Strategic Analysis Of BHP Billiton: Controversies, Criticisms & Environmental Essay.

Task 1 

Research what strategies has been deployed by the comp any, and explain How? Why?

• Research areas

• Mission, vision, core competences

• Successful Strategies deployed in the past

• Current strategies

There have been many criticisms of the business practices that company h as pursued in recent years. Describe TWO of these controversies and outli ne the outcomes.

• Focus on the past strategies / tactics which were criticised

The criticisms may comes from various stake holders, such as competitors, employees, customers, suppliers, communi ties and others, media journalist, industry experts, academi c professionals etc. 

Perform an environmental analysis for the involvement of the organisatio n in the context of the industry, it operates in – what are the main opport unities & threats?

• Analysis Tools

• General Environments (PESTEL) analysis

• Specific Environments analysis

• Porter’s five force analysis

• Resource Based Model analysis

• SWOT

Describe the organisational culture or leadership style wi thin the organisation.

• Research areas

• Core values/ competencies of the company

• CEOs who inspired the employees, developed / implem ented the strategies successfully and created the compan y’s unique culture.

Strategic Development of BHP Billiton

BHP Billiton, commonly known as BHP, is the largest natural resources company in the world. The company is headquartered in Melbourne, Victoria, Australia. It was formed in the year 2001 by merging Billiton PLC and BHP Limited. The dual structure if the structure of the company comprising of BHP Billiton Limited and BHP Billiton PLC operates as one business which has combined assets known as BHP Billiton, however, it legally operates as separated public companies (BHP, 2018). Both the entities have the same management team and board of directors. There are seven business units of the company which are energy coal, petroleum, aluminium, diamonds & specialty products, stainless steel materials, carbon steel materials and base metals. This study will contains the strategic development of the organisation along with the different controversies and criticisms that have been faced by the company regarding their operations. The study will full conduct an external analysis with the help of tools such as PESTLE and SWOT followed by the discussion about the culture of the organisation.        

1. Mission and Vision Statement

The mission statement of BHP Billiton is formed with the objective to become a company which is the choice of every person. They aim create a value which is sustainable for their employees, customers, shareholders, business partners, suppliers, host communities and their contractors. The vision of the company is to develop, discover and converse the natural resources into making their company more profitable and to develop solutions which are focused on the market and the customer (Epstein, 2018). The core competencies of the company are their experience in the natural resource sector, the size of their company and their diversified portfolio of their assets.

1. Past and Current Strategies of the Company

The strategic drivers of the company such as their financial strength, operations, assets and discipline are what leads them become a world class company and pushes them to perform better so that they may be able to secure a good position in the market. One of the strategy which is used by the company is the integrated cost leadership strategy of Porter. This strategy states that the company would produce good quality goods at a lower cost (Cataldo and McQueen, 2014). They make a reduction in their operations cost by making halts in their investments and sharing their skills and the knowledge that they possess about the industry. The company also focuses on their profits through their operations. The CEO of BHP, Andrew Stewart Mackenzie have focused on six key areas which would help them to further grow in the future. The six key areas are technology, development of the major projects, cost efficiencies, increase the flexibility & value, limit the risks & get more returns and exploration.      

Controversies and Criticisms Faced by BHP Billiton

BHP Billiton have been subjected to many criticisms and controversies over the years regarding their environmental issues, labor relations and several other reasons. Two of the criticisms which have been highlighted are as follows.

1. Environment Safety

BHP caused much damage to the environment and endangered the safety of the people around their mines for which they had to face many criticisms. In the year 2015, a containment dam which was a joint venture of BHP and Vale and was operated by Samarco, burst and a huge quantity of mining waste was released in the surrounding areas which killed several people and contaminated the River Doce and several water supplies of more than 200 towns (Landén and Malmberg, 2016). This incident was the reason that BHP faced several backlashes from environmentalist and the common people due to which their identity was affected.

1. Labor Issues

BHP also faced serious issues with their labours of several mines due to many reasons which resulted in strikes from the workers. In the year 2006, the workers of the Chile copper mine went in a 25 days strike before they could reach an agreement with the company for an increase in their wages and their bonuses (McKnight and Hobbs, 2013). In the same way, the workers of the nickel mine in Colombia went on a four week strike after which they were able to get an offer from the company regarding contract renewal which was acceptable to the workers. The company faced more controversies other than these two regarding their operations.  

To get a deeper understanding about the external environment it is important to conduct a pestle analysis which will analyse the different external elements which would create an impact on the strategic ideas of the company.

1. PESTLE Analysis

Political factors – The political factors can have a huge impact on the key drivers of the company such as their growth and developments, their assets and their operations. The company operates globally and hence is highly affected by any political risk that might occur in any country. The company has committed a major part of their capital to the development projects and exploration in those countries where there is political instability (Morgan, Gomes and Perez-Aleman, 2016). A few examples of those countries are Western Africa, Kazakhstan and others. The political risks which arise in these countries are terrorism, lease permits, changes in the policy of the government, civil unrest in the country, nullifying of the existing contracts by the government and nationalization. The taxes that are increased or introduced by the government can also affect the company to a great deal. The increase in the 5% tax in Chile for incurring taxable income from the mining companies have emerged as an uncertainty for the profit projections of BHP.

Environmental Analysis of BHP Billiton

Economic factors – BHP is highly influenced by the economic factors such as inflation in labor costs, material costs, operations costs, energy costs and exploration expenses. The inflation or increase in these costs have a serious impact on the different plans of the company such as their expansion, profitability and development projects. The company is dependent on the prices of the global commodities which are associated with the global economy (Lodhia and Martin, 2014). Due to the different changes that occurs in the economy, the company has to face the fluctuations of the value of currency and the economic risks that are present in the industrial sectors of the world. If any weakness exists in the economy of the world then the demand for the commodities could fall all of a sudden resulting in the rise in supply and the decrease in prices which would impact the profitability of the company.

Socio-cultural factors – The socio-cultural factors have a deep impact on the relationships between their stakeholders and their operations. Due to this relationship the company has to contribute to the support of the local communities where they were based and also has to provide resources for various infrastructure facilities such as buildings, schools and others (Mayes, 2015). The different projects of the company concerning their mining and developmental activities required social approvals which can affect the profitability and the development costs of the company. Several steps have been taken by the company to elevate their reputation and brand name by keeping their focus in the working conditions of the workers and the quality of life in the mines.

Technological factors – Technology is an important part of the operations and exploration process of BHP. Factors such as exploration, discovery of energy and mining assets and efficiency of mining is highly reliable on technology. Therefore, the company has to invest a large portion of their money on the technology and have to continually upgrade themselves to match with the new and evolving technologies in their sector (Nappi, 2013). All the factors of technology affects two areas of BHP that are considered strategically important, which are world class assets and project pipelines.

Environmental factors – BHP is a natural resources company, therefore it is affected highly by the rules and policies which are made in favour of the environment which includes several regulations such as the Asia-Pacific Partnership on the clean development and climate, the Kyoto Protocol of 1997, the European Union Emission Trading System, renewable and recyclable energy and clean emissions (Schoenberger, 2016). The company receives several pressures from various NGOs and environmental groups regarding their operations. The company tries to follow a zero harm policy which is done so that none of their operations harms the environment in any way and attempts to make sustainable development in the environment. The company has also made a commitment to make a reduction of 5% in the emission of greenhouse gases which is done through their operations.

PESTLE Analysis of External Environment

Legal factors – BHP Billiton faces much risk from the legal factors that exist regarding their operations and their company. There are various legal obligations that the company has to keep in mind to operate successfully. However, the company has also faced many legal issues in their tenure. The company has lost an important ruling by the Federal Court in Australia regarding the infrastructure of rail access for two mimes of iron ore in Western Australia (Lusty and Gunn, 2014). This lawsuit was first brought in by their competitor Fortescue Metals Groups which is a small iron ore company. They brought this lawsuit in the Australian Competitive Tribunal. The ruling by the Federal Court would have a great impact on iron ore productions in the region and would also create a delay in the future decisions of investments in the industry. The company also faced legal issue regarding the damage that they had caused in the operations of Southwest Copper in Arizona which created a great impact on the final performance.               

1. SWOT Analysis

SWOT Analysis is conducted to identify the strengths, weaknesses, opportunities and threats that are possessed by the company.

The organisational culture of BHP revolves around eight dimensions which are people orientation, team orientation, stability, innovation, corporate rituals, organisational stories, material symbols and evaluation. People orientation is taking decisions which would create a positive impact on the employee and also that the company would consider the needs of their people before they would make any decision. Team orientation is the delegation of work in the company among the teams rather than individually so that the people are able to develop their skills and perform better to succeed in achieving their goals (Brueckner et al., 2013). Stability is to maintain a stable environment in the company during any downfall and to ensure that they are able to adopt sustainable practices among the operations of their company. Innovation is motivating the employees of the company to take calculated risks and develop new & innovative ideas which will help to enhance the productivity of the company. Corporate rituals is making the employees understand the importance of the values and the goals on which the company stands and to work accordingly so that they are able to fulfil those goals. Organisational stories are the narratives which are often given by the founders or the CEO of the organisation regarding the significance and the importance of the establishment of the company and the need for a stable and fruitful organisational culture (Babnik et al., 2014). Material symbols are the different ways that the employees bond with each other and the different ways that the company makes the employees feel a part of the company. Evaluation is letting the employees have a free scenario which motivates them to give new ideas and support innovation and also enable them to live and work freely in the organisation. These dimensions help in the formation of a positive organisational culture which will enable a good working space for the employees.         

Organizational Culture and Leadership Style

Conclusion

Thus, it can be concluded that the company develops strategies for the fulfilment of their vision and mission and to develop their operations so that they are able to establish a good position in the market. However, there are certain controversies that are faced by the company which has serious effects on the brand of the company. These controversies arise in aspects of labor, environmental damage and also from stakeholders, suppliers and others. These controversies needs to be addressed for the better functioning of the organisation. The PESTLE analysis helps to understand the different scenarios based on external factors of the environment. Similarly the SWOT analysis helps to determine the strengths, weaknesses, opportunities and threats of the organisation. Finally, the organisations needs to follow certain dimensions to establish a good working culture in the company.   

References

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