ArcelorMittal USA (AMUSA), the US division of the world\u2019s largest producer of steel, seeks to produce high quality steel in a sustainable way, at the lowest cost possible. I believe that ArcelorMittal is an example of a company that has effectively aligned its operating and business models to create a competitive advantage over its competitors, which has allowed it to remain profitable (through 2014) despite a global supply glut in steel. <\/p>\n
The Business Model<\/p>\n
The business model of ArcelorMittal is to create high quality steel at the lowest cost possible in a manner that is safe and sustainable. A common misperception of steel is that all steel is the same. In fact, the different processing steps and combinations of alloys that are added can completely change the physical properties of the final product. Some of these different variations (called grades) can be extremely complicated and costly to make, and the producers who optimize their processes, upgrade their equipment, and invest in training their people are left in a position where they can sell grades that other producers cannot. AMUSA stays competitive by making the necessary investments to keep its product offering and processes world class. Additionally, it generates steel using a fully integrated process where it owns and controls every step of the production cycle: the mining and shipment of raw materials, iron production, steel production, hot rolling, and finishing (See below for a quick video outlining this process). This business model is extremely profitable during strong economic conditions (AM global was 29th on the global fortune 500 in 2007) but does very poorly during economic downturns (down to 108 as of start of 2015) as it often has to absorb massive fixed costs associated with its operations during periods where supply is greater than demand.<\/p>\n