Strategic Management of BHP Billiton Amidst Global Uncertainty

The assignment content discusses the performance of BHP Billiton, a leading mining company in Australia. It highlights the company's efficient use of resources to maintain its market position and supports the Australian economy through its diversified business plans. The key internal factors for success include resources, capabilities, and core competencies. The study recommends incorporating suppliers, employees, and local content acquisition as strategic considerations to improve business relations, employee development, and public infrastructure projects.

Business strategy
Environment analysis of BHP Billiton

EXECUTIVE SUMMARY
BHP Billiton is one of the leading diversified businesses in the world. Study shows that BHP
had gained competitive advantage due to its operational capability, cost management
strategies and maintaining quality productivity. The Australian Steel manufacturing has
decreased over the years with the increasing debts and global problems. The environment
analysis shows that company is facing significant competition in the Australian market but
management has been able to manage it due to their efficient internal resources and
capabilities.

TABLE OF CONTENTS
Introduction................................................................................................................................4
Purpose of report....................................................................................................................4
Company snapshot.................................................................................................................4
Environment analysis of BHP Billiton.......................................................................................4
Internal analysis.....................................................................................................................4
Current business strategy of BHP Billiton.........................................................................4
Assets.................................................................................................................................5
Competitive advantage of BHP Billiton............................................................................5
Sales, profits and share prices............................................................................................6
Strength and weakness.......................................................................................................6
External analysis....................................................................................................................7
Trends of Australian steel manufacturing industry............................................................7
PESTLE analysis................................................................................................................8
Micro analysis....................................................................................................................9
Opportunities and threats.................................................................................................10
Conclusion................................................................................................................................11
References................................................................................................................................12
Appendix..................................................................................................................................13

LIST OF FIGURES
Figure 1: Profit and sales of BHP Billiton.................................................................................7
Figure 2: Share prices of BHP Billiton over five years.............................................................8
Figure 3: PORTER FIVE FORCES ANALYSIS of BHP Billiton..........................................11

INTRODUCTION
Purpose of report
The present study aims to conduct environmental analysis of BHP Billiton which would
involve discussion of key information related to the competitive advantages and the current
business strategies of the organisation to determine their market and financial position in
comparison to industry standards. The environmental analysis of BHP Billiton will involve
internal and external (macro and micro) analysis. This analysis will help the organisation to
understand its market effectively and accordingly develop strategies for effective movement
of the business.
Company snapshot
BHP Billiton is one of the biggest Australian conglomerates that work all over the world. The
organisation has diversified into different fields steadily with time. The organisation has
extended in different markets which has helped the organisation to get renowned in different
regions. BHP has become an extremely important entity in the Australian economy that has
brought the company into the limelight (BHP, 2017). The organisation was established in
1885 in NSW as silver and lead mining company and the organisation since then extended
into iron ore, steel making, coal and petroleum. The company received domestic and global
growth in different countries like USA, Chile, Canada et cetera. With time passing by BHP
has faced significant competition in the global market and hence it is important for the
organisation to develop a strong strategy which would help the organisation to move forward
and cope up with the increasing difficulties and market hurdles (de Villiers, Low and Samkin,
2014).
ENVIRONMENT ANALYSIS OF BHP BILLITON
Internal analysis
Current business strategy of BHP Billiton
The Current mission statement of the organisation BHP Billiton is to “create long term
shareholder value through discovery, mining and acquisition, development and proper sales
and marketing of natural resources”. The business strategy of the BHP is mainly based on
their key pillars products i.e. iron ore, oil, copper and coal mining. The current business
strategy of BHP is to focus on maximising the returns for the shareholders through the

increase in the mineral assets and with the increase in new mining explorations and
innovation. The current business strategy of the organisation revolves around its progressive
dividend policy that focuses and commits to increase the returns of the shareholders (Grant et
al., 2014). With the new operating model the organisation will focus more on security aspect,
volume and cost management which would help to provide the best possible result from the
new strategy. The strategic shift will help to focus more on the interest of the investors and
shareholders and will help to provide them with better returns which are always good for the
organisation. The organisation has also made a strategic shift on its take on the environment.
Previously the organisation has received criticism for its unethical steps in the Mining
incidents in Brazil and this has definitely affected their reputation in the global market
(Perrott, 2015). Hence the organisation has been focused on managing environment properly
so that the environment could be properly managed. It has brought green supply chain into
practice, management of emission and mining operations, reduction in utilisation of
chemicals et cetera are also properly monitored in the new business strategy which just
creates brand awareness in the market (Peterson et al., 2015).
Assets
Human resources BHP Billiton is a huge organisation with substantial resources. The
company not only has huge financial assets as well as it has
significant reserves and human resources which help the
organisation to a large extent to perform its duties (Gamble and
Thompson, 2014). Management culture is another key internal
aspect which helps the organisation to focus on managing the
talents properly and communicating with them to understand their
grievances and problems which helps to gradually manage the
human resource properly.
Financial and
technological
resources
Financial resources are huge in the organisation which provides
upper hand to the organisation. Hence it could be said that the huge
financial resources are important for the organisation. The
organisation also has suitable technological resources which have
helped the organisation to implement innovation and development
(Hill, Jones and Schilling, 2014).
Physical resources The operational capability and technical expertise differs BHP in

Australia like Shell, Exxon, BP and Chevron especially in
petroleum extraction and even in other fields as well (Rothaermel,
2015). This clearly shows that the capability of the organisation
mainly lies in its production and operational capability which is
extremely important for an organisation like BHP. In 2014 BHP
produced 700,000 barrels per day which is more than companies
like BP, Chevron and Exxon.
Competitive advantage of BHP Billiton
BHP Billiton is one of the biggest organisations in Australia. The company has slowly
and steadily emerged as an organisation that has contributed to the growth and development
of the Australian economy. Business diversification is one of the key reasons for the
competitive advantage of BHP in the Australian market and apart from that the organisation
also is ahead due to its market intelligence and corporate model which has helped the
organisation to make sure it can cope up with the increasing competition in the Australian
market (Madsen and Walker, 2015). Further; the merger of BHP an Australian organisation
and Billiton a South African mining company the company has seen immense growth which
provided them benefit of economies of scale (Grant et al., 2016). The recently succeeded
CEO of BHP Andrew Mackenzie has been highly focused on strategies that would help the
organisation to gain competitive advantage. He has personally taken into account the change
in the environmental strategy and financial strategy of the organisation. Having been
renowned as a fellow of Postdoctoral research with the British Geological Survey has helped
him to manage the dipping importance of the organisation (Rothaermel, 2015). The
sustainable strategies of company assist them in making reduction of costs and attaining
flexible resources for growth and expansion of business. As a whole cited elements provide
business sustainable competitive benefit over competitors through which management is able
to generate value for stakeholders in the long run (Ahmad et al., 2016).

Sales, profits and share prices
Figure 1: Profit and sales of BHP Billiton
Figure 2: Share prices of BHP Billiton over five years
From the above data it could be seen that since 2006 the organisation has experienced
increase in revenue significantly with each year which is clearly shown in the above table. It
is important to mention that the diversification in business has helped BHP to a large extent
to keep the competitive advantage with the organisation. In the fiscal year of 2016 petroleum
accounted for around 23% of the total revenue and coal and iron ore followed. Hence it could
be said that the organisation definitely has all the different divisions working effectively
which has helped the organisation to compete in this highly competitive market in Australia
(Ahmad et al., 2016).
Strength and weakness
Strengths
 The organisation’s main strength is
its strong financial performance in
Australia and some other foreign
markets.
Weaknesses
 Past scandals have contributed to
loosening of foothold in certain
markets and negative publicity in

 Diversification in business like Oil,
Iron Ore, Coal et cetera.
 Significant presence in the
international market.
 Effective and strong marketing
(Grant et al, 2016).
Australia due to these incidents.
 Unskilled human resources create
problem.
 Poor corporate communication.
External analysis
Trends of Australian steel manufacturing industry
The Australian steel industry in the early years of 2013-14 and 15 employed approximately
around 100,000 people and generated an amount of revenue which was not less than $10
billion but in the last couple of years the revenue has gone down by 7.5% which is a major
reason for concern. Hence it could be said that the Australian Steel industry is showing a
declining trend in all respect including revenue and steel production as compared to the
earlier part years (Golev and Corder, 2016). However; steel Production in Australia is
increased from 448 thousand tonnes in June to 458.89 thousand tonnes in July 2017. There
has been a gradual growth in steel production in the country with an overwhelming average
of 582 thousand tonnes within 1970 to 2017. The presently discussed fact clearly states that
the country Australia has emphasised on steel manufacturing effectively. Since 2016 the steel
production has increased significantly which shows the dependence of the Australian
economy on steel production (Hudson and Sadler, 2017).
In the recent past the Australian Steel Manufacturing industry has faced significant issues
with debts and faced steep decline in the last few years overall and the revenue of the
Australian steel industry is expected to go down more by around $1.9 billion. The annual
growth hasn’t been up to the mark as expected which clearly shows that the industry is facing
problem and needs effective and positive revamp which could possibly help the industry. It
cannot be denied that even though the country has been able to manufacture significant
amount of steel but still it faces huge challenge (Hudson and Sadler, 2017).

PESTLE analysis
The PEST Analysis is an effective way to understand the external environment of the
organisation BHP Billiton. The PEST analysis stands for political, economic, social and
technological environment.
 Political: The organisation has got favourable political balance in Australia which has
helped the organisation to continue its business effectively. The Australian
Government has stretched its hands for the organisation which has helped to manage
their business effectively. The company is responsible to contribute to a large extent it
gets significant support from the Australian Government especially western Australia.
Even though the organisation is working smoothly the possibility of changes in the
government or in government policies definitely influence their overall operation like
labor policies, mining and digging regulations. Like the increase in the mining tax
royalty in Australia increased the cost of goods sold by the organisation (Saad,
Mohamed Udin and Hasnan, 2014).
 Economic: The organisation BHP is vulnerable to economic factors like the increase
in the price of the global commodities, national inflation, increase in the wage rate,
material costs of the labour (BHP, 2017). The organisation BHP is largely dependent
on the global market for its export of products and hence it becomes extremely tough
for the organisation to survive due to the increase in fluctuating currency value, rising
inflation within the country and in the recent past excessive reduction in prices of
mining products in Australia have reduced the profitability of the company
(Rothaermel, 2015).
 Social: The organisation is largely influenced by the social relationship with the
stakeholders. The change in demographics and lack of proper and young workforce
for mines has affected the organisation. Increasing importance of corporate social
responsibility like clean environment strategy and clean emission, and recycling
renewable source of energy have been good strategies for the organisation to cope up
with its previous scandals (Perrott, 2015).
 Technological: The Company relies on its up to date and efficient technological
assets to effectively continue its mining operations. The investment in technology for
the organisation to find oil underneath water and to effectively continue mining needs
ultramodern equipments and the organisation has emphasised on this more to gain
competitive advantage (Grant et al., 2016).

Micro analysis
The different micro environmental factors are competitors, customers, suppliers, public,
marketing intermediaries and employees. The competitors of the BHP Billiton have
significant role to play in the market. The company faces huge competition which affects its
business strategy and decisions (Peppard and Ward, 2016). Major players of industry and
crucial facts related to their business is enumerated as below:
Fig 6: Competitor key facts
(Source: Rothaermel, 2015)

Bargaining power of customers
Bargaining power of suppliers
Threat of new entrantsThreat of Substitutes
Intensity of existing rivalary
0
2
4
PORTER FIVE FORCES ANALYSIS of BHP Billton
PORTER FIVE FORCES ANALYSIS
Figure 3: PORTER FIVE FORCES ANALYSIS of BHP Billiton
Bargaining power of customers is moderate as price is increasing due to increasing demand
and scarcity of natural resources but bargaining power of supplier is high in terms of
materials, labour, shipping, energy, and energy costs (Grant et al., 2016). Threat of new
entrants is low because of restrictions and high complexity features of steel industry. Threat
of substitutes is also low as nothing can replace natural resources. However; rivalry among
market players is intense due to lucrative nature of industry (Perrott, 2015).
Opportunities and threats
Opportunities
 Constant expansion programs.
 Integrations in terms of mergers and
acquisitions.
 Opening in the global market.
 Excellent innovation in marketing
and product development (Gamble
and Thompson, 2014).
Threats
 Constant fluctuation in global
demand.
 Constant rise in competition.
 Increasing costs.
 Possibility of political threats (Grant
et al., 2016).

CONCLUSION
Present study shows that company is performing well by making efficient use of available
resources in order to maintain their leading position in market. Overall from the
environmental analysis it is clear that BHP Billiton has supported the Australian economy to
a large extent through its diversified business plans. The key internal factors for the success
of the company are Resources, Capabilities, and core competencies. Despite of cited aspect
company is recommended to incorporate following factors in their business strategy:
 Suppliers are tough hurdles as it is a huge market and hence BHP has to communicate
and strategize its plans to improvise business relations for better decision making.
 Employees are mainstay of the organisation and provide the basic support to the
operations with their intellectual acumen and capacity to the organisation and hence
the organisation effectively strategizes promotional plans and appraisal techniques to
effectively develop employee employer relationship.
 Enlargements and improvisation in the local acquisition of content through superior
involvement and promoting the technologies and skills regarding public
infrastructural projects.

REFERENCES
Books and journals
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de Villiers, C., Low, M. and Samkin, G., 2014. The institutionalisation of mining company
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Peppard, J. and Ward, J., 2016. The strategic management of information systems: Building a
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Online
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2017].

APPENDIX
SWOT analysis of BHP Billiton