1. A © Bruno G. Ruettimann Which Globalization for the Aluminium Industry ? Which Globalization for the Aluminium Industry ? Bruno G. Rüttimann, Alcan Engineered Products Bruno G. Rüttimann, Alcan Engineered Products ALUMINIUM 2008 - Essen, September 23-25 ALUMINIUM 2008 - Essen, September 23-25 Trade Fair & Conference Trade Fair & Conference

2. A © Bruno G. Ruettimann 1995 Alcoa buys Alumix 1995 Alcoa buys Alumix

3. A © Bruno G. Ruettimann 1997 Alcoa buys Inespal 1997 Alcoa buys Inespal

4. A © Bruno G. Ruettimann 1998 Alcoa buys Alumax 1998 Alcoa buys Alumax

5. A © Bruno G. Ruettimann 1999 Alcan to merge with Alusuisse and Pechiney 1999 Alcan to merge with Alusuisse and Pechiney

6. A © Bruno G. Ruettimann 1999 Alcoa buys Reynolds 1999 Alcoa buys Reynolds

7. A © Bruno G. Ruettimann 1999 Hoogovens merges with British Steel 1999 Hoogovens merges with British Steel

8. A © Bruno G. Ruettimann 2000 Alcan merges with Alusuisse 2000 Alcan merges with Alusuisse

9. A © Bruno G. Ruettimann 2000 Alcoa buys British Aluminium 2000 Alcoa buys British Aluminium

10. A © Bruno G. Ruettimann 2002 Norsk Hydro buys VAW 2002 Norsk Hydro buys VAW

11. A © Bruno G. Ruettimann 2003 Alcan buys Pechiney 2003 Alcan buys Pechiney

12. A © Bruno G. Ruettimann 2004 Alcan spin-offs Novelis 2004 Alcan spin-offs Novelis

13. A © Bruno G. Ruettimann 2006 Corus sells downstream to Aleris 2006 Corus sells downstream to Aleris

14. A © Bruno G. Ruettimann 2006 Rusal merges with Sual and Glencore 2006 Rusal merges with Sual and Glencore

15. A © Bruno G. Ruettimann 2007 Hindalco buys Novelis 2007 Hindalco buys Novelis

16. A © Bruno G. Ruettimann 2007 Alcoa fails to buy Alcan 2007 Alcoa fails to buy Alcan

17. A © Bruno G. Ruettimann 2007 Alcoa Extrusion merges with Sapa 2007 Alcoa Extrusion merges with Sapa

18. A © Bruno G. Ruettimann 2007 Rio Tinto buys Alcan 2007 Rio Tinto buys Alcan

19. A © Bruno G. Ruettimann 2007 Alcoa sells Packaging 2007 Alcoa sells Packaging

20. A © Bruno G. Ruettimann 2008 Rio to sell Packaging and Engineered Products 2008 Rio to sell Packaging and Engineered Products

21. A © Bruno G. Ruettimann 2008 BHP Billiton bids for Rio Tinto 2008 BHP Billiton bids for Rio Tinto

22. A © Bruno G. Ruettimann

23. A

24. A What have Globalization of mining Globalization of primary aluminium Globalization of extrusions Globalization of automotive in common? What have Globalization of mining Globalization of primary aluminium Globalization of extrusions Globalization of automotive in common?

25. A © Bruno G. Ruettimann  Analyzing the Industry Structure  Defining Business Types and associated Globalization Types  Evaluating the future evolution of the Aluminium Industry and possible Business Models  Analyzing the Industry Structure  Defining Business Types and associated Globalization Types  Evaluating the future evolution of the Aluminium Industry and possible Business Models Which Globalization for the Aluminium Industry Content

26. A © Bruno G. Ruettimann Analyzing the Industry Structure Framework and determinants Market structure Market structure Product characteristics Product characteristics Operating configuration Operating configuration Business type Business type Type of globalization

27. A © Bruno G. Ruettimann Analyzing the Industry Structure Basic classification of business types Market structure Market structure Product characteristics Product characteristics Operating configuration Operating configuration Business classification Business classification Typeof globalization Typeof globalization Product characteristics Product characteristics

28. A © Bruno G. Ruettimann Analyzing the Industry Structutre Basic classification of business types Product characteristics Product characteristics Market structure Market structure Product characteristics Product characteristics Operating configuration Operating configuration Business classification Business classification Typeof globalization Typeof globalization

29. A © Bruno G. Ruettimann Analyzing the Industry Structure Basic classification of business types Market structure Market structure Product characteristics Product characteristics Operating configuration Operating configuration Business classification Business classification Typeof globalization Typeof globalization Product characteristics Product characteristics PRODUCT CHARACTERISTICS non differentiated differentiated

30. A © Bruno G. Ruettimann Analyzing the Industry Structure Basic classification of business types Market structure Market structure Product characteristics Product characteristics Operating configuration Operating configuration Business classification Business classification Typeof globalization Typeof globalization Product characteristics Product characteristics PRODUCT CHARACTERISTICS non differentiated differentiated polypolistic oligopolistic MARKET STRUCTURE Commodity Speciality Standards Convenience

31. A © Bruno G. Ruettimann Convenience Standards Speciality Commodity Bauxite polypolistic oligopolistic MARKET STRUCTURE PRODUCT CHARACTERISTICS non differentiated differentiated Alumina Primary Rolling Extrusion Forging Casting Components Secondary Systems Analyzing the Industry Structure The aluminium businesses

32. A © Bruno G. Ruettimann Deriving Typologies of Globalization The natural types of globalization polypolistic oligopolistic MARKET STRUCTURE PRODUCT CHARACTERISTICS non differentiated differentiated Type II Market structure Market structure Product characteristics Product characteristics Operating configuration Operating configuration Business classification Business classification Typeof globalization Typeof globalization Type I Type 1: material G. (physical) Type 2: immaterial G. (financial)

33. A © Bruno G. Ruettimann Deriving Typologies of Globalization The natural types of globalization polypolistic oligopolistic MARKET STRUCTURE PRODUCT CHARACTERISTICS non differentiated differentiated Type Ib Type Ia Type II Market structure Market structure Product characteristics Product characteristics Operating configuration Operating configuration Business classification Business classification Typeof globalization Typeof globalization Type 1: material G. (physical) Type 2: immaterial G. (financial)

34. A © Bruno G. Ruettimann Nature of Globalization Types Type 1a: globalization of commodities

35. A © Bruno G. Ruettimann Nature of Globalization Types Type 1a: globalization of commodities

36. A © Bruno G. Ruettimann Nature of Globalization Types Type 1b: globalization of specialties

37. A © Bruno G. Ruettimann Nature of Globalization Types Type 1b: globalization of specialties

38. A © Bruno G. Ruettimann Nature of Globalization Types Type 2: financial globalization

39. A © Bruno G. Ruettimann Nature of Globalization Types Type 2: financial globalization

40. A © Bruno G. Ruettimann Deriving Typologies of Globalization Price discrepancy within different economies and corresponding propensity for globalization Volume Price FD I CH B G A E pApA pKpK Price span of similar economies Demand Z Supply Z Z pZpZ Transaction cost c ZK Globalization propensity (p K -p Z -c ZK )

41. A © Bruno G. Ruettimann Deriving Typologies of Globalization... An additional subtype is emerging polypolistic oligopolistic MARKET STRUCTURE PRODUCT CHARACTERISTICS non differentiated differentiated Type Ib Type Ia Type II Market structure Market structure Product characteristics Product characteristics Operating configuration Operating configuration Business classification Business classification Typeof globalization Typeof globalization Type Ic Type 1: material G. (physical) Type 2: immaterial G. (financial)

42. A © Bruno G. Ruettimann Nature of Globalization Types Type 1c: opportunistic globalization

43. A © Bruno G. Ruettimann Nature of Globalization Types Type 1c: opportunistic globalization

44. A © Bruno G. Ruettimann Nature of Globalization Types Comparison of NA with EU extrusion import dynamics from PRC

45. A © Bruno G. Ruettimann Deriving Typologies of Globalization Type 3 within the context of the other globalization types Type III polypolistic oligopolistic MARKET STRUCTURE PRODUCT CHARACTERISTICS non differentiated differentiated Type Ib Type Ia Type Ic Type II support internal Type 3: service type G. (human factor)

46. A © Bruno G. Ruettimann Nature of Globalization Types Type 3: human factor globalization 100.000 $ 20.000 $

47. A © Bruno G. Ruettimann Nature of Globalization Types Type 3: human factor globalization 100.000 $ 20.000 $

48. A © Bruno G. Ruettimann Type III polypolistic oligopolistic MARKET STRUCTURE PRODUCT CHARACTERISTICS non differentiated differentiated Type Ib Type Ia Type Ic Type II support internal Nature of Globalization Types Different types existing Conclusion Globalization is not equal to Globalization

49. A © Bruno G. Ruettimann Bauxitmining, Alumina production Primary smelter, Casting Rolling,Extruding, Die casting,Forging,... Components, Finished products Recycling Usage Remelters, Foundry Scrap waste Secondary Aluminium value addition chain and business types Analyzing the Industry Structure Holding, Services

50. A © Bruno G. Ruettimann Bauxitmining, Alumina production Primary smelter, Casting Rolling,Extruding, Die casting,Forging,... Components, Finished products Recycling Usage Remelters, Foundry Scrap waste Secondary Holding, Services Type Ia Type II Type Ib Type II Type III Nature of Globalization Types Aluminium value addition chain and globalization types Type Ic

51. A © Bruno G. Ruettimann Down stream integration Capital intensity Entry barriers CSF: cost CSF: providing solution Competitive intensity CSF: service Nature of Globalization Types Critical success factors along the value addition chain

52. A © Bruno G. Ruettimann Saturationin existing endmarkets Saturationin existing endmarkets World-wide communication network World-wide communication network Searching for optimization potential Searching for optimization potential Searching for geographical expansion Searching for geographical expansion Searching for diversification opportunities Searching for diversification opportunities M&A Opening ofa globalmarket with new competitive environment and new world market price Opening ofa globalmarket with new competitive environment and new world market price + Price/ margin pressure Price/ Change of competitive system Change of competitive system Shake-outShake-out Concentration process The Phenomenon of Economic Globalization Symptoms, causes and effects Export orientation of emerging low price economies Type II Type Ic

53. A © Bruno G. Ruettimann Alcan Alcoa Alumax Alumix Alusuisse British Alu Hoogovens Hydro Inespal Kaiser Pechiney Reynolds VAW Evolution of the Aluminium Industry Drastic change of market structure 1980199020002010 Market Structure 100% 50% concentration and dis-integration process by M&A of Western integrated aluminium companies from advanced economies prolieferation of independent companies by specialization

54. A © Bruno G. Ruettimann Evolution of the Aluminium Industry Drastic change of market structure 1980199020002010 Market Structure 100% 50% Alcan Alcoa Alumax Alumix Alusuisse British Alu Hoogovens Hydro Inespal Kaiser Pechiney Reynolds Alcan Alcoa Corus Hydro Alcoa Hydro Sapa Aleris Novelis Engineered-Products Rio-Tinto-Alcan (2009) …………….

55. A © Bruno G. Ruettimann Bauxit Alumina Primary Al Rolled semis Extruded semis Castings Forgings Components Systems Bauxit Alumina Primary Al Rolled semis Extruded semis Castings Forgings Components Systems Vertical integration Horizontal specialization Reasons for the alternative business models Evolution of the Aluminium Industry Past Today

56. A © Bruno G. Ruettimann Evolution of the Aluminium Industry Drastic change of market structure 1980199020002010 Market Structure 100% 50% Alcan Alcoa Alumax Alumix Alusuisse British Alu Hoogovens Hydro Inespal Kaiser Pechiney Reynolds Alcan Alcoa Corus Hydro Alcoa Hydro Sapa Aleris Novelis Engineered-Products Rio-Tinto-Alcan …………….. increasing importance of aluminium companies from emerging economies

57. A © Bruno G. Ruettimann Evolution of the Aluminium Industry Drastic change of market structure 1980199020002010 Market Structure 100% 50% Alcan Alcoa Alumax Alumix Alusuisse British Alu Hoogovens Hydro Inespal Kaiser Pechiney Reynolds Alcan Alcoa Corus Hydro Alcoa Hydro Sapa Aleris Novelis Engineered-Products Rio-Tinto-Alcan ……………. CBA Chalco Dubal UC-Rusal Hindalco Asia-Aluminium

58. A © Bruno G. Ruettimann Economy Life Cycle Integration Degree Embrionic Growth Maturity Aging Integrated Specialised Phase of Integration Phase of Disintegration (Phase of Reintegration) Vertical integration Shake-out Horizontal specialization General Industry Life Cycle Alternation of integration and dis-integration

59. A © Bruno G. Ruettimann Economy Life Cycle Integration Degree Embrionic Growth Maturity Aging Integrated Specialised Vertical integration Constellation I Constellation II Horizontal specialization ? Advanced economies: present state Aluminium Industry Life Cycle Advanced economies

60. A © Bruno G. Ruettimann Economy Life Cycle Integration Degree Embrionic Growth Maturity Aging Integrated Specialised Vertical integration ? Constellation I Constellation II Emerging economies: present state Aluminium Industry Life Cycle Emerging economies Horizontal specialization ?

61. A © Bruno G. Ruettimann Bauxit Alumina Primary Al Rolled semis Extruded semis Castings Forgings Components Systems Constellation III Bauxit Alumina Primary Al Rolled semis Extruded semis Castings Forgings Components Systems Bauxit Alumina Primary Al Rolled semis Extruded semis Castings Forgings Components Systems Constellation I Constellation II Vertical integration Horizontal specialization Contingent approach Future Evolution of Aluminium Industry Structure Comparison of alternative business models

62. A © Bruno G. Ruettimann To build a successful business model:  Take into consideration  The changing logic of business (Life cycle analysis)  The CSF of the business (Value addition chain)  The globalization type (Operating model)  Decide inbetween the two opposite models of  Minimizing risk (Vertical integration approach)  Maximizing synergy (Horizontal specialization approach) To build a successful business model: TTake into consideration TThe changing logic of business (Life cycle analysis) TThe CSF of the business (Value addition chain) TThe globalization type (Operating model) DDecide inbetween the two opposite models of MMinimizing risk (Vertical integration approach) MMaximizing synergy (Horizontal specialization approach) Future Evolution of Aluminium Industry Structure Framework of decision

63. A © Bruno G. Ruettimann Modeling Economic Globalization A Post-Neoclassic View on Foreign Trade and Competition