Environmental Analysis Of BHP Billiton In Australian Steel Manufacturing Industry

Internal Analysis

In the reported study the environmental analysis of BHP Billiton, one of the largest Australian multinational conglomerates dealing in metal mining and petroleum, has been described to identify the performance and outlook of the business (BHP Billiton, 2017). The study paper investigates the latest trends in Australian steel manufacturing industry to evaluate the position of BHP Billiton in the target market. Furthermore, the environmental analysis of the Australian corporation has been segmented into two different sections i.e. internal and external environment analysis. In the meanwhile, the internal analysis describes the management talent, and resource and capabilities to produce the competitive advantage of the metal mining company (Wei, Yi and Guo, 2013). On the other hand, the external environment of the business involves macro and micro environment analysis using PESTLE and Porter’s Five Forces analysis respectively. Before the conclusion, the current business strategy of the firm has been demonstrated highlighting the business outlook and performance.

Australian steel manufacturing industry can be identified as one of the most dynamic and versatile sectors contributed towards the infrastructural developments of the nations. Currently, the annual turnover of the sector in $30 billion and the industry provides more than ninety thousand jobs in the country. Due to the modernisation of technology, the steel industry in Australia has been supported by Building Information Modelling (BIM) technology used for manufacturing and recycling of steel. Currently, the metal mining and steel manufacturing industry in Australian market has been dominated by a number of firms e.g. BlueScope, Astra Resources PLC, Orrcon Steel, and BHP Billiton, etc. Due to the presence of the leading manufacturers and steel recycling companies, the operating companies have to face significant amount challenges (BHP Billiton, 2017). In order to elaborate the current trends of the industry, the micro and macro environment analysis have been presented in the reported study as well.

Internal analysis of BHP Billiton Limited discusses the management talent, and resource and capabilities of the organisation that influence the overall performance of the business. In BHP Billiton Limited, the leadership style can be identified as the leading factors influencing the management talent (Jackson, 2012). In the underlying section, the two decisive factors have been analysed as follows.

Management talent and leadership style of BHP Billiton Limited can be identified as the crucial instrument in the corporate planning. Based on the environmental challenges and growth targets, broad strategic planning has been taken into account involving the skills and talent of the management (Mu?hlfeld, 2004). Precisely, the organisational culture of BHP Billiton Limited ensured each department of the organisation can be led with adequate determination. By valuing the upstream resources of the firm, the management can appreciably handle the issues associated with the internal and external environment (Korneev, 2015). Fundamentally, identifying the strategic priorities of BHP Billiton Limited, the management has distributed talent and skills among the human resources to conduct the market operations in a safe and legal procedure (Kemp, 2009).  

External Analysis

In case of BHP Billiton Limited, there are a number of types of resources leading towards productivity of the business. For instance, financial resources, material resources, and human resources can be evaluated the most comprehensive resources for BHP Billiton Limited (Donnelly, 2011). Furthermore, non-material resources such as essential data and market-related information are considered as another type of resource influencing the performance of the business in the target market of Australia (Jenkins, 2004). In terms of material resources, the metal extracting and steel manufacturer has got several mineral mines in different countries other than Australia. On the other hand, the skilled and talented employees working for the company are considered as the human asset available to the business (Sharma, 2013). Therefore, each of the resources is contributing towards the growth of the business in the target market.

Significantly, the capability of an organisation has been noted by the efficiency and production capacity. Due to the availability of each type of resources, the capability of BHP Billiton Limited is considerably high (Hanson and Stuart, 2011). Moreover, the modern extracting and production technology have emphasised the production capacity in a positive manner. Furthermore, the capabilities of the business of BHP Billiton Limited are further boosted by employees’ commitment, ability, skills, and academic knowledge (Viveros, 2014). Meanwhile, the core competencies of the firm have activity influenced the capabilities of BHP Billiton Limited in the target market.

The external environment analysis of BHP Billiton Limited includes the micro and macro environment analysis using Porter’s Five Forces Model and PESTLE. Effectively, the external environmental analysis of the company can be evident to describe the competitive advantage and business strategy of BHP Billiton Limited.

By using Porter’s Five Forces model (follow appendix 1), strategic review of the external environment of the company has been elaborated as follows:

• Buyers Bargaining Power:Due to strong demand and supply limitations, the bargaining power of the market buyers is moderate to low. BHP Billiton Limited targets long-term relationship with the target audience. Therefore, the effect of increasing price is diminished.
• Suppliers Bargaining Power:The suppliers of BHP Billiton Limited are mining workers, shipping companies, costs of energy, and costs of materials (Marren, 2017). In such scenario, the bargaining power of the suppliers is considerably strong as increased costs from suppliers have affected the capacity of the business of BHP Billiton Limited.
• Threat of New Entrants:The mining and metal extracting company is operating in an industry where resources are limited. Hence, the threat of new entrants is significantly low. Also, the large capacity that has been required to run the business restricts any new participation in the industry.
• Threat of Substitutes:In the global market as well as Australian market, the substitutes of raw material are limited. Therefore, limited substitutes have eliminated the threat of substitutes. Also, the diversified product portfolio of BHP Billiton Limited has supported the business to tackle any challenges created due to new substitutes.
• Intensity of Existing Rivalry:Though the mining and metal extracting companies are in limited numbers in Australia, the intensity of existing rivalry are relatively high (Marren, 2017). Companies such as Rio Tinto, BlueScope, and Astra Resources PLC can be identified as the leading competitors for BHP Billiton Limited in the target market. On the other hand, due to profit potentials out of the industry, leading businesses are engaged in the strong rivalry in Australian mining and steel production industry.

In order to analyse the macro-environmental factor that influences the business of BHP Billiton Limited in the Australian market, PESTEL analysis has been used in the study. PESTEL analysis helps to identify the political factors, economic factors, socio-cultural factors, technological factors, environmental factors and legal factors that lead to different opportunities and threats for the steel production and mining businesses of BHP Billiton in the Australian market (Marren, 2017). The PESTEL analysis has been presented in details herein below:

• Political Factors:BHP Billiton is an international resources company that is vulnerable to political risks in most of its markets. However, the favourable political ambiance in Australia has been a major factor leading to the success of BHP Billiton in the current market scenario. For instance, the Australian Government has supported the growth of mining and steel industry by providing easy license to operate, better growth opportunities through tax reliefs and monetary supports (Korneev, 2015).
• Economical Factors:The increasing inflation rate in Australia has been a major factor leading to the rise in energy costs, labour costs, exploration expenses, operations costs and material costs (Korneev, 2015). The changing economic factors in the current market scenario have emerged to be a major threat for the company.
• Socio-cultural Factors:The mining and still production business often need social approval in order to operate in some regions that increase the development costs and impact the profitability of the firm (Testa and D’Amato, 2017). Hence, the company needs to make efforts in order to profit social benefits to the local residents by improving the working conditions and quality of life in order to get approval of the local authorities.
• Technological Factors:The operations of BHP Billiton highly demanded on the technical innovations to increase the efficiency of the mining, exploration and discovery of energy and mining resources (Donnelly, 2011). The development of technology in Australia and across the globe has supported the growth of the company in different parts of the world.
• Environmental Factors:Being a natural resource extracting and processing company, BHP Billiton needs to follow several rules and regulations related to environmental safety that include the 1997 Kyoto Protocol, Asia-Pacific Partnership on Clean Development and Climate, recycling of waste products, renewable energy policies and clean emission policies (Testa and D’Amato, 2017). NGOs and environmental groups exert huge pressure over the firm. However, the company focuses on following the practice of sustainable development and zero harm to the environment.
• Legal Factors:The changing legal rules and regulations have made it difficult for the company to operate smoothly with static strategies (Alam and Majumdar, 2011). For instance, the change in the tax rates and environmental policies must be considered by the management of BHP Billiton in order to be safe from legal obligations.

BHP Billiton operates under a Dual Listed Company structure that has two parent companies (BHP Billiton Plc and BHP Billiton Limited) that has a single economic entity referred as BHP. The company is run by a unified management and board (Korneev, 2015). The primary strategy of the organisation is to own and operate large, low-cost, long-life, expandable projects with upstream assets diversified by commodity, geography and market. BHP Billiton has a diverse and simple portfolio of tier one assets across the world with low costs options for the growth and value creation in the future. As BHP Billiton have its operations in several major resources rich regions of the world, the company now focuses on diversifying its business by developing new products for its existing market (Hogan and Lodhia, 2011). On the basis of Ansoff Matrix presented in appendix 2, BHP Billiton focuses on product development strategy in the existing markets by using its highly innovative and skilful R&D team. On the other hand, the company focuses on market development strategy in the new markets by using low cost policy.

Current Business Strategy

On the basis of the above analysis and the current business strategies of BHP Billiton, the competitive advantage for the firm that differentiates it from its rivals are discussed herein below:

• Diversity in Management:Diversity in management is the primary factor leading to competitive advantage for BHP Billiton. The company employs people from different region capable of performing different activities and expertise in various fields (Ratnatunga and Vincent, 2011). BHP Billiton employs separate technical head for every individual department. Hence, the diversified management of the company acts as its competitive advantage.
• Innovative Technology:Innovative technology used by BHP Billiton is highly effective in discovering new resources and increases productivity by using cost effective measures (Balachandran and Taticchi, 2011). Hence, continuous technology innovation is another factor leading to the competitive advantage of the firm.
• Research and Development:The research and development team of the firm is much effective in developing new products and invent cost effective methods to extract a higher amount of minerals (Ratnatunga and Vincent, 2011). Hence, the R&D department helps the company to seek cost advantage that helps the firm to gain competitive advantage in the Australian market.

Conclusion

By considering the above analysis, the strong management and innovative business strategies of BHP Billiton is the key to its success in the current competitive environment. Irrespective of the changing external market environment, the flexible strategies of the firm has helped it to survive in every battle of business survival. BHP Billiton Ltd and BHP Billiton PLC works together as a single entity to serve the mining and metal producing industry through its innovative strategies and diverse product portfolio. Conclusively, BHP Billiton changes its strategies in accordance to the changes in the internal and external market environment to seek sustainable growth of business.

References

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