BHP Billiton Strategic Management: Analysis of Strategies, Environmental Factors, Organizational Culture and Leadership Style

This report analyzes BHP Billiton's strategies, environmental factors, organizational culture, and leadership style. It discusses the company's success in the mining and metal industry, its use of strategic partnership, contingency approach, and Porter's generic strategies. The report also examines the company's weaknesses, opportunities, threats, and its commitment to corporate social responsibility.

BHP BILLITON STRATEGIC MANAGEMENT
Table of Contents
EXECUTIVE SUMMARY.............................................................................................................1
1.0 INTRODUCTION.....................................................................................................................2
1.1.1 Strategic Partnership...........................................................................................................2
1.1.2 Contingency Approach.......................................................................................................2
1.1.3 M. Porter’s Generic Strategies............................................................................................3
1.2 BHP BUSINESS PRACTICES CRITICISMS..........................................................................4
2.1 ENVIRONMENTAL ANALYSIS............................................................................................5
2.1.1 SWOT Analysis..................................................................................................................5
2.2 BHP BILLITON ORGANIZATIONAL CULTURE AND LEADERSHIP STYLE...............6
2.3 CONCLUSION..........................................................................................................................8
REFERENCES................................................................................................................................8

EXECUTIVE SUMMARY
The quest of this study report is to discuss BHP Billiton strategies that have made it a successful
market leader in the mining and metal industry around the globe. Among the many strategies
adopted to the business model, strategic partnership, contingency approach, and porters generic
approach. This report appraises how well these strategies have contributed to the success of this
company amidst significant threats of competitions around the globe. Moreover, environmental
analysis using the SWOT analysis is discussed in this report. The findings are indicating that
though the company is faced with competitive threats and political-legal threats, the company
still have significant opportunities in the industry. The company’s environmental policies on the
safety of the communities where the mining process has been creating a negative public image
though the company is committed to corporate social responsibility. Nevertheless, the corporate
culture and leadership styles of the company is all geared towards a favorable working condition
of the employees. The managers work ethics, beliefs, and values have instilled health safety to
the employees as well as safeguarding the interest of the shareholders through trust and openness
in financial disclosures through audits.
1.0 INTRODUCTION
BHP Billiton was formed as a merger between BHP and Billiton in the year 2001. This company
is the world’s largest mineral and mining firm with broad portfolios in different sectors of the
economy around the globe. This company has made huge advancements both in the domestic
markets in Australia and international markets. According to Hitt et al. (2012), BHP Billiton has
grown both in sales revenues, financial consolidation as well as market share. Furthermore, the
sale of petroleum products and mineral products has continuously matched the expectations of
the consumers.
1.1 BHP BILLITON STRATEGIES
1.1.1 Strategic Partnership
The merger between Billiton and Broken Hill Proprietary Company(BHP) enabled the company
to adapt to the new ventures and challenges that affected the operation of the business (Dastory,
2009). Mergers are one of the most appropriate strategies to increase the financial capability of
the firm to increase their operating and investing finance. According to Richard Daft, (2016)
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strategic partnership and alliances create a competitive advantage for firms to compete fairly
with other competitors in the industry.
1.1.2 Contingency Approach
A contingency approach to management states that managers activities or actions undertaken in
different situations must be aligned to the situation itself and that an action is only valid under
certain conditions. Managers are faced with significant process, behaviors, and systems which
did not integrate with the external environment. Therefore, this theory proposes that managerial
action is contingent upon the external environment and that no best approach is expected in each
circumstance.
BHP superior management team propelled the company towards successful business strategies
through contracting of Heidrick & Struggles to support the board with a CEO transition. The
transition process was planned for 18-36 months which was equally an extended period to
deliberate on this delicate matter. The company board sought to employ a highly professional
chief executive officer consistent with the increasing demand in the business internal and
external environment
The board was furnished with detailed strategies on the leadership and experience requirements
of the senior team members and individual managers.
Heidrick & Struggles transformed the leadership through talent management of BHP for the top
150 executives on succession planning and leadership development program.
1.1.3 M. Porter’s Generic Strategies
BHP Billiton has applied the five forces analysis as suggested by Michael porters to overcome
the competitive operating environment. This strategy enables a firm to assess its opportunities,
strengths, and threats from external factors that are beyond the control of the business.
Nonetheless, this is a critical strategic tool for realizing the goals and objectives of a company
(Richard Daft, 2016)
a. Bargaining Power of Buyers
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 The bargaining power of buyers is low. This is because the company shifts forward any increase
in price to the consumer due to high demand and a limited supply of the natural resources in the
market.
 BHP company is ever seeking to build a strong consumer relationship with its customers,
therefore, reducing any impact of the price increase.
 There are scarce natural resources in the environment. Therefore, fewer substitutes are available
in Bulk which reduces the bargaining power of buyers.
b. Bargaining Power of Suppliers
 BHP Billiton is mainly affected by the bargaining power of suppliers in, raw materials, human
labor, shipping, and energy costs. Though the company tries to reduce the capacity of production
through enhanced operations, the overall costs from suppliers have increased as well.
Consequently, due to fewer substitutes available the bargaining power of suppliers is enhanced.
c. The threat of New Entrants
 The threat of new entrants to the market is low. This happens since the natural resources used in
the production are very limited in capacity as well as supply available in the global market. This,
therefore, restricts new entrants into the market.
 Fluctuations in demand especially from developing economies such as China due to drop in
commodity prices made from iron ore. This leads to a fall in demand which is likely to create
barriers to new entrants into the market (Bloomberg, 2012)
 BHP Billiton has a vast investment in infrastructure, technology and human capital which
enhances production of quality products to the market. This creates a barrier to new entrants
which might take a while to upgrade to the same level.
 BHP Billiton geographical location is strategic due to best natural resource in the located areas of
its operations. New entrants to the market can be disadvantaged in getting such locations with
more natural resources.
d. Threat of Substitutes
 There is low threat of substitute products in the market since there is no vast substitute for
natural raw materials used in the company to generate minerals and metals. BHP Billiton has a
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strategic advantage due to its vast and diversified portfolio of natural resource assets that can
combat any threats of substitutes.
e. The intensity of Existing Rivalry
 There is high rivalry among the competitors selling the energy products and metals. Competition
to the scarce resources is too high along with maintaining competent staff as well as investing in
mega capital projects that can comfortably compete with the rivals.
 However, amidst strong rivalry, the mining and metal industry is still profitable and have high
growth potential. Therefore, low natural prices likely cannot influence the industry players.
 The industry has also suffered from hostile- takeover speculations. For example, in 2005, BHP
Billiton acquired WMC Resources of Australia which had the largest uranium reserves in the
world during a takeover battle.
1.2 BHP BUSINESS PRACTICES CRITICISMS
BHP environmental policies over severally years have been questioned as to its effectiveness in
ensuring the safety of the public. BHP faced litigations charges as to the safety of community
due to pollution activities to the environment and displacement of community in the natural
resource mining areas without adequate compensation to the community involved (Nyland, et al.,
2011). Moreover, the company’s shareholders have been involved in tussles with the board and
managing directors of the company on its corporate social responsibility. The shareholders are
fully aware that if the company public image is compromised it is a detriment to their overall
company corporate value.
Recently, criticism from the media on the commitment of the company to conserve the natural
resources of its broad portfolio of business around the world (Bellis, 2016)
2.1 ENVIRONMENTAL ANALYSIS
2.1.1 SWOT Analysis
a. Opportunities
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1. Expansions and growth- BHP financial position has led to various operations around the
globe. The high demand for fertilizers has led the company to venture into potash mining in
Canada as an addition to their group's portfolio.
2. Mergers and acquisitions-BHP has a potential of joining strategic partnerships and alliances
with other small related companies and gain a competitive advantage in both financial and
human resource capabilities.
3. Global ventures- the company presence in various countries in the world create a vast market
for its products and enhances the brand image of the company attracting global ventures.
4. Innovation in marketing- today’s marketing pegs on innovativeness and creativity to compete
favorably in the global market. BHP Billiton company though it is a business to business
company, good marketing through innovative market channels is essential to sustainable growth
b. Strength
1. Strong market position- BHP Billiton is a dominant market leader in the metal and mining
industry. The companies group has a portfolio of more than 100 operations in 25 countries
(Smith & Clinton, 2009)
2. Diversified production-BHP has diversified business lines and geographies of operations
which allows the business to minimize the risk of competition and revenue generation.
3. Marketing position- the group's marketing operations centralized in Singapore has increased
the proficiency of the marketing activities.
4. A strong financial capability which enhances the growth of the company by making
significant capital projects investments.
c. Weaknesses
1. History of safety issues with Western Australia Iron Ore operations which have led to a
reduction of site access
2. Weak corporate communications- the staff does not respond to the investors and stakeholders
corporate inquiries in a timely manner. The company has not adopted an effective group
communication using media.
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3. limited human capital skills capacity that matches with the increasing demand for innovative
methods of mining
d. Threats
1. Increasing cost of production- the cost of raw materials used by the company is ever
increasing. The labor cost, production cost and depletion of natural resources decrease the
overall profits of the company.
2. Increasing competition threats- BHP Billiton is facing adverse competition from various
organizations including ExxonMobil Corporation, Chevron Corporation, Anglo American Plc
3. Fluctuation in demand- BHP Billiton is facing increasing fluctuations in the demand of its
products China and India due to the uncertainty of the market situation.
4. Political threats- Threats from existing Australian government on the legal structures in the
operating environments can prove to be harmful to the effectiveness of company operations.
2.2 BHP BILLITON ORGANIZATIONAL CULTURE AND LEADERSHIP STYLE
The organizational culture of a company comprises of its values, mission, belief and work ethics
that guides the working environment. A good management values and visions of the company
enhances a good working environment that support the growth of the employees (Lestari, Ismail
& Mansur, 2014). Billiton mission is to capitalize on the diversification of the company’s
operations in the global market to maximize profits and revenue generation. This helps the
company to attract highly qualified employees committed to the excellence of the organization
(Adkins et al., 2013).
The mission as set out by Billiton is to use the diversification of the business in the market and
gains maximum profit. This helps them to attract high caliber people who are more committed to
the success of the organization. According to Schmeck, (2013), apart from the visible culture,
there is a hidden culture of an organization in which the success of an organization greatly
depends.
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BHP Billiton has adopted an efficient corporate structure believed in developing the skills and
capabilities of the employees. The culture believes in safe production operations and the
application of simple methods in the job duties. Employees working in the company are given
special medical attention since they are the priority of the company. Billiton ensures that the
employees work, duties and assignments are simple (Giannoni, 2014). Furthermore, the
employees are given specialized training and skill evaluations at regular times to increase their
skills and competency in the job processes. Capital discipline is another culture at Billiton
attracts the company as an excellent platform for employees to work. The company sets aside
finances at 10% to enable growth in their current annual production and eventually increase the
regular flow of cash that sustains the business operations.
The leadership style in the company is keen on maintaining the culture of the organization. The
financial committee has the duties to account for the audit issues in financial accounts as well as
business in securities. Nevertheless, BHP Billiton long-term plans for executive leadership are
managed by the independent directors this allows the management executives to act in the best
interest of the shareholders and other stakeholders (Grant, 2015). BHP Billiton employees work
in operational function groups with clear accord to the company managerial leadership.
Moreover, the executive leadership is fully furnished with competent skills and expertise about
the changing economic environment.
2.3 CONCLUSION
The BHP Billiton company strategies to be an outstanding market leader in Australia and several
countries in the world is incredible. The various environmental analysis reveals that the BHP
Billiton board of director, managers and other stakeholders all support the operations of the
company entirely. The culture and leadership styles in the company promote conducive working
conditions for the employees though their work is demanding. Moreover, the appointment of the
top managers is rigorous exercise aimed at appointing the right person to spearhead the
company. However, though the business environment is dynamic and natural resources are
scarce, this company innovativeness in a strategic partnership and mergers strategies has paid
them off in maximizing their financial strength. Finally, the company’s efforts in creating
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fairness and implementation trust and openness among the employees help the company achieve
consumer’s wants differently as compared to other companies in the industry.
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