BHP Billiton Strategic Analysis

This assignment requires a comprehensive analysis of BHP Billiton's strategic position. Using tools like SWOT, PESTLE, and Porter's Five Forces, you'll evaluate the company's internal strengths and weaknesses, external opportunities and threats, industry competitive landscape, and macroeconomic factors. Market research data and the impact of organizational learning on BHP Billiton's competitiveness are also key components of this analysis.

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BHP Billiton Strategic Analysis
Student’s Name

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Table of Contents
Introduction 3
a) Purpose of the Report………………………………………………………………..3
b) Company Snapshot…………………………………………………………………..3
c) Current Trends in the Australian Steel Manufacturing Industry………………..3
Internal Analysis of BHP Billiton 4
a) Assets………………………………………………………………………………….4
b) Competencies…………………………………………………………………………4
c) BHP Billiton Share price trend……………………………………………………...4
d) BHP Billiton Sales-Five Year Trend………………………………………………..5
e) BHP Billiton Profits: Five Year Trend……………………………………………..6
f) Strengths ……………………………………………………………………………..7
g) Weaknesses…………………………………………………………………………...8
External Analysis of BHP Billiton………………………………………………………………8
a) Macro Analysis - PESTLE analysis ………………………………………………..8
b) Micro Analysis – Competitors and Strategic Advantage over Rival Companies10
c) Opportunities……………………………………………………………………….11
d) Threats………………………………………………………………………..…….11
Conclusion 12

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Introduction
Purpose of the report
The report has been prepared to carry out a study on the internal and external environmental
evaluation of the Australian conglomerate BHP Billiton.
Company Snapshot
BHP Billiton is an Anglo-Australian multinational metal, mining, and petroleum Dual-listed
Company that was floated in the year 2001 by a merger between Anglo-Dutch Billiton plc., and
Broken Hill Proprietary Company Limited (BHP). The Australian-registered BHP Billiton Ltd. is
registered on the ASE or the Australian Stock Exchange and the English BHP Billiton plc. is
registered on the LSE that is the London Stock Exchange. Both the companies continue to exist
as separate legal entities but carry out their operations as a combined group under the name of
BHP Billiton. The central headquarters of the conglomerate BHP Billiton is based in Melbourne,
Australia (BHP Billiton, 2015).
Current Trends in the Australian Steel Manufacturing Industry
The Australian Iron Smelting and Steel Manufacturing Industry have shown a considerable
decline in the last five years. Industry sources predict that the revenue from the industry is
expected to decline at the annualized rate of 8.5% over the coming five years. The IVA or
industry value-added index which measures the overall contribution of the industry to the
national economy is also being expected to shrink by an annual rate of 1.9% in the next five
years. A reduction in demand for steel from the downstream markets, lower prices of steel,
increased competition from the substitute products and import markets have been the major

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cause of this decline in the recent years (Iron Smelting and Steel Manufacturing in Australia
Market Research, 2016).
Internal Analysis of BHP Billiton
Assets
The BHP operates a large variety of oil and natural gas, mining, and processing operations in
more than 25 countries across the world. BHP Billiton is the biggest company in terms of market
capitalisation in Australia. This enhances the stakeholders and investors confidence in the
company (BHP Billiton, 2015).
Competencies
The BHP Billiton is the world’s biggest diversified natural resources company and is engaged in
mineral production and exploration. BHP is one of the largest producers of base metals,
petroleum, specialty products, aluminium, diamonds, iron ore, energy coal, stainless steel,
metallurgical coal, manganese, etc. in the world (BHP Billiton, 2015).
BHP Billiton Share price trend
The following figure shows the ten year share price trend for BHP Billiton. It is seen that BHP
Billiton has seen a sharp rise in its share price from 2009 to 2013, and the share price being
highest in 2011, when the profits were highest. However, a decrease in share price is seen from
2014 to 2016. A drop in share price is witnessed in 2016, due to decrease in profits and the share
price is forecasted to be rising by 5% in 2017 (Stockopedia, 2015).

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Source: Stockopedia.com
BHP Billiton Sales-Five Year Trend
It is seen that BHP Billiton has witnessed highest sales in the year 2011, and since then BHP
Billiton has experienced a drop in its sales. It is found that sales have been decreasing with and it
is all time low in the year 2016 (Amigobulls, 2016)

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2012 2013 2014 2015 2016
0
10
20
30
40
50
60
70
80
sales
Source: Amigobulls.com
BHP Billiton Profits: Five Year Trend
The following figure shows the five year profits for BHP Billiton. All the figures are in billion. It
is found that BHP Billiton has faced sharp decrease in its profits since, 2011 and the profit being
lowest in 2016 and highest in 2012 (Amigobulls, 2016).

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2012 2013 2014 2015 2016
0
10
20
30
40
50
60
70
profits
profits
Source: Amigobulls.com
Strengths of BHP Billiton
 BHP Billiton has a product portfolio that consists of an extensive range of natural
resources and holds the position among the world’s largest suppliers of silver, uranium,
lead, copper, and aluminium. The company also happens to be one of the largest
producers of metallurgical, coal, iron ore, and manganese (BHP Billiton, 2015).
 The company’s energy coal section has eight operations across Australia, USA, South
Africa, and South America, and provides thermal coal for general industrial uses and the
electric power generation industry. This has also given the company an international
presence giving a strong competitive edge over its rivals (Santos-Vijande, López-
Sánchez, and Trespalacios, 2012).
 BHP Billiton has shown positive financial returns for the last ten years and through its
share buyback campaigns have returned the capital to their stakeholders and investors.

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The profitability and the solvency ratios of the company exhibit its strong presence in the
market (BHP Billiton: The future is yours, 2017).
 BHP Billiton has a good CSR policy and its active involvement in many social causes has
given the company a positive image and added to the competitive advantage that the
company enjoys over its rivals.
Weaknesses of BHP Billiton
 The company is facing a lot of legal restrictions from the changes in laws, rules, and
regulations in the country in the recent years (BHP Billiton, 2015).
 BHP Billiton has been facing a number of human resource issues which have affected the
operational efficiency of the company. They are facing a shortage of skilled labour in
many of its sectors particularly the mining section (Hesterly, and Barney, 2010).
 The internal and external communication of the company is very weak. The staff is not
adequately trained in responding to the stakeholders’ queries and the media enquiries.
The lack of effective corporate communication is detrimental to the growth of the
company (Bourke, Smith, Stockton, and Wakefield, 2014).
External Analysis of BHP Billiton
Macro Analysis - PESTLE analysis
 Political environment analysis: A favourable political environment: BHP Billiton has
been operating under a political environment which has generally been in the favour of
the company. The company has received a lot of support from the government of
Western Australia. The company has the advantage of being one of the biggest
companies in Australia in terms of market capitalisation, which has resulted in the

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government support the company in many of its ventures (Clarke, and Branson, 2012).
 Economic factors affecting BHP Billiton: BHP Billiton like the other manufacturers is
vulnerable to the economic factors like an increase in the cost of energy, labour,
operations, raw materials, etc. which has a direct impact on the profits, expansion and
growth plans of the company. However, the company enjoys a good credit rating as the
company is one the biggest in Australia in terms of market capitalisation. Therefore, the
company can improve its bottom line by its ability to raise capital at lower rates from the
market. The business ventures like mining have proved to be profitable propositions,
which have improved the financial standing and the brand image of the company (R,
2013).
 Social factors affecting BHP Billiton: The companies and businesses today are vulnerable
to the socio-cultural factors of the communities they are operating from. BHP Billiton has
always maintained a good rapport with the local communities it operates in and also with
the local administration and has always been at the forefront of contributing to the
development of the surrounding community. The company also offers good employment
opportunities to the local people as it believes in hiring the local populace in its
operations. This has enhanced the brand image of the company in the local communities
which has given it a competitive advantage in the market (Hayes, 2014).
 Technological factors: Investment in the latest and cost-effective technology is one of the
basic requirements of BHP Billiton to ensure safe, efficient, and to develop an ability to
cope with the change in the market demand structures. The company is also dependent on
the advancement in technology for the purpose of exploration and discovery of the new

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energy and mineral resources. The investment in technology has a major impact on the
strategic drivers for BHP Billiton giving it a competitive edge in the market and
improving the revenues of the company (Hogan, and Lodhia, 2011).
 Legal factors: BHP Billiton has always strived to comply with the laws, procedures,
rules, and regulations of the country, which has ensured a positive government and local
community support for the company. However, in the recent times, the company has been
involved in some conflicts with the government and the administration over some issues
and problems. This has acted as a deterrent in the business plans of the company and can
affect its future operations (BHP Billiton: The future is yours, 2017).
 Environmental factors: BHP Billiton is a natural resource company and is susceptible to
the public policies, laws, rules, and regulations regarding the environment. However,
BHP Billiton has always followed a policy of sustainable development through its
policies of causing zero harm and has even committed to the cause of reducing the
emission of greenhouse gases in its operations. This has proved to be an advantage for the
company as it continues to receive a lot of support from the international and national
administrative authorities and local communities in its business ventures (Hayes, 2014).
Micro Analysis – Competitors and Strategic Advantage over Rival Companies
The main rivals of BHP Billiton in Australia are multinational companies like Nippon Steel and
Exxon Mobil. BHP Billiton’s business and competitor strategies are based on diversification by
geography, commodity, and market. The company’s strategy which has given it an edge over its
competitors is the company’s policy of holding or possessing and administering large,
expandable, economical, prolonged-efficacy asset base which have been transformed by physical
geography, raw material, and markets. The diversified asset base increases the flexibility of the

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cash flows of the company by reducing the risk of exposure to any single commodity or
geographical location, enabling the company to maintain a good financial performance as
compared to its competitors. BHP also has a very good CSR policy in place and makes efforts to
improve the local communities and its recent environmental initiatives have made it easier to
work and recruit from the local communities (Hesterly, and Barney, 2010).
Opportunities
 The BHP Billiton group has many projects in the pipeline and if these are executed in a
cost effective manner, they are likely to become good income generators for the company
(Resourcing Global Growth Strategic Report, 2014).
 The company can use its financial credibility and its good brand name to further expand
its scale of operations (Hesterly, and Barney, 2010).
 The company can seek out partnerships, mergers, and acquisitions with the local
companies in the countries it already has its operations to further expand its business in
those countries (Resourcing Global Growth Strategic Report, 2014).
 The BHP Billiton commitment to 5% reduction in greenhouse gas emissions can become
a symbol of sustainable development for the company (BHP Billiton, 2015).
Threats
 The developing countries in the world especially India and China are repeatedly turning
to in-house manufacturing reducing the demand for BHP Billiton in the global market
(Clarke, and Branson, 2012).

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 The rising level of costs from the suppliers which includes a rise in shipping, energy, and
contract labour costs, are proving a hindrance to the growth and development of the
company (Hill, Jones, and Schilling, 2014).
 The political uncertainty and unfavourable political climate in its home country are
proving detrimental to the growth of the company (Clarke, and Branson, 2012).
 The company is facing increasing competition from other international players like
Nippon Steel, Exxon Mobil, and many more. This could become a major threat to the
company’s scale of operations in the coming years (Bourke, Smith, Stockton, and
Wakefield, 2014).
Conclusion
BHP Billiton is recognized as one of the global leaders in the natural resources industry. In order
to maintain its leadership position, the company is always looking for new ways to upgrade and
optimize its practices and policies. However, in the recent years BHP Billiton has been dealing
with strategic issues regarding uncertainty in the political and macro-economic environment,
volatility in the costs of the raw materials at the manufacturing stage, complexity in operations
due to the changes in the legal environment, and ambiguity in decision-making due to lack of
clarity in certain variables and their role in the business strategies of the company like the change
in political environment (BHP Billiton: The future is yours, 2017).
To counter these strategic challenges BHP Billiton in addition to its existing policies will have to
devise additional strategic planning approaches. The company will have to devise certain
situational strategic planning strategies that will allow the company to develop different

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illustrations of the outlook and accordingly change their system of management to prepare for
different outcomes in the future.

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