Glencore Case Study Essay

1504 Words Sep 22nd, 2015 7 Pages
Glencore, Xstrata and the Restructuring of the Global Copper Mining Industry in 2012
Diana Alvarez Valencia (1310200)
University Canada West
Dr. Paul Rome
MGMT 661
Strategic Management
Tuesday, May 12, 2015

Introduction and Problem Identification In this case study we will identify the problems that can be issued in the process of the merger between two of the largest commodities traders in the world, Glencore and Xstrata. It will provide the background of both companies, the situation analysis, identification of alternatives
Companies Background.
Glencore had been a trading company since their early years with the name of Marc Rich & Co. Glencore, was founded by March Rich; Rich was a consummate dealmaker, doing business
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The market power would create higher operating profits due to cost savings in human resources and operating expenses and revenue increases. (Devos, Kadapakkam & Krishnamurthy, 2009). Furthermore, with this merge, Glencore and Xstrata were allowed to create a vertical integration business, where the Glecore’s expertise in trading, marketing and logistics and the Xstrata expertise in operation would create the right synergy for success in the commodity business environment. In a vertical integration or merge, the two companies are related in terms of their industry and have been competing for many years, such is the case of Glencore and Xstrata, therefore, these two companies, combine their forces and expertise to create a succesful business. (Hitt, Ireland & Hoskisson, 2013).
Glencore have been creating different advantages through the mining industry such as marketing trading, pricing and freights. In the mining industry, the trades fell into three categories: 1) Geografical arbitrage, where the buyer, in this case Glencore, seek for low cost commodities to sell them in a higher price; 2) Product arbitrage, whre the commodities are more demanded therefore they can increase the price, 3) Time related, to buy now in a lower price and buy in the future for profits. All this practices were done by Glencore, however to make a stronger company and leverage their

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