The purpose of this assignment is to provide an opportunity to utilise your skills and knowledge of strategic planning to undertake the tasks associated with the key question of where are we now in...

Running Head: ENVIORNMENTAL ANALYSIS 1
Environmental Analysis
Running Head: ENVIORNMENTAL ANALYSIS 2
Introduction
Australia is known for its iron ore in the world because it is a leading ore export country.
Australia has a large ore reserve which is more than 25 billion metric tons. This industry noted
11.5% growth in its revenue, which reached $76.8 billion in 2014-2015 (Enright & Petty, 2016).
The main factor behind such growth was the increment in the demand of iron ore from India and
China due to their strong economic growth (Allday, 2015). The other reason that works in the
growth of Australian iron ore industry is its price leadership, which allows this industry to grab
the huge market share of iron ore demand in the world. According to the report of government,
share of Australia in global iron ore output will be reached 23.7% till the end of 2019. This is
because of the go-ahead policy of its three top companies (BMI Research, 2015). There are some
other ‘Junior Miners’ which cover 26.0% share of Australian ore market.
Therefore, it can be stated that there many ore mining companies. Due to this; the ore
industry of Australia is called an oligopolistic market. But the setting of price and supply of ore
are decided by the larger miners. In this context, this paper will conduct the five force analysis of
iron ore industry and its profitability factors. Further it will analyze the change in this industry
and its impacts on the profitability of the industry.
Porter’s Five Force Analysis
Following is the analysis of Australian iron ore industry:
Internal Rivalry:
The iron ore industry of Australia has great competition because each firm competes with
other firm through the help of internal competition. On the other hand, local companies of
Australia also face competition from global firms. Because of this, there are many global mining
companies, which have entered the market through the joint venture to reduce the impacts of
Running Head: ENVIORNMENTAL ANALYSIS 3
internal rivalry and to decline the market risks also (Enright & Petty, 2016). According to the
data 2014-2015, 74% revenue of ore industry was earned by top three companies. Through the
help of this, it can be stated that there is tough competition between small and larger ore mining
companies (Enright & Petty, 2016). It means any new company in this industry will see tough
competition in this industry. Therefore, the struggle to gain market share for making
improvement in profits is still a considerable point for the ore mining companies.
But the low cost of ore mining and good transpiration facilities in Australia facilitates the
companies to keep the iron ore price below than the global market. Therefore this industry is
more attractable for not just local players but for the global players also. The slow demand from
China and India imposes adverse impacts on the growth of industry, which is also reducing the
market share of companies. This situation has also changed the competition level in this industry.
But there is still a tough fight between companies on the low price ore that is more attractable for
the global players because the low price helps to control the cost of finished goods (Enright &
Petty, 2016). The Corporation act 2001 also gives support to each mining firm because it restricts
the use of any unfair business practices by companies that also control the competitive rivalry in
the market.
Entry Barriers
As per the current market structure, it can be stated that the entry barriers in the iron ore
industry are high. This is because of certain reasons. To establish a mining company will need
huge capital. If a company wants to do an acquisition, it will also require money to establish a
competing operation. It means a firm which has limited capital may not think to enter into ore
mining industry of Australia. Further, the new entrant in ore market will need long-term contract
with buyers of India or China to ensure the regular consumption of iron ores (Enright & Petty,
Running Head: ENVIORNMENTAL ANALYSIS 4
2016). It will be a tough task to them because no one wants to work with the new company due
to high operational cost and high price of...