Strategic Analysis of BHP Billiton

BHP Billiton is a leading resources company that operates globally across eight countries in Australia, South Africa, the USA, and South America. It has increased its global image by operating in diverse markets, making it the largest company in terms of market capitalization, which enhances investor trust. The company also engages in various Corporate Social Responsibility (CSR) activities, further strengthening its image. However, BHP Billiton faces challenges such as restrictions imposed by land rules and regulations that can affect efficiency, as well as communication system weaknesses that hinder collaboration. Additionally, the company is exposed to opportunities for growth through mergers and acquisitions, expanding current operations, and cooperating with local competitors. On the other hand, it also faces threats from rival companies like Anglo American plc, ExxonMobil Corporation, and Nippon Corporation, as well as increasing costs of raw materials, which can impact production costs.

Business Strategy
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Table of Contents
Introduction................................................................................................................................3
Competitive advantage of BHP Billiton....................................................................................4
Trends in Australian steel manufacturing Industry....................................................................4
Current business strategy of BHP Billiton in Australia.............................................................5
Plan of the company to grow value........................................................................................6
Capital management...............................................................................................................6
Internal analysis of BHP Billiton...............................................................................................6
Swot analysis of BHP Billiton is:...........................................................................................6
External analysis of Bill Billiton................................................................................................7
Political factors:......................................................................................................................7
Economic factors....................................................................................................................8
Social factors..........................................................................................................................8
Technological factors.............................................................................................................8
Environmental factors............................................................................................................9
Legal factors...........................................................................................................................9
Conclusion................................................................................................................................10
References................................................................................................................................11
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Introduction
Business strategy sets out for achieving desired objective. It is defined as a long term
business planning. A business approach generally covers a period of around 3-5 years and at
times even longer. BHP Billiton is one of the greatest leading resources Company. This
company extract and process minerals, oil and gas, and more than 60,000 workers and
contractors works in Australia and America. This company product is sold worldwide, sailing
and marketing led through Houston, Singapore and United States. BHP Billiton headquarters
are in Melbourne, Australia. This firm operate a dual listed firm structure with two parent
firms, first is BHP Billiton Limited and second is BHP Billiton Plc. The approach of this
corporation is to own and operate large, long life, low cost, upstream assets diversified by
commodity, market and geography.
This report will demonstrate the current business strategy of BHP Billiton, internal &
external analysis of BHP Billiton and its competitive advantage.
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Competitive advantage of BHP Billiton
As China’s growing retreats from exponential to desirable, with service prices following suit,
geology and geography is not sufficient to assurance the on-going growing of Australia. If
Australia want to give fresh jobs with great pay scale and some prospects will be beneficial
for the youngsters, then they should address the state’s output challenges. There are some
reasons, due to which the productivity in Australia has deteriorated in some industry as they
are unable to participate efficiently in the world-wide market. A punier Australian dollar
gives short-term release which is not sufficient (Alam and Majumdar, 2011). The
fundamentals needs to be examined which support productivity, development of talents and
the skill of the people of the company – which is the most essential resource of all; the roads,
rails and harbour organisation to make the company an effective interchange nation and
incentivising and upgrading the skill and innovative ideas to give extra production today and
give a provision to the job for tomorrow. The pains are very crucial to increase the output,
which will help in organising the capital required to implement new resources and to apply
some new technology (Grant et al., 2013). The flow of capital to investment opportunities
will be smooth in Australia, if they can be able to make the stability between risks and arrival
right. To attract new principal, the most important factor is to make sure that they have a
modest taxation command globally – which means they want to have a good tax rate and a
proper scheme which is created from the values of simplicity, constancy, transparency,
sustainability and fairness (Barbash and Roye, n.d.). A debate which has been informed
before, as how to improve the tax system, based on the principles and also needed to have an
appreciation of today’s worldwide reality. This discussion should identify the main role of tax
locations which it plays, to expand the growth and productivity – and BHP Billiton also want
to take part in the discussion. The economy of BHP Billiton make the influence to Australia
of around A$27 billion last year by the expenses given to suppliers, earnings and the benefits
of the employee, taxes and monarchs, dividends. BHP Billiton is the country’s largest tax
payer.
Trends in Australian steel manufacturing Industry
The steel manufacturing industry in Australia has gone through some major failures from the
last five years. Industry revenue is likely to fall in an annual rate4 of 8.5% from last five
years in 2016-17 to $9.1 billion. This makes an expected decline of 7.9% in the present year.
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The falling down of demands from the markets going downwards has driven industry failures
(Hubbard and Moore, 2012). To be precise, the activity of falling from downstream of mining
and manufacturing industries has decreased the demands for the products of the industry. To
add in it, low cost of steel and the competition of the import markets has put lots of pressure
on the operators of the industry by the help of low cost and decreased demands, with many
individuals reducing the production from a long period. The steel industry is relatively
capital-intensive (Edwards, 2014). For each and every dollar spent on cost of capital,
approximately $3.77 has been spent on wages. The capital strength of differs with the size of
the operators of the industry, as more benefits of the firm from the economic scale and more
demanding regarding capital, whereas some smaller operators are labour oriented with the
high cost of wages in relation to depreciation. In spite of this, high expenses of capital on
equipment and machines which is needed to operate in the industry. Capital tool like electric
arc furnaces, blast furnaces, charging buckets and machines used for casting are very costly
and can be modified to a great extent (Grant et al., 2013). To run the operation, labours with
high skill is required to control the machines and the tools of the industry, which makes the
expenditure high in the cost of wages.
Figure 1: Australian exchange rates in terms of trade
Source: (Anderson, 2017)
From the above graph, it can clearly be identified that there has been a fall in in the exchange
rate in in Australia’s terms of trade. The decline has continued into 2016, as the terms of
trade has dipping to 80.5 in the June quarter of 2016, which is the lowest level in the decade.
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Figure 2: Business Investment by Industry, June 2006 to June 2016
Source: (Anderson, 2017)
The following data is the real trend data of the business investment in Australia. It can be
clearly identified from the above graph that there has been continuation in the falling of the
business investment mainly in mining. Business Investment in mining was $54.2 in 205-26,
whereas it was $74.8 billion in 2014-15. This clearly indicates a drop of 29.9 per
cent(Anderson, 2017). The future business investment and its impact on the domestic
economy is still a concern for Australia.
As per the Trading Economics global macro models and analysts expectation the
production of steel in Australia is expected to be 450.59 thousand tonnes within the end of
this quarter. Looking towards the future, it has been estimated that the production of steel in
Australia will stand at 453.63 with 12 months times. It has been analysed that the production
of steel in Australia is estimated to trend about 453.69 thousand tonnes in the year 2020 as
per the econometric models.
Current business strategy of BHP Billiton in Australia
The policy of this business is to own and run large, long life, low cost, upstream properties
spread by commodity, market and geography. This firm have an easy and diverse portfolio of
tier one assets about the world, with low cost options for future development and creating
new values (Grant et al., 2013). This applies values and culture, emphasise security and
productivity, deploy technology and exert capital discipline for extracting the most value and
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the maximum returns from the assets. Its effective model allows leveraging expertise across
its business, with multifunctional terms expertise across the group for sharing best practice,
make harmless and focus on solving problems together. Its producers are over the world top
producer of major commodities involving iron ore, metallurgical coal and cooper. This
company also have substantial interests in production on oil, energy coal and gas.
Plan of the company to grow value
Consistent with company strategy, it has a plan to develop the value of BHP. This plan is
focused on six important parts:
 Cost efficiencies- focused on more gains
 Latent capacity- smart returns, normal risk
 Major projects- timed for value and revenues
 Exploration- progressive result reduce risk future wells
 Technology- develop security, minimum cost and unlocks resource
 Onshore- value and flexibility
Capital management
The aim of company capital allocation framework is to maximise the potential value of every
dollar earn for company shareholder.
Internal analysis of BHP Billiton
Swot analysis of BHP Billiton is:
Strength: BHP Billiton is one of the largest resources companies. This firm supplies many
capitals including copper, uranium, lead and silver etc. it also crops Iron ore, metallurgical
coal and manganese in Australia, South Africa and Brazil. This corporation provides thermal
coal which is very useful and it is used in the electric power generation and general industry
anxieties. This company has shown strong financial returns to its stakeholders (Grant et al.,
2013). The profitability ratios show a strong hold on the market. BHP Billiton operates
crossways eight countries in Australia, South Africa, the USA and South America. So it has
increased the global image of the nation. In case of market capitalization, it is the largest
company. This increases the trust of its investors towards the firm. This firm is involved in
many CSR activities which has increased the image of the company. These are the strengths
of the company.
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Weakness: The firm is facing many restrictions by the rule of the land. These rules and
regulations include increasing traffic organisation standards and to suspend all the work
which is non- essential outside sunshine hours. These have compact the efficiency of many
events (Anon, 2017). Communication system of the company is one of the main faintness of
the company. One of the ways for growing is to collaborate.
Opportunities: So there are many opportunities for Bill Billiton to raise in size by unions
and attainments. This company may obtain related small firms. This company increase a
competitive control in terms of social and also in non-human capitals. The monetary
condition of the company and general reliability may be broken for expanding the current
operations. It may co-operate with the local competitors there for growing. This will increase
the image of the firm in many nations. In this modest world, it is essential to continuously
discover in order to endure (Bhp.com, 2017). So proper marketing through effective channels
is very necessary for growing in this company.
Threats: The BHP Billiton is fronting rivalry from many administrations like Anglo
American plc, ExxonMobil Corporation, and Nippon Corporation etc. This may be the major
threat in the upcoming centuries. The cost of the raw supplies which is used by the firm is
growing at a very fast rate. This will increase the production cost which results to increase the
general success.
External analysis of Bill Billiton
The PESTEL analysis of Bill Billiton is strategic tool for analysing the macro environment.
PESTEL analysis stands for radical, Economic, Social, Technological, Ecological and lawful
factors which impact the instruction environment of Bill Billiton.
Political factors:
Political factors play an important role to determine the factors which may impact the long
term profitability of BHP Billiton in a country or in market (Bhp.com, 2017). This company
is operating in industrial metals and minerals in many countries. BHP Billiton analyse some
factors before exploiting in a market.
 Governmental solidity and importance of metals and minerals in economy of the
country
 Legal framework
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 Level of corruption
 Business regulations
 Employees benefits
 Tax rates and incentives
 Anti-trust laws related to industrial metals and minerals.
Economic factors
The factors of macro environment like inflation rates, saving rates, interest rate, and foreign
exchange rates regulate the demand and asset in an economy (Anon, 2016). Macro
atmosphere factors like struggle norms which effect the competitive advantage of the
company. Some economic factors which BHP Billiton should analyse are:
 Type of economic system means what type of monetary system there is and how stable
it is.
 Exchange rates and stability
 Efficiency of financial markets
 Education level of the economy
 Labour cost and production cost
 Commercial cycle stage
 Financial growth rate
 Joblessness rate
 Interest rate
 Inflation rate
Social factors
The culture of the society also impacts the nation of a group in an environment. Arrogances
of the population play an important role in how the dealers of BHP Billiton will understand
the consumers of the market (Anon, 2016). Social factors which BHP Billiton should analyse
are:
 Skill levels of the population
 Class structure and hierarchy
 Education level in this company
 Culture which includes gender, roles and social conventions etc.
 Attitudes which include health, environment and consciousness etc.
 Leisure interests
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Technological factors
Technology is growing very fast across the world. Over the last five years the company has
been growing very fast (Anon, 2016). Skill analysis includes understanding of many effects-
 Fresh technological growths by BHP Billiton opponents
 Effect of skill on product contribution
 Effect on cost assembly
 Rate of technical diffusion
Environmental factors
As different marks consist different environmental standards that can impact the
profitability of a company (Anon, 2010). Some of the ecological factors which a company
should reflect are:
 Climate
 Climate change
 Rules which regulate environmental effluence
 Recycling
 Air and water effluence guidelines in metals and mineral industry
 Leftover management
 Support for renewable energy
Legal factors
Some of the legal factors which BHP Billiton leadership should analyse
 Anti-trust law in the company
 Discrimination law
 Employment law
 Costumer protection
 Health and safety law
 Data protection
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Conclusion
It has been found from the discussion that BHP Billiton is one of the greatest leading
resources Company. This company extract and process minerals, oil and gas, and more than
60,000 workers and contractors works in Australia and America. The flow of capital to
investment opportunities will be smooth in Australia, if they can be able to make the balance
between risks and return right. As per the Trading Economics global macro models and
analysts expectation the production of steel in Australia is expected to be 450.59 thousand
tonnes within the end of this quarter. This firm have an easy and diverse portfolio of tier one
assets about the world, with low cost options for future development and creating new values.
This company provides thermal coal which is very useful and it is used in the electric power
group and general manufacturing anxieties.
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References
Alam, Q. and Majumdar, N. (2011). Cases in business and management. Prahran, Vic.: Tilde
University Press.
Anderson, K., 2017. Sectoral Trends and Shocks in Australia's Economic Growth. Australian
Economic History Review, 57(1), pp.2-21.
Anon, (2010). Our strategy delivers Sustainability Report. [online] Available at:
http://static.globalreporting.org/report-pdfs/2010/d15f1e51b615717103b0c49f0818acad.pdf
[Accessed 18 Sep. 2017].
Anon(2017). Value through perfromance. [online] Available at:
http://www.bhp.com/~/media/bhp/documents/investors/annual-reports/
bhpbillitonannualreport2014.pdf [Accessed 18 Sep. 2017].
Anon, (2016). Integrity Resilience Growth Annual Report. [online] Available at:
http://www.bhp.com/-/media/bhp/documents/investors/annual-reports/2016/
bhpbillitonannualreport2016_interactive.pdf [Accessed 18 Sep. 2017].
Barbash, B. and Roye, P. (n.d.). Investment Management Institute, 2017.
Bhp.com. (2017). Cite a Website - Cite This For Me. [online] Available at:
http://www.bhp.com/-/media/bhp/documents/investors/annual-reports/2015/
bhpbillitonstrategicreport2015.pdf?la=en [Accessed 18 Sep. 2017].
Edwards, A. (2014). Mineral resource and ore reserve estimation. Carlton, Vic.: Australasian
Institute of Mining and Metallurgy.
Grant, R., Butler, B., Orr, S. and Murray, P. (2013). CONTEMPORARY STRATEGIC
MANAGEMENT AN AUSTRALASIAN PERSPECTIVE 2E. Melbourne: Wiley.
Hubbard, T. and Moore, M. (2012). BHP Billiton. Evanston, IL: Kellogg School of
Management.
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