The executive director of Previ was the former member of the City Council in Sao Paulo, since 2003. His name was Silva Rosa and he became the president of the board of directors for Vale in 2009. Therefore, the government had the power to influence Vale’s decisions through him. Apart from this, the Brazilian government also held 12 golden shares which gave a veto power to the government for any proposed action relative to the objectives of the company, the location of the mining and the change in the name of the company. Through this veto power, the company can also veto any decisions for winding up the company and influence merging decisions.

Changes in Global External Environment since Privatization of Vale

            The global external environment has changed significantly since the privatization of Vale in 1997. Mineral ores have become one of the five largest export sectors in Brazil. Moreover, the emerging markets were becoming less dependent on Europe and the US as export destinations. After the financial crisis, China became the most important source for Brazilian exports. This was mainly due to the rapid increase in the US interest rates and this negatively affected the demand of the iron ore exports from Brazil. Moreover, the external environment has also changed from technological perspectives.

The technology has dramatically changed which has increased the demand for complex alloys and rare minerals especially in the emerging economies such as China(Khanna, 2005).The demand for iron ore had increased significantly in China where 98% of the iron ore volume sold went to the steel production. The supply for iron ores and minerals lagged behind the demand therefore, the prices soared. Overall, these external environment changes made a significant contribution for Vale pursuing a global diversification strategy and exporting to emerging economies.

Strengths, Value Proposition & Sustainable Competitive Advantage of Vale

Number 1 Player in Iron Ore Industry: There are many strengths of the company which had made it the number 1 player in the iron ore industry. First of all, Roger Agnelli was an experienced bank executive and had served on many boards of major energy companies such as Petrobas and CSN. The infrastructure of Vale was also strong which supported the mining operations around the globe. The construction of the distribution centers also provided Vale with an added advantage which strengthened its shipping capabilities in Asia. As Vale had become the second largest metals and mining company, the company was the largest producer of iron ore and other minerals such as kaolin, manganese ore, aluminum, potassium and coal. This also added to the strengths of the company. It was the largest exporter of iron ore, minerals and metals such as nickel in 2009, which made it the number 1 player among the five major players in iron ore industry in 2009. The long term contracts and the benchmark pricing system also strengthened the position of Vale against its competitors, Rio Tinto and BHP Bhilliton.

Value Proposition: The international diversification strategy was the core component of the customer’s value proposition of Valve. The diversification of Vale in emerging economies such as China where the consumption of minerals had spurred between 2002 and 2009 had created a value proposition for the customers of the company(Yücel, 2015). The company has always capitalized on its opportunities for international diversifications and achieved this through strategic acquisitions and development of logistics solutions around the world. The company has mineral exploration efforts in 22 countries. The value proposition of Vale lies not about being only in Brazil but expanding and diversifying its core business or iron ore and minerals around the world.

Sustainable Competitive Advantage:Vale was the largest producer of the iron ore in the world and in 2009, the mineral ores had become one of the five largest export centers in Brazil. Therefore, the core business of the company which was the iron ore business with a business model based on bulk volumes handled by the integrated platforms and logistics of the company is the sustainable competitive advantage of the company(Warf, 2007). Despite rapid diversification around the world, the iron ore business remains the biggest business of the company where the key success factors for Vale depend upon.Steel companies on the other hand were also dependent on the supply of iron ore and Vale had a sustainable advantage based upon the mines of the company which yielded highest grade of iron ore. Secondly, the company was also able to supply its iron ore products at a relatively low price due to its advanced technology, open pit mines and the less complex logistics network. Finally, the rapid boost in the consumption of the minerals and the iron ore in the major emerging economies such as China has boosted from 30% to 50% of the worldwide sales. These all factors had created a sustainable competitive advantage for Vale…………………..

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