BHP Billiton's Market Position Analysis

The assignment begins with an analysis of BHP Billiton's internal and external environment, highlighting the company's market position, competitors, and macro factors affecting its business operations. It also includes a review of business software applications, specifically MIS (Managerial Information System) and ERP (Enterprise Resource Planning), and their potential benefits for operational efficiency and productivity.

STRATEGIC ANALYSIS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
PART 1............................................................................................................................................1
1. Company's background...........................................................................................................1
2. Industry...................................................................................................................................1
3. General environmental analysis..............................................................................................2
4. Industry analysis......................................................................................................................3
5. Competitive Environment.......................................................................................................4
6. Opportunities and threats .......................................................................................................4
TASK 2 ...........................................................................................................................................5
1. Firm's tangible and intangible resources ................................................................................5
2. Identification of capabilities of BHP Billiton.........................................................................6
3. Core competency analysis ......................................................................................................6
4. Proposing an Information system solution ............................................................................7
5. Evaluation of proposal ...........................................................................................................8
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Strategic analysis can be defined as the systematic process of conducting detailed
research on a particular organisation and its dynamic business environment in which it operates.
This analysis helps the company in formulating business strategies (Csuros and Csuros, 2016).
The present report will discuss the internal and external analysis of BHP Billiton, a multinational
mining, metals and petroleum company headquartered in Melbourne. External Analysis will
include threats and opportunities of firm, its competitive analysis, industry analysis. Internal
analysis will include firm's tangible and intangible resources, core competency analysis.
Information solution system for the company will be proposed in the report.
PART 1
EXTERNAL ANALYSIS
1. Company's background
Broken Hill Proprietary company merged with Billiton, is a public limited company
listed on Australian Securities Exchange, FTSE 100 component, London Stock Exchange. It was
founded in 2001 and its headquarter is in Melbourne, Victoria. The company deals in exploration
of petroleum, metals and mining. It is headed by Ken MacKenzie, the chairman and Andrew
MacKenzie, the CEO of the company. The organisation offers iron ore, petroleum, coal, natural
gas, nickel, copper and uranium as its main products in the market. It offers its products
throughout the world. Company have a solid human resources of more than 62000. Income of
the dual listed company in the year 2018 amounted to 4.823 billion US dollars.
2. Industry
BHP Billiton belongs to Oil and Gas industry. The industry deals with exploration,
extraction and production of metal & minerals, natural gas, mining, petroleum products etc.
Australia have a well diversified oil and natural resources that has helped country in making this
industry as large as it can be possible. Firms in this industry are mostly connected throughout the
world. The industry is known for overcoming the challenges of extracting and exploring natural
resource from very remote areas by collaboration with world's biggest firms of this sector and
through innovation in drilling machines and process of production, effective engineering and
designs in operations etc. With investment of billions in this industry, the country is believed to
leave behind world's biggest oil and gas industry of Qatar in coming few years (Australian Oil &
Gas industry, 2019)
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3. General environmental analysis
Environment analysis is the screening of elements of the environment that affects the
functioning of BHP Billiton. It includes various components such as economic, social, political,
legal etc. An analysis is given below:
Economic factors: Country's economic conditions significantly affects this particular
industry. Since BHP Billiton operates worldwide, it affected by exchange rates prevailing in the
country. For instance, high fluctuations in the interest and exchange rates adversely affects the
profitability of the company and the industry in whole. Country is experiencing steady economic
growth in the year 2018 and is likely to witness increasing trend in 2019. This will make the
economic conditions favourable for the oil and gas industry of the country.
Political Factors: Australia have stable political conditions and liberalised international
trade policies and low level of corruption which positively affects the business of BHP Billiton.
However, country's strict and unnecessary industry regulations creates a problem in company's
operations.
Technological factors: Excellent infrastructure related to transportation and
communication is a favourable condition for BHP Billiton to operate in. Oil & Gas industry of
country is prone to heavy exploration and extraction machinery. Innovation in engineering and
equipments have made firms in this industry more efficient which is a good sign for the
company.
Social/ Demographic factors: Factors such as education, ethnicity, beliefs and religions
of people affects the businesses of all industry. Country has a satisfied education rate. Highly
qualified engineers are required in this industry. BHP Billiton would be able to add more to its
workforce, a pool of talented personnel (Schaltegger and Wagner, 2017).
Legal factors: These constitutes legal frameworks and regulations in which firms of oil
and gas industry operates. Trade laws, employment laws, safety and health regulations of the
country affects the decision making of corporate houses. Employment laws relating to foreigners
are rigid that poses a challenge to hire more qualified employees. BHP Billiton would face this
problem in hiring employees from overseas.
Ecological factors: Low pollution level and availability of abundant and diversified
natural resources is the attraction factor that induces firms to indulge in oil and gas extraction
and exploration in the country.
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4. Industry analysis
Porter's five model can be used for conducting an industry analysis. It has five elements
in which force of each element is determined.
Illustration 1: Porter's Five Forces
(Source: Porter’s Five Forces Analysis, 2015)
 Bargaining power of customers: There are large number of buyers purchasing oil and
gas products for BHP Billiton. Buyers prefers the best quality at the most reasonable
price. Large number of customers denotes high bargaining power of them. However,
switching cost customers is higher which brings down the bargaining force.
 Bargaining power of Suppliers: Suppliers in this industry is less which brings them in
the dominant position of increasing the prices of inputs. BHP Billiton needs to increase
its supplier base for coping with this high bargaining power of suppliers.
 Threats of New Entrants: A firm in Oil & Gas industry requires huge investment,
patented technological know-how and needs approval from different authorities entering
this sector. This makes the force weak for BHP Billiton. Company can utilise this
opportunity and maintain its leading position in market.
 Threats of Substitutes: There are firms offerings similar products at the most
competitive prices which poses a threat for company. Customers can easily switch to
other firms providing same products. BHP Billiton can make its products highly
differentiated and cost effective to reduce this force.
 Rivalry: BHP Billiton faces intense competition from Anglo American, Exxon Mobil,
Nippon Steel. However, company has a loyal customer base that provide a competitive
edge to it over rival firms.
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5. Competitive Environment
A Strategic group is cluster of companies within an industry that are grouped together on
the basis of same strategies, similar business models etc. applied by these organizations. An
analysis is done for finding out the competitiveness amongst the firms using same models or
strategies. BHP Billiton belongs to both oil and gas sector, so its direct competitors in the mining
& olil sector is taken into consideration. Anglo American, Nippon Steel, Exxon Mobil. Each of
the mentioned companies gives tough competition to BHP Billiton in terms of price, quality,
market position, core competencies, customer base etc (Grant, 2016).
Anglo American is world's leading manufacturer of diamonds and platinum. It enjoys
solid brand equity and reputation in the global market. It has its operations widely scattered in all
over the globe. It also has a pool of talented workforce of more than 100000 employees. Exxon
Mobile has a strong Research & Development department providing it innovative techniques and
engineering in manufacturing its products. It has around 37 oil refineries in about 20 countries.
Strong profitability over the years.
Rival firms applies the strategies of product innovation, immensely unique marketing
tactics. These organisations focus on finding out the most cost effective supply chain so that cost
of production could be decreased. They are also emphasising on market development strategy
and are continuously growing their business in the international boundaries.
The intense competition from these direct competitors has posed some serious threats to
BHP Billiton. Loss of market share and loyal customer base is one of the major threat company
is facing. Rival firms providing high quality products at cheap rates is making it hard for the
company to maintain its leading position in the market. Competing firms employs very different
and effective marketing an promotion strategies that is taking diluting the interest of target
market's interest towards BHP Billiton's products and services (Fleisher and Bensoussan, 2015).
6. Opportunities and threats
BHP Billiton is one of the largest and leading organisation in Oil & Gas industry in
Australia. However, there are some threats which needs to be consider for better handling the
unwanted circumstances that might arise in the future.
Opportunities:
 Company can tap the opportunities of expanding its business operations in the emerging
markets of the world.
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 BHP Billiton can go for the mergers and acquisitions for increasing its size, taking
benefits of economies of scale. These mergers & acquisitions will help the company in
diversifying in its product range, reducing risk and will assist in entering into new
markets.
 More effective and innovative marketing strategies could be develop by BHP Billiton for
attracting the attention of its target market. Unique marketing strategies and tactics act as
a competitive advantage for the organisation that helps them to stay ahead of their
competitors. Tapping the most cost effective input suppliers available in the market. For instance, cost
cutting of the transportation expenses that will help BHP Billiton to lower their
production cost, ultimately providing products at the most reasonable price to its
customers.
Threats:
 Cut throat competition from local producers and international manufactures like Anglo
American, Exxon Mobil etc. Surviving this level of competition may take a toll on BHP
Billiton's position in the market.
 Political instability of various foreign countries in which it operates can severely affect
the business of firm.
 Rising trend of inputs such as increased labour rates, increased cost of raw materials etc.
all over the world is a matter of threat for the organisation.
TASK 2
1. Firm's tangible and intangible resources
BHP Billiton has a very sound financial background over the last few years. It has some
unmatchable resources that makes it a leading organisation in the industry.
Tangible resources are those resources which can be touched or felt. Company possess
an excellent top management team that has made this firm to reach at new heights. The
organisation tangible resources such as human resources', property, land. It has a solid human
capital of more than 60000 in 25 countries. Its technological resources involves innovative
machinery, equipments and the capability of utilising the natural resources available at the
remote areas helps company in establishing itself different from its rivals.
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Intangible resources which cannot be felt or touched such as goodwill, brand recognition,
trademarks, patents etc. Company have a tremendous brand image and goodwill at the global
level and is currently one of the top producer of oil, metal and natural gas producer.
2. Identification of capabilities of BHP Billiton
Capabilities of BHP Billiton states its ability of operating in a way that helps in achieving
its strategic objectives. Capabilities of the company can be identified by analysing its strengths
that makes its different from its competitors (Wheelen and et.al., 2017).
Strengths:
 Vast production of oil and gas products, helping it to achieve economies of scale.
 It offers wide range of products such as iron ore, petroleum, mining, metal extraction
such as copper, silver, nickel mineral extraction like uranium, natural gas.
 Marketing strategies are very innovative and unique from its rivals which makes BHP
Billiton a leading firm in the oil and gas industry occupying strong market position.
 Technical expertise in its operations makes its products and services relatively cheaper
than its competitors. This helps the company in building a competitive advantages in
terms of cost effectiveness over its rivals.
 It has more than 62000 employees. Talented and skilled workforce enhances the
efficiency of the company.
3. Core competency analysis
Core competency can be described as set of skills and abilities that no other can do better.
Core competencies of BHP Billiton highly differentiates it in the market. Analysis of core
competencies by the application of VRIO model which consist of 4 test that helps in identifying
the effectiveness of capabilities of the company (Min and et.al., 2016).
 Value: This element ask whether the capabilities add to the value of company.
 Rarity: This questions the uniqueness of the core competencies of the BHP Billiton.
 Inimitably: Whether capabilities or resources are easy to imitate by its competitors.
Difficulty in imitating company's capabilities reflects the effectiveness of its competitive
advantage.
 Organisation: Whether the organisational structure supports the optimum utilisation of
capability or resources.
Capabilities Value Rare Inimitable Organized
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Talented and
skilled workforce
Yes Yes Yes Yes
Technological
expertise
Yes yes No yes
Marketing
Strategies
Yes No Yes Yes
Diversification Yes Yes No Yes
Economies of
scale
Yes Yes No Yes
From the above table, it can be analysed that BHP Billiton have skilled human capital
which adds to the value of the company, it is rarely available, not all the competitors can have
pool of this large workforce and the organisation structure optimally utilise the capabilities of
human capital. Likewise, company have extreme competitive and innovative technology which
is enhances the value , it is rare as acquiring involve huge expenses in the terms if licenses,
patents etc. However, it can be imitate by competitors but its organised so efficiently that it has
become company's core competency. Economies of scale provides company huge cost benefit
which makes this capability rare and build value in the form cost effective company. Marketing
tactics of BHP Billiton are unique in nature and has increased its sales and profitability over the
years. Diversification in business has reduced company's risk of failure and has provided it
alternative sources of income.
4. Proposing an Information system solution
BHP Billiton must have an integrated information system which is capable of meeting its
requirements. The system must include:
 Management Information System (MIS) : It is an automated system which keeps the
database of all the routine operating activities of the company. It provides efficiency in
the operations and the information can be easily accessed as and when needed by the
managers for taking rational decisions.
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 Customer Relationship Management (CRM) software : This software keeps the track
of customers data. Keeping data in an organised form helps the company in concluding
critical marketing and customer support policies.
 Decision Support System: A customised DSS is an application programs for integrating
the information from different sources for problem solving and decision taking. This is
usually used by top and middle level management.
 Enterprise resource planning (ERP) : This software helps in proper flow of
information across the organisation. It also helps in managing relationships with external
stakeholders.
5. Evaluation of proposal
BHP Billiton will have various benefits from using these customised softwares in its
operations. A proper integration of different softwares in the company will enhance the
operational efficiency. MIS is purely a manager oriented software programs that aims to help
them in carrying out different management functions such as planning, organising, monitoring
and controlling. ERP software effectively manages relationships with outside stakeholders and it
ensures seamless flow of data and information through the company. Overall benefits of
application of this application information system will enhance the productivity of the company,
ultimately resulting into higher profitability. However, this proper integration of different
softwares and lack of coordination amongst people using this system poses challenges in
applying it (Prajogo, 2016).
Recommendation: Proper coordination and integration is required for optimally utilising
the advantages of the proposed information system. More skilled employees are required for
exploiting the various uses of business softwares. Computer programs included in the system can
be more customized according to the needs and requirement of the company.
CONCLUSION
From the above project report, it has been summarised that analysing internal and
external environment is critical for BHP Billiton for knowing its market position, its competitor's
position, macro factors affecting its business operations. The report concluded that macro
environment is mostly favourable for oil and gas industry but company have to take care of the
strict environmental concerns of the government for avoiding the burden of penalties. The
company faces hell lot of a competition from its direct rival firms such as Anglo American that is
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delivering quality oil and gas products to customers at the most competitive prices. In the last
segment of assignment, it showed that proper integration of computer softwares in the routine
operations will enhance the productivity of the company.
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REFERENCES
Books and Journals
Csuros, M. and Csuros, C., 2016. Environmental sampling and analysis for metals. CRC Press.
Fleisher, C. S. and Bensoussan, B. E., 2015. Business and competitive analysis: effective
application of new and classic methods. FT Press.
Grant, R. M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
Min, B. S and et.al., 2016. VRIO Model Based Enterprise Capability Assessment Framework for
Plant Project. Korean Journal of Construction Engineering and Management. 17(3).
pp.61-70.
Prajogo, D. I., 2016. The strategic fit between innovation strategies and business environment in
delivering business performance. International Journal of Production Economics. 171.
pp.241-249.
Schaltegger, S. and Wagner, M., 2017. Managing the business case for sustainability: The
integration of social, environmental and economic performance. Routledge.
Wheelen, T. L and et.al., 2017. Strategic management and business policy. pearson.
Online
Australian Oil & Gas industry. 2019. [Online]. Available through
<https://www.austrade.gov.au/local-sites/singapore/contact-us/australian-oil-gas-industry>
Porter’s Five Forces Analysis. 2015. [Online]. Available through
<https://pestleanalysis.com/porters-five-forces-analysis/>
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