Essays on BHP Billiton Market Trends Case Study

Download full paperFile format: .doc, available for editing

The paper "BHP Billiton Market Trends" is an outstanding example of a marketing case study. BHP Billiton cases give insight into strategic management. The case is based on managerial decisions that will determine the long-run performance of BHP Billiton. Through analysis of the case, one can understand the internal environment, external environment, strategy formulation, implementation and control. The analysis shows the managerial efforts in looking for a competitive advantage in the industry. This will involve determining organisation strategy flexibility and long term commitment. This essay will analyse the BHP Billiton environment, strategies formulated and implemented that have led to current success.

Finally, the essay will give an assessment of the firm decision to the demerger and give recommendations. Market TrendsBHP Billiton is in a market where there is a growing demand for the products and limited supply globally (Connolly & Orsmond, 2011). This has BHP Billiton to be a beneficiary of the growing demand. With the emerging markets which include China and India, the company have benefited a lot. The market is in an environment where strong demand is driven by developing countries and industrialised countries.

It’ s expected that the market will have stable long-term profits margins based on long earnings growth. BHP Billiton is in a highly attractive market based on the profit perspective (Bozon, Hall & Oygard, 2005). The industry is capital-intensive making it hard to meet growing demand or causing excess supply. The costs of increasing supply are high making it hard for prices to reduce. PESTEL AnalysisPestel analysis looks at the main factors that affect BHP Billiton external operations. The factors identified have both time and financial cost to the firm. PoliticalThe industry is susceptible to political risks.

BHP Billiton has some operations in countries where there is a high degree of political instability (BHP Billiton, 2014). This involves African countries, where mining activities are in some countries, are used to finance illegal political interests. Political factors are a major threat since they can disrupt growth and reduce firm output capabilities. The major political threats are civil unrest, nationalisation and terrorism. The company also faces government policies and regulation that in some cases may act as a disadvantage. When tax set is too high, the firm profit projections are affected. Economic factorsBHP Billiton is affected by economic issues such as rising inflation, high labour costs, operating costs and other expenses.

Economic factors have a great impact on the organisation growth, expansion and profitability (Thompson & Macklin, 2009). BHP Billion depends on global economic health to determine their prices. Since the company operations are in different countries, fluctuating exchange rates is a major concern. Financial crisis leads to a fall in commodities demand leading to low prices. The company have been highly dependent on the emerging economies especially China.

China demand accounts for more than a third of the company commodities (BHP Billiton, 2014). This implies that China economy plays a major part in BHP performance. Social-cultural factorsBHP Billiton has been very ethical in their operations ensuring that they maintain biodiversity (Kirsch, 2010). BHP works in close collaboration with the local community. This involves supporting the local communities in infrastructures such as roads and housing. When venturing into a new country, the company have to ensure that they create a good relationship with the community around.

The company operations have to ensure that they include the local population and offer good working conditions. The health and safety of mineworkers at BHP Billiton are given a lot of attention (BHP Billiton, 2014). TechnologicalBHP Billiton has invested heavily in technology. Investment in technology has been a major source of competitive advantage due to reduced expenditure (Fisher & Schnittger, 2012). Technology has been a key strategic driver for company assets. The company have world-class assets that have made it easier to carry out exploration and extraction (BHP Billiton, 2014).

The industry is highly reliant on modern technology. EnvironmentSince the company deals with natural resources, it’ s guided by public policies on the environment. The company have to adhere to the emission levels. Due to climate change, governments have been introducing regulatory responses on emissions that have an impact on BHP Billiton productivity and profit levels. The organisation is committed to sustainable operations through a strategic approach to the environment (Kirsch, 2010). Legal factorsBHP Billiton is supposed to operate based on the laws of their country of operations.

When the company operations cause environmental damage it becomes liable to fines (Prno, 2013). Lawsuits are a major concern in the legal environment. Being a multinational company, BHP Billiton is supposed to ensure that they understand all laws in a given country which can affect them. CompetitorsThe industry is highly competitive with major players competing for resources. The competitors have been looking to expand their countries of operations leading to overlapping operations. There has been a shortage of mining workers leading to high competition for qualified staff. Despite the competition in the industry, prices have not been affected (Thompson & Macklin, 2009).

The major competitors in the industry are; Rio Tinto Limited, Alcoa Inc. , Vale do Rio Doce and Anglo American. Internal analysisResource capabilityBHP Billiton is highly diversified in its resource portfolio. The company have operations in different natural resources. BHP Billiton operations are in oil and gas, minerals and metals that are located in different countries worldwide. Diversification approach has enabled the company to spread risks which give it a competitive advantage. Due to their vast resources in copper, the company have been one of the world largest copper suppliers.

BHP Billiton has the largest copper mine located in Chile (Coleman, Urtubia & Alexander, 2006). Most of the company assets have been profitable and have long-term market value. Value chain managementValue chain management is a major internal organisation competency. This is due to the fact that the value chain is a major cost driver in an organisation. BHP Billiton has managed their inventory well leading to cost reduction. Most of the company final commodities are bulk requires a high cost of transportation. The company have been engaging in bulk transport.

Transport has been a major key driver in the organisation value chain. The company have also been very active in ensuring that their mining footprint is reduced. The company have trained their employees to carry out their operations with minimal harm to the environment. Due to labour shortage, BHP Billiton has been working with governments to ensure that there is an increase in training. Despite this, the company still faces shortages of mining workers. BHP Billiton has an elaborate management succession (BHP Billiton, 2014). Financial strengthBased on the company strategic report, the company have strong financial performance.

In 20014 results, the company recorded a profit of US$13.8 billion and share earnings of US$ 6.4 billion. BHP Billion had an EBIT of US$22.9 billion. The company dividend increased by 4% while net operating cash flow increased by 26% (BHP Billiton, 2014). This is an impressive financial performance for the company. The results show that the company is in a strong financial position. BHP financial management is a core internal competence.

References

Barney, J. B., & Clark, D. N. 2007, Resource-based theory: Creating and sustaining competitive advantage. Oxford: Oxford University Press.

Bartlett, C., & Ghoshal, S. 2013, “Building competitive advantage through people,” Sloan Mgmt. Rev, Vol.43, no.2.p.34-41.

Bozon, I. J., Hall, S. J., & Oygard, S. H. 2005, “What’s next for Big Oil?” The McKinsey Quarterly, Vol.2, no.2, p.94-105.

BHP Billiton, 2014, Strategic Report 2014, Viewed 13th April 2015, http://www.bhpbilliton.com/home/investors/reports/Documents/2014/BHPBillito nStrategicReport2014.pdf

BHP Billiton, 2014, 2014 Annual General Meetings, Viewed 13th April 2015, http://www.bhpbilliton.com/home/investors/reports/Documents/2014/140925_20 14AnnualGeneralMeetingsChairmansLetter.pdf

Breen, M. 2005, “How to manage a demerger,”Accountancy, Vol.135, no. 1340, p. 70-71.

Coleman, R. G., Urtubia, H. E., & Alexander, D. J. 2006, A comparison of BHP-Billiton’s Minera Escondida flotation concentrators. In Proceedings of the 38th Annual Meeting of the Canadian Mineral Processors, Ottawa, Ontario, Canada. p. 17-19.

Coyle, B. 2000, Mergers and acquisitions, Global Professional Publishers.

Connolly, E., & Orsmond, D. 2011, The mining industry: from bust to boom. Economic Analysis Department, Reserve Bank of Australia.

Fisher, B. S., & Schnittger, S. 2012, Autonomous and remote operation technologies in the mining industry: Benefits and costs. BAE Report, p.12.

Hoskisson, R. E., Hitt, M. A., Wan, W. P., & Yiu, D. 1999, “Theory and research in strategic management: Swings of a pendulum,” Journal of management, Vol.25, no.3, p.417-456.

Kirsch, S. 2010, “Sustainable mining,” Dialectical anthropology, Vol. 34, no.1, p.87-93.

Panda, B., & Rao, P. H. 2012, “Corporate Restructuring: Demerging Impact,” SCMS Journal of Indian Management, Vol.9, no.1, p.80-88.

Priem, R. L., & Butler, J. E. 2001, “Is the resource-based “view” a useful perspective for strategic management research?” Academy of management review, Vol.26, no.1, p.22-40.

Prno, J. 2013, “An analysis of factors leading to the establishment of a social licence to operate in the mining industry,” Resources Policy, Vol.38, no.4, p. 577-590.

Singh, R., Bhowal, A., & Bawari, V. 2009, “Impact of Demerger on Shareholders’ Wealth,” Enterprise Risk Management, Vol.1, no.1, p.44-58.

Thompson, P. A., & Macklin, R. 2009, The big fella: the rise and rise of BHP Billiton, Queensland Narrating Service.

Download full paperFile format: .doc, available for editing
Contact Us