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
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.
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-
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 p
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-
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.
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.
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 upoperations 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-
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.
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.
Framework for the Formulation and Implementation of Strategies by Western Australia Iron Ore
Sustainability approach
Sustainability is at the core of everything the company does. Health and safety are put first. The company is also environmentally responsible. Human rights and host communities are priorities of business.
Governance of sustainability
The board of the company believes high governance standards are critical to implement the strategy formulated the group and for creating long-term value and upholding their social license to operate. Our Board oversees the sustainability approach by the formulating of the Board Sustainability Committee which assists with governance and scrutinizing the Group’s systems of risk management along with the Risk and Audit Committee (BHP Annual Report, 2017). The company ensures that the senior Executives get the best advice while making key managerial decisions that could possibly impact sustainability. The key tenet of stakeholder engagement program is the BHP Forum on Corporate Responsibility.
Implementation of sustainability approach
For implementing the sustainability approach, the company’s daily activities and decisions are sustained by the obligatory minimum performance requirements stated in the Requirements standards in the MOA and AOA (Western Australia Iron Ore, 2017). These standards serve as the basis for developing and applying management systems at the operations.
Western Australia Iron Ore has applied philosophical ethical approaches while conducting its daily operation and activities of the entity. As the company believes that every employee should be provided equal right to present his caliber and thus equal chance and opportunity is made available to every employee in the organization. The entity applies valid principles of justice in which every decision is taken in a way that they could freely and impartially consider the situation and under the veil of ignorance everyone ignores characteristics such are race, gender, intelligence etc.
Managing risk
The company identifies and manages material risks across the business functions and processes and activities through their Risk Management standard. This standard is followed Company-wide allowing them to apply a consistent risk-based approach for sustainability. All material risks of the business are recognized by considering its potential impact on the health and safety, society, environment, reputation of the company, legal and financial aspects. By incorporating risk management into work processes and in the essential business systems, the entity ensures that decision-making is based on legitimate data.
Marketing and supply function
Marketing and supply are inter-reliant functions of all the subsidiaries of BHP. This function serves as the connection between global operations of the Group, customers and local and global suppliers. The same is aligned to Minerals Australia, Minerals America and Petroleum. This is how the entity mines iron ore in Australia and sells it to customers located in China for the purpose of making steel. The same method is used to connect a fabricator residing in Japan and supplying them copper cathode from the business located in Chile and pumping oil in the Mexico Gulf to fuel the transport of US. The Marketing business of the company adds worth to the overall operations of the company by estimating the needs of the customers and connecting with them via right product.
The company also works maximizing the total asset value of upstream resources, optimizing distribution costs and making sure that the Company’s view of commodity markets is insightful. The Marketing function of the business is focused on optimising realised prices. The global procurement division of the company is its Supply function, which acquires the goods and reduces operating cost by improving working capital (Operations of Western Australia Iron Ore, 2017.). The Supply function manages the risk associated with the supply chain by developing sustainable relationships with both global and local suppliers.
References
Books and Journal
Béal, V. and Pinson, G., 2015. From the governance of sustainability to the management of climate change: Reshaping urban policies and central–local relations in France. Journal of Environmental Policy & Planning, 17(3), Pp.402-419.
Campbell, T.D., 2016. The legal theory of ethical positivism. Routledge.
Crane, A. and Matten, D., 2016. Business ethics: Managing corporate citizenship and sustainability in the age of globalization. Oxford University Press
Ellram, L.M. and Cooper, M.C., 2014. Supply chain management: It’s all about the journey, not the destination. Journal of Supply Chain Management, 50(1), Pp.8-20.
Frynas, J.G. and Mellahi, K., 2015. Global strategic management. Oxford University Press, USA.
Goetsch, D.L. and Davis, S.B., 2014. Quality management for organizational excellence. Upper Saddle River, NJ: pearson.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated approach. Cengage Learning.
Hult, G.T.M. and Ketchen, D.J., 2017. Disruptive marketing strategy. AMS Review, Pp.1-6.
Knott, P.J. 2015. Does VRIO help managers evaluate a firm’s resources?. Management Decision. 53(8), Pp.1806-1822.
Nussbaum, M.C., 2013. The therapy of desire: Theory and practice in Hellenistic ethics. Princeton University Press.
Pearce, J.A. and Robinson, R.B., 2013. Strategic management: Planning for domestic & global competition. McGraw-Hill/Irwin.
Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education.
Schatzki, T., 2014. Practices, governance and sustainability. Social Practices, Intervention and Sustainability: Beyond Behaviour Change, Strengers Y, Maller C (eds). Routledge: Abingdon, UK, pp.15-30.
Shrivastava, P. and Addas, A., 2014. The impact of corporate governance on sustainability performance. Journal of Sustainable Finance & Investment, 4(1), pp.21-37.
Steyn, B. and Niemann, L., 2014. Strategic role of public relations in enterprise strategy, governance and sustainability—A normative framework. Public Relations Review, 40(2), pp.171-183.
Syam, S.S. and Bhatnagar, A., 2015. A decision support model for determining the level of product variety with marketing and supply chain considerations. Journal of Retailing and Consumer Services, 25, Pp.12-21.
Trevino, L.K. and Nelson, K.A., 2016. Managing business ethics: Straight talk about how to do it right. John Wiley & Sons.
Online
Operations of Western Australia Iron Ore. 2017. (Online). Available through < https://www.bhp.com/media-and-insights/image-gallery/locations-and-operations/western-australia-iron-ore>. [Accessed on 29th October 2017]
Western Australia Iron Ore. 2017. (Online). Available through < https://www.bhp.com/media-and-insights/image-gallery/locations-and-operations/western-australia-iron-ore>. [Accessed on 29th October 2017]
BHP Annual Report. 2017. (PDF). Available through < https://www.bhp.com/-/media/documents/investors/annual-reports/2017/bhpannualreport2017.pdf>. [Accessed on 29th October 2017]
Calla. W. Path cleared for major Western Australia iron ore mine expansion.2016. (Online). Available through < https://www.theguardian.com/business/2016/nov/23/path-cleared-for-major-western-australia-iron-ore-mine-expansion >. [Accessed on 29th October 2017].
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