Development Knowledge Intensive Industries Essay

Question:

Discuss About The Development Knowledge Intensive Industries?

Answer:

Introduction

This report is based on the environmental analysis of BHP Billiton. This report will provide details about the different competitive advantages of BHP Billiton which help this company to outperform than its competitors. Along with this, trends in the Australian steel manufacturing industry will be discussed in this report. This report will also provide information about the current strategy of BHP Billiton. This report will also provide details about the analysis of internal factors such as; management talent and resources and capabilities of BHP Billiton. Along with this, this report will also provide information about the micro and macro external factors of BHP Billiton that effecting the operations of BHP Billiton.

Competitive advantages of BHP Billiton

BHP Billiton is a largest company of Australia. It was formed in 2001. BHP Billiton Company is a merger of Anglo dutch Billiton Plc and Australian Broken Hill Proprietary company Ltd. BHP Billiton processes the oil, gas and minerals. It was the world’s 3rd largest company in 2011 (BHP, 2017). There are some competitive advantages which make this company stronger than others and following are the competitive advantages of BHP Billiton:

Strong workforce:

BHP Billiton has a large work force, it has over 45,000 employees. Strong workforce helps an organization to increase the productivity and competitive advantage. Large work force means a large number of employees, so these employees can offer new ideas and suggestion to the organization (Dickie and Dwyer, 2011). Along with this, with large number of employees organization can work faster.

One of the largest Mining and Petroleum Company:

BHP Billiton is the largest diversified resource company of the world. This is the big competitive advantage of BHP because this company has a large infrastructure and working on large level. No other company is working on this large level that’s why BHP have this advantage.

Strong brand name:

BHP Billiton is a multinational company and working in many countries. In international market BHP Billiton has a strong brand position and most of the customer likely to choose famous brands. Strong brand name provides many advantages to a company like; customers prefer to buy branded products, company can easily introduce new products etc (Robbins, et al., 2014). So it can be said that Strong brand name is also a factor which provide competitive advantage to BHP accounting.

Strong financial position:

One of the competitive advantages of BHP Billiton is strong financial position. BHP is the largest company of Australia it means its financial position is very strong as compare to its competitors. In 2011 BHP’s record profit was US $23.6 billion. Every year its revenue is increasing continuously which make this company more strong. BHP has strong financial position it means in terms of finance it can offer more offers to customers and can improve quality and can sell in cheap price to increase the customers (Lodia and Martin, 2014).

The increase in profit of BHP can be understood from the following table:

Profitability

2007-06

2008-06

2009-06

2010-06

2011-06

2012-06

2013-06

2014-06

2015-06

2016-06

TTM

Tax Rate %

25.07

32.03

45.44

33.53

23.39

32.53

38.03

31.53

45.51

47.57

Net Margin %

33.97

25.88

11.7

24.1

32.96

21.35

16.49

20.58

4.28

-20.66

7.32

Asset Turnover (Average)

0.74

0.89

0.65

0.63

0.75

0.62

0.49

0.46

0.32

0.25

0.29

Return on Assets %

25.15

22.96

7.6

15.18

24.67

13.28

8.14

9.56

1.38

-5.24

2.09

Financial Leverage (Average)

1.96

1.98

1.97

1.83

1.81

1.96

1.95

1.91

1.92

2.19

2.11

Return on Equity %

49.79

45.26

15.01

28.76

44.92

25.14

15.93

18.47

2.65

-10.73

4.43

Return on Invested Capital %

37.28

34.22

11.65

21.59

34.65

18.74

11.3

12.93

2.04

-6.19

3.36

Interest Coverage

28.71

46.33

14.64

30.04

128.05

53.2

24.58

37.04

20.27

-7.56

6.84

Best implementation of CSR Policies:

BHP’s CSR policies are very good. BHP continuously working for its stakeholder and society which increasing its brand value and these CSR activities are the reason why its customers trust this company. So it can be said that CSR activity of BHP Billiton is providing competitive advantage to it.

Trends in the Australian steel manufacturing industry:

To raise the living of standard of a nation productivity improvement is very important. The federal government awarded $5 million in five years to provide fund for research and development of Australian Steel industry in 2013. In the last five years of 2013 the steel manufacturing industry’s growth declined. Steel manufacturing industry’s revenues is decreased annually 8.5% in last five years. One of the reasons of industry declined is low demand of downstream market. Competitors of import market and lower prices of steel are some reason why the steel manufacturing industry’s growth is decline and many manufacturers reduced their production (Yellishetty, et al., 2011). The main reason of decline growth of steel manufacturing is competition of import market and introduction of new and cheap products. To understand the trends of Australian steel manufacturing industry it is very important to know that steel manufacturing is a global business. About 60% of total steel production is manufacturing in India, South Korea, Taiwan and China. Some of these countries’ businesses produce more steel than the total steel manufactured in Australia. Many global businesses manufacture in mass this provides them low cost facility and they also can provide products in low price but in this case Australia’s manufacturers have problem. The main problem of Australian steel manufacturing industry is that the competitors are increased and they are providing steel in cheap price (Mason, et al., 2011). To eliminate the problem Australian steel manufacturers should established a steel export market. There are another ways which can provide profit to Australian steel manufacturing industries that industry can use most efficient work practice and can use the best techniques to increase the value of products. In the duration of past years, as compared to 2013’s data the steel production in Australia increased 448.77 thousand tones in June 2017 and this was increased in July 2017 and the Steel production in July month was 458.89 thousand tones. The lowest growth of Australian steel manufacturing was 238 thousand tones in 2009. This trend can be understood from the following graph:

From this graph it is clearly shown that in October 2016 the steel production in Australia were 481.7 thousand tones it was declined in January 2017 with 45.4 thousand tones and in that year the production was 436.66 thousand tones. With the increment in July 2017 the steel production was 458.89 thousand tones. The highest steel production in Australia was recorded in March 1998 and at that time the production was 819 thousand tones. 238 thousand tones is the lowest steel production recorded in March 2009.

From the following table the trends in Australian steel manufacturing industry can be understood with the comparison of other countries’ trends:

Countries

Last Production (Thousand Tones Monthly)

Previous production (Thousand Tones Monthly)

Highest Production (Thousand Tones Monthly)

Lowest Production (Thousand Tones Monthly)

Australia

458.89

449

819

238

Brazil

2832

2649

3269

918

Canada

1100

970

1534

349

China

74021

73231

74021

4918

France

1150

1325

2466

643

Germany

3513.98

3605

4744

907

India

8362

7950

9000

713

Italy

2120

2085

3033

750

Japan

8588.4

8391

10775

1177

Mexico

1725

1685

1830

466

Netherlands

574.18

604

687

236

Russia

5585

5341

6804

3130

South Korea

6158.95

5906

6406

650

Spain

1000

1261

1980

555

Turkey

3344.53

3021

3345

152

United Kingdom

601

747

2848

131

United States

7071

6707

11951

3799

Current business strategy of BHP Billiton in Australia

BHP Billiton is a largest diversified resource firm and it is operating in many countries. BHP Billiton operations mainly involve gas and oil exploration, mineral exploration, production and processing and steel manufacturing, so these multiple activities are the reasons why many external factors affect the business of BHP Billiton. According to its traditional strategy the BHP have developed plan to grow the value of the company. This plan focused in the six main areas and they are; Technology, Exploration, Onshore US, Latent capacity, Cost efficiencies and Major projects. According to the report of 2016 the BHP announced that it will implement a new strategy to enhance the values and returns of shareholders. The company is implementing the new strategies to increase the profitability and the productivity as well. Along with this, the new strategy of BHP Billiton will support the top and bottom line growth rates over time. BHP has also made a progressive dividend policy which ensures its shareholders that the growth of the shareholders’ wealth will increase (Benn, et al., 2014). But it should be noted that the company’s dividend policy need support from a superior capital management system for successful implementation. In addition to this, according to the new business strategy of BHP Billiton, the company will invest in those opportunities from which it can get high return so that it can provide benefits to its shareholders also. The new business strategy of BHP Billiton involves a new business model which is going to make the business more stable in the negative situation of mining. According to the new business model of BHP the business will mainly focus on three aspects such as; volume, cost and safety. With the help of the new strategies the company can grow in future time and the productivity can increase with new operation model. The present situation in market is challenging for BHP because there is low market demand and prices are also low but according to the new strategy of BHP Billiton the company will pursue its growth without waiting for recovery of product’s price.

Internal Analysis of BHP Billiton

Management talent is an internal factor which affects the BHP Billiton. BHP Billiton is comprises two companies BHP Billiton Limited and BHP Billiton Plc. This group work in 25 countries and have more than 100 operations. BHP believe that the employees should be talented to perform better for this the HR department of the company doing great job. The BHP Billiton foundation programs are for the graduates which provide facilities to them so they can inspired from the leaders (Humphreys, 2011). The HR team of BHP Billiton provides support to the all employees of BHP who are working on other countries also. According to the strategy the capable specialist will be responsible for the group work. Currently, more than 1,100 graduates from different universities are working in this company in different places and these are those students who are talented and willing to work with BHP Billiton. With talented workforce BHP can grow more efficiently.

Resources and capabilities:

Any elements that is productive and that can help in activity for an desired outcome are called resources. There are four types of resources; Human resources, financial resources, material resources and non-material resources. Human resources and material resources are very important for BHP because these are the resources which mostly help in improving the the performance. BHP Billiton has many mineral resources in many countries and these are the assets of the company without these mineral resources company cannot survive. Human resources are those people who work for this company. Financial resource includes capital of the company and the financial position of the company is very good (Ireland, et al., 2014). All the resources are very important because they directly impact on the performance of the company. Along with this the capability of the company measured by the level of production of the company. High production refers high capability and low production refers low capability of company. The capability of BHP Billiton is high because it has many mineral resources in different continents.

External Analysis:

Outside factors of an organization that effect the business is called external factors of a business. These factors are uncontrollable by the business. External factors are of two types:

Micro factors:

Micro factors are those factors which are in direct contact with business and these factors affect the routine activities of business. BHP Billiton has some micro external factors that affect the business such as; competitors of BHP Billion are part of micro factors. Thus BHP Billiton is the largest company so small competitors cannot affect it easily and its brand value. Another micro factor is suppliers, BHP Billiton is one of the largest company of the world so it has trusted suppliers. Public is also a micro factor which can affect the business. BHP Billiton has a good brand image and customers trust this company, its CSR activities are also a reason why it has so many customers all over the world. Public is a strong micro factor that can affect business.

Macro Factors:

One of the macro factors which affect the BHP Billiton is political factor. The BHP Billiton’s political aspiration remains same in every country because it never contributes in the funds of any political party. Social factor is also a part of macro factor, BHP Billiton is well known with the social issues that can arise at the time of construction in every country. For this company has appropriate management which reduces the social risk and ensure the maximization of social work (Marin, et al., 2015). Along with this, environmental factors are also part of macro factors, BHP Billiton mainly focus to provide benefits to environment by improvement of natural resources. Legal macro factors are affecting the business because BHP Billiton is working in different countries and every country have its own laws and regulation that should be consider by the BHP Billiton whenever it start operations. Along with this technological factor is also a part of macro external factors that can affect the business. Innovation is very important for oil business if business will not adopt innovation than it will not survive. To focus on its efforts on technology, BHP Billiton has a technological park in Australia. By focusing in this innovation and technology BHP Billiton can beat its competitors.

Conclusion

From the above report it can be concluded that BHP Billiton has some competitive advantages that make it stronger than other companies. Beside this, it can be also concluded that the trends in Australian steel manufacturing industry is not constant and there are some decrement and increment in the trend in past few years. It is also concluded that management talent of the company good and BHP is hiring graduates from different countries and the available resources and capability of BHP is high. In addition to this, it can be concluded that there are some external factors that can affect the company and BHP Billiton working with the consideration of those factors.

References

Benn, S., Dunphy, D. and Griffiths, A. (2014) Organizational Change for Corporate Sustainability. 3rd edn. New York: Routledge.

BHP (2017) About Us. [Online]. Available at: (Accessed: 18 September 2017).

Dickie, C. and Dwyer, J. (2011) A 2009 perspective of HR practices in Australian mining, Journal of Management Development, 30(4), pp.329-343.

Humphreys, D.( 2011) Emerging miners and their growing competitiveness, Mineral Economics, 24(1), pp.7-14.

Ireland, R.D., Hoskisson, R.E. and Hitt, M.A. (2014) Understanding Business Strategy Concepts Plus. Australia: Cengage Learning.

Lodhia, S. and Martin, N. (2014) Corporate sustainability indicators: an Australian mining case study, Journal of cleaner production, 84, pp.107-115.

Marin, A., Navas?Alem?n, L. and Perez, C. (2015) Natural resource industries as a platform for the development of knowledge intensive industries, Tijdschrift voor economische en sociale geografie, 106(2), pp.154-168.

Mason, L., Prior, T., Mudd, G. and Giurco, D. (2011) Availability, addiction and alternatives: three criteria for assessing the impact of peak minerals on society, Journal of Cleaner Production, 19(9), pp.958-966.

Robbins, S. P., Bergman, R., Stagg, I. and Coulter, M. (2014) Management. Australia:Pearson.

Yellishetty, M., Mudd, G.M. and Ranjith, P.G. (2011) The steel industry, abiotic resource depletion and life cycle assessment: a real or perceived issue?, Journal of Cleaner Production, 19(1), pp.78-90.

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