BHP Billiton: Strategic Management Analysis

This assignment examines the strategic management of BHP Billiton, a global mining giant. It analyzes the company's business model, key strategic decisions, competitive advantages, and approach to sustainability. The analysis draws on various sources, including academic journals, industry reports, and company publications, to provide a comprehensive understanding of BHP Billiton's strategic landscape.

Business
Strategy
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TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................1
Introduction......................................................................................................................................1
Company profile..............................................................................................................................1
Competitors of BHP Billiton.......................................................................................................2
BHP competitive advantage............................................................................................................2
Australia steel industry....................................................................................................................3
Business strategy of BHP in Australia.............................................................................................3
Internal analysis...............................................................................................................................4
External analysis..............................................................................................................................6
PESTLE analysis.........................................................................................................................6
Swot.............................................................................................................................................7
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................9
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EXECUTIVE SUMMARY
Business strategy is all about the plans that a business prepares in order to accomplish its
desired goals and objectives. The present study carried out is based on BHP Billiton which is an
Australian company that deals in mining, metal, and petroleum related products. The key
competitors of the company are Arconic Inc, Rio Tinto limited and Vale S/A. Adoption of
advanced technology aids in providing the competitive edge to businesses and it has been found
that BHP Billiton strictly relies on advanced tools. The entire industry employs around 90,000
people and has generated revenue of $11bn in the year 2014-15. Australia’s share in the world
steel production has fallen as compared with the past. The main strategy associated with BHP
Billion emphasizes on expanding its upstream assets so as to develop unique products in the
market. Another key strategy of the company focuses on exploration, undertaking advanced
technology. The entire study carried out has supported in knowing about the business strategy of
BHP Billiton. Further, the business is operating efficiently in the market due to the presence of
effective strategies.
INTRODUCTION
Business strategy can be defined as the overall action plan developed by organizations to
accomplish their long and short term goals. In the modern era, the market where the business
operates is full of challenges and this, in turn, acts as hurdle while carrying out overall operations
(Steyn & Niemann 2014). For analyzing the external environment of the business PESTLE as
one of the tools is undertaken the tool consists of factors such as political, social, legal,
economic, environmental and technological that influences business performance. In order to
deal with these factors, the company has to prepare effective strategies that will maintain its
performance. The present study carried out is based on BHP Billiton which is an Australian
mining, metal, and Petroleum Company headquartered in Melbourne. The key products of
company include iron ore, petroleum, copper, nickel, and uranium, etc. The entire research
focuses on business strategy of the BHP Billiton along with the macro and micro environmental
analysis.
COMPANY PROFILE
BHP is a leading resource company that is indulged into the process of extracting and
processing mineral, oil and gas. The company renders its products and services with the help of
more than 60,000 staff members all around the globe (Billiton 2017). The entire product range of
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the business is sold worldwide. The ultimate objective of the business is to develop long-term
value with its shareholders by carrying out development and marketing of natural resources.
BHP Billiton is one of the main manufacturers of major commodities such as copper,
metallurgical coal and the iron ore. The key strategy employed by the business is low cost, long
life resources as per its business needs (Roberts & Stockport 2009). In order to grow the overall
value of the company focuses on six key areas which are latent capacity, cost efficiency,
technology, onshore US, major projects, and exploration. By focusing on all these key areas
business wants to focus on its future growth and this, in turn, it is acting as the development tool
for the company in every possible manner. Apart from this, the operational model of the business
is quite effective that has allowed business to gain the competitive edge over its rivals.
Competitors of BHP Billiton
BHP Billiton operates in the market which is highly competitive as there are many
players operating in the industry. The key competitors of the selected organization are Arconic
Inc, Rio Tinto limited and Vale S/A (Hoovers 2016). All these companies are operating in the
same sector, and are offering products as per the actual need of the target market. In order to
efficiently deal with the issue of intense competition, various strategies have been undertaken by
the business that enhances its market performance in every possible manner. The main
competitive strategies employed by the business are low-cost commodities and diversified
product portfolio.
It has been identified that the range of metal and mining products offered by the company
are sold at low cost and this, in turn, attracts customers. In short, cost leadership as one of the
main strategy has been considered by the business for its long-term survival in the market. Due
to the high level of competition the company focuses on this strategy and it has helped in
maintaining the leading position of the firm in the market where it operates (Measham et al.
2013). Apart from this, the diversified workforce present within the company also acts as the
major strength of the business in the Australian market. Therefore, this is the main competitive
strategy undertaken by BHP Billiton.
BHP COMPETITIVE ADVANTAGE
Large numbers of factors are present that have allowed BHP Billiton to gain competitive
advantage. The main factor is diversity where different types of employees have been hired
within the workplace that provides ideas and information to the company in order to support its
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business strategy (Research 2016). It is the main reason due to which company is able to develop
effective business strategies that provide the competitive advantage to the business in every
possible manner. Apart from this, adoption of advanced technology also aids in providing the
competitive edge to the company where it has been found that BHP Billiton strictly relies on
advanced tools for the production of steel and other products. This also contributes a lot in
gaining the competitive edge over its rivals (Measham et al. 2013). No doubt producing all the
products at low cost as compared with the competitors is also one of the main sources of
competitive advantage for the business and this is only possible as the company has adopted
some latest tools.
AUSTRALIA STEEL INDUSTRY
Steel is considered as one of the main ingredients in the construction and infrastructure.
Further, some growth has been witnessed in the steel industry of Australia as compared with the
past. The entire industry employs around 90,000 people and has generated revenue of $11bn in
the year 2014-15. Australia share in the world steel production has fallen as compared with the
past. The steel industry is considered to be highly complex where many players are present in the
market along with the various broad components (Martin & Rice 2010). All the companies are
operating efficiently in the domestic market, but with regard to the industry, various challenges
are present that acts as a hurdle for the companies. In short, the industry is not growing as per
expected level and is not delivering benefits to the companies operating in the market.
Therefore, it sometimes acts as the challenge for the company like BHP Billiton in the
market. No doubt steel industry has contributed a lot to the development of the Australian
economy by creating a large number of jobs, but in the near future, more growth is expected so
that companies can efficiently perform in the market. The entire steel industry is supported by
the supply chain of more than 200 distribution outlets, and the overall supply chain practice is
complicated.
BUSINESS STRATEGY OF BHP IN AUSTRALIA
The main strategy associated with BHP Billion is to operate largely and expand its
upstream assets so as to develop unique products in the market. Further, the company has the
simple portfolio of tier one assets with the low-cost options that are associated with the future
growth of the company. In short, the overall business strategy of the enterprise is to maintain
overall cost which is kept the cost so that products can be produced at low cost and can be
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offered to the target market easily (Billiton 2017). This somehow enhances the performance of
the enterprise in the market and brings favorable results for the company.
Another key strategy adopted by the company involves exploration, undertaking
advanced technology that can assist in efficient production, to be cost-efficient and enhancing its
overall capacity. So, this has also favorable impact on the overall performance of the
organization, and this represents that company has developed effective plans for carrying out its
operations in the near future also (Klettner, Clarke & Boersma 2014). This is directly building
internal strength and overall competencies of the company. Utilizing technology and other of
resources directly aids in providing a competitive edge to the business. The use of advanced and
upgraded technology is present in case of BHP Billiton where company strongly focuses on the
advanced tools for enhancing its business performance in every possible manner.
Moreover, it is a well-known fact that BHP Billion operates in the market where effective
strategies are needed and through this reason company relies on latest tools for its performance
enhancement in every possible manner (Hubbard et al. 2017). In short, this has developed
internal capabilities of the business and has acted as the development tool for the company in
every possible manner. Therefore, with the help of this, it can be clearly stated that the overall
business strategy of BHP Billion is effective in every possible manner and has allowed in
gaining competitive edge also.
INTERNAL ANALYSIS
In order to know the internal strength of the business, it is necessary to conduct internal
analysis so as to know the actual strength of the BHP Billiton. The overall management of the
enterprise is effective
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Above shown is the management structure of the BHP Billion that highlights the key
activities carried out by the business. The main responsibility lies in the hands of the BHP
Billiton board that holds the main responsibility to carry out the major operations and taking
crucial decisions for the overall growth and benefit of the enterprise. Further, it has been found
that customer sector groups of the business are present that are segregated into different areas.
Further, the main responsibility of the board is to frame different type of strategies for the
survival and growth of the company (Grant et al. 2014). It has been found that the major
positions present in the top management of the business involve managers, executives, CEO, etc.
whether they manage all the business operations effectively and this leads to favorable results for
the enterprise in every possible manner.
The range of effective internal resources present with the company involves financial,
technology, human, etc. All these resources are significantly contributing to the success of the
business. For the production of steel products advanced technology is employed and this has
contributed a lot to the success of the company (Floris, Grant & Cutcher 2013). Further, the
organization is financially strong that has supported to invest in different areas that are associated
with the long-term success of the business. BHP Billiton strongly focuses on optimum utilization
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of resources and this aids in delivering competitive advantage to the business in every possible
manner. Through this organization can focus on its mission and vision.
The real capability of BHP Billion lies in low cost production and this is one of the
unique strategies which assist in acquiring cost leadership in the entire industry (Driussi & Jansz
2006). On the continuous basis, BHP Billion focuses on the development of its capabilities that
has allowed the company to deal with the issue of competition in the market and acted as the
development tool in every possible manner. Therefore, these are some of the main resources and
capabilities of the company that has developed its internal strength and through these overall
operations are carried out in an effective manner keeping in view the ultimate objective of the
business.
EXTERNAL ANALYSIS
PESTLE analysis
For carrying out the external analysis of the business, PESTLE analysis has been used
and the tool undertakes factors such as political, social, technological, legal and environmental
that influences performance of the business.
Political: BHP Billiton is a worldwide resource company that is influenced due to the presence
of political risk. Further, the company has invested a large amount of funds in exploration and
infrastructure projects where it has been identified that high risk is present in Kazakhstan,
Democratic Republic of Congo, Mongolia and Western Africa that is associated with political
instability (Dick & Merrett 2007). The most common political risk present involves civil unrest,
changes in government policy, lease agreements, etc. Due to all these factors, overall activities of
the company are affected. The main example associated with the effect of the change in policy
was the implementation of Mineral and petroleum resource development in the year 2004 due to
which mining department of the BHP has to face losses. The rise in the level of taxes is also one
of the main issues faced by the company while conducting its operations in the market.
Economic: BHP Billiton is affected due to the presence of large economic factors that involve
material, labor cost, energy cost, discovery expenses, etc. The fluctuations present in all these
factors directly income of the business, expansion decisions, etc (Bossi 2017). No doubt the
economy of Australia is developing, and it has provided different opportunities to the business.
But on the other hand, fluctuations taking place in the economy such as unpredictable currency
assessment and economic perils affects business operations.
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Social: It has the direct impact on the performance of the BHP Billiton where it has been
identified that in the third world regions the strong sense of regressive culture exists. The
development of new mining and infrastructure project requires tailor-made approval that
enhances development cost and reduces profitability. The company has taken measures by
changing the worker condition and providing them the quality of life in the city of Antofagasta.
Technological: The Company mainly focuses on the technical elements that are associated with
energy possession, unearthing of mining and exploration (Adler 2008). Therefore, the company
has to rely on advanced tools for conducting these operations.
Legal: Laws and regulations present in the mining industry directly influence operations of the
BHP Billion where it has been identified that payment of taxes, complying with employment,
environmental laws, etc. are must for the business (McCluskey & Barros 2016).
Environmental: Government has introduced various guidelines so that negative impact of
companies can be reduced. So, BHP Billiton has also undertaken some sustainable practice
through which company ensures that its impact on the environment is minimal.
SWOT
Strengths
 International presence
 Strong financial position
 Market positioning
 Association with the social clauses
Weaknesses
 Semi skilled human resource
 Corporate communication
Opportunities
 Expanding operations
 Innovation in the marketing mode
 Merger and acquisition
Threats
 Rising competition and cost of
production
 Political threats
 Fluctuation in demand
CONCLUSION
The entire study carried out has supported in knowing about the business strategy of BHP
Billiton. Further, the business is operating efficiently in the market due to the presence of
effective strategies. The Australian steel industry is not favorable for the business, and this can
somehow adversely affect the performance of the business. PESTLE analysis has shown that
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various factors are affecting business performance such as political, technological, and
economical and they have to be managed properly.
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