Strategic Analysis of Western Australia Iron Ore Pty Ltd Report

This report provides a comprehensive analysis of Western Australia Iron Ore Pty Ltd, a subsidiary of BHP Billiton. It examines the company's strategic management, including product and geographic diversification, VRIO analysis, and strategic planning focused on cost efficiencies and technological innovation. The report also delves into the company's international business activities, ethical considerations, and responses to climate change. It addresses issues faced in developed and emerging economies, such as corruption in the resource industry and competition law compliance. Furthermore, the analysis covers multinational strategies and the integrated responsive framework employed by the company. The report highlights the company's future projects, including expansion plans and associated environmental concerns, as well as the challenges related to sustainable production and market dynamics. It provides insights into the company's efforts to navigate these complexities and maintain a competitive edge in the global iron ore market.

ANALYSIS OF WESTERN
AUSTRALIA IRON ORE Pty Ltd

TABLE OF FIGURES
Figure 1 Increase in level of performance due to product diversification.......................................4
Figure 2 Graph representing increase in level of performance with level of geographic
diversification..................................................................................................................................5
Figure 3: VRIO Analysis.................................................................................................................7
Figure 4: Assessment of scope of an entity.....................................................................................8
Figure 5: Positioning for emerging market companies..................................................................10
Figure 6: Integrated Responsive Framework of Multi-national strategies....................................12
Figure 7: Multinational Strategies and Structure...........................................................................13
Figure 8: Philosophical approaches to ethics.................................................................................14
Figure 9: Ethics in international business......................................................................................15

BHP Billiton Iron Ore Pty Limited
BHP Billiton is a leading global company dealing in natural resources. The corporate
objective is to generate long-term value for shareholders through the identification, development
and alteration of natural resources. The company also aims to provide innovative solutions for
customer and market. The company’s unique position in the resources industry is due to their
proven strategy. One of the important subsidiaries BHP group is Western Australia Iron Ore. The
subsidiary extracts and processes minerals, oil and gas which are sold worldwide. The global
headquarters are in Melbourne, Australia. The company operates with two parent companies
under a Dual Listed Company structure (BHP Billiton Limited and BHP Billiton Plc). The
corporation runs by a unified Board and management.
Global Strategic Management
Product and geographic diversification
Figure 1 Increase in level of performance due to product diversification

The company’s strategy is focused at operating long-life at low-cost and achieving
expandable and upstream assets diversified by geographical boundaries, market and commodity.
The organization has simple and diverse tier one portfolio of assets worldwide, with low-cost
alternatives for future growth and creation of value. This allows them to apply their culture and
value, by emphasizing on safety and productivity, deployment of technology and exerting capital
discipline for the purpose of extracting the highest returns from assets.
Figure 2 Graph representing increase in level of performance with level of geographic
diversification
The concept of product diversification can be applied to the company as Western
Australian Iron ore can be specified as enhanced level of geographic diversification. It can be
assessed that due to effective and profitable financial performance of the company; its holding
company BHP Billiton has attained advantages as well as higher profits. In present case
extensive level of performance has been attained by Western Australian Iron Ore. The same can
be accessed through the increase trend in profit of company.
The Operating Model of the company allows them to leverage their expertise across their
business which has multifunctional teams connecting for sharing the best practice across the
organization, which makes the operations safer and easier problem solving. The Group is among

the top producers of the world engaged in major commodities, including metallurgical coal, iron
ore and copper. They also have considerable interests in oil, gas and energy coal.
Strategic Plan
The company’s strategic plan is consistent with their overall strategy of the parent
companies. The plan is to increase the value of BHP Group. The six key areas of this plan is
focused on-
 Focusing on further gains through cost efficiencies,
 Exploring latent capacity through attractive returns and limiting risk
 Investing in major projects timed for creating value and generating returns
 Exploring positive results by reducing risk for future
 Innovating technologies that improves safety, reduces cost and unlocks resource of
various kinds.
 On shoring value and flexibility in US.
The company is fully committed to work with integrity and as per the Code of Business
Conduct formulated by the Parent Company. Safety and working with integrity by doing what is
right (Syam and Bhatnagar, 2015). This is the starting point of everything the company does.

VRIO Strategic Analysis
Figure 3: VRIO Analysis
(Source: Knott, 2015)
This analysis reveals the firm’s strategic position in the industry it operates. The basic
strategic process of Western Ore Pty Ltd begins with a vision statement and continues through
objectives, interior & exterior analysis, strategic choices available with the company at business
and corporate level, and their strategic implementation. The VRIO analysis is a part of the
internal analysis of the company. The main highlights of the analysis are-
 The Question of Value: The Company is able to exploit an opportunity and combat
external threat with the available resource, thereby adding value.
 The Question of Rarity: The control over the resource capability is in the hands of senior
executives.
 The Question of Imitability: For other companies in the same industry is it difficult to
replicate significant cost advantages to the Company.
 The Question of Organization: The Company is well- organized to capture value.
The share price of the company as on 29th October 2017 stood at $26.59.

Major competition is faced by Rio Tinto Group.
Figure 4: Dividend Rates of the company in Various Countries
(Source: Western Australia Iron Ore. 2017.)
International business activities of Western Australia Iron Ore
The company has an independent scientific technical and advising panel for managing
International Union for Conservation of nature. Béal and Pinson asserted that the specified
provide guidance in accordance with principles of independence, transparency, accountability
and engagement so that appropriate decision can be taken regarding international activities. The
theoretical variants which are forecasted before initiating any international operation or activity
comprise implementation of stewardship program, monitoring of development and early warning
technologies, emergency response program other development. (Campbell, 2016) International
response of climate change has also been evolved in order to resolve issue relating to breach of
other international law or conventions.

Figure 5: Assessment of scope of an entity
(Source: Crane and Matten, 2016)
Western Australian Iron ore has enhanced its activities through extreme level of
diversification. The company has attained the position that it can take advantage of marginal
bureaucratic cost as well as marginal economic benefits. The reason behind the same is existence
of increased level of diversification in product as well as geographical area (Trevino and Nelson,
2016.). As the company is making efforts for diversifying in both the factor; it has been alleged
to attain the maximum benefits of same.
Future Projects
Environment Protection Authority has provided permission for three fold expansion f
Andrew Forrest’s Solomon iron ore mine and the same will be seen in production for next thirty
five years. However, western Australian authorities have represented their concern relating to
new field of water bores for production which could be affect Hamersley Gorge in Karijini
national park. It has been assessed in the worst condition, on extraction of 12 gigaliters of water
for thirty years it could drop twelve percent of water flowing to gorge. The two mines which are
involved in Solomon iron ore project are Fire tail and Kings. An another expansion approval of
clearing addition 12146 hectare of native vegetation even after clearing 6313 hectares of existing

mine is required for successfully completing the project (Calla, 2017). A fact which cannot be
denied is that the clearing of six hectares of Brockman iron cracking clay will provide harm to
ecological community as well as habitat which is used by vulnerable Pilbara olive python and
endangered northern quoll. Forest cue Mining Group has begun to seek permission so that the
production and Solomon projects remain sustainable. The reason behind the same is that the
increase in production of ore will crash the existing price of core in market. It has been assessed
by the analyst that even though the Australia has low sovereign risk rate in comparison to other
competitors of iron ore; the additional cost due to unilaterally changing state agreement will be
less beneficial for the company (Ellram and Cooper, 2014).
Issues Faced In Developed and Emerging Economies
Corruption in Resource Industry
Western Australia Iron Ore is determined to play an important role in the international fight
against fraud in the resources industry. Frynas and Mellahi, (2015), stated that developing a
strong framework that is focused on continuous improvement regarding a world-class
compliance program of anti-corruption is the main action of the company in this regard . The
Code of Conduct of the Business and its anti-corruption standard clearly forbids evils like
bribery and corruption in all their business dealings. The Group strictly restricts facilitation
payments payable to government officials for obtaining routine services done to which BHP is
legally entitled. The commitments are very clearly listed for employees and contractors and are
imparted to them through training and support to ascertain that these are understood in clear
sense. Similarly, the senior management of the company is required to incorporate anti-
corruption compliance into key performance indicators of the business and also in the
determination of employee remuneration.

Figure 6: Positioning for emerging market companies
(Source: Goetsch and Davis, 2014)
Western Australian Iron ore can be asserted as contender as well as extender. The reason
behind the same is that company is making efficient efforts for its future projects in order to
upgrade the capabilities so that it can match up itself with multinational companies at global
level. On the other hand it is also expanding its activities and operations into home market
through application of competencies developed in home market.
Competition Law Compliance
The subsidiaries of BHP Billiton are committed to maximum observance with laws related to
competition and their enforcement of against third parties acting in a manner which is anti-
competitive towards the Company. The company forbids all forms of competitive conduct which
are in contrast with competition laws prevailing in the country. These include-
 Rigging of bids and fixing of price- cartel formation.
 Setting other competitive terms, like margins or rebates;
 Acts that limits production or agree for reducing production capacity;
 Assigning geographic territories, markets, suppliers customers, and

 To boycot any customer or supplier without rational reasons
The company has also established some procedures and standards for ensuring
Compliance and Legal Functions by conducting a preliminary legal appraisal of competition law-
sensitive activities. Hill, Jones and Schilling (2014), asserted that for example, prior legal review
is required before entering into many types of agreements with competitors, and before joining
any trade association or industry body involving competitors. Renewals of existing agreements
or memberships are also subject to review.
Competition law training and awareness
Each business and function identifies employees whose roles involve potential
competition law risks, for example those having regular interaction with competitors. These
employees receive regular training, developed and largely delivered by the Compliance
Function. Similar to the training of anti-corruption methods, the company also provides training
regarding competition law to their executives and employees either online or offline, which is
focused on the needs of a business. Steps are taken regularly to increase awareness of issues
related to competition law. These include episodic communications from senior management
stressing the need for compliance with competition law and the significance of operating with
integrity in all the dealings with third parties together with the competitors (Hult and Ketchen,
2017).
Confidential reporting and investigations
The employees of the company are encouraged and supported for reporting alleged
competition issues, through the Legal Compliance Functions. People are also encouraged report
anti-competitive behaviour of any third party. The Compliance team investigates all potential
competition issues.
Multinational Strategies
The main issue with which each multinational company has to deal with is pressure relating to
reduction in cost and local responsiveness (Nussbaum, 2013). The four strategies which are

usually choice of MNEs are home replication, localization, global standardization and
transnational.
Figure 7: Integrated Responsive Framework of Multi-national strategies
(Source: Pearce and Robinson, 2013)
Western Australia Iron Ore applies home replication strategy as it transfer the products to
foreign market as the competitors does not have that valuable skill relating to products. The
company applies global standard strategy for the product iron ore as the main focus of the
company is on product standardization of iron ore. In present case the pressure relating to cost
reduction is also high. As it is anticipated that the increase in production will lead to decrease in
price of iron ore in market, thus efforts have been made by the company to sustain the production
level of iron ore in future projects.
As the company apples home replication strategy and global standard strategy, it has to
face the relating advantages as well as disadvantages of same. The advantage of ease in
application of strategy is attained by the company as the whole structure of the entity is centrally
organized. On the other hand disadvantage as lack of local responsiveness exists as the main
focus of the company is to enhance its operations and activities in other countries.