BSRE301: Analyzing BHP Billiton's Business Strategy and Performance

This report provides a strategic evaluation of BHP Billiton, examining its business strategy, internal and external factors, and competitive advantages. It includes SWOT and PESTLE analyses to assess the company's strengths, weaknesses, opportunities, and threats, as well as political, economic, social, technological, environmental, and legal factors. The report also discusses the trends in the Australian steel manufacturing industry and BHP Billiton's current business strategy, which focuses on long-term shareholder value through the development and marketing of natural resources. The study highlights the company's financial performance and market position, recommending strategic modifications to address market changes and improve operational aspects. The report concludes with a detailed analysis of BHP Billiton's operational activities and its position in the global market.

BSRE301 Business strategy

EXECUTIVE SUMMARY
Business strategy is a documented plan that assists business in achieving their goals
and objectives for long term growth and sustainability. The present study is based on
environment evaluation of BHP Billiton to assess their strategic efficiency by considering
internal and external factors. The study shows that major aim of BHP Billiton is to maintain a
longer term shareholder value by detecting, attaining developing and advertising mining and
natural resources. Further, the company is performing well financially and having
strengthened market position. For further development company is required to make
modification in strategies by considering market changes and making an improvement on
weak areas of operational aspects.

TABLE OF CONTENTS
Introduction................................................................................................................................3
Strategic evaluation of BHP Billiton..........................................................................................3
Background and operational activities of BHP Billiton.........................................................3
Internal and external analysis.................................................................................................3
Competitive advantage of BHP Billiton................................................................................3
Trends in Australian Steel manufacturing industry...............................................................3
Current business strategy of BHP Billiton.............................................................................3
Conclusion..................................................................................................................................3
References..................................................................................................................................4
Appendices.................................................................................................................................5

INTRODUCTION
The present study is focused on environment evaluation of BHP Billiton by
considering their external and internal business factors to determine their strategic efficiency.
The study will include a description of trends in Australian steel manufacturing industry and
their current strategy to assess their competitive advantages. For better presentation and
understanding of subject matter tools such as SWOT and PESTLE analysis will be applied.
STRATEGIC EVALUATION OF BHP BILLITON
Background and operational activities of BHP Billiton
BHP Billiton Limited is an international company engaged in the development of
natural resources. The company manufactures a range of commodities such as iron ore,
uranium, copper and metallurgical coal. Division of company is inclusive of Coal, Petroleum,
Iron Ore and Copper. The division of Petroleum segment is totally involved in the
examination, growth and productivity of both gas and oil (Boons, Quist and Wagner, 2013).
The division of Copper is completely involved in gold, copper, lead, zinc, silver,
molybdenum and uranium mining. The division of Iron Ore segment is involved in Iron ore
mining. Lastly, the division of Coal is involved in metallurgical coal as well as thermal
energy coal mining. The business management contains Australia’s and America’s Minerals,
advertising and Petroleum. The industry is engaged in extracting and practising oil, minerals
and gas from its operations of productivity established in America and Australia (Young et al.
2014). Product distribution is managed by the industry by its large-scale chains of logistics
containing goods and transportation of pipelines. The company’s business contains
Australia’s and America’s Minerals, advertising and Petroleum.
Internal and external analysis
SWOT analysis
Strength
 BHP is one of the successful and
reputed companies of natural
resources with a varied range of
assets. The company has a great
image and position in the
marketplace (Peng, 2016).
Weakness
 Lack of experienced staff further
having damage on operations, so
there is a need for training, area
development and recruitment
 Poor company communication is
another weakness of BHP as there is

 BHP has served class financial
returns in preceding five years. The
industry through an aggressive
program of share buyback in order
to return their capital amount to
investors.
 BHP is a strong international
operator aiming at sustainable
growth and development along with
a tough record of the track with no
significant downside negative brand
awareness because of the issues with
the stakeholders.
lack of active replies (Grant and et
al. 2014). This can be cured by using
new media or better communication
among groups.
Opportunities
 Implementation of creative
marketing strategies as an active
promoter of the entity by making use
of new media techniques and
outreach of customers, at the same
time marketing of natural resources
from the wide ranging assets of the
company (Lodhia and Martin 2014).
In order to widen the brand so as to
increase the self-awareness of
customer of operations and strengths
of the company.
Threats
 Suppliers increasing costs, inflation
in the environment, issues regarding
labour staffing are considered as the
major threats faced by BHP at
present stage of growth and
development (Hubbard and et al.
2017).
 International Operations usually
endangered by environmental
factors, and the industry must
mainly aim at sustainable
development and good
communication among stakeholders,
in order to prevent delays in
operations or customer relationship
damage due to environmental
interests (Steyn and Niemann,
2014).

Pestle analysis
Political factors
BHP Billiton Limited is an international company of resources which is liable
regarding political factors risks in all the markets. Political factors create a great influence on
key factors of a company such as operating license, pipeline projects, development choice
and high-quality assets (Dobele and et al. 2014). BHP has dedicated its capital to projects of
examination and growth in countries having political instability risks such as changing
regulations of Democratic Republic of Congo, Mongolia, Western Africa, and Kazakhstan.
Economic factors
BHP is vulnerable to inflation’ economic factors; energy costs, examination expenses,
costs of labour, operational costs, costing of materials. These increments may adversely
affect the development plans, expansion projects and profitability of the company (Hudson
and Sadler, 2017). The industry is dependent on the existing strength in international
commodities pricing which is related to the global economic health.
Socio cultural factors
BHP is liable to sociocultural factors regarding all its operations and relationship with
stakeholders. These factors compel the industry to support financially support local societies
and offer them resources for the development of infrastructure which includes housing,
schools, and roads (Lazzarini, 2015). New Projects of mining and growth mostly requires
approvals by society as without this it can impact productivity and profitability.
Technology factors
BHP is totally dependent on technological factors effective mining, discovery and
survey of natural resources. The company is relying greatly on technological use for
discovery. The technology investment is considered as a crucial expenditure for the company.
This mentioned technical factor impacts two major key aspects of BHP Billiton which is
project pipeline and world class assets.
Environment factors

Being a company of natural resources, BHP Billiton is responsible for rules and
policies of the public about the environment interest inclusive of Kyoto Protocol in 1997,
Clean Development and Climate of the Asia-Pacific Partnership, clean production, renewable
yet recycled energy resources, trading system of the European Union Emissions (Sheth and
Sinha, 2015). The company tend to drive practices of sustainable development and zero harm
to the environment. BHP Billiton is accountable for the existing conditions of environment,
past mining and tool operations. The responsibility of environment is directly linked to the
key drivers of the operating license.
Legal factors
Legal factors are considered to be the significant factors of risks for the company
‘BHP Billiton’. The company has suffered from authorized liabilities regarding the cause of
damage to the environment from the Southwest Copper operations at Arizona, which
consequently affected the financial performance of the company. BHP failed in a significant
Federal Court Decision in Australia concerning access for two Western Australia iron ore
mines regarding rail infrastructure.
Competitive advantage of BHP Billiton
BHP Billiton is said to be the number one mining company around the world,
enjoying a great competitive edge through its well-diversified portfolio of mining operations
worldwide. All thanks to its large scale and size, solid balance sheet and available resources,
BHP Billiton is totally capable of ensuring the stability and instability of commodity markets.
Another major factor to be considered is the diversification of commodities and
characteristics of the company as it assists in reducing risks and provides stability in cash
flow (BHP, 2015). The long useful life of the company, reduce costs, flexible assets and also
the company’s hand in the growth of Asian markets (BHP, 2017). These elements come
together in order to offer sustainable competitive benefit to BHP over many of their industry
peers, which assists the company in continuing value creation for shareholders in the long
run.
Trends in Australian Steel manufacturing industry
These products are utilized in diverse activities across the globe, especially in the
sectors of production and construction. Aiming to the GFC, steel and aluminium demand and
needs have reached peak level. Consumption of Steel growth has been unstable while
consumption of aluminium growth increased since 2014. International consumption of steel

and aluminium is nearly related to the activities of the economy (Hudson and Sadler, 2017).
The International economy is becoming ever more competitive while the markets of steel
markets have become unstable. Global steel consumption and construction turned down
during 2015.
Consumption of the commodities declined from 1.7% to 1.6 billion of tones whereas
the productivity fell by 1.9%, primarily because of China, US and Japan’s low output. The
2016 outlook is serious, with the potential to increase the consumption by 0.9%
internationally, production to stay at existing levels (Dobele and et al. 2014). The prediction
done for Australia is relatively sobering, likely to decrease the production of steel by 6.2%
because of international competition. Australia is highly rated as the freest economy across
the globe: A judgment the IBC welcomes. While dramatically lowers the barrier to entry for
markets that means the global compels has a major influence on competitiveness domestic
steel industries.
Instability in oil price has noticeably increased the output of steel (especially in
China) and has reduced the price of the hot rolled coil in 2010 from $US300 to $US00 in
2015. Respectively, these factors considerably gnarled profit margins
Price dumping: This is engaged product exporting at a price under its cost production, or a
price in the manufactured location, for the purpose of rapid reduction of prices in competitive
markets and rapid increment in market shares. Evidence from foreign steel companies
inclusive of South Korea and China competitors are involved in prohibited price dumping.
The latest information on anti-dumping legislation done by Federal Government is a solution
for this issue.
Market distorting policies: policies of Market distorting introduced by the government in the
completive countries also creates a negative effect on the private steel industry. China is said
to be the largest supplier of steel commodities worldwide and is a net exporter of steel from
2005, its operational and production capability has peaked recently (Lazzarini, 2015).
Policies have promoted the China producers in order to raise the market share. These are
inclusive of viable treatment of tax, liberal subsidies also proper development and research to
maintain high-quality skills and techniques of manufacturing onto land
High input costs:

The high dollar cost of Australia has increased the input and production costs, containing the
key driver commodities like coal and iron ore.
Recommendations: Supporting the government of States and Territories to make use of
agreements of Industry Participation. Improvements in the local content acquisition by better
involvement, analysing and promoting the technologies, tools, skills, employment and the
results of public infrastructural projects. There is a requirement of suppliers of government to
match the steel quality levels and standards. Encouraging economic diversification through
better formulation of entrepreneurship, improving small scale business research and devoting
more to infrastructure
Current business strategy of BHP Billiton
BHP major aim is to maintain a longer term shareholder value by detecting, attaining
developing and advertising mining and natural resources. So as to attain the business model
of BHPB business model, this model aim on having and operating large, long term, flexible,
and lower costs assets which can be expanded by products, characteristics and market (BHP,
2015).
BHPB is well divided into four pillars of operational business which are Iron Ore
Coal, Petroleum and Copper – encouraged by extensive and centralised business (Functions
of Group) as well as divisions of advertising (Marketing). Every business has its personal
managerial team, and the chief executive officer is the head managing the Group
Management Committee, the major management committee is the BHPB’s.
The business model of BHPB’s and its concerns on decision making allows to make
long-term, viable decisions concerning such assets either by discovery or a new acquisition,
at the same time it maximizes value from operating its existing assets.
An instance of BHPB’s pledge to just make the operation of Tier 1 assets was given
emphasises on 25 May 2015, when it adopted the amalgamation of its small and non-core
assets in a new public enterprise named South. During the merge of both entities BHP and
Billiton, 2001, assets in the portfolio of the company increased immensely diverse rates
concerning the international conditions of the market and consequent investigation (BHP,
2017). Consequently, BHPB contained assets at both ends of the scale spectrum. As the
smaller and noncore assets were unable to encourage their corporate share and operating

costs, and thus a conclusion was made that would be valued in a fair manner by the market
under a separate entity.
CONCLUSION
In accordance with the present study, the conclusion can be drawn that BHPB is performing
well financially and having strengthened market position. The study shows that company has
significant competitive advantages in the market but they are required to work on their
internal working practices such as the development of human resources and communication
methods for further improvement. The company is also recommended to update business
strategies as per industry trends.