Broken Hill Proprietary Company Analysis

BROKEN HILL PROPRIETARY COMPANY ANALYSIS i
AN ANALYSIS OF THE BROKEN HILL PROPRIETARY COMPANY IN AUSTRALIA
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BROKEN HILL PROPRIETARY COMPANY ANALYSIS ii
Executive Summary
Globalization is taking over today’s world of business at a fast pace (Brière, Chapelle
and Szafarz 2012, p.1729). Technology is advancing with time. Businesses should,
therefore, invest in advanced technological production methods and innovation in order
to remain competitive in their respective industries not only domestically but also
internationally. For a company to perform better, it needs to strategize its future goals
keenly. In this process, the company needs to analyze its past and current performance
and that of its industry. In this report, BHP Company in Australia has been analyzed and
it is not only among the largest Australian mining companies but also in the world at
large.
The Australian mining industry is oligopolistic as it is dominated by only a few large
companies with the two significant ones being BHP Company and Rio Tonto. The
industry has various barriers to entry such as high initial capital investment and lengthy
registration procedures before startup. Also, the demand elasticity and its determinants
for the BHP Company have been analyzed. A recent event in the industry which is the
introduction of the RCS 5 by the Epiroc Company has been analyzed. In a nutshell, the
Australian mining industry has been doing well as evidenced by its significant
contribution to Australian economic growth and better results are anticipated in the
future (Ergas and Pincus 2014, p.13). BHP is also expected to perform better in terms
of profitability as its industry is expanding and its various products such as iron ore and
copper are highly demanded by the developing economies especially China and India.

BROKEN HILL PROPRIETARY COMPANY ANALYSIS iii
Table of Contents
Executive Summary...........................................................................................................ii
Introduction........................................................................................................................1
An Overview of the Broken Hill Proprietary Company in Australia...................................1
An Overview of the Australian Mining Industry..................................................................2
Australian Mining Industry Market Structure.....................................................................3
Determinants of Demand and Supply for BHP Products..................................................5
Determinants of Demand...............................................................................................5
Determinants of supply...................................................................................................5
The Demand elasticity for BHP Products..........................................................................6
Factors affecting the demand elasticity for BHP products.............................................6
A Recent Event Analysis...................................................................................................7
How the event is likely to impact supply.........................................................................7
Effect of the event on market quantity and price............................................................7
Conclusion.........................................................................................................................8
References.........................................................................................................................9

BROKEN HILL PROPRIETARY COMPANY ANALYSIS 1
Introduction
Today’s world of business is becoming globalized at a fast pace (McMillan and Rodrik
2011, p.17143). Innovation and technology advancement have been happening
regularly. Businesses are adopting advanced technology in production and investing
much in research and development to outdo their competitors. It, therefore, requires
sound strategic goals by organizations to survive in their respective industries. Some of
these goals are formulated from the business analysis and its overall industry to access
its competitors and the trends and future of the industry it operates in. Great scrutiny
and analysis of an industry within which an entity operates enable it to plan for its future
operations with great certainty based on the facts at hand. In this report, the Broken Hill
Proprietary Company in Australia has been analyzed and the Australian industry in
which it operates (Australian Mining Industry). Various factors about the industry such
as its growth rate and contribution towards the overall Australian employment rate
among others and the company’s products characteristics such as elasticity of demand
and supply have been analyzed. In a nutshell, it is of paramount importance for a
company to analyze its industry to a have a broad view of its competitors and the future
of its industry before planning for future goals.
An Overview of the Broken Hill Proprietary Company in Australia
Broken Hill Proprietary Company in Australia was formerly referred to as the Broken Hill
Proprietary Billiton Company. Currently, it is a trading entity of the Broken Hill
Proprietary Group Limited and the Broken Hill Proprietary Group Plc. The company was
formed during the year 2001 when Broken Hill Proprietary (BHP) and Billiton formed a
merger to form Broken Hill Proprietary Billiton Company in Australia abbreviated as
BHP Billiton (Blainey 2010, p.23). The company has its headquarters at Melbourne,
Victoria, Australia. This is according to BHP history since 1851 as obtained from the
company’s website.
Broken Hill Proprietary was formed during the year 1885 at Broken Hill, Victoria,
Australia. The company was initially formed to mine silver, zinc, and lead at Broken Hill.
It later on expended and started the development and discovery as well as the
production and marketing of oil and gas, steel, iron core and copper among others.
During the year 2000, the company was given the name BHP Limited.
Billiton was formed during the year 1851 in Billiton (Belitung) island in Indonesia. It was
initially established to mine tin in Indonesia. The company since then expanded and
became a leader in the mining sector and metals and even started producing
manganese and chrome, titanium minerals, alumina, and aluminum, steaming coal,
alloys and ores and nickel among others especially the copper portfolio.
Since the establishment of the two companies, Broken Hill Proprietary and Billiton, the
companies continued to grow and develop while contributing much towards the
Australian mining industry, communities, and the entire world economic growth. After
their merger, the companies have grown significantly and have been ranked among the