Environment analysis of BHP Billiton - Myassignmenthelp.Com

Question: Discuss about the Environment analysis of BHP Billiton. Answer: Introduction Purpose of report The present study aims to conduct environmental analysis of BHP Billiton which would involve discussion of key information related to the competitive advantages and the current business strategies of the organisation to determine their market and financial position in comparison to industry standards. The environmental analysis of BHP Billiton will involve internal and external (macro and micro) analysis. This analysis will help the organisation to understand its market effectively and accordingly develop strategies for effective movement of the business. Company snapshot BHP Billiton is one of the biggest Australian conglomerates that work all over the world. The organisation has diversified into different fields steadily with time. The organisation has extended in different markets which has helped the organisation to get renowned in different regions. BHP has become an extremely important entity in the Australian economy that has brought the company into the limelight (BHP, 2017). The organisation was established in 1885 in NSW as silver and lead mining company and the organisation since then extended into iron ore, steel making, coal and petroleum. The company received domestic and global growth in different countries like USA, Chile, Canada et cetera. With time passing by BHP has faced significant competition in the global market and hence it is important for the organisation to develop a strong strategy which would help the organisation to move forward and cope up with the increasing difficulties and market hurdles (de Villiers, Low and Samkin, 2014). Environment analysis of BHP Billiton Internal analysis Current business strategy of BHP Billiton The Current mission statement of the organisation BHP Billiton is to create long term shareholder value through discovery, mining and acquisition, development and proper sales and marketing of natural resources. The business strategy of the BHP is mainly based on their key pillars products i.e. iron ore, oil, copper and coal mining. The current business strategy of BHP is to focus on maximising the returns for the shareholders through the increase in the mineral assets and with the increase in new mining explorations and innovation. The current business strategy of the organisation revolves around its progressive dividend policy that focuses and commits to increase the returns of the shareholders (Grant et al., 2014). With the new operating model the organisation will focus more on security aspect, volume and cost management which would help to provide the best possible result from the new strategy. The strategic shift will help to focus more on the interest of the investors and shar eholders and will help to provide them with better returns which are always good for the organisation. The organisation has also made a strategic shift on its take on the environment. Previously the organisation has received criticism for its unethical steps in the Mining incidents in Brazil and this has definitely affected their reputation in the global market (Perrott, 2015). Hence the organisation has been focused on managing environment properly so that the environment could be properly managed. It has brought green supply chain into practice, management of emission and mining operations, reduction in utilisation of chemicals et cetera are also properly monitored in the new business strategy which just creates brand awareness in the market (Peterson et al., 2015). Assets Human resources BHP Billiton is a huge organisation with substantial resources. The company not only has huge financial assets as well as it has significant reserves and human resources which help the organisation to a large extent to perform its duties (Gamble and Thompson, 2014). Management culture is another key internal aspect which helps the organisation to focus on managing the talents properly and communicating with them to understand their grievances and problems which helps to gradually manage the human resource properly. Financial and technological resources Financial resources are huge in the organisation which provides upper hand to the organisation. Hence it could be said that the huge financial resources are important for the organisation. The organisation also has suitable technological resources which have helped the organisation to implement innovation and development (Hill, Jones and Schilling, 2014). Physical resources The operational capability and technical expertise differs BHP in Australia like Shell, Exxon, BP and Chevron especially in petroleum extraction and even in other fields as well (Rothaermel, 2015). This clearly shows that the capability of the organisation mainly lies in its production and operational capability which is extremely important for an organisation like BHP. In 2014 BHP produced 700,000 barrels per day which is more than companies like BP, Chevron and Exxon. The competitive advantage of BHP Billiton BHP Billiton is one of the biggest organisations in Australia. The company has slowly and steadily emerged as an organisation that has contributed to the growth and development of the Australian economy. Business diversification is one of the key reasons for the competitive advantage of BHP in the Australian market and apart from that the organisation also is ahead due to its market intelligence and corporate model which has helped the organisation to make sure it can cope up with the increasing competition in the Australian market (Madsen and Walker, 2015). Further; the merger of BHP an Australian organisation and Billiton a South African mining company the company has seen immense growth which provided them benefit of economies of scale (Grant et al., 2016). The recently succeeded CEO of BHP Andrew Mackenzie has been highly focused on strategies that would help the organisation to gain competitive advantage. He has personally taken into account the change in the environmental strat egy and financial strategy of the organisation. Having been renowned as a fellow of Postdoctoral research with the British Geological Survey has helped him to manage the dipping importance of the organisation (Rothaermel, 2015). The sustainable strategies of company assist them in making reduction of costs and attaining flexible resources for growth and expansion of business. As a whole cited elements provide business sustainable competitive benefit over competitors through which management is able to generate value for stakeholders in the long run (Ahmad et al., 2016). Sales, profits and share prices Figure 1: Profit and sales of BHP Billiton Figure 2: Share prices of BHP Billiton over five years From the above data it could be seen that since 2006 the organisation has experienced increase in revenue significantly with each year which is clearly shown in the above table. It is important to mention that the diversification in business has helped BHP to a large extent to keep the competitive advantage with the organisation. In the fiscal year of 2016 petroleum accounted for around 23% of the total revenue and coal and iron ore followed. Hence it could be said that the organisation definitely has all the different divisions working effectively which has helped the organisation to compete in this highly competitive market in Australia (Ahmad et al., 2016). Strength and weakness Strengths The organisations main strength is its strong financial performance in Australia and some other foreign markets. Diversification in business like Oil, Iron Ore, Coal et cetera. Significant presence in the international market. Effective and strong marketing (Grant et al, 2016). Weaknesses Past scandals have contributed to loosening of foothold in certain markets and negative publicity in Australia due to these incidents. Unskilled human resources create problem. Poor corporate communication. External analysis Trends of Australian steel Manufacturing Industry The Australian steel industry in the early years of 2013-14 and 15 employed approximately around 100,000 people and generated an amount of revenue which was not less than $10 billion but in the last couple of years the revenue has gone down by 7.5% which is a major reason for concern. Hence it could be said that the Australian Steel industry is showing a declining trend in all respect including revenue and steel production as compared to the earlier part years (Golev and Corder, 2016). However; steel Production in Australia is increased from 448 thousand tonnes in June to 458.89 thousand tonnes in July 2017. There has been a gradual growth in steel production in the country with an overwhelming average of 582 thousand tonnes within 1970 to 2017. The presently discussed fact clearly states that the country Australia has emphasised on steel manufacturing effectively. Since 2016 the steel production has increased significantly which shows the dependence of the Australian economy on stee l production (Hudson and Sadler, 2017). In the recent past the Australian Steel Manufacturing industry has faced significant issues with debts and faced steep decline in the last few years overall and the revenue of the Australian steel industry is expected to go down more by around $1.9 billion. The annual growth hasnt been up to the mark as expected which clearly shows that the industry is facing problem and needs effective and positive revamp which could possibly help the industry. It cannot be denied that even though the country has been able to manufacture significant amount of steel but still it faces huge challenge (Hudson and Sadler, 2017). PESTLE Analysis The PEST Analysis is an effective way to understand the external environment of the organisation BHP Billiton. The PEST analysis stands for political, economic, social and technological environment. Political: The organisation has got favourable political balance in Australia which has helped the organisation to continue its business effectively. The Australian Government has stretched its hands for the organisation which has helped to manage their business effectively. The company is responsible to contribute to a large extent it gets significant support from the Australian Government especially western Australia. Even though the organisation is working smoothly the possibility of changes in the government or in government policies definitely influence their overall operation like labor policies, mining and digging regulations. Like the increase in the mining tax royalty in Australia increased the cost of goods sold by the organisation (Saad, Mohamed Udin and Hasnan, 2014). Economic: The organisation BHP is vulnerable to economic factors like the increase in the price of the global commodities, national inflation, increase in the wage rate, material costs of the labour (BHP, 2017). The organisation BHP is largely dependent on the global market for its export of products and hence it becomes extremely tough for the organisation to survive due to the increase in fluctuating currency value, rising inflation within the country and in the recent past excessive reduction in prices of mining products in Australia have reduced the profitability of the company (Rothaermel, 2015). Social: The organisation is largely influenced by the social relationship with the stakeholders. The change in demographics and lack of proper and young workforce for mines has affected the organisation. Increasing importance of corporate social responsibility like clean environment strategy and clean emission, and recycling renewable source of energy have been good strategies for the organisation to cope up with its previous scandals (Perrott, 2015). Technological: The Company relies on its up to date and efficient technological assets to effectively continue its mining operations. The investment in technology for the organisation to find oil underneath water and to effectively continue mining needs ultramodern equipments and the organisation has emphasised on this more to gain competitive advantage (Grant et al., 2016). Micro Analysis The different micro environmental factors are competitors, customers, suppliers, public, marketing intermediaries and employees. The competitors of the BHP Billiton have significant role to play in the market. The company faces huge competition which affects its business strategy and decisions (Peppard and Ward, 2016). Major players of industry and crucial facts related to their business is enumerated as below: Fig 6: Competitor key facts (Source: Rothaermel, 2015) Figure 3: PORTER FIVE FORCES ANALYSIS of BHP Billiton Bargaining power of customers is moderate as price is increasing due to increasing demand and scarcity of natural resources but bargaining power of supplier is high in terms of materials, labour, shipping, energy, and energy costs (Grant et al., 2016). Threat of new entrants is low because of restrictions and high complexity features of steel industry. Threat of substitutes is also low as nothing can replace natural resources. However; rivalry among market players is intense due to lucrative nature of industry (Perrott, 2015). Opportunities and threats Opportunities Constant expansion programs. Integrations in terms of mergers and acquisitions. Opening in the global market. Excellent innovation in marketing and product development (Gamble and Thompson, 2014). Threats Constant fluctuation in global demand. Constant rise in competition. Increasing costs. Possibility of political threats (Grant et al., 2016). Conclusion Present study shows that company is performing well by making efficient use of available resources in order to maintain their leading position in market. Overall from the environmental analysis it is clear that BHP Billiton has supported the Australian economy to a large extent through its diversified business plans. The key internal factors for the success of the company are Resources, Capabilities, and core competencies. Despite of cited aspect company is recommended to incorporate following factors in their business strategy: Suppliers are tough hurdles as it is a huge market and hence BHP has to communicate and strategize its plans to improvise business relations for better decision making. Employees are mainstay of the organisation and provide the basic support to the operations with their intellectual acumen and capacity to the organisation and hence the organisation effectively strategizes promotional plans and appraisal techniques to effectively develop employee employer relationship. Enlargements and improvisation in the local acquisition of content through superior involvement and promoting the technologies and skills regarding public infrastructural projects. References Ahmad, W.N.K.W., Rezaei, J., Tavasszy, L.A. and de Brito, M.P., 2016. Commitment to and preparedness for sustainable supply chain management in the oil and gas industry.Journal of environmental management,180, pp.202-213. de Villiers, C. and Alexander, D., 2014. The institutionalisation of corporate social responsibility reporting.The British Accounting Review,46(2), pp.198-212. de Villiers, C., Low, M. and Samkin, G., 2014. 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