Environmental And Organizational Analysis Of Northern Star Resources Limited

PESTLE Analysis

Discuss about the Strategic Management Of Capstone.

The northern star resources limited is referred to an Australian gold producing organization that possesses world-class projects situated in highly perspective as well as low sovereign risk regions of the Northern Territory and Western Australia. The company has a portfolio of high grade yet low-cost gold mines and the chief focus of the company includes maximizing the shareholder returns. The company is a well-known global gold producing company. However, due to enhanced completion in the gold producing industry, the Northern star is suffering from decrement in the competitive advantage. In this report, both environmental, as well as organizational analysis of the company, will be performed in order to detect the loophole of the company which is hindering its further enhancement of revenue. Apart from that, the recommendation to eradicate the detected loopholes will also be provided in this report.

The environmental analysis is considered to be a strategic tool that helps an organization to access its external as well as internal environment. Both external, as well as the internal environment, has the potential to affect the performance of an organization. Therefore, in the following paragraph, environmental analysis of the northern star resources has been conducted in order to  assess the level of threat as well as opportunities that can be availed by the mentioned company.

PESTLE analysis is a strategic tool that will help the management of the mentioned company to analyze its macro environment. The term PESTLE stands for Political, Economic, Socio-cultural, Technological, Legal and Environmental factors that impose an impact on the business of the Northern Star Resources.

The political condition of Australia is stable and this has imposed a positive impact on the long-term profitability of Northern Star. The Australian government provides immense support to the gold mining industry through an effective legal framework and the bureaucracy as well as interference of the government in the gold industry is much less compared to other developed countries (Ferguson, Feigin & Kean, 2013). Moreover, the risk of military invasion is also low in Australia. However, the taxation of Australia over the Australian gold industry is high. The government peruses policies of hoarding gold for encouraging miners to mine new gold.

In spite of being a developed country, the recent recession has shaken the financial stability of the Australians. However, this fact has affected the gold industry of Australia positively. Considering the fact that the price of gold is inversely proportional to the economic stability of a country, the temporary instability of Australia has enhanced the demand for gold in the country. Due to stock market fail, investors had invested heavily in gold that has resulted in the rise of revenue of Northern Star Resources. Hence, the recession in Australia has positively affected the company.

Political

Considering the fact that there exists a multi-diverse culture in Australia, gold is a metal of high demand in Australia. Like other countries, in Australia, the chief consumption of gold includes making of jewelry (Schembri et al., 2015). The demand for gold jewelry is high in Australian women especially in social and cultural occasions like wedding, religious festivals. However, compared to the Asia countries like China and India, the demand for gold is Australia is presumably low.

Australia being a developed country is highly advanced in technology. Australian government fund more than 60 percent of all the researches (Lam, 2014). Moreover, the communication networks, 24*7 availability of electricity as well as the internet are the major factors that impose a positive impact on the gold industry of the nation. Advanced technology helps gold producers like the Northern Star Resources to communicate and delivers Gold to a wide range of industry like the Bio-Medical, Catalysis, Dental, Environmental, Fuel Cells, Electronics, Nanotechnology and Photography companies. Moreover, internet availability makes it easier for the organizations to promote their products online through eminent social media platforms and keep in direct touch with the suppliers and consumers.

Like any other country, Australian gold producers require the permission of the government before mining gold. In Australia, all the gold mining companies are controlled by the General Mining Act 1872 (Giurco & Cooper, 2012). Considering the fact that the gold industry is a major source of revenue of the mentioned country, the legal framework of Australia is highly effective when it comes to the gold industry.  

Since Gold mining includes the production of highly toxic waste products, environment and the gold industry does not go well with each other. The government of Australia has imposed a good number of environmental laws like Biodiversity Conservation Act 1999. Since a good amount of revenue of the Australian government comes from the gold industry, the government have imposed several relaxations on environmental laws.

The Porter’s five forces analysis can be considered as a framework that helps the management of an organization to assess the microenvironment with the help of five forces that influences the industry. In order to understand the strength and weakness of the Northern Star resources, Porter’s five forces analysis of the company has been performed below:

The threat of New Entrants: In Australia, the chief barrier to the new entrance is financing. Gold along with all precious metal industry is highly capital intensive. High investment is required to establish a gold producing company even before the first production. However, in order to enhance its revenue, the government of Australia encourages the global organization to open their branches in Australia (Ranängen & Zobel, 2014). Overall, it can be said that the threat of new entrance is low for the Northern Star Resource-limited in Australia.  

Economic

Power of Suppliers: The primary resource that is needed for the production of the gold island. Australia has several gold rushes that make it easier for gold producing organization to flourish. Hence, the only problem associated with supply is the permission of the government to mine a specific land. Since several environmental issues are associated with mining of gold, it is difficult for organizations to access the permission for mining land from the government. Hence the power of supplier is moderate in the Australian gold industry.

The chief buyers of the gold-producing organizations in Australia including Gold jewelry manufacturing companies along with Bio-Medical, Catalysis, Dental, Environmental, Fuel Cells, Electronics, Nanotechnology and Photography companies (Rouillon, Gore & Taylor, 2013). Since gold is a commodity-based product, the power of the buyers is high in the Australian gold industry. Gold mined by one company is almost similar to the one mined by another company. Hence, in Australia, buyers prefer gold producing organizations that offer them high-quality gold at a lower price or at favorable contract terms.

In Australia, the acceptance level of gold to the consumers are much higher compared to its substitutes. Hence, the power of the substitute in Australian metal producing industry is low. Chief substitute of the mentioned industry includes platinum, silver and diamond. Moreover, currently gold holds the advantage of being a world currency all over the world and hence is seen by the consumers as an investment. However, since diamond is slowly gaining popularity in the Australian market, there prevails a risk for the gold industry to lose it a competitive advantage in the near future.

The major competitors of the Northern Star Resource-limited in Australia include Barrick Gold, Newmont Mining, AngloGold Ashanti, Kinross Gold and Goldcorp. Since extensive competition happens between the companies, the power of competitive revelry in the mentioned industry is high (E. Dobbs, 2014). All the mentioned companies are well established and are more mature than Northern Star Resource Limited. Unlike other industries, gold producing organizations does not compete over the price of gold as it is already being determined by the marketing forces. The chief competition between the companies happens with respect to the possession of land. The prolonged survival of a gold producing organization depends upon its reserved amount. Therefore gold producing organizations invest heavily on exploration since the first one to discover is given first preference when it comes to mine by the governments.

Socio-cultural

Organizational analysis refers the process of reviewing the work environment, personnel and operations of a business by assessing its strategy, performance and capabilities. In order to assess the development of the Northern Star Resources Limited organization analysis of the same has been performed below.

Strengths ·         Brand equity of the organization is high ·         The organizational structure of the company is strong. ·         The demand of gold in the Australian industry is increasing.	Weaknesses ·         Lack of presence in the international market. ·         Lack of shareholders (Mathooko & Ogutu, 2015)
Opportunities Considering the fact the UK and USA gold market is less saturated compared to the Australian gold market, the company can expand its branches in the mentioned nations.	Threats ·         High labor cost in the Australian Gold industry. ·         High competition in the industry

Table 1: SWOT of Northern Star Resources

Source (created by the Author)

The vision of Northern Star Resource-limited is to continue building safe, quality mining and Exploration Company which is focused on creating value for the shareholders. The mission of the company is to generate value for the shareholders with the help of operational effectiveness, growth opportunities primarily focusing on the success of meeting the targets.

The strategic goal of the company is to attract global investors by developing a responsible company. For this the chief strategies followed by the company are as follows:

1. Sustain of critical mass: The company have to maintain its annual gold production by 525,000 ounces per annum (Mathooko & Ogutu, 2015).
2. The management maintains a diversified asset base with the help of the company’s portfolio of world-class operating mines.
3. The management ensures that the employees have significant mine lives. Aggressive in-mine and near-mint are explorations are being conducted by targeting total group Resources of 20 million ounces along with Reserves of 10 million ounces.
4. In order to maintain low-cost operations, the management of the company is constantly driving productivity and efficiencies in order to achieve sustaining cost less than 1, 1000 Australian dollar (Northern Star, 2018).
5. In order to uphold strong financial discipline, the company maintains a track record of paying full-franked dividends to the shareholders.

Resources	Valuable	Rarity	Imitability	Organization
Gold mines	Yes	No	No	No
Ability to raise capital	No	Yes	No	No
Employee compensation	No	No	Yes	No
Employee benefits	No	No	No	Yes

Table 2: VRIO Analysis of Northern Star Resources

Source (Created by the Author)

Valuable: Considering the fact there exist high competition between the gold producers when it comes to gold mines, the Northern Star Resources posses a commendable number of mines which can be considered as a valuable asset for the company (Prior et al., 2012).

Ability to raise capital: The organizational structure and the management of the company are considered to be the chief reason behind gradual enhancement in the revenue of the company. Considering the fact that majority of gold mines in Australia lack appropriate organizational structure that supports it enhancement of revenue, this factor can be considered as rarity.

Employee compensation: The compensation provide by the company is much higher than its competitors and hence cannot be replicated by the competitors easily. The mentioned factor helps the company to enhance its performance by attracting and retaining highly skilled employees.

Employee benefits: In order to retain employees a good number benefits associate with the health and safety measures are being provide to the employees (Mathooko & Ogutu, 2015). The work satisfaction of the employees thus demonstrates that the firm is organized, ready, and able to exploit the resource appropriately.

Financial performance

The financial performance margin of the northern Star Limited Company has increased since 2013. The chief reason for that is the enhancement of Return On Investment (ROI) due to the appropriate balance between cash inflow and cash outflow. In the following table, the financial report of the Northern Star Resource Limited has been given in order to demonstrate its gradual enhancement in revenue.

	2017	2016	2015	2014
Cash & Short Term Investments	403,060.0	315,341.0	167,443.0	82,387.0
Total Accounts Receivable	23,594.0	9,932.0	23,325.0	13,665.0
Inventories	58,851.0	59,986.0	70,982.0	63,104.0
Total Current Assets	486,165.0	440,415.0	263,086.0	170,781.0
Total Investments and Advances	35,319.0	8,779.0	7,537.0	2,906.0
Total Assets	965,548.0	804,933.0	632,919.0	422,234.0

Technological

Table 1: Financial report 2017-2013

Source (Northern Star, 2018)

It can be understood from the financial report that the performance of the company is improving and so does its consumer base. The company has seen significant share price volatility over the past couple of months rising to as high as A$6.96 and falling to them as low as A$6.16.  Being a moderately recognized gold manufacturing company; the company is able to provide limited satisfaction to its consumers. In order to enhance its revenue, the company has kept its share price cheaper than its competitors.

Considering the fact that the company is currently trying to enhance its consumer base as well as competitive advantage effective recommendations to enhance the revenue of the company has been suggested below.

1. In order to enhance its consumer base, Northern Star Resource Limited can promote its business both through offline and online platforms. While offline platform includes conducting campaigns and sponsoring events like gold shop inauguration, online promotion can include promotion through social media platforms. This will not only help the company to directly communicate with the consumers and understand their specific requirement but will also enhance consumer loyalty (Prior et al., 2012).
2. Since the labor cost at Australia is high, in order to reduce cost and enhance the competitive advantage Northern Star Resource can implement Internet of Things (IoT) to gain competitive advantage (Mathooko & Ogutu, 2015).

Conclusion

From the above discussion, it can be concluded that the Northern Star Resources Limited is emerging towards higher revenue due to its effective strategies leading to its gradual financial enhancement. However, since the company is still not one of the leading gold producing g organization in Australia, the management needs to work on eradicating the loopholes like high labor costs and low competitive advantage. It is expected that with the implementation of the mentioned strategy, the company will be able to list its name among the top gold producing organizations in Australia.

Reference List

Dobbs, M. (2014). Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), 32-45.

Ferguson, A., Feigin, A., & Kean, S. (2013). Goldmine feasibility study disclosure in Australia: Determinants and implications. Resources Policy, 38(1), 8-17.

Giurco, D., & Cooper, C. (2012). Mining and sustainability: asking the right questions. Minerals Engineering, 29, 3-12.

Lam, J. (2014). Enterprise risk management: from incentives to controls. John Wiley & Sons.

Mathooko, F. M., & Ogutu, M. (2015). Porter’s five competitive forces framework and other factors that influence the choice of response strategies adopted by public universities in Kenya. International Journal of Educational Management, 29(3), 334-354.

Northern Star. (2018). Retrieved from https://www.nsrltd.com/

Prior, T., Giurco, D., Mudd, G., Mason, L., & Behrisch, J. (2012). Resource depletion, peak minerals and the implications for sustainable resource management. Global Environmental Change, 22(3), 577-587.

Ranängen, H., & Zobel, T. (2014). Revisiting the ‘how’of corporate social responsibility in extractive industries and forestry. Journal of Cleaner Production, 84, 299-312.

Rouillon, M., Gore, D. B., & Taylor, M. P. (2013). The nature and distribution of Cu, Zn, Hg, and Pb in urban soils of a regional city: Lithgow, Australia. Applied geochemistry, 36, 83-91.

Schembri, N., Hernandez-Jover, M., Toribio, J. A., & Holyoake, P. K. (2015). On-farm characteristics and biosecurity protocols for small-scale swine producers in eastern Australia. Preventive veterinary medicine, 118(1), 104-116.