Executive Summary

BHP Billiton is a dual listed organisation that is a world leader in the resources
industry. Operating in the metals, mining and petroleum industry, the organisation is
involved in the processing of gas, minerals and oil and have their customers located
throughout the world. The Global headquarters of BHP Billiton is located in
Melbourne, Australia. This research includes the analysis of the minerals and mining
organisation BHP Billiton and address the requirements of environmental analysis
and balanced scorecard analysis for them. Based on the findings, this report also
discusses and recommends the appropriate Porter’s Generic Strategy for the BHP
Billiton to adopt. Of the three generic strategies developed by Porter, it is
recommended that BHP Billiton follows the differentiation strategy. BHP Billiton must
work towards developing unique products for the different customer segments.
Already has a clear competitive advantage in the market since it is one of the oldest
and largest Mining and Minerals Organisation in Australia. The differentiation
strategy would require the development of Advertising and marketing campaigns and
should be adopted by BHP Billiton as the marketing strategy two emerge and stand
out from the advertising noise existing in the market. BHP Billiton needs to
differentiate itself and its brand from all the competitors by investing in innovation
and invention of new technologies for mineral extraction. This will allow the
organisation to be the first entrant in the market and regular expenditure on the
research and development initiatives will also allow the company to come up with
new products and services that are able to fulfill the demands of their customers
better.
Contents
Executive Summary......................................................................................................1

Introduction...................................................................................................................3

Research methodology.................................................................................................3

Data collection...........................................................................................................3

Data analysis.............................................................................................................4

Ethical considerations...............................................................................................4

Findings and implications of findings............................................................................5

Environment of BHP Billiton......................................................................................5

SWOT analysis......................................................................................................5

Porter’s five forces analysis...................................................................................7

PESTEL analysis.................................................................................................10

Balanced Scorecard for BHP Billiton......................................................................12

KPIs for strategic objectives....................................................................................13

Conclusions and recommendations...........................................................................15

Recommended Porter’s generic strategy...............................................................15

References.................................................................................................................16
Introduction
BHP Billiton is a dual listed organisation that is a world leader in the resources
industry. Operating in the metals, mining and petroleum industry, the organisation is
involved in the processing of gas, minerals and oil and have their customers located
throughout the world. The sales and marketing of BHP Billiton are managed through
their offices in Houston, United States and Singapore. The Global headquarters of
BHP Billiton is located in Melbourne, Australia. They operate as a dual listed
company structure and has to Parent companies with the name of BHP Billiton
Limited and BHP Billiton Plc. The corporate purpose of BHP Billiton is to create
shareholder value in the long term by constantly working towards discovering,
developing, acquiring and marketing natural resources throughout the world. BHP
Billiton is among the world’s top producers of major commodities, including iron ore,
metallurgical coal and copper. They also have substantial interests in oil, gas and
energy coal. This is achieved by following their strategy : “to own and operate large,
long-life, low-cost, expandable, upstream assets diversified by commodity,
geography and market”. This research includes the analysis of the minerals and
mining organisation BHP Billiton and address the requirements of environmental
analysis and balanced scorecard analysis for them. Based on the findings, this report
also discusses and recommends the appropriate Porter’s Generic Strategy for the
BHP Billiton to adopt.

Research methodology
The research methodology is the method and approach followed for carrying out a
study. The detail research methodology and its various constituents are explained in
this section.

Data collection
This research requires the collection of data and information about the organisation
BHP Billiton and address the requirements of environmental analysis, generic
strategy recommendation and balanced scorecard analysis of the organisation. For
this, a desk research has been conducted with the help of secondary data. The
secondary sources of data include the previously published journals, books, articles,
research papers and other scholarly writings that are compiled on BHP Billiton or the
related topics to this research. The secondary data is the data that has been
gathered and compiled originally for the purpose of some other research. This data
was accessed through the electronic and non-electronic forms and was compiled to
carry out the analysis and draw inferences and meaningful conclusions from it.

Data analysis
Both qualitative and quantitative data analysis techniques have been employed in
conducting this research. The quantitative data includes the information that can be
measured and expressed in the form of numbers. The previous years' performance
of BHP Billiton was accessed with the help of their annual report in order to
understand the position of the organisation in the industry at present. The qualitative
information is the information that includes the description that cannot be computed
are expressed through mathematical calculations and numbers. The qualitative
classification of the objects and information is done on the basis of its attributes and
the properties. Subjective approach is adopted for analysing the qualitative data and
this information has been analysed to increase the depth of understanding and for
developing the knowledge regarding the organisation and the industry in which they
operate. The quantitative information is more objective and statistical in nature.
Structured analysis is conducted with the help of the quantitative data gathered with
regard to the performance of BHP Billiton and their internal and external
environment.

Ethical considerations
Reliability is considered to be the measure of the consistency of information or the
test scores included in it. The ability to repeat the research findings for a given study
is the measure of its reliability. Validity if the determination of the accurate
measurement of the information presented in a research. All measures are taken to
ensure that the research and the information communicated through it is reliable and
valid. Only authentic and reliable sources of information have been used for
gathering the data related to the research and while it is important for the study to be
reliable, the reliability alone is not sufficient. It is important that the research is valid
for the current day and age and provides information that is relevant. For this only
the current sources of information and the articles and researchers that have been
published on or after the year 2010 are included in this study. Measures are taken to
clearly define the goals and objectives of the study and state the expectations from
the research so that the assessment can be compared to them and ensure that the
research fulfils the goals and remains relevant to the readers.

Findings and implications of findings

Environment of BHP Billiton

The business environment of an organisation comprises of the various internal and
external factors that directly or indirectly influence the working and the performance
of the company. BHP Billiton is the leading Australian organisation operating in the
industrial metals and mineral industry. The organisation has completely redefined
mining and business operations and is one of the largest organisation listed on the
Australian securities exchange. It is an Anglo-Australian company that was formed
after the merger of BHP and Billiton that were two independent mining organisations
that were established in the 1800s. Currently, BHP Billiton is headquartered in
Australia and the operations of this organisation are spread out to more than 25
countries. The workforce constitutes more than 65,000 employees and the
organisation is one of the leading companies not just in the metals and mining
industry but in all of Australia. The environment analysis and scanning for BHP
Billiton are conducted by using three distinct frameworks and tools for strategic
analysis of the organisations. This includes the SWOT analysis, the Porter's five
forces analysis and the PESTEL analysis. Each of these tools provides information
about the internal and external environment of BHP Billiton to carry out the analysis
and recommend a generic strategy to them that is best suited according to their
operations.

SWOT analysis
The swot analysis is a tool used for strategic planning by the organisation that helps
in identifying the internal strength and weaknesses and external opportunities and
threats for a company. This tool is used to carry out a situation analysis for BHP
Billiton and to identify the strengths, weakness, opportunities and threats that the
organisation is presently facing in terms of their business environment.

Strength Weakness
  Excellent returns on the capital
expenditure
 Great planning and execution of
the new projects
 Strong flow of cash and resources
in hand
 Excellent supply chain of
distributors and dealers
 Excellent performance in the new
market
 Successful record of the
development of new products
 Constantly innovating and
investing in research and
development
 Extremely skilled workforce with a
low turnover rate
 Investment in training and
development of the employees
Opportunities
 Core competencies of BHP Billiton
 Government agreements are
leading to opening the new
markets
 Reduction in the inflation rate is
resulting in stable market
 New policy of taxation will
increase profitability
 Increase in customer spending as
the economy recovers from the
recession
 Commitment to a reduction in
greenhouse gas emission
 Greater environmental
responsibility resulting in
enhancing brand image
 Organisation operating in the
stable and democratic countries
 Implementation of new tools of
media and promotion
 Increasing customer outreach
Porter’s five forces analysis
The Porter's five forces analysis is another very effective Framework that provides a
holistic strategic view of the external environment and the competitive forces
contributing to its. Michael Porter developed this framework to analyse the level of
 Poor demand forecasting
 Unsuccessful integration with the
organisations after Merger
 Poor results of marketing
initiatives
 High days inventory in comparison
with the competitors
 Require investment in Innovation
and new technology
 Unclear positioning and USP
 Require improvement in long-term
financial returns
 Extremely weak corporate
communication
 Poor public relations
Threats
 Increasing cost of the suppliers
 Issues related to labour staffing
 Unfavourable ruling by the
Australian government for
infrastructure access
 Presence of lobbying and
environmental protection
 Relying on China for supplying
natural resources
 Not practising financial discipline
to achieve profitability
 New environment regulations after
Paris agreement
 Changing buying behaviour of the
customers
 Exposed to currency fluctuations
 Intense competition impacting the
profitability
competitiveness in an industry and how attractive or unattractive it is for an
organisation to carry out business. The five forces analysis for BHP Billiton is carried
out below. This analysis takes into consideration all the sources of strength and the
competitive environment that have an impact on the organisational working and their
ability to achieve their long term and short term goals and objectives.

 Bargaining Power of Buyers

BHP Billiton is easily able to pass on an increase in the prices of the goods and
services provided by them since there is an increasing demand for them in the
market and the natural resources are only present in a limited amount. When it
comes to the quantity at which BHP provides the minerals to its customers, it is
difficult to find a substitute organisation that will be able to fulfil that demand. BHP
also works on maintaining good customer relationships and therefore the changes in
the prices of the commodity have little to no impact on the customer base of the
company. It is expected that the financial position of the organisation will continue to
remain strong in the coming years as well since the current economic and political
conditions are fairly stable.

The buyers are constantly trying to maximize their benefit by trying to obtain as much
as possible at the minimum price. This pressure is experienced by all organisations
but since BHP used base of customers that are loyal and dedicated buyers, it does
not face a very high pressure or bargaining power from its customers. Therefore, it
can be stated that the bargaining power of the buyers of BHP Billiton is moderate to
low.

 Bargaining Power of Suppliers

The suppliers of BHP Billiton have exerted a lot of pressure on the organisation in
the past. Due to the increase in the cost of labour, shipping, energy and the
materials that are sourced by them, BHP faces a significant pressure in the form of
the bargaining power of the suppliers. The current position of BHP Billiton is also
weak and they are not in a position to counter the increasing pressure that the
suppliers are able to put on them. There are numerous different suppliers that
provide similar metals and Minerals but having the suppliers in the dominant position
will lead to an increase in the margins for the company. The powerful suppliers of
BHP Billiton can make use of the power of negotiation to get higher prices from
them. By having a high bargaining power, the suppliers of BHP Billiton will lower the
profitability of the organisation and also reduce the efficiency of the supply chain.

 Threat of New Entrants

The new entrants in any industry bring with them innovative technologies and means
to carry out the work and also enhance the pressure on the existing organisations
since they need to develop new strategies to ensure that their customer base
remains loyal and intact. There is moderate pressure faced by BHP Billiton when it
comes to the threat of new entrants. BHP Billiton is an established organisation and
capacity at which they operate in the industry is unmatched. Any organisations
willing to enter the metal and mineral industry will have to significantly invest in the
infrastructure and while BHP Billiton already enjoys the economies of scale, any new
organisation will not be able to match with them in terms of the prices and the variety
of services offered. BHP Billiton also owns the assets in the form of iron ore and
mineral Ores and the quality and location of rest of these areas will be lower than the
once owned by them. There are significant barriers to the entry of any new
Organisation in this industry and therefore the threat of new entrants for BHP Billiton
is moderate to low.

 Threat of Substitutes

A substitute is a product or service that is able to meet the needs of the customers in
different ways. The substitute has a direct impact on the profitability of the business.
Any product or service that offers a uniquely different value proposition to the
customers as compared to the ones offered by BHP Billiton will prove to be a threat
in the form of a substitute. BHP Billiton is a service-oriented industry and not just
product oriented. They thoroughly understand the needs of their customers and the
switching cost of the customer when moving from one organisation to the other are
also significant. The materials and Minerals provided by BHP Billiton to their
customers is not much and the raw materials and products offered by them do not
have many substitutes in the market. BHP Billiton already has an extremely
diversified portfolio including a variety of different acids in the form of natural
resources. BHP Billiton is in an extremely strong position when it comes to facing
any substitute that may be present or entering the market because of a diversified
portfolio and the rich reserves of the company.

 Rivalry among Competing Sellers

The existing organisations operating in the mining and oil industry are constantly in
competition in order to gain access to the existing natural resources across the
world. Because of the intense rivalry, the prices of the products and services offered
by BHP Billiton are often driven down which results in a decrease in the profitability
for the company. The metals and mineral industry is also extremely competitive and
although BHP Billiton is one of the top performing organisations of the world, this
increasing competition might take a toll on the long-term profitability for the company.
BHP Billiton is constantly working to develop a substantial differentiation in their
product and service offerings to shield itself from the existing rivalry. They have also
built a significant scale to provide them with the necessary edge above their
competitors and they are also constantly collaborating with the existing organisation
and undergoing strategic mergers and acquisitions so that they can maintain and
increase their market size and customer base instead of simply competing with small
organisations in an existing market.

To conclude, can be stated that the overall attractiveness of the metal and mineral
industry in which BHP Billiton operates is moderate but since BHP Billiton already
has an established base of customers and has been operating in this industry for a
very long time, they have gained access to a number of resources as a key player
and therefore the organisation is not affected but by the strong forces that increase
the competition and work towards lowering the profitability for the organisation.

PESTEL analysis
The PESTEL analysis is used to understand and analyse the Macro environment of
an organisation and an industry. The various factors that are taken into consideration
for carrying out this analysis are the political factors, economic factors, socio-cultural
factors, technological factors, environmental factors, and legal factors. All of these
factors together constitute the external environment of a company and their
significantly impact the operations of any organisation operating in an industry. The
PESTEL analysis for BHP Billiton and for the materials and mining industry is carried
out below.
  Political factors

BHP Billiton operates globally and therefore there are a number of political factors
that significantly impact the operations of the company. They are dependent on the
political relations of Australia with the other countries to get the licence to operate in
those location and the political conditions also impact the growth option and the
project pipelines for BHP Billiton. The government and regulatory bodies have the
power to decide on the rate of interest that directly contribute to the inflation for that
region. This impact the profit projections for the company and also influence their
immediate and long-term profitability.

 Economic factors

The economic factors that impact the operations of BHP Billiton in the materials and
Mining industry and in the global scenario are the inflation and the changes are the
cost incurred by the company for their operations and for sourcing the raw materials.
These include the cost of labour, the cost of energy, expenses borne by the
company for exploration and the general cost of operation for the company for any
location. Any increase in these costs has a direct adverse impact on the profitability
of the company. BHP Billiton is dependent on the various different nations not just for
generating the revenues but also for the natural resources and the mines that are
owned by them.

 Socio-cultural factors

BHP Billiton faces a considerable amount of challenges due to the fighting of

countries and cultures that they engage with to carry out their business operation the
different demographics and skill level of the population along with the class structure
and the hierarchy followed there has to be carefully understood in order to efficiently
operate and manage the people. BHP Billiton is susceptible to a lot of risks and
challenges when it comes to the management of the socio-cultural factors since they
not only impact the finances of the company but also influence their long-term health.
BHP Billiton required a lot of approval in order to carry out their mining and extraction
activities. The new development projects also require the approval from the
government as well as the local people. BHP Billiton needs to take into consideration
the factors that help in building a reputation in the market and also work towards
enhancing the work conditions for their employees to take care of all the socio-
cultural factors influencing their business.

 Technological factors

As an organisation operating in the minerals and Mining industry, technology has a

significant role in ensuring the profitability and efficiency of the company. The
exploration and mining activities conducted by BHP Billiton are heavily reliant on the
technology. BHP Billiton significantly invests in the research and development of the
latest technology and is known as an organisation that focuses on innovation. The
projects and their success is determined by the technical factors and the delivery of
world-class products and services is also dependent on the technology implemented
by BHP Billiton.

 Environmental factors

BHP Billiton is a natural resources organisation and therefore all their operations are
impacted by the environmental guidelines and public policy. All the major protocols
and regulations laid down for the organisations by the government and other
regulatory bodies contribute to forming the environment for BHP Billiton. Although
the organisation promotes their policy of zero harm and constantly works to ensure
that they follow the sustainable development principles, operations of BHP Billiton
disturb the natural environment and involve extraction of minerals from their source.
BHP Billiton constantly works towards reducing the greenhouse gas emissions of the
company and has succeeded in it for the past few years. The sustainability report
published by BHP Billiton every year an overview of all the actions taken by the
company to take care of the environmental factors impacting their operations.

 Legal factors

The legal factors also pose a significant risk to BHP Billiton as they form a
paramount component of their day-to-day operations. BHP Billiton has faced a
number of lawsuits in the past by both individuals and organisations because of the
impact that they have on the ecology and environment. The Organisation was able to
defend itself in some cases and was found to be guilty in others. In addition to this,
BHP Billiton also have to take care of the legal compliance with the antitrust laws,
the laws against discrimination, copyrights patents and the law for intellectual
property protection, employment law, law for health and safety of the employees,
consumer protection law and the rules and regulations for data protection to be
followed by the organisations.

Balanced Scorecard for BHP Billiton

The balanced scorecard technique is used for performance measurement by the
organisations and helps in aligning the business activities with the long-term mission
and vision of the company. It adds value to the business and is used for strategic
planning and Management and for enhancing the performance system of the
company. The balanced scorecard can also be used for structuring the business
activities and improving the internal and external communication for the company my
constantly monitoring their performance and measuring them against the strategic
goals. The preparation of a balanced scorecard for BHP billiton would require
analysing and listening the activities of the organisation on the following four
perspectives.

 Financial perspective
 Customer perspective
 Internal business perspective
 Learning and growth perspective

All these perspective are listed in the four quadrants of a 2 by 2 matrix to determine
the broad guidelines for BHP Billiton and to prepare and compile the balanced
scorecard for them. The listing of the critical business perspective and the strategic
objectives for each of them is presented in the grid below.

Financial perspective Customer perspective

 Working towards maximizing the
profitability of the company.
 Increasing the growth percentage
for sales and net profit for BHP
Billiton.
Internal business perspective
 Planning, designing and
development of new products and
services by the company.
 Improving the marketing activities
 Expanding the customer base for
the company to increase their
market share.
 Improving customer service by
focusing on the specific market
segments.
Learning and growth perspective
 Working towards providing an
improved work-life balance to all
the employees.
 Designing a customised plan for
 conducted by BHP Billiton to the pay, benefits and personal
enhance the image and the growth for each member of the
effectiveness of the campaign. organisation.

KPIs for strategic objectives

The key performance indicators are the relevant measures that the organisations
can use for assessing their state of achievement of the developed goals and
objectives. The long-term objectives for each of the four perspectives identified in the
balanced scorecard technique for BHP Billiton have been designed in the previous
section. This section comprises of the key performance indicators that can be used
to analyse whether the organisation has been able to successfully achieve these
objectives and strategic goals or not.

 Financial perspective

The profitability of the organisation can be measured in terms of the net profit margin
for them which defines the bottom line of the company. The gross profit margin and
the overall profitability in terms of sales and cost of sales for BHP Billiton can also be
measured by making use of the various financial ratios for the calculation of liquidity
and profitability of the company. The growth percentage can be directly measured
and compared with the help of the previous performance of the organisation. BHP
Billiton must work towards utilising their assets to attain maximum profit and also
maintaining the right mix of liabilities and assets to ensure that the liquidity ratio of
the organisation is balanced.

 Customer perspective

The translation of the mission of the organisation towards service of their customers
is analysed with the help of the customer perspective in the balanced scorecard. The
time, quality of products and services, the performance of the delivered products and
services by the company and the cost incurred by the customers are the four
parameters on which the customers assess the performance of the company. In
order to expand their customer base, BHP Billiton needs to ensure that the offer a
fair competitive price of the products and services and they should reduce the
response time taken for their customers. The customer acquisition model currently
being followed by the organisation should also be analysed to find any lags or
loopholes and they should work towards providing excellent after Sales Service by
customising their service provisioning as per the specific market segments being
targeted by them.

 Internal business perspective

The organisation also needs to focus on their internal operation so that they are able
to operate efficiently and meet all the needs of their customers. The internal
operations perspective of the Balanced Scorecard is significant for the organisation
for the development of control measures that ensure operational efficiency for the
company. BHP Billiton needs to constantly work on designing and developing new
products and services so that the ever-changing and dynamic needs of the
customers can be fulfilled by them. They also need to reassess the marketing plans
and activities currently being carried out in the market since their efficiency is not up
to the mark.

 Learning and growth perspective

Learning and growth perspective of BHP Billiton is the one that allows the
organisation to constantly improve and add value to their service offerings. Increased
focus on the learning and growth perspective by the company will result in more
satisfied customers and an improved value for the shareholders of the company.
Work-life balance should be of utmost importance to the organisation as it directly
contributes to the efficiency and motivation level of their employees. The
organisation should provide the necessary job security for their members and also
teach them how to take responsibility and ownership for their work. The
compensation practices and reward system followed by BHP Billiton should also be
analysed to ensure that the Abel members of the organisation are rewarded regularly
for any work that the successfully complete. This will keep them motivated and also
help them move in the path of personal growth by obtaining new skills and honing
the ones that they are good at.

Conclusions and recommendations

BHP Billiton is the leading Australian organisation operating in the industrial metals
and mineral industry. The organisation has completely redefined mining and
business operations and is one of the largest organisation listed on the Australian
securities exchange. It is an Anglo-Australian company that was formed after the
merger of BHP and Billiton that were two independent mining organisations that
were established in the 1800s. After carrying out a detailed assessment of the
operations of BHP Billiton, it can be concluded that the external environment of the
organisation is extremely challenging and there are a number of factors that the
decision makers of the organisation need to take into consideration when developing
the Strategies for their growth and development.

Recommended Porter’s generic strategy

There are three distinct strategic options that are available with your organisation
that they can utilise for gaining a competitive advantage in the market. These include
cost leadership, differentiation and focus. Michael Porter give these generic
strategies that are used to analyse the method adopted by the organisation to
pursue the competitive advantage while understanding the scope of their growth in
the market. Of these three generic strategies, it is recommended that BHP Billiton
follows the differentiation strategy. Differentiation strategy is the strategy that aims
to distinguish a product or service, from other similar products, offered by the
competitors in the market. It entails development of a product or service, that is
unique for the customers, in terms of product design, features, brand image, quality,
or customer service. BHP Billiton must work towards developing unique products for
the different customer segments. Already has a clear competitive advantage in the
market since it is one of the oldest and largest Mining and Minerals Organisation in
Australia. The differentiation strategy would require the development of Advertising
and marketing campaigns and should be adopted by BHP Billiton as the marketing
strategy two emerge and stand out from the advertising noise existing in the market.

BHP Billiton needs to differentiate itself and its brand from all the competitors by
investing in innovation and invention of new technologies for mineral extraction. This
will allow the organisation to be the first entrant in the market and regular
expenditure on the research and development initiatives will also allow the company
to come up with new products and services that are able to fulfill the demands of
their customers better. BHP Billiton can also make use of the promotion and
marketing mix to utilise their brand equity. BHP can rely on their branding efforts for
converting the customers and attracting them by making use of the right promotion
mix. They can target the right segment and differentiate themselves and gain a
significant competitive advantage in the market by making use of the differentiation
strategy.

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