Explain the major strategic issues in for the business.
Every company operates in the market based on certain specific strategies. These strategies depend greatly on the internal and external factors of the company. The task is to examine the recent trends of business activities and strategies of BHP Billiton. For the same purpose, it is important to understand the internal environment of the company along with the strategies that the company set for their business. An analysis of the internal and external environment of the company will be done along with the strategies planned by the company. Further, issues arising at the time of implementing the strategies will also be analyzed.
BHP Billiton is one the leading global resource company. The company is greatly committed to business values such as sustainability, integrity, performance, simplicity and accountability as well. The company is one of the largest producers of major commodities such as minerals like coal and uranium other conventional and non-conventional resources of energy such as oil and natural gas. The diversified nature of the business with low expenditure and tier one asset base helps the company in keeping a cash flow in its business. Its strong market position and steady financial position are the main strengths of the company, whereas intense competition and reduction in demand in major market such as China are regarded as the major threats for the country (Billiton.com).
Internal environment depends on the resources available for the company to operate in the market. An analysis of these resources is to be done here with context to BHP Billiton.
Resources, capabilities and core competencies:
Since the company is it related to extraction of resources such as copper, bauxite, oil or gas. It does not require any kind of raw material but the main requirement is human labor and thus main resource is Human. The company has been working for a long time and has been operating in various businesses. The ability of carrying out the business activities in combination with the labor skills and raw materials shows core competencies of the company.
VRIO:
It is the acronym that stands for answering four questions in determining the competitive potential of a company. These are value, rarity, imitability and organization.
Value: It is the ability of a company exploits the opportunities and defends against the threats of the market. When a company is not able to confront these situations, the company faces problems (Knott, 2015). In case of BHP Billiton, it can be said that in spite of such competition and threats in the market, the company has been able to tackle the situation.
Rarity: Every business requires raw material to carry on with their work. Sometimes, the materials are rare in existence that creates a problem for the business. The materials required for BHP Billiton are not rare in nature but are available easily (Cardeal & Antonio, 2012).
Imitate: There is no scope for the company to imitate the products. Their job is to extract the minerals from the ore and other conventional or unconventional resources.
Organization: The Company is highly organized and it is only on the basis of the organizational structure that the BHP Billiton is a successful company in its sector (Kim, Lee, & Shin, 2015).
Value Chain:
Value chain is done by a company in which the company finds the primary and some supporting activities of the company which help the company to add value to its final product. These are basically done to decline the cost of the product that would ultimately result in increase in differentiation of the product. Checking the level of influence at every step of operation and then working accordingly is what is meant by margin in the value chain. It is one of the strategies undertaken by a company to utilize the most profitable product to improve their business (Antara & Chor, 2015).
In case of BHP Billiton, it can be said that producing commodities such as iron ore, copper, aluminum ore shows high quality growth opportunities for the company. Billiton gains maximum profit from their resource extracting business than other businesses and thus it can be said that the most valuable business of BHP is this one.
Culture:
Culture of a company includes its value, mission, beliefs and habits that the company follows in their work culture. Culture of a company makes it distinguished in its operating sector. When a company is supported with good culture, the employees working in the company get a particular platform to conduct their duty (Lestari, Ismail & Mansur, 2014).
The mission as set out by Billiton is to use the diversification of the business in the market and gains maximum profit. This helps them to attract high caliber people who are more committed to the success of the organization (Adkins et al., 2013).
As opined by Schmeck, (2013), that the culture of a business organization is similar to a iceberg floating in the ocean. Just as in an iceberg only one-third part is visible and the rest part is below the water; culture of an organization is similar, some perspectives of the company’s culture is visible and the rest remain invisible to others. Success of an organization depends greatly on the hidden culture of a company.
BHP Billiton follows a new streamlined corporate structure in their recent expansion in the gulf streams. The company believes in developing the skills and capabilities of the employees. This is the most committed aspect of the company that differentiates it from the other companies (Fullan, 2014). They believe in safe productivity and simplification in their work. Great care are taken for the employees working for the company
The strategy of the company is based on diversification in their commodity, geography and market as well. BHP Billiton believes in satisfying the need of the customers. Their focus remains on quality of product and serving people with proper materials. The company is proud of their unchanged strategy of owning and operating such a big company. Low cost, expandable, diversification in terms of commodity and market gives them the ability to expand their business
In the contemporary situation, the company is facing certain strategic issues due to uncertainty of the market situation. There has been continuous decline in demand in the market and on the other hand the cost of the raw materials is increasing. Some of the issues can be highlighted as below:
Reduction in unit cost: There has been reduction in per unit labor cost in the market, as a result of which the company faced certain issues in their strategy regarding appointing labors (Siva et al., 2015).
Continued optimization has reduced expected share: There has been increase in number of competitors in the market. As a result of which, there has been reduction in the expected market share.
Market volatility: The standard return of the products is not up to mark. The expenses that the company is providing in the process of extraction of minerals and other resources are not meeting with the exchange amount received by the company (Harrell, 2015). In case, the company is not able to meet the desired result in their marginal profit.
Geopolitical instability: Continuous chaos and instability in the governmental structure is harming the operation of the companies in the market. This creates a great issue in following the strategies set by the company.
The above mentioned issues are related to each other and they are acting as the major deficit for the company to operate with better result.
It is their capability to work as teams that result in success of their company. Their effort in creating equality and embracing trust and openness among the employees is what makes them capable to hold the position where they are today. It can be said that it is the culture of the organization and the strategies implemented by the company differentiate the company from the other existing companies in the market.
Reference list:
Adkins, C. L., Samaras, S. A., Gilfillan, S. W., & McWee, W. E. (2013). The Relationship between Owner Characteristics, Company Size, and the Work–Family Culture and Policies of Womenâ€ÂOwned Businesses. Journal of Small Business Management, 51(2), 196-214.
Antràs, P., & Chor, D. (2013). Organizing the global value chain.Econometrica, 81(6), 2127-2204.
BHP Billiton. (2016). Bhpbilliton.com. Retrieved 23 May 2016, fromhttps://www.bhpbilliton.com/
Bhpbilliton.com Available at: www.bhpbilliton.com/ [Retrieved on 20th May 2016]
Cardeal, N., & Antonio, N. S. (2012). Valuable, rare, inimitable resources and organization (VRIO) resources or valuable, rare, inimitable resources (VRI) capabilities: What leads to competitive advantage?. Cardeal, N., António, (2012), 10159-10170.
Fullan, M. (2014). Leading in a culture of change personal action guide and workbook. John Wiley & Sons.
Giannoni, G. (2014). Alan Mulally’s secrets of success at Ford: how changing the corporate culture saved the company. Kindle e-book. Retrieved from amazon.​ com.
Harrell, F. (2015). Regression modeling strategies: with applications to linear models, logistic and ordinal regression, and survival analysis. Springer.
Kim, S. C., Lee, J. S., & Shin, K. I. (2015). The impact of project management assets on the VRIO characteristics of PM process for competitive advantage. International Journal of Productivity and Quality Management, 15(2), 153-168.
Knott, P. J. (2015). Does VRIO help managers evaluate a firm’s resources?.Management Decision, 53(8), 1806-1822.
Lestari, H., Ismail, R., & Mansur, A. (2014, April). Organizational Culture in Manufacturing Company: Study Case of Small and Medium Sized Enterprises in Central Java, Indonesia. In Applied Mechanics and Materials(Vol. 493, pp. 486-491).
Ragin, C. C. (2014). The comparative method: Moving beyond qualitative and quantitative strategies. Univ of California Press.
Schmeck, R. R. (Ed.). (2013). Learning strategies and learning styles. Springer Science & Business Media.
Siva Balan, K. C., Swaminathan, B., Hughes, J. D. A., Kasemsap, P., Dasgupta, S., Dutta, O. P., … & Chantrasmi, V. (2015). Farm profitability and value chain management of tomato growers: a case study from India.
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