Role of Business, Cultural, and Natural Environments in Shaping the Behavior of Rio Tinto

This article discusses the role played by business, cultural, and natural environments in shaping the behavior of Rio Tinto, a British-Australian MNC in the metal and mining industry. It explores the impact of internal and external factors on the company's decision-making process and highlights the importance of understanding and respecting cultural heritage and environmental concerns.

CONTEMPORARY BUSINESS
ENVIRONMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................2
Role played by Business, Cultural, Natural Environments in shaping the behaviour of Rio Tinto 2
CONCLUSION ...............................................................................................................................7
REFERENCES................................................................................................................................9

INTRODUCTION
Contemporary refers to belonging to same time period'. It is a business environment with
a vast competitive market that changes continuously at very speed pace. Organizations owners
are required to have better understanding of the developments and requirements of company
Contemporary business environment is increasingly dynamic and competitive. As the fact that
corporate environment is changing at very fast pace there should also be changes in the concepts.
New accounting controls are required to be developed by the organisation for coping with the
changes taking place in firm. (Nikitina and Lapiņa, 2019). Companies are required to develop
reliable and logical business strategies and using adequate management tools for supporting the
planning, controlling and decision-making. Before engaging in any management plans
organisations are required to develop understanding of the factors, which are influencing the
business decisions.
There are various contemporary issues in the business environment. Planning is an
essential factor of management that requires all the aspects to be covered before making any
decisions. Many of the issues which can be faced by Rio-Tinto includes changes in laws, rules
and regulations. They can also face issues like updation of technology. Today organizations
faces increased influence due to legal and political uncertainty. There are issues related with
changes in governance and regulatory requirements. Consumer protection, intellectual property,
health care environment has raised various issues pressuring the industry and at the same time
keeping them under control. Companies are required to consider its implications on their
business ensuring their compliance. Rio Tinto leaders and managers needs to make their
decisions on basis of changes which are taking place in external environment.
Industry has accelerated their growth with the technological advancements. Technology
is helping both companies and society to grow like for example use of automation has made their
work process easy and faster. (Susu and Birsan, 2019). It is giving benefits for trading in the
competitive market. Financing is an economical factor but has great importance in the
contemporary business environment. It is not easy for the companies to raise loan for business.
Management is required to do deep analysis of the projects and activities for which the funds are
to be raised. There are various sources of funds available in the market but it is difficult to gain
the trust and confidence of society.
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Rio Tinto is British- Australian MNC in metal and mining’s field having primary focus
over extraction and also consists refining subsidiaries. Company was established in 1873 with
the headquarters in London, UK. More than half of global assets of company are housing in
Australia, with offices in Brisbane and Perth and headquarters in Melbourne. Company
specialises in the production of bauxite , iron ore, aluminium, alumina, diamonds, uranium and
salts in Australia. Report will emphasise on role played by business, cultural, natural
environment in shaping the behaviour of Rio Tinto. It will also include external and internal
environmental factor affecting business.
MAIN BODY
Role played by Business, Cultural, Natural Environments in shaping the behaviour of Rio Tinto
Rio Tinto is one of the company that is operating in the mining industry and is quite
popular across the world. Business factors play a very important role in sharping behaviour of
Rio Tinto. There are many rivals of Rio Tinto that are operating in this industry. Cost in the
mining operations always remain high which directly determine sales price of the product. Rio
Tinto from its inception focus on cost control and adopt varied cost cutting approaches and
innovative technology in order to reduce its cost (Driffield and Karoglou, 2019). Cost
significantly increased when economy is in recession and at that time due to increase in price of
the products demand get decline. Management of this company understand such a complex
situation and due to this reason, it consistently works on improving its technology base so that
cost can be controlled as much as possible. There are number of components of the business
environment like internal and external. Internal factor further is classified into HR and suppliers
etc. If any company has skilled and efficient human resources then in that case it become able to
compete with rivals and accelerate business growth at rapid pace. Rio Tinto is consistently
expanding its workforce and is also focusing on retaining its employees to maximum possible
extent. This help Rio Tinto in developing highly skilled and efficient workforce in its business.
This is the reason due to which mentioned firm easily implement any innovative idea in its
business at rapid pace (Ruokonen and Temmes, 2019). Thus, it can be said that internal factor is
shaping behaviour of Rio Tinto. Mentioned firm is also consistently improving its suppliers base
at fast rate and maintain close relationship with them due to which it is able to run its operations
smoothly. This is normal business practice that each company follow.
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As part of external environment, it can be observed that economic factor is greatly affecting
business firm. Currently, global economy is growing at low rate and due to this reason, there is
less demand of mined products. Such kind of situation heavily affect the business firm. Due to
decline in demand revenue either decline or grow at low pace (Cultural heritage., 2019. Cultural
heritage., 2019). On other hand, firm have to do new explorations which required sufficient
availability of cash. Due to low profit in the business it become hard to make such expenses
easily. Thus, firm is improving its cash management mechanism so that business growth can be
maintained. In this regard firm is making delay in making payment through payables and recover
receivables as fast as possible. Thus, cash inflow increase in specific time period.
Political factor also greatly affect business as it can be seen that there is political stability in the
UK and due to this reason, there is no problem on this front. All political parties of the UK are
business friendly and give support to the business as much as possible. Easily, Government
department give permit to the firms to open their business in the UK. Hence, it can be said that
political and economic environment to great extent affect response of the Rio Tinto. Cultural and
social factor also have impact on the firm as firm is consistently engaged in mining operations
and there is possibility that it may explore any area to which people are emotionally attached.
Hence, cultural factor also determined the way in which firm will respond to the specific
situation.
Rio Tinto is very serious about people emotions and due to this reason, it takes into
consideration cultural factors. It believed that cultural heritage indicates past and present of any
society and due to this reason, it has due importance for any nation people (Luiz, Ganson and
Wennmann, 2019). Cultural heritage includes everything from cultural monuments to historical
places and artefacts as well as archaeological sites. Rio Tinto management understand that many
of the company operations are near to land that is considered sacred by the local people. In other
words, it can be said that Rio Tinto understand the cultural, spiritual and emotional relationship
that people have with specific place. Management of the mentioned company also understand
that in many areas people have connection with natural resources and they do not like to see that
any company is exploiting that natural resources. Thus, Rio Tinto respect rights and attitude of
the people and excavate any place only when local people do not have any people and in this
way, company make its decisions (Luiz, Ganson and Wennmann, 2019).
Rio Tinto before starting mining of any land to cultural and environmental studies to develop
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broad understanding of the area. Rio Tinto’s employees gather all information from the people
that live and work in that specific area. Rio Tinto employee’s professional’s like archaeologists,
scientists and also partner with Universities, Government and other local organizations so as to
ensure that area proposed to excavate can be considered for business purpose. Opinion is taken
from these specialists and it is ensured that in future time period no issue will be created by the
local people in respect to mining area In the mentioned company, there is a system to find out
and develop broad understanding about cultural heritage values. If any issue is identified then in
that case Rio Tinto identify an option that can be followed to address issue in proper manner
(Murdifin and et.al., 2019). Like training is given to the employees and contractors so that can
understand importance of the site and take steps accordingly on time. Rio Tinto with full
awareness do work and it allow local people to visit site of cultural significance so that their
connection with relevant location can not be disturbed.
Rio Tinto is fully committed towards UN Declaration on the rights of indigenous people.
Rio Tinto try to obtain prior and informed consent of the local people so that no issue can be
raised by anyone after commencement of the project on the relevant location. Thus, overall it can
be said that business firm is taking care of the people belief and attitude and it do not carry any
activity that negatively affect people emotions.
In today time period due importance is given to the natural environment as many items are
prepared by using chemicals by the firms and used by the people which create pollution in
surrounding area (Fraser, 2019). Many of these items are not disposed of in proper manner and
due to this reason pollution is increasing and global warming is the one of the common examples
of this. Due to global warming in the current time period weather conditions are changing at
rapid pace. Like in cold weather less cold is feel by the people and even they do not wear jackets.
Glaciers are melting at fast pace which is the matter of concern for the entire world. In current
time period many nations of the world are taking tough steps to control pollution on their land
and in this regard, responsibilities are assigned to the business firms. Different market has
different norms on environment protection which heavily affect firm profitability (Saenz, 2019).
In many nations it is observed that within states there are different rules and regulations that
firms need to follow as environment protection measure. For example, in USA Texas and Florida
have different rules and regulations in respect to environment protection. Thus, Rio Tinto before
entering into the new market carefully do study of environment protection laws and accordingly
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take steps that are beneficial for the business. Some of the environment factors that Rio Tinto
consider before entering into the new market are weather, climate change, legal rules, waste
management rules and attitude of the people as well as presence of rare species in geographic are
Rio Tinto evaluate all rules and regulations of the nation deeply and then make an estimate about
the technology infrastructure that it will need to build in order to meet that standard. If it
identifies that potential is moderate in the specific geographic area and more technological base
need to be developed, then in that case firm avoid to commence its operations in the specific
nation. On other hand, if firm identify that cost of developing technology base will be low then
in that case it commences its business operations in the specific nation. Moreover, firm also
evaluate present of rare and endangered species in the specific geographic area (Singh, 2019). If
it identifies that endangered species are presented then in that case it does not commence
operations in that specific geographic area. This is because clearance can be obtained from the
Government but NGO’s and people after some time may protest against firm operations and in
that case, firm may be forced to close its operations. Hence, after considering number of factors
Rio Tinto commence its operations in the specific area. This is the reasons due to which till the
date in no country any protest happened against Rio Tinto operations.
PESTEL Analysis
This model will provide details about the opportunities and challenges that Rio Tinto is facing in
the existing dynamic environment due to different market forces.
Political Factors
Political factor includes impact of rules and regulations which are implemented by
government. Company needs to lay special emphasis on these factor while conducting their
business activities. These factors can lay positive as well as negative impact.(Kurtz and Berston,
2019). These risks are to be considered and other factors including bureaucracy and interference
of governance is to be analysed.
Economic Factors
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Economic factors of environment influencing the business are interest rates, inflation
rate, saving, foreign exchange and economic cycle. These factors are used in determining the
demand and investments in economy. Other micro level factors like competition impacts
competitive advantage of company. Rio because of the stable economy of Australia might suffer
due to low demand of metals and increase in substitutes. Company is facing influences in
demand of iron ores due to slow Chinese economy. United Kingdom, coal was replaced by the
cheaper and abundant natural gas and oil and this was the end of an era. Today, coal still
accounts for the production of near to 25% of the world's energy, but is declining fast, and by
2050, coal will contribute to about one‐third only
Social Factors
It is influenced by cultures, beliefs, values and attitudes held by majority of society. This
factor is not only important for operational aspects but also for marketing aspects of Rio Tinto.
Thorough understanding about the segment, society education and lifestyle is to be considered by
the company (Amankwah-Amoah and Wang, 2019). Company faces various criticism because
of mining activities in society. They need to implement strategies related to reducing carbon
emission in order to lay positive impact on society.
Technological Factor
Technological advancements are disrupting the operations of various industries. During
the past few years, mining industry has transformed very fast. Technology can affect the
competitive landscape and pricing structure of company within short period. Company has to
maintain its speed with technological advancements. Rio Tinto is leveraging technology for
supporting the productivity programs. At the same time company is also investing in lithium
batteries for aiding future growth.
Environmental Factor
Companies are required to hold various standards of environment protection for operating
without any disturbance. These environmental standards helps organisation in preventing the
influences of society and boycotts because of lack of consciousness for environment. Violation
of environmental policies by Rio Tinto can affect the business.
Legal Factor
Legal factors include the legal compliance procedures and frameworks for carrying on
business in country. All the polices and government regulations are required to be followed as
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they can cause business risks for the mining industry (Rudawska and Zhanna Belyaeva, 2018).
Lawsuits for corruption and licensing issues can affect profitability of business.
Australia mining industry
(Source: value of australia mining industry, 2017)
SWOT Analysis
SWOT analysis helps in identifying the internal strengths and weaknesses and external
opportunities and threats that can influence the business.
Strengths
 This is s company with high diversity with the economies of scale.
 Company is having strong capital structure and is consistent in providing consistent
returns to shareholders.
 Company operates with strong safety measures that creates trust and confidence. Company is having workforce diversity.
Weaknesses
 Rio Tinto is having poor practices followed in minings.
 Company is having bad human rights record that keeps into criticism.
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 It is not having uniformity in revenue generation.
Opportunities
 Rise of demand for aluminium in future due to search for substitutes of the other metals.
 Company with big data analytics on 'Mine of the Future' will drive the productivity of
company. Spending in infrastructure will be leading to higher demands and expansions for the
metals (Makojević, 2016).
Threats
 Demands for coal and iron ore are declining.
 Perception of incompatibility the mining practices can impact the company and industry.
 Competition is growing continuously which may affect the demand and prices.
CONCLUSION
The above reports give us understanding that Rio Tinto is taking the business
environments contemporary issues adequately. The cultural beliefs of the society are considered
by the company. Company before starting the extraction identifies the beliefs and emotions
attached with the land in which they are living. The company also complies with legal
frameworks and requirements of the region in which mining and other business activities are
conceived by the company. This will help company in preventing the social and other
environment related criticism.
Business environment promotes companies to trade across nation for growing and
expanding their business. Countries trade with one another as no country is having enough
resources or the capacity of satisfying the needs and demands of nation. Countries by developing
as well exploiting the domestic resources produces surplus and trade for resources for their
requirements. goods and services are imported and exported between nations for increasing their
efficiency and having new experiences. Cross countries trade encourage companies to specialise
in their specific fields (Dodd and Frijns, 2018). This helps them to produce the goods at lowest
of opportunity costs. Trade helps in increasing competition at the global level that is essential for
keeping the prices under control. This increases the purchasing power of consumers. Countries
trade with each other for breaking the domestic monopolies by facing competition with other
firms. This helps in technological advancement globally. Today large number of manufacturing
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firms are importing and exporting the advance equipments and machineries for speeding the
production process. Technological inter transfers have helped in the overall growth of the
economies of trading countries. Cross border trade between countries is very essential for bot the
society and businesses. There are number of factors due to which the countries are required to
trade with each other. This helps in the overall growth of the economies by sharing the resources.
There has been a growing impact of the European Union on British business. UK is part
of European Market. This enables the British business to trade with all the other members of EU
without any trade barriers. It eliminates restrictions in employment of any member of EU. Due to
the union businesses are available with increased market size that helps in greater movements of
goods and services (Halasi and et.al., 2019). British business can have employees from other
nations without any restrictions. Business in EU are not required to pay additional costs for
selling their products and services. British businesses face increased competition due to EU
membership and increased cost for complying with EU regulations.
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REFERENCES
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Nations Sustainable Development Goals. The Extractive Industries and Society. 6(3).
pp.788-791.
Halasi and et.al., 2019. The impact of eu support resources on business success of family-owned
businesses. Potravinarstvo Slovak Journal of Food Sciences. 13(1). pp.846-853.
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Luiz, J.M., Ganson, B. and Wennmann, A., 2019. Business environment reforms in fragile and
conflict-affected states: From a transactions towards a systems approach. Journal of
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Environmental Management. 26(2). pp.296-306.
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Online
Cultural heritage., 2019. [Online]. Available through:<
https://www.riotinto.com/en/sustainability/communities/cultural-heritage>.
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