The paper "BHP Billiton Strategic Choices" is a great example of a business case study. Strategic management goes beyond coming up with a strategic plan (Eden & Ackermann, 2013). Analysis of BHP Billiton case and the strategic report gives several strategic concepts. The core strategic management concept in BHP Billiton case is the achievement of competitive advantage (BHP Billiton, 2014). The analysis shows strategic issues that BHP Billiton is addressing to attain competitive advantage includes; demergers, operational efficiencies, diversification, human resource management and socially responsible behaviours. This essay will analyse the strategic management of BHP Billiton through critically analysing the core strategic management concepts in the case and strategic issues management have to address.
This will be achieved by carrying out external and internal environmental analysis and review strategies that led to BHP Billiton strategic growth. Finally, the essay will carry out an assessment of BHP Billiton’ s 2014 decision to split. External analysis Industry BHP operates in an industry with a strong demand for its commodities. This has made the mining and oil industry to record profits over the years. Emerging economies have been a major boost to the industry.
BHP Billiton has been depending on China growing consumption due to industrialisation. Metal and mining industry is capital intensive for the company to meet the market demand. This implies that it takes several years to come up with a supply that will lead to reduced prices. The increased demand by China is a great opportunity for BHP Billiton (Connolly & Orsmond, 2011). Porter 5 forces analysis Porter 5 forces analysis will help in determining the competitive external environment that faces BHP Billiton. Bargaining powers of the buyers The purchasing powers of the buyers are low to moderate in the industry.
BHP Billiton has the capability to pass labour, shipping and other costs to buyers in most of their products. There are low supply and high demand in most of the company products. The high demand for company products is driven by developing countries such as China. With the emerging economies, there is a high demand for materials due to infrastructure being set up. This makes it possible for BHP Billiton to set high prices without losing customers.
BHP Billiton is in an industry where there are no substitutes for most of their products. The availability of few substitutes for the BHP Billiton products reduces buyers bargaining power. Due to the company ability to create a long-term relationship with buyers, they have been able to achieve more powers (Connolly & Orsmond, 2011). The situation has lowered the bargaining powers of the buyers. Bargaining power of suppliers Suppliers have high powers as compared to BHP Billiton. The company have faced a strong impact of bargaining power of the suppliers in shipping costs, energy, materials and labour.
The overall costs for the suppliers have been increasing. There are few substitutes for the suppliers that have given them higher bargaining power. The mining industry requires replacement of parts for the machinery that in some cases faces a shortage. The mining industry has been facing labour shortage. There is few experienced staff in the mining industry making suppliers of labour more costly. The costs of exploration have been rising as well as the labour costs (Connolly & Orsmond, 2011).
Ballard, C., & Banks, G. 2003, “Resource wars: the anthropology of mining,” Annual review of anthropology, Vol.32, no.1, p.287-313.
Barney, J.B. 2007, Gaining and sustaining competitive advantage, (3rd edition). Upper Saddle River, NJ: Pearson Education.
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.
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
Billiton, B. H. P. 2008, BHP Billiton Our Businesses: Worsley Alumina. BHP Billiton.
Breen, M. 2005, “How to manage a demerger,”Accountancy, Vol.135, no. 1340, p. 70-71.
Brown, T. J., Bide, T., Walters, A. S., Idoine, N. E., Shaw, R. A., Hannis, S. D., ... & MacKenzie, A. C. (2011). World mineral production 2005-09. British Geological Survey.
Connolly, E., & Orsmond, D. 2011, The mining industry: from bust to boom. Economic Analysis Department, Reserve Bank of Australia.
Eden, C., & Ackermann, F. 2013, Making strategy: The journey of strategic management. Sage.
Floris, M., Grant, D., & Cutcher, L. 2013, “Mining the Discourse: Strategizing During BHP Billiton's Attempted Acquisition of Rio Tinto,” Journal of Management Studies, Vol.50, no.7, p.1185-1215.
Freeman, R. E. 2010, Strategic management: A stakeholder approach. Cambridge University Press.
O'Shannassy, T. 2008, “Sustainable competitive advantage or temporary competitive advantage: Improving understanding of an important strategy construct,” Journal of Strategy and Management, Vol.1, no.2, p.168-180.
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.
Shankleman, J. 2009, Going global: Chinese oil and mining companies and the governance of resource wealth. Woodrow Wilson Center: Washington.
Singh, R., Bhowal, A., & Bawari, V. 2009, “Impact of Demerger on Shareholders’ Wealth,” Enterprise Risk Management, Vol.1, no.1, p.44-58.