Strategic Analysis Of Bhp Billiton Essay Samples

Introduction

This report is a strategic analysis and review of the strategic plans and strategy systems of BHP Billiton. To this end, the report will critically examine and review the features and elements of the 2014 strategic report of BHP Billiton and it will focus on important elements and features including the core strategic management concepts and theories as well as the elements and aspects of strategic issues and strategic management in the company. The paper will also handle the elements of the strategic environment of the firm and critique the demerger and reorganization planned by the management of BHP Billiton

Core Strategic Management Concepts in Report

According to the legendary work of Johnson, Scholes and Whittington, corporate strategy consists of three main elements:
It affects the entire organisation and all its units;
It is carried out by the top management and directors &
It covers a long-term horizon of 5 to 10 years
Corporate strategy devolves from the mission and vision of the organisation and this guide the activities and conduct of the organisation and its stakeholders in all situations. This enables a firm to define the parameters within which the firm operates and carries out its corporate and organisational planning over different timeframes and horizons.
The process of drawing strategy is about focusing on where the firm is and where the firm wants to be over a given period of time. Corporate strategy culminates in a corporate plan that is transposed to the different units and components of a firm.
In the case at hand, BHP Billiton’s central strategy is based on sustained growth and profitability and this is done through the leveraging of positive actions that are meant to create and build strong relationships with stakeholders in different aspects of the firm’s existence and activities. A stakeholder is defined as any entity within or outside an organisation that affects or is affected by the activities of the organisation.
Stakeholder sensitivity has become a central aspect of corporate strategies around the world today. This is because most firms have transcended the normal procedure of just focusing on shareholders and they are currently pursuing an approach whereby other parties affected by their activities are considered and their needs are taken seriously.
In the case of BHP Billiton, the fundamental strategic idea is to provide long-term sustained profits for shareholders through stakeholder engagement and stakeholder integration. This is done through the integration of ethics, environmental responsibility, sustainability and society engagement in their activities and processes. This has culminated in a view whereby they make sustained quests to grow and expand their operations by cautiously integrating ethical standards and sustainability rules in all units. This is done with the view of making profits over a long period of time into the future.

External Environmental Factors

First of all the external environment of the industry is steeped in the need to protect and guide the affairs and activities of the Australian environmental matters and desires. BHP Billiton is bound by Australian environmental regulations in all areas including the areas and aspects of community development and related activities that are done overseas.
This implies that Australian firms are required to set up a system of promoting a consistent system of environmental and social responsibility in overseas firms that they acquire. The implication is that the management of an Australian firm is liable for malpractices and environmental breaches that occur overseas. Therefore, Billiton BHP will have to ensure that they have the relevant systems and structures that are consistent with local laws in order to achieve desired goals and ends relating to performance and results.
In this process, BHP Billiton has various standards in the external environment that they ought to be sensitive to. And in the year under review, the main features of BHP Billiton that are of essence is to promote climate change policies that will ensure responsible production and activities. This has to be done in a way and manner that will promote social responsibility and deal with the needs and expectations of people in the various societies and communities.
Aside these pointers, there are other elements of economic importance that are relevant to the growth of BHP Billiton. They include amongst other things:
The growth of the global economy which is recovering from the global financial crisis. The implication of this is that there are growing and expanding features and activities that are usually coming up in the developed world. The developed world is growing and their economies are picking up faster. Hence, there is the opportunity to focus on better methods and improved systems of marketing. This will culminate in higher volumes of sales and better performance results;
There is a slowdown in the emerging economies like China and other intermediary economies due to the obvious glut in production and the processes of the global economy that resulted from the American economic recovery. China’s economic slowdown has far-reaching consequences and this is having a ripple effect on various markets in the emerging economies around the world.
The growing markets in the poorest countries around the world like India and Africa and this gives the opportunity for sales in these economies that were previously disregarded by BHP Billiton;
There are new specialised markets that will need specific energy products from the asset range of BHP Billiton. This allows the company to get the chance to grow and expand into these new markets and implement its asset based segmental growth and expansion.
Competitors of BHP Billiton are still pursuing regional and geographical strategies and this comes with the same challenges and difficulties in attaining and retaining focus and concentration.

Internal Environment of BHP Billiton

Internally, the fundamental elements and features of BHP Billiton’s activities and advantages lie in that they have a very strong and solid capital and revenue base. The 2014 annual reports posted a revenue of $67.2 billion and a profit of $13.8 billion. This shows that BHP Billiton has a strong financial position that can aid its expansion processes in the coming years if it decides to grow into different markets.
BHP Billiton also has an inherent strength of being a major entity that has a positive reputation of being socially and environmentally responsible. The company has strong indicators and technologies for monitoring the corporate social responsibility and sustainability strategies and activities they indulge in.
BHP Billiton is also seen to be an organisation that has a very experienced team of managers and authorities who take the most important decisions for the firm. However, it must also be pointed out that BHP Billiton is a company that is highly diversified. In spite of this, BHP Billiton has various units and product lines like aluminium that are somewhat unproductive.

Strategic Approach of BHP Billiton

Strategic focus refers to the main areas that an organisation critically integrates into its activities and processes and this is done through the integration of these pointers of strategic focus in the mission and vision of the organisation over a period of time. The strategic focus of BHP Billiton has to do with the important things which are now shaping their activities and preparing the framework for all activities and this includes:

The transition from a geographical corporate structure to a segmental asset-based corporate structure;

The integration of sensitivity to global climate change
Integration of features of consolidated sustainability and cost-cutting;
Integration of ethics and integrity in the judgements and decisions of the bank
Promotion of health and safety
Proper forecasting to eliminate risks and problems with fuel, financial risks and environmental risks.
These pointers have shaped the fundamental essence and the main activities of the company. This includes the way through which they are doing their things and all strategic business units have the obligation to ensure that all these pointers and features are central and vital in the decisions and actions they take. The process culminates in a system through which ethical standards are set up and all stakeholders and their considerations are integrated in decisions and choices. The fundamental end is that the organisation is steered in a system of responsible and thorough choices of the company.

Critical Review of the Decision to Split the Company in a Segmental Approach

Apparently, BHP Billiton is one that has a regional and geographical structure. There are numerous activities that are being carried out in different parts of the world that are meant to lead to results that include high levels of returns and better results in different aspects of performance.
It must also be recalled that the company seeks to attain lowest costs and optimal production and this implies that they will have to find a way through which costs could be cut and optimum results could be attained. A demerger will help the company in its quest for vertical integration and the achievement of best results at the lowest costs.
The demerger will also enable the different units of the firm to specialise and attain better results. This indicates that they will be able to get better operational competencies and their activities are likely to be more productive and they will gain more profits than other competitors in the different industries.

Recommendations to BHP Billiton

The paper recommends that a vertical integration and an approach towards the demerger will enable BHP Billiton to specialise and focus on specific markets and products. This will cut down costs and allow the company to pursue a strategy of vertical integration. The implication is that there will be lower costs and production will bring higher returns due to specialisation that comes with the reorganisation.
Additionally, BHP Billiton must invest significantly in change management principles and ideas if it seeks to change to the demerger approach. This is because the change is such that there will be the need for better and a more systematic approach to deal with issues and matters. This will allow them to move on systematically and learn from their mistakes in order to consolidate their gains and competencies and also eliminate errors and problems.
Finally, there must be a systematic promotion of approaches and methods for the conduct of research and the company should use a more proactive approach to detect issues with their change and merger and improve their stake when the set onto the path of reorganisation.

Conclusion

BHP Billiton has a strategy steeped in social responsibility and environmental efficiency. This has the view of achieving long-term and sustained profit for the shareholders. The company has a strong financial position and a solid reputation. It is recommended in this study that BHP Billion should pursue a demerger strategy that will be steeped in creating vertical integration and specialisation.

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