takeover by what they regarded as a business from a developing country. Of 29 senior Canadian managers in early 2007, three years later 23 had departed, mostly voluntarily. At one tense meeting a Brazilian manager riposted: 'How come, if you're so smart, you didn't take us over?' The clash resulted in a strike that lasted almost a year. While the conflict was finally resolved it was seen as a sign of potential confrontations when companies from emerging economies such as Brazil, China and India expand into new, unfamiliar territories. The booming demand from China has been a gift and Vale's export of iron ore there account for about 30 per cent of revenues. Compared to main rivals Australian miners BHP and Rio Tinto, Vale, however, has a considerable disadvantage: distance. Vale's solution has been to develop giant iron-ore vessels. A fleet of 100 of the so-called 'Valemaxes' would reduce shipping costs to China by 20 per cent and carbon emission by 35 per cent. The giant ships have, however, ignited controversy among Chinese authorities, especially when one developed a crack in a ballast tank. The struggling Chinese shipbuilding community has been particularly critical as it claims that the mega-carriers would drive freight rates down. All this has resulted in a ban on the Valemaxes to dock at China's ports, forcing Vale to unload in Malaysia and the Philippines instead. A contrast so far has been Vale's experience in Mozambique. Like many Brazilian companies, Vale has been attracted to the two African countries of Angola and Mozambique because of the shared cul- tural and linguistic heritage of Portuguese colonial- ism. About half the 3 million black African slaves sent to Brazil between 1700 and 1850 came from Angola and in the 1820s, settlers in Angola and Mozambique applied to join the newly independent Brazil in a federation. Vale first invested $1.7 bn (1.3 bn) in Moatize, considered by investors to be one of the world's largest untapped coal reserves. Because of its success Vale has decided to expand Moatize's capa- city from 11 million to 26 million tonnes per year with an additional investment of $6 bn (4.5 bn) includ- ing the expansion of railway linkages and infrastruc- ture. Vale's CEO, Murilo Ferreira, confirms Africa's significance for the company's strategy: 'It's a new frontier... Africa is very important. We want to grow there.' Sources: Financial Times, 25 February 2010; Financial Times, 9 February 2010; Financial Times, 11 February 2010; Financial Times, 12 April 2012; Financial Times, 1 October 2012; mining- technology.com, 24 November 2011; miningweekly.com, 18 May 2012. Questions 1 Suggest three reasons for Vale's different reception in Canada and Mozambique. 2 What can Vale do to mitigate the problems the company encounters when expanding globally? ILLUSTRATION MARKET SELECTION AND ENTRY 277 ILLUSTRATION 8.4 Vale - a Brazilian giant in different cultures Rapid overseas expansion brings this Brazilian multinational some contrasting experiences. Until the late 1990s, Brazil's Vale mining company was a state-owned sleeping giant. Vale, the world's largest iron-ore producer and the second-largest miner overall by volume and market value, was privatised in 1997. Since then the company has transformed itself into a dynamic conglomerate and expanded globally. As the former CEO Roger Agnelli commented in 2010: 'Vale used to be fundamentally an iron-ore company. We used to operate essentially in Brazil. Now we are in 36 countries.' Although Vale has been described as 'one of the world's most power- ful and aggressive mining companies' its international experiences have been mixed as shown in the exam- ples below and consequently the new CEO Murilo Ferreira has somewhat slowed down Vale's global expansion. Vale's $17.6 bn (13.2 bn or 10.5 bn) takeover in 2006 of Inco, the world's largest nickel producer, was its first major overseas acquisition. Canada's largest national newspaper, the Globe and Mail, described Vale's arrival as 'The great Canadian mining disaster.' Many Canadians resented this takeover by what they regarded as a business from a developing country. Of 29 senior Canadian managers in early 2007, three years later 23 had departed, mostly voluntarily. At one tense meeting a Brazilian manager riposted: 'How come, if you're so smart, you didn't take us over?' The clash resulted in a strike that lasted almost a year. While the conflict was finally resolved it was seen as a sign of potential confrontations when companies from emerging economies such as Brazil, China and India expand into new, unfamiliar territories. The booming demand from China has been a gift and Vale's export of iron ore there account for about 30 per cent of revenues. Compared to main rivals Australian miners BHP and Rio Tinto, Vale, however, has a considerable disadvantage: distance. Vale's solution has been to develop giant iron-ore vessels. A fleet of 100 of the so-called 'Valemaxes' would reduce shipping costs to China by 20 per cent and carbon emission by 35 per cent. The giant ships have, however, ignited controversy among Chinese authorities, especially when one developed a crack in a ballast tank. The struggling Chinese shipbuilding community has been particularly critical as it claims that the mega-carriers would drive freight rates down. All this has resulted in a ban on the Valemaxes to dock at China's ports, forcing Vale to unload in Malaysia and the Philippines instead. A contrast so far has been Vale's experience in Mozambique. Like many Brazilian companies, Vale has been attracted to the two African countries of Angola and Mozambique because of the shared cul- tural and linguistic heritage of Portuguese colonial- ism. About half the 3 million black African slaves sent to Brazil between 1700 and 1850 came from Angola and in the 1820s, settlers in Angola and Mozambique applied to join the newly independent Brazil in a federation. Vale first invested $1.7 bn (1.3 bn) in Moatize, considered by investors to be one of the world's largest untapped coal reserves. Because of its success Vale has decided to expand Moatize's capa- city from 11 million to 26 million tonnes per year with an additional investment of $6 bn (4.5 bn) includ- ing the expansion of railway linkages and infrastruc- ture. Vale's CEO, Murilo Ferreira, confirms Africa's significance for the company's strategy: 'It's a new frontier... Africa is very important. We want to grow there.' Sources: Financial Times, 25 February 2010; Financial Times, 9 February 2010; Financial Times, 11 February 2010; Financial Times, 12 April 2012; Financial Times, 1 October 2012; mining- technology.com, 24 November 2011; miningweekly.com, 18 May 2012. Questions 1 Suggest three reasons for Vale's different reception in Canada and Mozambique. 2 What can Vale do to mitigate the problems the company encounters when expanding globally?
Expert Answer:
Answer rating: 100% (QA)
1 Three reasons for Vales different reception in Canada and Mozambique could be a Cultural differences In Canada there may have been a sense of nation... View the full answer
Related Book For
Exploring Strategy Text and Cases
ISBN: 978-1292145129
11th Edition
Authors: Gerry Johnson, Richard Whittington, Patrick RegnÈr, Kevan Scholes, Duncan Angwin
Posted Date:
Students also viewed these marketing questions
-
Harley-Davidson: Preparing for the Next Century There are very few products that are so exciting that people will tattoo your logo on their body. Richard Teerlink, Retired CEO, Harley-Davidson In...
-
1. Based on the information provided in the case below, what is the key strategic goal for Tim Hortons as of August 2014? It would be a year of dramatic change for Tim Hortons Inc. On August 26,...
-
Guidance Residential in Reston, Virginia, offers a Shari'ah-compliant housing finance product for Muslims and others who do not believe in collecting or paying interest. Under their Declining Balance...
-
Assume that it is now January 1, 2016. Wayne-Martin Electric Inc. (WME) has developed a solar panel capable of generating 200% more electricity than any other solar panel currently on the market. As...
-
A meeting can be a vehicle for fostering team building and reinforcing team member expectations, roles and commitment to the project objective. Please discuss what would take place during the five...
-
What does the responding party need to do to object to a motion for summary judgment?
-
Rodeo & Blue Inc (RBI) has been a remarkable success story over the past four years. Starting from a small basement operation, it has quickly grown to a worldwide leader in the music industry. It is...
-
A stock is currently traded at $60. The standard deviation of the stock return is 30% per annum. The riskless interest rate is 5% per annum. The terminal payoff of the derivative is specified as:...
-
Cheapest Car Rental rents cars at the Chicago airport. The car rental market consists of two segments: the short-term segment, which rents for an average of 0.5 week, and the medium-term segment,...
-
Class, just to help with one of the elements of the marketing mix, place includes the entire channel of distribution and how a business gets their product from their location to the customer....
-
In 2023, Martinez receives the raw materials and pays the required $1,700,000. The raw materials now have a market value of $1,360,000. Prepare the entry to record the purchase. (Credit account...
-
1. What is the essential basis for ethical reasoning, according to Paul and Elder? Why are ethical principles not a matter of subjective preference? 2. How might reasoning processes be used to...
-
Biology define
-
a) Discuss whether the system should be controllable or not. Check your intuition by forming the controllability matrix and checking its rank. b) Assume that all of the state variables can be...
-
First, for this case study, define the ethical dilemma facing "John". Second, isn't the collectability of an account ultimately based on opinion? If so, how does that play in the ethical dilemma...
-
A software contract and consultancy firm maintains details of all the various projects in which its employees are currently involved. These details comprise: Employee Number, Employee Name, Date of...
-
Compare and contrast licensing and subcontracting.
-
1. What is the importance of entrepreneurialism and innovation in designing and implementing strategy? 2. How are the pillars of strategy defined in both organisational structure and human relations...
-
Pick an organisation mentioned in this chapter (e.g. Apple, IKEA, Microsoft, Ryanair, Starbucks, and Zara) or one you admire and would like to work for. What micro foundations (e.g. individuals and...
-
1. Try reversing the sequence of the three parameters (to diversification, investment and growth) and redraw the decision tree. Do the same eight options still emerge? 2. Add a fourth parameter to...
-
Discuss the factors that a firm should consider in deciding whether to enter a foreign market.
-
In 1984, the Qingdao General Refrigerator Plant was one of 300 or so collectively owned domestic white goods manufacturers turning out shoddily made appliances sold to local Chinese consumers on a...
-
What are the basic differences between a JV and other types of strategic alliances?
Study smarter with the SolutionInn App