BHP Billiton Business Strategy Report

1. Executive Summary
   There has been global commodities boom throughout the world and BHP Billiton has
   executed strategic plans and increased shareholders value during the time. The purpose of this
   strategic analysis is evaluation of key areas of the company; vision, mission, values and
   strategic drivers and they are the aims of this enterprise which are related to performance and
   operation of the company. Several tools are incorporated in this analysis that will be used to
   execute growth plans and the development of the key company areas. The analysis tools
   include PESTEL analysis, SWOT analysis, VRIO analysis and Porter Five Forces Analysis to
   understand external and internal positioning of BHP. This is followed by formulation and
   identification of the strategic issues that face the company and are followed by development
   of strategic alternatives on addressing the strategic issues.
   PESTEL framework was used to identify strengths and opportunities in the external
   environment and complimenting general macro environment understanding of commodities.
   The Porters Five Forces Analysis offers strategic view offer BHP Billiton a competitive
   external environment enabling it to access resources, impact and strengths of the forces and
   their effect on goals and objectives achievements. SWOT objective is to analyse key
   strengths, weaknesses, opportunities and threats through a completed internal and external
   analysis. Their operating model describes how the company is organised, and sets the
   relations between marketing’s, group functions and businesses. It is the organisation culture
   to ensure a sustainable society that depends on biodiversity, its operations impacts diversity
   and related economic diversity.
   Competitive strategy uses key success factors on its external competitive on its on-going
   success and they include; exploration and development, sustainable development and skills
   and capabilities. The BHP Billiton statement is to be the company of choice creating
   sustainable value of its employees, shareholders, suppliers, contractors, host communities and
   business partners, aspiring to be zero harm to the community, environment and strive in
   achieving the leading industrial practice. Sound principles govern business conduct, safety,
   environmental, social and economic activities form integral way of doing business

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2 Introduction
BHP-Billiton is Anglo-Australian multinational petroleum, metals and mining company
located in Melbourne Australia. Measured by 2013 revenue, it is the biggest mining company
in the world and the biggest company in Australia by revenue. It was created in 2001 after the
merging of Anglo-Dutch Billiton plc and Australia Broken Hill Company Limited (BHP) and
brought together an exception mix of quality and low quality resource assets through a strong
management team that has the determination of operating the assets in an efficient manner
(Thompson and Macklin, 2010). Its strategy is to operate and own large, low cost,
expandable, long life, upstream assets that are diversified by commodity, market and
geography.
BHP Billiton operates nine customer sector groups (CSGs) that are aligned with extracted
commodities and markets. They are iron ore, base metals, energy coal, aluminium,
manganese, stainless steel materials, diamonds, metallurgical coal and petroleum. Business
reports are documents prepared by managers and provide creditors, regulators and investors
with information of business performance and strategies. The important business reports are
financial reports – income statement, balance sheet, and cash flow- that are used in business
growth assessment. Other important reports include mission statement and business plan,
which provide direction to the organisation and benchmark for employees and management
Strategic planning is the process of bringing life to vision and mission of an enterprise, and it
considers the external and internal environment around the business (Warner, 2010). Business
strategy review of BHP-Billiton will improve communication, better selection of tactical
options, help in effecting decision making, will lead to higher probability to achieve
stakeholders goals and objectives. No formula exists for strategic planning but it is guided by
principles and processes. The choice of the process to use in any organisation is based by
comfort level of participants and the culture of the organisation. The process must mirror the
goals and cultural values of a company.
While strategic reports are useful to the management, they have their limitation. Considerable
cost of money and time during report preparation has potential of limiting business logistics
and financial ability for expansion. Some reports present inaccurate information of financial
situation or entire business situation. They may be limited from quality information and

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competence of the one preparing them. Some reports may not be comparable as they appear
for example, difference in accounting methods create difficulties.

3. Strategic Analysis
   3.1 Methods
   This analysis is entirely based on information from internet; the primary sources include BHP
   analysis reports, annual communications, magazine articles and newspaper reports. The study
   used subjective evaluation methods based on perception data collected by BHP Billiton
   management. Survey questionnaire in the company, interviews and archival search were
   some of the methods of data collection and were found in the company’s website and its
   library. The secondary sources mostly included previous reports of the company and
   documents found in its website. Being a multinational company, most of its reports are
   available in its webpage internet, media sources and databases.
   The main source of data was BHP Billiton webpage; it contained many reports, figures and
   process that are present in the company. The internet contains a lot of reports and previous
   documents and plans of the company. Many media houses have different interests in the firm
   and thus have researched and published information about the firm. Journals, newspapers and
   magazines are tools that have recorded BHP Billiton previous activities. Business documents,
   interviews and questionnaires in the organisation were one first hand source that was reliable
   and contributes to 70% of the data collected.
   3.2. External Analysis
   3.2.1. PESTEL Analysis
   The PESTEL is a framework that lists external environmental influences in six categories;
   political, economic, social, technological, ecological and legal (Davidson, 2009). These
   PESTEL analysis elements have impact on strategic drivers in BHP Billiton Company and
   strongly influence success or business failure. The framework is used to identify strengths
   and opportunities in the external environment and complimenting general macro environment
   understanding of commodities (Hubbard and Moore, 2012). Political factors- BHP Billiton is
   a global company and thus susceptible to political risks in the all its market and the political
   factors have great impact on the stated key drivers of the company; growth options, project
   pipeline, license to operate and world class assets. The company is committed to exploration

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of capital even in politically instable countries and the risk factors include; terrorism,
nationalism, civil unrest, lease agreements or permits, nationalization and change of
government policy.
Economic factors- BHP Billiton is susceptible to the economic factors of; exploration
expenses, inflation in energy costs, operation cost, labour cost and material cost. The
increased adversely affects company expansion plans, company profitability and
development projects. The company is exposed to general economic risks and fluctuating
currency valuations in industrial world economies and major weaknesses in global economies
can cause fall off in demand of commodities resulting to increased supply and reduced prices
thus impacting business profitability. In socio-cultural factors, the company is susceptible to
the factors in all its stakeholders’ relations and operations which require it to support the local
communities financially and provide infrastructure. Social approvals are required before new
mining and developmental projects that impact profitability due to additional development
costs (Hubbard and Moore, 2012).
Technological factors- the BHP depends on technical factors for efficient exploration, mining
and discovery of energy and mining assets. Technology investment is a vital expenditure in
this company for every day to day life and includes new technologies and discoveries
developments- internet, new composite materials and Nano-communication affect the
organisation. Environmental factors- BHP Billiton is a natural resource company and thus
susceptible to public policies and regulations regarding the environment. The company has
committed its self in reduction of greenhouse gas emission to the environment. In current and
former drilling and mining operations, the company is responsible for their environmental
conditions that are linked to the key strategic driver of operating license. (Gordon, 2007)
Legal factors- they are important BHP Billiton risk factors as it is faced with legal liabilities
in all its ruling for causing environmental damages. The company ones lost an important
Federal Court Decision pertaining to rail infrastructure access in two Australian iron ores
mines. The important key drivers in BHP Billiton are world class assets and project pipeline.
The world class assets provides cash flow for building new projects that contribute to the
country’s economy while meeting employee, suppliers and partners obligations. Project
pipeline focuses on deliverance of enhanced resource endowment which underpins future
generation growth (bhp billiton, 2015).
3.2.2 Porters Five Forces Analysis

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The Porters Five Forces Analysis offers strategic view offer BHP Billiton a competitive
external environment enabling it to access resources, impact and strengths of the forces and
their effect on goals and objectives achievements. Bargaining power of buyers is low to
moderate, with the company passes prices that increase shipping and increased labour and
production cost. There are no substitutes of supply in large quantities reducing buyers’
bargaining power and it is dependant to strong customer relations. Bargaining power of
suppliers is high- labour, shipping, materials and energy cost- caused by increased firm
activities that reduce capacity. The company is in weak position of countering bargaining
power and competitive pressure of employees (Hubbard and Moore, 2012).
Threats of new entrants are moderate to low due to the shortage of available supply and
capacity of natural resources. The threat of substitutes is low because there are not many
substitutes for raw products. BHP Billiton is able to counter substitute threats due to
portfolios and reserves. The rivalry among competing sellers is high caused by competition of
mining and oil companies on access to natural resources. There is competition for qualified
staff, increased staffing costs and competitive rivalry on transportation infrastructure (bhp
billiton, 2015).
3.2.3 Strategy canvas

3. 3 Strategic Capabilities
   3.3.1 VRIO criteria
   A VRIO criterion is a business analysis framework forming the greatest firm’s scheme. It
   uses four criteria in deciding if a capability is distinctive; Value, Rarity, Inimitability and
   Organisation support (Cadle et al., 2014). Value- BHP Billiton is a strong market dominating
   the mining and metal industry. Its revenue streams are diversified in terms of geographies and
   business lines. Rarity- the company possess capability that no other competitors can has, in
   Energy Coal customer sector group, it contains the largest operations and it is strategically
   positioned to deliver products from Australia.
   Inimitability- the capabilities of competitors to are expensive and difficult for competitors to
   imitate. It is the 3 rd richest company in the world and has established its own resources and
   spread worldwide any competitors is limited in achieving and taking its place. Organisation
   support- the organisation is properly organise in exploiting its resource. It owns many mining

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system and does not rely from one source. It is a strong market producing mineral and metals
and its diversity opens room for more opportunities (Hubbard and Moore, 2012).

3.3.2 SWOT Analysis
Its objective is to analyse key strengths, weaknesses, opportunities and threats through a
completed internal and external analysis. The analysis will translate conclusions to strategic
plans (Cadle et al., 2014)

Strengths(S) Weaknesses(W)

Opportunities(O) Superior financial returns
Company of world class
natural resource with
diversified portfolio of assets
Largest supplier of uranium,
silver, copper and lead in the
world
Largest nickel producer in
the world
Largest operations on energy
coal customer sector group

Committed to reduce
greenhouse gas emission by
5% thus leading to
sustainable development and
environmental
responsibilities
It has energy trading and
transportation divisions and
having source of energy, it
will integrate supply chains
and transportation companies
in capturing more profits.
It can sell off its energy
assets in future at a premium
if need arises.
High natural gas and oil
value and its portfolio is
positioned in Australia a
stable democratic country.

Threats(T) Operates with dedicated The company works to fulfil

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customer service component
on its product portfolios.
Increase of past along prices
to customers
Strong market due to no
priced substitutes caused by
supply constraints
Solid track on sustainable
development without
noteworthy downside from
negative brand awareness

demand and remain
financially discipline in
achieving increased profits
and shipment growth of
natural resources
It must be vigilant against
acquisitions and mergers not
to fall victim of being
acquired
Depends heavily on china for
natural resources and any
slowdown in world market
can impact BHP sales and
profitability
Requires a strong lobbying
presence to counter political
opposition.

3.4 Strategy and Culture
Organisation culture is taking for granted behaviours and assumptions that make sense of a
people’s organisation context (Spender, n.d.). Using the culture web, the company has lost Sir
John who was a non-executive director from 2003 till he died. It recognizes Carlos Cordeiro
and Keith Rumble for the contribution they have impacted in the company both in their
retiring period. The company core value is operating with integrity and accountability to be
the world’s leading company. It commits itself to ethical business activities with high quality
governance in all it does.
The rituals and routine of the company is supplying energy and mineral commodities that are
crucial for economic growth. They place the health of their workers and the community as
their central to their success (Rudd, 2009). As a major consumer and producer of energy,
BHP Billiton has set a mitigation of greenhouse gases reductions and energy efficacy. This is

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an opportunity in SWOT analysis where they have set to reduce greenhouse effect by 5%.
The company has ensured educate operating margin is maintained and operated.
Their organisation structure operates under Dual Listed Company (DLC) with two parent
companies; BHP Billiton plc and BHP Billiton limited which operated as single entity, run by
a unified management team and board. Their operating model describes how the company is
organised, and sets the relations between marketing’s, group functions and businesses. It is
the organisation culture to ensure a sustainable society that depends on biodiversity, its
operations impacts diversity and related economic diversity. Concerning diversity, it has two
important targets; maintaining unique biodiversity and ecosystems of the areas they operate
and conserving the ecosystem and biodiversity broadly (Gordon, 2007).
The company is controlled by financial systems and quality systems. They respect and
engage indigenous people in their operations and recognize traditional rights and values and
they advance them with opportunities. They make positive contribution to the society by
helping the communities achieving sustainable social and economic benefit. This relates well
with the strategy in provision of infrastructure, creation of jobs, purchase of goods and
services and they pay royalties to the government and authorities. The company focuses on
its core priorities of business and profits but it uses community involvement to mitigate the
specific risk (Rudd, 2009).
3.5 Competitive Strategy
BHP Billiton is independent on important Key Success Factors on external competitive
environment on its on-going success. Development and exploration is an important KSF
demands efficient, cost effective and timely supply and delivery of quality products with high
degree of customer service and expertise (Barney and Hesterly, 2012). In skills and
capabilities, BHP Billiton investors demand strong company leadership that relies on
management to achieve its strategic goals, growth and objectives. This is performed during
superior risk adjustment financial performance.

Key Success Factor Explanation
Exploration and development Manage and build world class commodities
product portfolio; transport, successful
extract, market bulk commodities.

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Skill and capability They execute secondary and primary value
chains activities cost efficient and effective
Sustainable development No harm should be applied to the
environment; they are employer choice in
determining mining industry and managing
stakeholders’ relationships.

Sustainable development- citizens, government and community stakeholders are demanding
high degree for environmental responsibility. The cost in time reputation, money and
goodwill for environmental responsibility and sustainable development cannot be ignored. It
is dependent on attracting and retaining employees across network. It is imperative that the
strategy is considered ‘the employer of choice’ among natural resource companies (BHP
Billiton to proceed with Rapid Growth Project, 2008).
One competitive advantage of Billiton is being tier 1 mining asset that is amongst the largest
in the world and has potential expansion. These mines exhibit lower operational cost than the
ones owned by their competitors. Top quality assets are situated in politically stable countries
which are well diversified from currency perspective. BHP has continually grown both in
dividends and earnings significantly faster than its competitors. It is the 3 rd richest company in
the world thus uses its finances in exploring new resources, utilising the available ones,
purchasing of the newest technological machines and pay good wages to its employees.
Its supply chain management is one of its largest cost drivers for inventory management and
the business in the key function of its enterprise. Through its size, it is able to achieve
delivery efficiency and active in bulk freight. The company remains in a high portfolio
market and has delivered high superior financial returns. It operates with dedicated customer
service components on its product portfolio and pass along prices have increased to
customers due to strong markets with no reasonable priced commodities. BHP is a powerful
business strategy statement global operator that is focused on sustainable development with
solid record track and does not incur noteworthy negative brand awareness (Gordon, 2007).
3.6 Business Strategy System
The company is the leading global resource company, it’s among the world’s best on major
commodities including; metallurgical coal, iron core, uranium and copper and contain interest

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in convectional and unconventional gas and oil and energy coal. BHP company mission is;
‘the core purpose is to create long term value through the discovery, development and
conversion of natural resources and the provision of innovative customer and market focused
solutions’ (bhp billiton, 2015). To achieve the charter and creation of growth and prosperity,
the company build and manage the portfolio of high quality services and assets. It continues
the drive towards high organisation performance where every individual accepts
responsibilities is rewarded for results. It earns trust of suppliers, employees, suppliers,
shareholders and communities for being forthright in communication and consistent
deliverance of commitments.
The company’s value are listed as; integrity, high performance, courage to lead, win-win
relations, respect for each other and courage to lead change.it lists its successful value as,
superior shareholders return to the environment and communities valuing company
citizenship. Value creation is portrayed by employees working with sense of accomplishment
and purpose. Suppliers and customers has also benefited from BHP business relationships.
BHP Billiton vision is to own and operate large long-life, low cost, upstream expandable
assets diversified by commodity geography and market (bhp billiton, 2015).
The BHP Billiton statement is to be the company of choice creating sustainable value of its
employees, shareholders, suppliers, contractors, host communities and business partners,
aspiring to be zero harm to the community, environment and strive in achieving the leading
industrial practice. Sound principles govern business conduct, safety, environmental, social
and economic activities form integral way of doing business.
4 Conclusion
In conclusion, PESTEL analysis serves the purpose in identifying key factors that impact the
company on its external operations. The areas of risks are omnipresent in company
operations, have time and financial cost in many cases as addressed by BHP mission in
providence of innovative, market focused and customer solutions. In Porters Five Forces
Analysis conclusion, there is active and lively competition on the surface among sellers in
global bulk commodities industry. BHP is positioned near the top being the market leader and
the largest natural resource company in the competitive field based on number of employees,
global reach, and scope of products and value of sales.

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SWOT analysis translates the strength, weaknesses, opportunities and threats conclusions in
to strategic actions so that the company can execute the opportunities to act as defensive tool
in threats. The company through SWOT analysis is vigilant against acquisitions and mergers
not to fall as victims of being acquired. It works to fulfil demand and remain financially
disciplined in achieving the increased profits and shipment growth of natural resources. The
company must work to achieve effective best cost as its generic competitive strategy. For
sustainable development, the company should set public plans and outreaches for
shareholders by setting up SMART greenhouse gases reduction

6. List of References
   Barney, J. and Hesterly, W. (2012). Strategic management and competitive advantage.
   Englewood Cliffs, N.J.: Pearson.
   BHP Billiton to proceed with Rapid Growth Project. (2008). Pump Industry Analyst, 2008(3),
   p.3.
   bhp billiton, (2015). bhp billiton resourcing global growth strategic report.
   Cadle, J., Eva, M., Hindle, K., Paul, D., Rollason, C., Turner, P., Yeates, D. and Cadle, J.
   (2014). Business Analysis. Swindon: BCS Learning & Development Limited.
   Davidson, A. (2009). 1000 CEOs. London [England]: DK Pub.
   Gordon, J. (2007). BHP Billiton | BHP Billiton | Strategy. [online] Bhpbilliton.com.
   Available at: http://www.bhpbilliton.com/aboutus/strategy [Accessed 17 May 2007].
   Hubbard, T. and Moore, M. (2012). BHP Billiton. Evanston, IL: Kellogg School of
   Management.
   Rudd, K. (2009). Closing the gap on Indigenous disadvantage.
   Spender, J. (n.d.). Business strategy.
   Thompson, P. and Macklin, R. (2010). Big fella. Milson’s Point, N.S.W.: Random House
   Australia.
   Warner, A. (2010). Strategic analysis and choice. New York: Business Expert Press.