Strategic Corporate Analysis of BHP Billiton: Market Analysis Report

This report presents a strategic corporate analysis of BHP Billiton, a leading global resource company. It begins with an executive summary outlining the company's market analysis, focusing on its capital allocation framework, strengths in the energy market, and potential disruptions like legal restrictions and social agreements. The introduction provides an overview of BHP's operations, objectives, and strategic approaches, including productivity, portfolio simplification, and capital discipline. The discussion section details successful past strategies and criticized operational endeavors, such as the Samarco dam collapse and issues with the Cerrejón coal mines. The report then outlines BHP's restructuring of priorities, including physical safety, portfolio evaluation, and acquiring social licenses. The current strategies adopted by BHP are analyzed using SWOT and PESTEL analyses, identifying strengths, weaknesses, opportunities, and threats, as well as political, economic, social, technological, environmental, and legal factors. The report concludes with a discussion of the company's leadership style and provides references for further reading.

Running head: STRATEGIC CORPORATE ANALYSIS OF BHP BILLITON
Strategic Corporate Analysis of BHP Billiton
Name of the Student
Name of the University
Author note

1STRATEGIC CORPORATE ANALYSIS OF BHP BILLITON
Executive Summary
The following article aims to discuss the market analysis of BHP Billiton. For this purpose, a
thorough enquiry is made into all relevant articles pertaining to corporate strategies, market
analytical tools relevant for evaluating the global operative scenario of the organisation such
as the principle of asset-integrity which is based on the framework of capital allocation.
Evidence from such observations suggested that BHP being the marketer of coal and natural
gas based energy, it has huge upper-hand in the volatile economic environment and
opportunity in the business since energy is always high in demand for all firm operations. The
article concludes with highlighting the outcomes from such analysis of the relevant tools
citing the possible causes of disruption, such as legal restrictions in terms of pollution control
and hazards from mining activities, which if not taken into account this can potentially cause
the company to incur heavy loses. New mining as well as development deals or projects
typically require social agreement that can facilitate to the development expenses. It must
also be duly noted that basic resources in over 10 nations and intends to expose itself to
various forms of political environment as well as political system risks.

2STRATEGIC CORPORATE ANALYSIS OF BHP BILLITON
Table of Contents
Introduction................................................................................................................................3
Discussion..................................................................................................................................3
Successful Strategies of BHP deployed in the past................................................................3
Operational Endeavours of BHP that were criticised............................................................3
Restructuration of its Current Priorities.................................................................................4
Current Strategies adopted by BHP.......................................................................................4
1. SWOT Analysis...........................................................................................................4
Strengths—.........................................................................................................................4
2. PESTEL ANALYSIS..................................................................................................5
Leadership Style within the Organisation..............................................................................7
Conclusion..................................................................................................................................7
References..................................................................................................................................8

3STRATEGIC CORPORATE ANALYSIS OF BHP BILLITON
Introduction
Headquartered in Melbourne, Australia, BHP is one of the leading Global resource
companies, run by a unified framework of Board and Management, involved in the extraction
and processing of oil and gas along with minerals. It primarily operates in Australia and
Americas under the structure of a Dual Listed Company: BHP Billiton Limited and BHP
Billiton Plc, with an employee strength of about 60,000 (BHP, 2018). It supplies its products
and services through sales leads of Singapore and Houston, USA. The organisation’s primary
objective is to utilize its capital discipline to obtain maximum beneficial returns from its
assets and establish long term relationships with its shareholders by way of creating values
and enforcing future growth options. BHP aims to achieve this purpose through exploration,
procurement, enhancement and market propagation of natural resources by means of
geographic expansion, diversification of tier one assets, cost-effective economic strategies,
emphasizing on safety and by implementing updated technology. These means have led BHP
to position itself as one of the top producers of iron ore, metallurgical coal, copper, oil and
gas across the world.
Discussion
Successful Strategies of BHP deployed in the past
BHP Billiton had prioritized 3 strategic approaches with a view to ensure maximum output
with optimized level of inputs. These included:
Productivity: The primary focus of the strategy subscribing to productivity is ensuring the
safe maintenance of quality assets that guarantee stronger cash flow. Through productivity
gains, the company was able to generate a free flow of cash over US$10 billion (BHP, 2018).
Simplification of Portfolio: In order to gain an upper-hand in the volatile economic
environment, BHP strives to utilise the opportunities associated with the diverse range of
portfolios to increase the per share value. The company had reached the heights of financial
strength and flexibility that led to its prosperity at all points in the economic cycle. A
significant example includes the demerger of South32 (the Guardian., 2018).
Capital Discipline: This particular strategy works on the principle of asset-integrity which is
based on the framework of capital allocation. The framework also caters to the maintenance
of balance-sheet strength. By paying minimum dividend under the pay-out policy, the
company reinvests the surplus cash flow or resell it to the shareholders through additional
dividends. By doing so, BHP had been able to achieve an overall reduction of 70 per cent in
its capital expenses (Financial Review, 2018).
Operational Endeavours of BHP that were criticised
On 5th November, 2015, a fine waste dam at the iron ore mine of Samarco, Barazil had
devastatingly collapsed. This construction was a partially owned BHP venture. It had polluted
a large portion of Doce River Basin and its adjoining sea and killed around 20 people
(Financial Review, 2018).

4STRATEGIC CORPORATE ANALYSIS OF BHP BILLITON
The second catastrophe in which BHP got involved was linked to the coal mines of Cerrejón
in Columbia. As per the information brought into the limelight by an associate of the
Organisation of Indigenous Women, the coal mines of Cerrejón had led to unacceptable
impacts and deliberate violation of the fundamental rights of La Guajira Community (Ford,
Steen and Verreynne, 2014). To condemn these impacts, the human rights activists and the
land defenders participate in the BHP held Annual General Meetings, every year. Although
the company had assured them of proper examination of the situation in order to change it for
better, their promises did not get reflected in the official agreements with La Guajira
Community.
Restructuration of its Current Priorities
With a view to overcome the effects of casualties and disasters, BHP had substantially
restructured its priorities:
 Physical Safety of the Workers
 Evaluation of the Existing Portfolios to Estimate the Values and Returns
 Capital Allocation Policies
 Reformation within the Organisational Culture
 Focussing on the Employee Capabilities
 Acquiring Social License for Operation in Volatile Environment (Jupp et al., 2016).
Current Strategies adopted by BHP
1. SWOT Analysis
Strengths—
Growth and Development: BHP follows a cost-effective expandable strategy. It aims to
recruit from different communities so that it can readily meet their changing needs and
accordingly plan better strategies for future (Datta et al., 2014).
Powerful Market Position: BHP is an established organisation and involved in the
marketing of coal energy along with oil and gas. This is one of its biggest strengths as it is the
leading player in the global market (Mayes, McDonald and Pini, 2014).
Diversification: Unlike other refineries, BHP has been able to expand its base in various
commodities such as Uranium, Copper, Manganese, Copper, Aluminium, Iron Ore, Silver
and Nickel along with Petroleum, Potash and natural oil and gas (the Guardian., 2018).
Weakness—
Economy: BHP’s profitability is largely dependent on the market demand of coal and its
price in the global market. Depending on its surge and dip respectively, BHP’s booming
market with large cash flow or heavy losses will operate (Bice 2014).
Trading of Community: The commodity that BHP trades in is a volatile one which makes
financial decisions a tough call under circumstances when market does not do well (Datta et
al., 2014).

5STRATEGIC CORPORATE ANALYSIS OF BHP BILLITON
Opportunities—
Locational Advantage: Due to abundance of natural resource, BHP has a huge opportunity
in exploring such areas for the purpose of mining, throughout the year. This fact has also lend
the company an advantage with respect to cost leadership strategy (Sykes, 2015).
Energy Efficiency: The main product of BHP consist of Energy. Going by recent statistics,
the demand for energy has been rising steadily as it is an integral part of all functional
operations for all industries (Richardson, 2016).
Availability and Cost Efficiency of Coal: BHP has established itself as the largest producer
of coal, worldwide. This stability has delivered it a huge opportunity to increase capital in
this industry (Mayes, McDonald and Pini, 2014).
Economic Trends: The number of developing nations across the world has been growing
steadily and so has the demand for coal energy since it is the cheapest form of energy. This
fact gives BHP a huge opportunity (Ft.com., 2018).
Maximum Benefits from Potential Assets: Through discovery of new resources and
effective means to extract it, BHP has been able to obtain around 2300 billion tons of coal
(Fish and Wood, 2017).
Threats—
Alternative Sources of Energy: Researches are being conducted to explore the alternative
sources of energy in order to preserve and safeguard the exhaustible resources such as coal
and natural gas. This is one of the major potential threats (Londonminingnetwork.org., 2018).
Health Hazards from Mining: A large number of BHP employees suffer from the health
hazards posed by mining. There are also risks of chemical hazard and hazards from air or
water bourn pollution (Ft.com., 2018).
Government Regulations: A new regulation with respect to the EPA can substantially
disrupt BHP’s profit making strategies as such restriction or rules imposed would lead the
company to spend additional amounts on safety and clean-up measures (Grant et al., 2014).
2. PESTEL ANALYSIS
The components of the determinants in the PESTEL Analysis tend to influence on the
strategic drivers for BHP Billiton Australia.
Political factors
 BHP Billiton is identified as a global resources organization which is vulnerable
towards political risk factors in all markets. BHP Billiton PLC has been executing
its operations in Basic resources in over 10 nations and intends to expose itself to
various forms of political environment as well as political system risks (BHP
2018).

6STRATEGIC CORPORATE ANALYSIS OF BHP BILLITON
 The organization must comprehensively analyse the political constancy and value
of basic resources in Australia’s economy and further focus on its legal framework
in terms of contract enforcement (Bice 2014).
Economic factors
 BHP Billiton to evaluate the economic conditions must use Australia’s economic
factors associated to its growth rate, customer spending mechanisms in order to
anticipate the growth trajectory of the country as well as the company (Jupp et al.
2016).
 The organization is greatly dependent on the current strength in international
commodities prices which are correlated with the condition of global economy
(Bice 2014). BHP is further exposed to the shifting currency valuations along with
the overall economic risk factors in the Australian industrial economies.
Social factors
 It has been observed that mutual beliefs and attitudes of the Australian populace
serve a vital role in the way marketers at BHP Billiton will comprehend the
stakeholders of a specific market and is highly susceptible in all business
operations (Epstein 2018).
 These vital factors necessitate the organization to support the local communities
through financial aids and further offer resources for infrastructure facilities such
as educational institutions, roadways and housings.
 New mining as well as development deals or projects typically require ‘social
agreement’ that can facilitate to the development expenses and influence
profitability level (Jupp et al. 2016).
Technology Factors
 BHP Billiton relies greatly on technical determinants related to proficient mining,
exploration as well as discovery of mining and resource assets (Bice 2014).
 The organization to a great extent depends on the usage of technology for its
process of exploration (BHP 2018). The financial investment in technical areas is
identified as a critical expenditure for the organization.
 Furthermore, wide ranging technical determinants impact the two vital essential
strategic drivers for BHP Billiton project pipeline along with its supreme assets
(Jupp et al. 2016).
Environment Factors
 BHP Billiton being a natural resources company is highly prone towards
parameters, guidelines and public policies in regards to environment sustainability
(Epstein 2018).

7STRATEGIC CORPORATE ANALYSIS OF BHP BILLITON
 Environmental associations along with Non-Government Organizations tend to
exert persistent pressure on the organization. Consequentially BHP Billiton
endeavours to adapt the practices of ‘zero harm’ as well as sustainable growth and
progress. The company further has been committed in condensing greenhouse gas
emissions in the execution of its operations by over 10% in 2013 (Bice 2014).
Legal factors
 Legal factors of Australia is identified as critical risk factors for BHP Billiton,
resulting the company to encounter certain legal liabilities in the decisions for
causing environmental disruption in Arizona which has further affected the
company’s financial performance and growth (Bice 2014).
 Reports claim that BHP has lost a vital Federal Court Judgement in Australia
related to rail transportation infrastructure convenience for two Western Australia
iron ore mines (Jupp et al. 2016). The Pilbara region in Australia has been
identified as one of the major regions for the company and thus provides export
profits of around $ 7 billion dollars and employment for over 10,000 Australians
(Bice 2014).
Leadership Style within the Organisation
BHP attempts to maintain a well-versed leadership ethos within its framework by
emphasizing and improving the core relationship and communication between the leaders and
the subordinates. It focuses on achieving the most refined skill in leadership by addressing
the management needs and making the team operations effectual. BHP has already curved a
niche as the leading coal producer, competing with three major industries namely, Alcoa Inc,
Vale S/A and Rio Tinto Hill (Hill and Seabrook, 2013). In its effort to keep a fair
competition, BHP has been able to exercise about 40% control in the market (Jupp et al.,
2016).
Conclusion
To conclude the above report it can be said that BHP has been able to establish itself
as a market leader in coal, natural gas and oil production across the world. With the help of
effective strategies in corporate governance and market operations, the organisation has been
able to gain competitive advantage over other industries in similar domain. Being in the
extraction and marketing of coal which is the cheapest source of energy, BHP strives to make
its business as cost effective as possible by optimizing its resources to maximise the
production. Apart from few restrictive measures addressed by the pollution control board,
BHP has mostly opportunities to help it carry forward its operation with the intended vigour.
BHP also takes care of the hazardous effects of mining that its employees have to face.
Another advantage in the form of public policies has facilitated its agenda to spread its
market across the globe at reasonable price. By maintain effective measures against the
popularity of the alternative renewable sources of energy, it can be said that BHP has a good
prospect in creating a sustainable market in the years to come.

8STRATEGIC CORPORATE ANALYSIS OF BHP BILLITON

9STRATEGIC CORPORATE ANALYSIS OF BHP BILLITON
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