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Running head: BHP BILLITON 1
BHP BILLITON: AN ANALYSIS
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BHP BILLITON 2
Executive Summary
The primary purpose of this report is to elaborate on the strategies applied by BHP Billiton to
secure competitive advantage and industry leadership. The objective and goal of this report is
to analyze how BHP Billiton has been able to align its organizational structure with its value
enhancement strategies. Moreover, in this report it is by elaborating on the management
aspects of Billiton that it has to be revealed how proper application of strategic management
principles can eventually help an organization succeed at the face of adversities and amidst
competition.
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Table of Contents
1. Executive Summary 2
2. Introduction 4
3. The Organization 4
4. Internal and External Governance Mechanisms 7
5. Application of Strategic Management Theories 8
6. Sources of Cost and Differentiation Advantage in the Industry 10
7. Value Chain Analysis of BHP Billiton 12
8. VRIO Analysis of Sources of Competitive Advantage 12
9. Conclusion 13
10. References 14
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Introduction
BHP Billiton has succeeded in continuously sustaining its success run and market
hold. But this success has not been easy to earn, and for securing such a successful run, the
top management of BHP has resorted to the process of implementing strategic management
principles in practicality. The alignment between the company’s corporate structure, its
leadership approaches, and its ways of employee management, has pointed to the fact that
whenever the goals and objectives of a company are intricately related to its strategic
management principles. The objectives and goals of the company are quite at sync with its
organizational structure and this should be considered as yet another important aspect that has
helped BHP in accomplishing success thoroughly almost without interruption. In this report it
is by elaborating on the management aspects of Billiton that it has to be revealed how proper
application of strategic management principles can eventually help an organization succeed at
the face of adversities and amidst competition.
The Organization
BHP Billiton Ltd. was incorporated on August 213, 1985, and since then, on a gradual
basis, it has emerged as a global resources company (Reuters, 2017). It is noteworthy that
“BHP Billiton operates under a Dual Listed Company (DLC) structure, with two parent
companies BHP Billiton Limited and BHP Billiton Plc operated as a single economic entity,
run by a unified Board and management” (BHP Billiton Strategic Report, 2014). The
company is a producer of different commodities including iron ore, metallurgical coat,
copper, and uranium (Reuters, 2017). Petroleum, copper, iron ore and coal are the primary
segments that have together constituted the business of Billiton. In respect of its primary
segments it must be noted that; BHP’s petroleum segment “is engaged in the exploration,
development and production of oil and gas. The Copper segment is engaged in mining of
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copper, silver, lead, zinc, molybdenum, uranium and gold. The Iron Ore segment is engaged
in mining of iron ore. The Coal segment is engaged in mining of metallurgical coal and
thermal (energy) coal” (Reuters, 2017). Being a multinational entity, BHP’s top management
has to resort to the policy of managing its product distribution through its global logistics
chain which include freight and pipeline transportation (Reuters, 2017). It is through direct
supply agreements with customers that Billiton usually supply its products and this render a
thorough impact on the global commodity exchanges (Reuters, 2017). The primary
businesses of BHP Billiton include “Minerals Australia, Minerals Americas, Petroleum and
Marketing” (Reuters, 2017). Quite interestingly, it has hardly been ever found that Billiton is
lagging behind its competitors due to resource crises (Reuters, 2017). In respect of such a
huge degree of sustainability of Billiton that it must be said that the company’s ownership of
important natural resources repositories has also paved the way for the expansion of its
business of the company world-wide. Billiton’s strength lies in the fact that it operates
Macedon which is an offshore gas field located approximately 75km southwest of Onslow
(Reuters, 2017). The company also operates Minerva which is a gas field that is located
approximately 17km south-southwest of Port Campbell in western Victoria (Reuters, 2017).
Moreover, the company also operates the Greater Angostura field which is an integrated oil
and gas development “located offshore 40 kilometers east of Trinidad” (Reuters, 2017). In
Algeria too the company operates successfully. In Algeria, Billiton operates with six satellite
oil fields that are responsible for pumping back oil to a processing train (Reuters, 2017).
Moreover, the company “holds approximately 16% non-operating interest in the Bruce oil
and gas field in North Sea and over 31.8% non-operating interest in the Keith oil and gas
field, a subsea tie-back” (Reuters, 2017). Hence, it can be seen that the company is never out
of resource, and this is one of the primary reasons of its success.
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Moreover, as a part of its strategic management policy, BHP has been striving to
transform itself from a hierarchical to a simpler and flat organization. In this respect it must
be noted that, the company intends “to become a much simpler organisation focused on
geographic operating regions and supported by globalised functional services drawing upon
world-class expertise and scale” (Hobbs, 2016). The company’s intention to get transformed
into an entity with a simpler organizational structure is complemented by its strategies
including demerger and well-timed asset divestments, and it is also an outcome of the
company’s objective of improving its overall productivity (Hobbs, 2016). The present
organizational structure and the desired organizational structure – both are based on the
principles of employee safety, production volume and cost enabled by functions that are
integrated globally and largely (Hobbs, 2016). Quite interestingly, looking forward towards
becoming a simpler yet efficient organization, the President of Billiton’s coal segment has
assumed the role of President Operations in Minerals Australia and the current President
would have the responsibility for Billiton’s Australian operations in coal and iron ore (Hobbs,
2016). Moreover, he has been given the responsibility to promote world-class maintenance
practices company-wide (Hobbs, 2016). The current President of Billiton’s copper section
has also been given the responsibility for maintaining and supervising Billiton’s copper assets
in Chile, the New Mexico Coal mine, etc (Hobbs, 2016). He has also assumed the
responsibility to bring about advancements in the company’s capital efficiency and has also
been given the responsibility of overseeing Billiton’s ongoing copper exploration programme...