BHP Billiton Sustainability and Operations

This assignment delves into the sustainability initiatives and operational strategies of BHP Billiton, a leading global mining company. It analyzes the company's commitment to environmental responsibility, social impact, and economic performance. The assignment examines key aspects such as resource management, community engagement, and climate change mitigation. Furthermore, it explores the challenges facing BHP Billiton in a volatile market environment and its plans for future growth and development.

Running head: BUSINESS STRATEGY
Topic: Business Strategy
Name of the Student:
Name of the University:
Author’s Note:

1BUSINESS STRATEGY
Executive Summary
A report has been provided for BHP Billiton concentrating on its current operating situation. It
has been found that the organization is extremely successful in managing its resources and it is
found to keep good relationship with stakeholders of global market. Competitive advantage is
gained through average pricing and deeper market distribution channel. BHP Billiton has been
found to successfully serve in the steel production of Australia but in future it will need to reduce
carbon emission. The organization has successfully able to deal with market expansion because it
has concrete business strategy framework comprising of vision, purpose, objectives and key
success points.

2BUSINESS STRATEGY
Table of Contents
1.0 Introduction................................................................................................................................5
2.0 BHP Billiton’s Competitive Advantage....................................................................................5
2.1 Porter’s Generic strategy.......................................................................................................5
2.1.1 Cost Leadership..............................................................................................................5
2.1.2 Differentiation.................................................................................................................6
2.1.3 Focus Strategy................................................................................................................8
3.0 Trends in the Australian steel manufacturing industry..............................................................9
4.0 Current business strategy of BHP Billiton in Australia...........................................................11
4.1 Market Penetration...............................................................................................................11
4.2 Consistent Business Model..................................................................................................12
5.0 Internal Analysis of BHP Billiton............................................................................................13
5.1 VRIO Framework....................................................................................................................13
5.1.1 Management Talent......................................................................................................13
5.1.2 Resources and Capabilities...........................................................................................13
6.0 External Analysis.....................................................................................................................15
6.1 Macro Environment Analysis (PESTLE)............................................................................15
6.2 Micro Environment Analysis (Porter’s Five Force)............................................................16
7.0 Conclusion...............................................................................................................................17
Reference List................................................................................................................................18

3BUSINESS STRATEGY
Appendix........................................................................................................................................21
A. BHP Billiton Expenditure.....................................................................................................21
B. BHP Billiton Operating Markets...........................................................................................22
C. Governance Structure............................................................................................................23

4BUSINESS STRATEGY
1.0 Introduction
One of the most successful multinational mining organizations is BHP Billiton, which
was established through merger between BHP and Billiton in the year 2001. It is having its
headquarter in Melbourne, Australia and London, UK. Through global market diversification it
has achieved A$30.9 billion revenue, US$6.2 billion operating income and US$6.2 billion profit
in the year 2016. The organization is listed under metal and mining industry and is related to
mining, petroleum and metal extraction and steel production in the last couple of years. This
report will discuss the BHP Billiton’s competitive advantage, trends in the Australian steel
manufacturing industry, current business strategy of BHP Billiton in Australia including internal
and external analysis.
2.0 BHP Billiton’s Competitive Advantage
The competitive advantage of BHP Billiton can be analyzed through the Porter’s Generic
strategy. This theory suggests an organization towards gaining competitive edge through either
of or combination of cost leadership, differentiation, and focus strategy. The competitive
advantage of BHP Billiton has been shown through the Porter’s Generic strategy.
2.1 Porter’s Generic strategy
2.1.1 Cost Leadership
Cost leadership strategy suggest for being low cost producer within an industry for a
given minimum quality of products. While considering BHP Billiton, it can be said that the
organization offers its products at below the average industry prices for gaining enhanced market
share in Australia. According to Price (2015), the organization offers lower prices to its clients
and customers for its products like minerals, petroleum, iron, gold, oil, natural gas and others. In

5BUSINESS STRATEGY
this way, the organization has grabbed huge clients and customers. Moreover, the cost leadership
strategy encouraged several clients and customers towards taking its products. Pepper et al.
(2015) pointed out that increasing customer and client base have increased the sales volume of
BHP Billiton, which in turn increased its market share. BHP Billiton has grabbed 53% market
share in Australian market through its cost leadership strategy.
Figure 1: Market Competition
(Source: Pepper et al. 2015)
2.1.2 Differentiation
Differentiation strategy suggests for adding some unique factor to the product ranges or
an organization. Such strategy facilitates in providing unique value to the customers over the
rival companies. In this way, differentiation through unique value helps an organization in
creating competitive edge over the rivals. In case of BHP Billiton, the competitive edge of the
organization lies in wide ranges of product portfolio. Moreover, Bellis (2016) opined that BHP
Billiton is capable of providing wide ranges of mining products like Coal, Iron Ore, Copper,
Nickel, Gold, Natural Gas, Petroleum, Uranium and many more. Moreover, the organization

6BUSINESS STRATEGY
always maintains high quality of the products in all categories. The high quality copper
concentrate is extracted from sulphide ore through flotation extraction process. On the other
hand, Hubbard (2017) opined that the high-quality metallurgical coals of the organization are
quite attractive to the customers and clients of Australia. Moreover, the premium quality of the
iron ore and copper and other minerals has differentiated BHP Billiton from the others in the
market and enhanced its competitive advantage. Such competitive factors have also increased the
sales volume of the organization in the market.
Figure 2: Sales Volume of Different Commodities of BHP Billiton
(Source: Hubbard 2017)

7BUSINESS STRATEGY
2.1.3 Focus Strategy
Focus strategy concentrates more on narrow segment and applying either cost advantage
or differentiation for gaining competitive advantage. In Australia, BHP Billiton has directly
focused on the direct customers, who need direct minerals. The organization has used
differentiation strategy within this narrow segment for gaining competitive advantage through
providing unique quality minerals.
Figure 3: Summary of the Pricing trends of Commodities
(Source: Bellis 2016)

8BUSINESS STRATEGY
3.0 Trends in the Australian steel manufacturing industry
Australian steel manufacturing industry is extremely vital for overall growth of Australia
Economy. It has created employment for almost 100000 people nationally. Furthermore, Arrium
Limited (2016) opined that the multiplier effect of steel manufacturing company creates almost
3-5 indirect jobs for every direct job on steel manufacturing companies. Apart from economic
benefit, the industry also offers high quality, safe and consistent supply of products for critical
infrastructure. The industry has contributed almost 9% to the overall GDP growth of Australian
Economy. Yellishetty and Mudd (2014) pointed out that Australia steel manufacturing industry
is highly innovative and contributes more than 25% of its business expenditure to its research
and development for enhancing the quality of the steels.
Figure 4: Increase in Steel Production in Australian Steel Manufacturing Companies
(Source: Arrium Limited 2016)

9BUSINESS STRATEGY
While considering the latest trends of Australia Steel Manufacturing industry, it can be
said that the industry uses latest technologies for manufacturing premium quality steel.
Yellishetty and Mudd (2014) pointed that the ever evolving steel industry is developing cheap
and efficient technologies for producing high quality steels. Advanced technology has also
increased the production volume of the steel in the steel manufacturing industry.
The domestic demand of steel has been increased by 5% by the year between 2015 and
2016. However, global demand of steel has been reduced with huge production of steel in China,
Taiwan, India and South Korea. Furthermore, Donovan and Hartley (2016) opined that the
higher Australian Dollars have driven increased production cost, which includes key
commodities like Coal and Iron Ore.
Figure 5: Steel Prices, Costs and Capacity Utilization
(Source: Donovan and Hartley 2016)

10BUSINESS STRATEGY
4.0 Current business strategy of BHP Billiton in Australia
4.1 Market Penetration
With the progress of time, the organization has diversified its production base in multiple
markets from Australia to Unites States. The assets are comprised of Onshore units, production
unit and joint interest unit with ownership from 1 to 100% in international market. In this way,
the organization has able to diversify its risk and take competitive advantage (refer to appendix
A, B).
Figure 6: BHP Billiton Market Penetration Planning
(Source: BHP Billiton 2016)
Figure 7: BHP Billiton Australia Operation Planning
(Source: BHP Billiton 2016)

11BUSINESS STRATEGY
4.2 Consistent Business Model
Following strategic business model framework has led to the success of BHP Billiton.
FACTORS EXPLANATION
PURPOSE  To create long-term shareholder value
 Ensure acquisition, development, discovery and marketing for
natural resources
STRATEGY  Establish diversified commodity upstream market through low cost,
long-life and expandable geographic location across globe
 Extracting, developing and evaluating natural resources across globe
 Selling and distributing natural resources as well as risk
management
 Governing and defining world-class functional standards
VALUES  Organization is guided by own Charter values of Accountability,
simplicity, performance, respect, integrity and sustainability
 Ensuring people safety and respecting community and environment
commitment
SUCCESS
FACTORS
 Sense of achievement, accomplishment and purpose oriented
 Establishing relationship with suppliers, customers and communities
 Sustainably developed world-class asset portfolio
 Shareholder wealth maximization by acquisition and partnership
Table 1: Business Model Elements of BHP Billiton
(Source: BHP Billiton 2016)

12BUSINESS STRATEGY
5.0 Internal Analysis of BHP Billiton
The internal Analysis of the organization can be analyzed through the framework of
VRIO. It analyzes the ability of organizational resources and capabilities towards gaining
sustainable competitive advantage.
5.1 VRIO Framework
5.1.1 Management Talent
The management of BHP Billiton is highly talented towards taking right decision at right
time. Moreover, the management of this organization has strong capabilities towards assessing
the market opportunities and taking decision for utilizing those market opportunities. Moreover,
Mayes, McDonald and Pini (2014) opined that the group management committee of BHP
Billiton always opt right policies and procedures in consultation with each other for business
operations. Furthermore, the management of the organization has adopted horizontal
communication policies for encouraging shared value with organization and fostering innovation
through considering the input of all organizational members. Lodhia and Martin (2014) pointed
out that the managers are also quite capable of managing the valuable human resource for getting
their best effort towards organizational success. The managers effective decision regarding
financing and strategy formulation towards getting organizational success in optimum manner.
5.1.2 Resources and Capabilities
The worldwide distribution network of BHP Billiton is high valuable for creating
sustained competitive advantage. It helps them towards getting smooth flow of raw materials and
finished goods. Chambers (2016) pointed out that the secret formula of BHP Billiton towards
adding high quality in all their mineral products has led to sustained competitive advantage for

13BUSINESS STRATEGY
the organization. Such secret formula cannot be imitated by any other organization s.
Furthermore, Turner (2014) opined that brand recognition of BHP Billiton attracts huge volume
of customers, which also adds to the sustainable competitive advantage. Apart from that, strong
technological advancement has made BHP Billiton capable of producing premium quality
minerals in large quantity. However, such technology can be imitated by other competitors. It
has added to the competitive parity to the organization. On the other hand, de Villiers, Low and
Samkin (2014) opined that talented and dedicated human resources of BHP Billiton have huge
contribution to its competitive parity.
RESOURCES AND
CAPABILITIES
VALUABLE RARE COSTLY
IMITATE
ORGANIZED BY
ORGANIZATION
COMPETITIVE
ADVANTAGE
WORLDWIDE
DISTRIBUTION
NETWORK
Yes Yes Yes Yes Sustainable
Competitive
Advantage
SECRET
FORMULA
Yes Yes Yes Yes Sustainable
Competitive
Advantage
BRAND
RECOGNITION
Yes Yes Yes Yes Sustainable
Competitive
Advantage
TECHNOLOGICAL
ADVANCEMENT
Yes No No Yes Competitive
Parity
HUMAN
RESOURCES
Yes No No Yes Competitive
Parity
Table 2: Internal Analysis of BHP Billiton through VRIO

14BUSINESS STRATEGY
(Source: Created by Author)
6.0 External Analysis
6.1 Macro Environment Analysis (PESTLE)
PESTLE ANALYSIS OF BHP BILLITON
POLITICAL  BHP Billiton gets the advantage political stability of Australia
 Government support towards industrialization in turn supports the
business of BHP Billiton
 Risk of military invasion in Australia can hamper business
 Flexible trade agreement of Australia support the import and export
activities of the organization
ECONOMIC  Growing economic condition of Australia has increased the return
on investment of BHP Billiton
 Developed infrastructure of has increased the potential for business
development of the organization
 Fluctuating inflation rate of Australia affect the price rate of the
products
SOCIAL  Increasing spending power of Australia people has sales volume of
the organization
 Increasing demand of sophisticated infrastructure among the people
has ultimately increased the demand of the products of BHP Billiton
 Changing consumer preference can have negative effect on the
business performance of the organization
TECHNOLOGY  BHP Billiton always uses advanced technology in the extraction of

15BUSINESS STRATEGY
minerals
 The combination of pressure acid and atmosphere leads to
extraction techniques for optimizing Nickel extraction
LEGAL  Aligns with consumer laws of Australian Government
 Maintains all employment standards of Australia
ENVIRONMENTA
L
 BHP Billiton is targeted towards water optimization
 The organization has also reduced the carbon emission
Table 3: PESTLE Analysis of BHP Billiton
(Source: Bayari 2016)
6.2 Micro Environment Analysis (Porter’s Five Force)
Porter’s Five Force of BHP Billiton
Threats of New
Entrants
 High cost of basic inputs and services, which needs large investment
to start mining business
 It is extreme tough for the new entrants to beat the competition of
reputed companies like BHP Billiton and Rio Tinto
 Threats of new entrants is less on BHP Billiton
Threats of
Substitute
 The companies producing aluminum, carbon Fiber and plastic can
create threats on BHP Billiton
 However, these products are not up to the standards of the products of
BHP Billiton
 Threats of Substitute is moderate
Competitive
Rivalry
 Tough competition from the Companies like Rio Tinto, Adani

16BUSINESS STRATEGY
Mining, Ewmount and others
 The competitors are also providing same quality products in much
affordable prices
Bargaining Power
of Suppliers
 High raw material price, lack of transportation quality of materials
has increased the bargaining power of suppliers for BHP Billiton
 High bargaining power of suppliers
Bargaining Power
of Buyers
 Less availability of substitute products have reduced the bargaining
power of buyers
 However, the products of direct competitor companies have increased
bargaining power of buyers
 Moderate bargaining power of buyers
Table 4: Porter’s Five Force Analysis of BHP Billiton
(Source: Lèbre, Corder and Golev 2017)
7.0 Conclusion
While concluding, it can be said that BHP Billiton is having a concrete competitive
advantage in the worldwide market because of clear purpose and business model. However, it is
facing tough operational challenges due to lack of transportation in developing countries. It is
evident that usage of advanced technology, asset management techniques and good relationship
with stakeholders has led BHP Billiton to achieve huge reputation in global market. However, in
future it needs to reduce greenhouse gas emission at the time of extraction as at present it is the
19th corporate polluter in the mining industry.

17BUSINESS STRATEGY

18BUSINESS STRATEGY
Reference List
Arrium Limited 2016. The future of Australia's steel industry. 16. Sydney: Arrium Limited, pp.1-
21.
Bayari, C., 2016. Economic geography of the Australian mining industry. Tijdschrift voor
economische en sociale geografie, 107(5), pp.552-566.
Bellis, J.F., 2016. The iron ore production joint venture between Rio Tinto and BHP Billiton:
The European angle of a multinational antitrust review. In Emerging Issues in Sustainable
Development (pp. 221-243). Springer Japan.
BHP Billiton, 2016. Resourcing global growth Strategic Report 2015. 15. Melbourne: BHP
Billiton Plc, pp.1-68.
Chambers, M. 2016. BHP to focus on strategy. [online] Theaustralian.com.au. Available at:
http://www.theaustralian.com.au/business/mining-energy/bhp-billiton-to-focus-on-strategy-and-
development/news-story/6218fc52b8eb9f415fe26564202d10fc [Accessed 21 Sep. 2017].
de Villiers, C., Low, M. and Samkin, G., 2014. The institutionalisation of mining company
sustainability disclosures. Journal of Cleaner Production, 84, pp.51-58.
Donovan, J. and Hartley, P., 2016. Riding the Iron Ore Cycle: Actions of Australia’s Major
Producers (No. 16-15).
Holappa, L.E.K., 2017. Energy Efficiency and Sustainability in Steel Production. In Applications
of Process Engineering Principles in Materials Processing, Energy and Environmental
Technologies (pp. 401-410). Springer International Publishing.

19BUSINESS STRATEGY
Hubbard, T.N., Hubbard, T.N., Moore, M.J. and Moore, M.J., 2017. BHP Billiton: Mining
Potash. Kellogg School of Management Cases, pp.1-13.
Lèbre, É., Corder, G. and Golev, A., 2017. The role of the mining industry in a circular
economy: A framework for resource management at the mine site level. Journal of Industrial
Ecology, 21(3), pp.662-672.
Lodhia, S. and Martin, N., 2014. Corporate sustainability indicators: an Australian mining case
study. Journal of cleaner production, 84, pp.107-115.
Mayes, R., McDonald, P. and Pini, B., 2014. ‘Our’community: corporate social responsibility,
neoliberalisation, and mining industry community engagement in rural Australia. Environment
and Planning A, 46(2), pp.398-413.
Pepper*, A., McIntosh, P., Fitzsimmons, R., Gebhardt, T. and Dillenbeck, E., 2015, September.
The Unconventional Global Endowment: Results of BHP Billiton's Global Assessment.
In International Conference and Exhibition, Melbourne, Australia 13-16 September 2015 (pp.
283-283). Society of Exploration Geophysicists and American Association of Petroleum
Geologists.
Price, G., 2015. Spotlight on seeds for BHP Billiton Iron Ore. AusIMM Bulletin, (Jun 2015),
p.76.
Turner, P., 2014. A brief tale of two BHP-billiton mining proposals. Nature New South
Wales, 58(1), p.29.

20BUSINESS STRATEGY
Yellishetty, M. and Mudd, G.M., 2014. Substance flow analysis of steel and long term
sustainability of iron ore resources in Australia, Brazil, China and India. Journal of cleaner
production, 84, pp.400-410.

21BUSINESS STRATEGY
Appendix
A. BHP Billiton Expenditure
(Source: BHP Billiton 2016)