The aim of this paper is to analyse the process of the internationalisation progress of ThyssenKrupp in Brazil. In chapter 2 there will be the analysis of motives for the realisation of the internationalisation project by the time of the decision-making. The analysis of developed problems tells us why the expected success did not result from the transaction. Which factors led to failure? Finally a critical reflexion of the turned out challenges is carried out and shows potential for optimisation of this internationalisation transaction. The paper ends with the conclusion.
Table of Contents
1 Introduction
2 Analysis
2.1 Reasons for internationalisation
2.2 Problem statement
2.2.1 The Decision
2.2.2 The Building Process
2.2.3 Environmental Damage
2.2.4 Consideration of Sale
2.3 Critical reflexion
3 Conclusion
Objectives and Topics
This seminar paper provides an ex post analysis of ThyssenKrupp's internationalisation project in Brazil (TKCSA), investigating the strategic motives, the emergence of operational and environmental challenges, and the subsequent failure of the investment to meet initial economic expectations.
- Strategic motives for internationalisation in emerging markets.
- Operational challenges and cost escalations during industrial construction.
- Ecological and social impacts of the project on the local environment.
- Evaluation of management decisions and market entry strategies.
- Reflection on failure factors and potential for strategic optimisation.
Excerpt from the Book
2.2.2 The Building process
In September 2006 there was the groundbreaking ceremony of the TKCSA. In May 2007 at the 20th Brazilian Steel Conference, ThyssenKrupp’s Dr. Hans-Ulrich Lindenberg declared that the first slab would be produced in March 2009. He concluded his presentation with the sentence: “Actual situation – in budget, on time!”10. The board of management gave way to 2.4 billion Euros for the investment project. Production should begin in 200911. In November 2006 the investment budget increased to 3.2 billion Euros due to the integration of the harbour, the coke oven and the power station12. Up to this point the management was contented regarding the development of the project. The work for the preparation of the land was completed. The construction proceeded13. But there were already difficulties in the building area. It was located in a mangrove swamp; a fixation with poles was necessary. A multiple of originally planned stakes had to be anchored in the ground, which cost another three-digit billion Euros range14. The executive management decided to continue the further construction on a low-price level. The contract for the construction of the coke oven was therefore concluded with the Chinese company Citic. Citic promised cost savings to the amount of 60 million Euros compared to ThyssenKrupp’s subsidiary company Uhde 15 . However, the accomplishment did not correspond to the required quality standards. Citic defaulted and the remediation of defects was completed by Uhde at last. That led to additional costs of about 500 to 700 million Euros – instead of the cost savings that were calculated first16. The management reacted with further saving measures.
Summary of Chapters
1 Introduction: This chapter outlines the scope of the TKCSA project in Brazil and presents the core objectives of the paper, focusing on why the anticipated success of the internationalisation failed to materialize.
2 Analysis: This section details the motives for internationalisation, the specific problems encountered during the construction phase, the resulting environmental damage, and the company's eventual shift toward considering a sale of the steelworks.
2.1 Reasons for internationalisation: This section explores the strategic drivers for building the steelworks in Brazil, highlighting the pursuit of cost advantages and access to new growth markets.
2.2 Problem statement: This section investigates the specific hurdles the project faced, ranging from initial decision-making to the structural and financial complications of the building process.
2.2.1 The Decision: This section outlines the initial feasibility studies and the board's approval process that set the project in motion in 2005.
2.2.2 The Building Process: This section documents the timeline of construction, the budget overruns, and the technical difficulties faced during the development of the site.
2.2.3 Environmental Damage: This section addresses the ecological consequences, including the impact on the Rio Guandu and local fishing communities, as well as the resulting legal challenges.
2.2.4 Consideration of Sale: This section analyzes the management's decision to seek a buyer for the steelworks due to ongoing financial losses and changed market conditions.
2.3 Critical reflexion: This section provides a strategic evaluation of why the internationalisation failed and offers suggestions for better risk management and future strategic approaches.
3 Conclusion: The final chapter summarizes the key findings of the ex post analysis, emphasizing the necessity for constant monitoring and adaptability in international business strategies.
Keywords
ThyssenKrupp, TKCSA, internationalisation, Brazil, steel production, strategic management, market entry, cost leadership, environmental impact, industrial investment, project management, financial loss, globalization, emerging markets, corporate strategy.
Frequently Asked Questions
What is this paper primarily about?
This paper is an ex post analysis of ThyssenKrupp's investment in the Brazilian steelworks project known as TKCSA, examining why the project resulted in significant financial and operational difficulties.
What are the central thematic fields of this work?
The core themes include international management strategies, industrial site construction in emerging economies, risk management, ecological responsibility, and the strategic evaluation of large-scale corporate investments.
What is the primary objective of the research?
The main goal is to analyze the internationalization progress of ThyssenKrupp in Brazil, identify the factors that led to the project's failure, and perform a critical reflection on how such challenges could have been managed or avoided.
Which scientific methods are applied in this work?
The work utilizes an ex post analysis method, combining case study research with an evaluation of management decisions based on historical financial data, internal company reports, and academic perspectives on strategy.
What topics are covered in the main body?
The main body covers the strategic motives for the project, a detailed timeline of construction problems, the social and environmental consequences, the financial decline, and a strategic reflection on organizational lessons learned.
Which keywords best characterize this work?
Key terms include ThyssenKrupp, TKCSA, internationalisation, strategic management, cost leadership, environmental damage, project failure, and industrial investment.
What impact did the construction site location have on costs?
The location in a mangrove swamp required complex and expensive foundation work using a much larger number of support poles than originally planned, leading to significant budget overruns.
Why did the company eventually seek to sell the project?
The company sought a sale because the original goals of quality and cost leadership could no longer be met, exacerbated by soaring costs, unfavorable exchange rates, and the continuous financial burden of the project.
How did the market react to the publication of a possible sale?
Interestingly, the market responded with a disproportionate rise in ThyssenKrupp's stock price, suggesting that investors viewed the potential exit from the problematic project as a positive step toward sustainability.
- Quote paper
- Anonym (Author), 2014, Ex Post Analysis of the Internationalisation of ThyssenKrupp in Brazil, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/349770
