Competitive Advantage of BHP Billiton in the Australian Market

The assignment content highlights the internal and external factors affecting BHP Billiton, a mining and still production company. The internal factors include rising energy costs, labor costs, exploration expenses, operations costs, and material costs. External factors include socio-cultural, technological, environmental, and legal factors that impact the company's profitability. To address these challenges, BHP Billiton operates under a Dual Listed Company structure, with a unified management and board, focusing on product development strategy in existing markets and market development strategy in new markets. The company's competitive advantages lie in its diverse management, innovative technology, and research and development team. Overall, the strong management and business strategies of BHP Billiton enable it to adapt to changing external environments and seek sustainable growth.

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Business Strategy
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Executive Summary
BHP Billiton is one of the leading mining and metal processing organisation of Australia
that has its operations in several regions of the world. The strong financial position and diverse
management of BHP Billiton helps the firm to seek growth in the current competitive
environment in the Australian Steel industry. Moreover, the external market factors changes with
time that enforces the company to adopt a flexible business strategy in Australia. BHP Billiton
focuses on diversifying its business owning and operating large, low-cost, long-life, expandable
projects. The diverse management, highly skilled R&D team and implementation of innovative
technology help the firm to seek sustainable growth of business in the current Australian market.

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Table of Contents
Introduction......................................................................................................................................4
Trends in Australian Steel Manufacturing Industry........................................................................4
Internal Analysis of BHP Billiton....................................................................................................5
Management Talent......................................................................................................................5
Resource and Capabilities............................................................................................................5
External Environment Analysis.......................................................................................................6
Micro Environment Analysis.......................................................................................................6
Macro Environmental Analysis...................................................................................................8
Current Business Strategy................................................................................................................9
Competitive Advantage.................................................................................................................10
Conclusion.....................................................................................................................................11
References......................................................................................................................................12
Appendices....................................................................................................................................14
Appendix 1: Porter’s Five Forces for BHP Billiton Limited.....................................................14
Appendix 2: Ansoff Matrix........................................................................................................15

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Introduction
In the reported study the environmental analysis of BHP Billiton, one of the largest
Australian multinational conglomerates dealing in metal mining and petroleum, has been
described to identify the performance and outlook of the business (BHP Billiton, 2017). The
study paper investigates the latest trends in Australian steel manufacturing industry to evaluate
the position of BHP Billiton in the target market. Furthermore, the environmental analysis of the
Australian corporation has been segmented into two different sections i.e. internal and external
environment analysis. In the meanwhile, the internal analysis describes the management talent,
and resource and capabilities to produce the competitive advantage of the metal mining company
(Wei, Yi and Guo, 2013). On the other hand, the external environment of the business involves
macro and micro environment analysis using PESTLE and Porter’s Five Forces analysis
respectively. Before the conclusion, the current business strategy of the firm has been
demonstrated highlighting the business outlook and performance.
Trends in Australian Steel Manufacturing Industry
Australian steel manufacturing industry can be identified as one of the most dynamic and
versatile sectors contributed towards the infrastructural developments of the nations. Currently,
the annual turnover of the sector in $30 billion and the industry provides more than ninety
thousand jobs in the country. Due to the modernisation of technology, the steel industry in
Australia has been supported by Building Information Modelling (BIM) technology used for
manufacturing and recycling of steel. Currently, the metal mining and steel manufacturing
industry in Australian market has been dominated by a number of firms e.g. BlueScope, Astra
Resources PLC, Orrcon Steel, and BHP Billiton, etc. Due to the presence of the leading

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manufacturers and steel recycling companies, the operating companies have to face significant
amount challenges (BHP Billiton, 2017). In order to elaborate the current trends of the industry,
the micro and macro environment analysis have been presented in the reported study as well.
Internal Analysis of BHP Billiton
Internal analysis of BHP Billiton Limited discusses the management talent, and resource
and capabilities of the organisation that influence the overall performance of the business. In
BHP Billiton Limited, the leadership style can be identified as the leading factors influencing the
management talent (Jackson, 2012). In the underlying section, the two decisive factors have been
analysed as follows.
Management Talent
Management talent and leadership style of BHP Billiton Limited can be identified as the
crucial instrument in the corporate planning. Based on the environmental challenges and growth
targets, broad strategic planning has been taken into account involving the skills and talent of the
management (Mühlfeld, 2004). Precisely, the organisational culture of BHP Billiton Limited
ensured each department of the organisation can be led with adequate determination. By valuing
the upstream resources of the firm, the management can appreciably handle the issues associated
with the internal and external environment (Korneev, 2015). Fundamentally, identifying the
strategic priorities of BHP Billiton Limited, the management has distributed talent and skills
among the human resources to conduct the market operations in a safe and legal procedure
(Kemp, 2009).

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Resource and Capabilities
In case of BHP Billiton Limited, there are a number of types of resources leading towards
productivity of the business. For instance, financial resources, material resources, and human
resources can be evaluated the most comprehensive resources for BHP Billiton Limited
(Donnelly, 2011). Furthermore, non-material resources such as essential data and market-related
information are considered as another type of resource influencing the performance of the
business in the target market of Australia (Jenkins, 2004). In terms of material resources, the
metal extracting and steel manufacturer has got several mineral mines in different countries other
than Australia. On the other hand, the skilled and talented employees working for the company
are considered as the human asset available to the business (Sharma, 2013). Therefore, each of
the resources is contributing towards the growth of the business in the target market.
Significantly, the capability of an organisation has been noted by the efficiency and
production capacity. Due to the availability of each type of resources, the capability of BHP
Billiton Limited is considerably high (Hanson and Stuart, 2011). Moreover, the modern
extracting and production technology have emphasised the production capacity in a positive
manner. Furthermore, the capabilities of the business of BHP Billiton Limited are further
boosted by employees’ commitment, ability, skills, and academic knowledge (Viveros, 2014).
Meanwhile, the core competencies of the firm have activity influenced the capabilities of BHP
Billiton Limited in the target market.
External Environment Analysis
The external environment analysis of BHP Billiton Limited includes the micro and macro
environment analysis using Porter’s Five Forces Model and PESTLE. Effectively, the external

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environmental analysis of the company can be evident to describe the competitive advantage and
business strategy of BHP Billiton Limited.
Micro Environment Analysis
By using Porter’s Five Forces model (follow appendix 1), strategic review of the external
environment of the company has been elaborated as follows:
 Buyers Bargaining Power: Due to strong demand and supply limitations, the bargaining
power of the market buyers is moderate to low. BHP Billiton Limited targets long-term
relationship with the target audience. Therefore, the effect of increasing price is
diminished.
 Suppliers Bargaining Power: The suppliers of BHP Billiton Limited are mining
workers, shipping companies, costs of energy, and costs of materials (Marren, 2017). In
such scenario, the bargaining power of the suppliers is considerably strong as increased
costs from suppliers have affected the capacity of the business of BHP Billiton Limited.
 Threat of New Entrants: The mining and metal extracting company is operating in an
industry where resources are limited. Hence, the threat of new entrants is significantly
low. Also, the large capacity that has been required to run the business restricts any new
participation in the industry.
 Threat of Substitutes: In the global market as well as Australian market, the substitutes
of raw material are limited. Therefore, limited substitutes have eliminated the threat of
substitutes. Also, the diversified product portfolio of BHP Billiton Limited has supported
the business to tackle any challenges created due to new substitutes.
 Intensity of Existing Rivalry: Though the mining and metal extracting companies are in
limited numbers in Australia, the intensity of existing rivalry are relatively high (Marren,

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2017). Companies such as Rio Tinto, BlueScope, and Astra Resources PLC can be
identified as the leading competitors for BHP Billiton Limited in the target market. On
the other hand, due to profit potentials out of the industry, leading businesses are engaged
in the strong rivalry in Australian mining and steel production industry.
Macro Environmental Analysis
In order to analyse the macro-environmental factor that influences the business of BHP
Billiton Limited in the Australian market, PESTEL analysis has been used in the study. PESTEL
analysis helps to identify the political factors, economic factors, socio-cultural factors,
technological factors, environmental factors and legal factors that lead to different opportunities
and threats for the steel production and mining businesses of BHP Billiton in the Australian
market (Marren, 2017). The PESTEL analysis has been presented in details herein below:
 Political Factors: BHP Billiton is an international resources company that is vulnerable
to political risks in most of its markets. However, the favourable political ambiance in
Australia has been a major factor leading to the success of BHP Billiton in the current
market scenario. For instance, the Australian Government has supported the growth of
mining and steel industry by providing easy license to operate, better growth
opportunities through tax reliefs and monetary supports (Korneev, 2015).
 Economical Factors: The increasing inflation rate in Australia has been a major factor
leading to the rise in energy costs, labour costs, exploration expenses, operations costs
and material costs (Korneev, 2015). The changing economic factors in the current market
scenario have emerged to be a major threat for the company.
 Socio-cultural Factors: The mining and still production business often need social
approval in order to operate in some regions that increase the development costs and

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impact the profitability of the firm (Testa and D’Amato, 2017). Hence, the company
needs to make efforts in order to profit social benefits to the local residents by improving
the working conditions and quality of life in order to get approval of the local authorities.
 Technological Factors: The operations of BHP Billiton highly demanded on the
technical innovations to increase the efficiency of the mining, exploration and discovery
of energy and mining resources (Donnelly, 2011). The development of technology in
Australia and across the globe has supported the growth of the company in different parts
of the world.
 Environmental Factors: Being a natural resource extracting and processing company,
BHP Billiton needs to follow several rules and regulations related to environmental safety
that include the 1997 Kyoto Protocol, Asia-Pacific Partnership on Clean Development
and Climate, recycling of waste products, renewable energy policies and clean emission
policies (Testa and D’Amato, 2017). NGOs and environmental groups exert huge
pressure over the firm. However, the company focuses on following the practice of
sustainable development and zero harm to the environment.
 Legal Factors: The changing legal rules and regulations have made it difficult for the
company to operate smoothly with static strategies (Alam and Majumdar, 2011). For
instance, the change in the tax rates and environmental policies must be considered by the
management of BHP Billiton in order to be safe from legal obligations.
Current Business Strategy
BHP Billiton operates under a Dual Listed Company structure that has two parent
companies (BHP Billiton Plc and BHP Billiton Limited) that has a single economic entity
referred as BHP. The company is run by a unified management and board (Korneev, 2015). The

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primary strategy of the organisation is to own and operate large, low-cost, long-life, expandable
projects with upstream assets diversified by commodity, geography and market. BHP Billiton
has a diverse and simple portfolio of tier one assets across the world with low costs options for
the growth and value creation in the future. As BHP Billiton have its operations in several major
resources rich regions of the world, the company now focuses on diversifying its business by
developing new products for its existing market (Hogan and Lodhia, 2011). On the basis of
Ansoff Matrix presented in appendix 2, BHP Billiton focuses on product development strategy in
the existing markets by using its highly innovative and skilful R&D team. On the other hand, the
company focuses on market development strategy in the new markets by using low cost policy.
Competitive Advantage
On the basis of the above analysis and the current business strategies of BHP Billiton, the
competitive advantage for the firm that differentiates it from its rivals are discussed herein
below:
 Diversity in Management: Diversity in management is the primary factor leading to
competitive advantage for BHP Billiton. The company employs people from different
region capable of performing different activities and expertise in various fields
(Ratnatunga and Vincent, 2011). BHP Billiton employs separate technical head for every
individual department. Hence, the diversified management of the company acts as its
competitive advantage.
 Innovative Technology: Innovative technology used by BHP Billiton is highly effective
in discovering new resources and increases productivity by using cost effective measures

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(Balachandran and Taticchi, 2011). Hence, continuous technology innovation is another
factor leading to the competitive advantage of the firm.
 Research and Development: The research and development team of the firm is much
effective in developing new products and invent cost effective methods to extract a
higher amount of minerals (Ratnatunga and Vincent, 2011). Hence, the R&D department
helps the company to seek cost advantage that helps the firm to gain competitive
advantage in the Australian market.
Conclusion
By considering the above analysis, the strong management and innovative business
strategies of BHP Billiton is the key to its success in the current competitive environment.
Irrespective of the changing external market environment, the flexible strategies of the firm has
helped it to survive in every battle of business survival. BHP Billiton Ltd and BHP Billiton PLC
works together as a single entity to serve the mining and metal producing industry through its
innovative strategies and diverse product portfolio. Conclusively, BHP Billiton changes its
strategies in accordance to the changes in the internal and external market environment to seek
sustainable growth of business.

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References
Alam, Q. and Majumdar, N. (2011). Cases in business and management. 4th ed. Prahran, Vic.:
Tilde University Press.
Balachandran, K. and Taticchi, P. (2011). Sustainability, Accounting and Reporting. 3rd ed.
Bradford: Emerald Group Pub.
BHP Billiton. (2017). BHP Billiton | Our Company. [online] Available at:
http://www.bhp.com/our-approach/our-company [Accessed Sep. 2017].
Donnelly, J. (2011). BHP Billiton Forges Ahead With Large, Complex Projects. Journal of
Petroleum Technology, 63(03), pp.38-45.
Hanson, D. and Stuart, H. (2011). Failing the Reputation Management Test: The Case of BHP,
the Big Australian. Corporate Reputation Review, 4(2), pp.128-143.
Hogan, J. and Lodhia, S. (2011). Sustainability reporting and reputation risk management: an
Australian case study. International Journal of Accounting & Information Management, 19(3),
pp.267-287.
Jackson, S. (2012). Five secrets to success in business strategy. Journal of Business Strategy,
33(2).
Jenkins, H. (2004). Corporate social responsibility and the mining industry: conflicts and
constructs. Corporate Social Responsibility and Environmental Management, 11(1), pp.23-34.

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Kemp, D. (2009). Community relations in the global mining industry: exploring the internal
dimensions of externally orientated work. Corporate Social Responsibility and Environmental
Management, 17(1), pp.1-14.
Korneev, S. (2015). BHP Billiton: assets optimization — scale quality or quality scale. Tsvetnye
Metally, pp.15-19.
Marren, P. (2017). High‐functioning business strategy. Journal of Business Strategy, 28(6),
pp.37-39.
Mühlfeld, K. (2004). Strategic Shifts between Business Types. 3rd ed. Wiesbaden: Deutscher
Universitätsverlag.
Ratnatunga, J. and Vincent, M. (2011). The Valuation And Reporting Of Reputation Risk
Management Capability. Journal of Business & Economics Research (JBER), 5(10).
Sharma, B. (2013). R&D strategy and Australian manufacturing industry: an empirical
investigation of emphasis and effectivness. Technovation, 23(12), pp.929-937.
Testa, M. and D’Amato, A. (2017). Corporate environmental responsibility and financial
performance: does bidirectional causality work? Empirical evidence from the manufacturing
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Viveros, H. (2014). Examining Stakeholders' Perceptions of Mining Impacts and Corporate
Social Responsibility. Corporate Social Responsibility and Environmental Management, 23(1),
pp.50-64.

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Wei, Z., Yi, Y. and Guo, H. (2013). Organizational Learning Ambidexterity, Strategic
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pp.832-847.

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Appendices
Appendix 1: Porter’s Five Forces for BHP Billiton Limited
IntensityofExistingRivalry(High)BuyersBargainingPower(Moderate/Low)

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Appendix 2: Ansoff Matrix

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