Westfarmers Curragh Pty Ltd - Assignment Example

? External Environment Analysis (China) Contents Westfarmers Background 3 Analysis of external environment 4 Political 4 Economical 4 Social 6 Technological 6 Environmental 7 Legal 7 Conclusion 8 Reference 9 Westfarmers Background Westfarmers Curragh Pty Ltd is a company which owns and operates coal mines. The company is based in Brisbane and was founded in 1989 and operates as a subsidiary of Westfarmers Resources Limited. Curragh mine is operated and handled by Westfarmers and covers approximately an area of 12600 hectares close to Blackwater. Westfarmers Limited in June 2000 had purchased assets to Curragh Co and presently it holds full equity interest of “Curragh Coal Sales Co. Pty Ltd” and “Curragh Queensland Mining Pty Ltd” (Curragh, 2011). Curragh Curragh falls under the category of largest independent producer of coal mines and Curragh mission is to deliver and create sustained, outstanding growth for shareholders value and return by way of delivering quality products to the customers as per their requirements. The key mining products of Curragh includes hard coking coal, steam coal and PCI coal (Curragh, 2011). Advantage for Curragh to enter the Chinese coal market would be since China is the second largest importer of coal and it imports mostly from Australia and Indonesia making room for Curragh to enter China and export coal reserve. Several factors have contributed to China’s sudden entrance in the coal import sector such as environmental as well as safety consideration, transportation bottleneck, and economic factors along with concerns with respect to depleting coal reserve. Based on the above several factors it would wise to export coal to china Analysis of external environment External environment includes industry factor and the general environmental factors and starts with an analysis of the political factors, economic, social, technological factors, environmental and legal factors which are also referred to as PESTEL analysis. Thus if Westfarmers Curragh l wants to entry China it should analyze the external environment of China through PESTEL. Political The Chinese government also plays a vital role in the growth of the economy and coal sector. The government has sought steps to improve the safety associated with coal mining by closing small and unsafe illegal mines. Safety with coal production has been significant focus for the Chinese government and as result deaths per million tons of coal produced has decreased by 85% in between 2000 and 2009 (World Coal Association, 2011). China has been suffering from imbalance transportation which means coal needs to be transported through long distance through roads, railways and water bodies. Thus from the perspective of the Chinese government import of coal has been encouraged and can be regarded as a way to ease the deteriorating bottleneck of transportation in China. Curragh coal can benefit through this policy as it will get assistance from the Chinese government to export coal in China which in return will enhance the brand name and value of Westfarmers, it can avail to all the rights and regulation and enter the Chinese market. Economical Coal imports in China accounts for more than half of the global production and contributes to the economy of China. Over the years China has become the second largest coal reserve globally next to US. China is the largest energy consumer and the economy which has grown at an average rate of 10% is the key driver in consumption of energy both in China and also on international grounds. China GDP grew to 7.8% as estimated in the first half of 2012 (EIA, 2012). China is said to be the biggest producer of coal for the past 2000 years and is the third largest coal reserves with 114billion tones and in any economic environment would make it to the top coal producer. In an environment of rapid growth of economy, China production of coal has grown up drastically and in between 2000 and 2010 the coal production has tripled (World Coal Association, 2011). Exporting Curragh Coal in China will also boost up the Australian economy as China consumption of coal has been steadily increasing providing opportunity for international country to export coal and improve national income. Coal has been the most dominating factors for the growth of Chinese economy. By 2010, consumption of coal in China stood at half of the global coal consumption and made up of 45% of the total global production and currently China represents 68% of energy consumption (Tu & Reiser, 2012). Social With rise in coal reserve in China and growth in economy due to import of coal, the social life of the Chinese population has also improved drastically. Similarly Australia has been the second largest exporter of coal and with growth in consumer income; the standard of living has also shifted leading to comfortable life for the population residing in China and Australia. China economic growth has experienced a tremendous growth rate resulting in higher disposable income. With relation to coal mining, china has very low fatality rates but at the same time smaller mines tends to ignore the safety regulation and the miners are not provided with all modern equipments. Companies should maintain health safety in order to maintain the social and healthy way of living of the Chinese population and provide them with better social life. Technological China hosts few facilities which tend to feature few of the largest scale and also most advanced equipment from fully automated mining equipment, coal washeries, and ultra power plants with super critical means. Adopting imported technology helps to reduce the cost and thus meet the local needs of the market by importing coal. Westfarmers Curragh coal will also be benefited from the transfer of technology has the potential to deliver more and relaxing any form of remaining barriers of foreign companies as joint venture and FDI will prove to be effective means of technology. Thus the government should encourage FDI and joint venture in energy sector and promote transfer of technology both in China and outside China. Due to this promotion Curragh coal will be benefited to adapt to new innovation and technical solutions, thus adopt well proven technologies, policies and management practices which would help in improving sustainability. Environmental The environment also plays a crucial part in China’s importing decision of coal. Importing coal from international market might enable the government to shut down small mines to prevent other small mines to open with an aim to protect the local environment. This gives rise to import from other countries and Curragh coal has a huge opportunity to enter the China market with its low emission coal which will benefit the economy and its people. The carbon emission from coal combustion is said to be high in China and China importing strategy of coal rather than mining it is one of the best strategy to reduce coal related carbon footprint (Tu & Reiser, 2012). The local ecosystem along with residents near to coal mines are mainly at risk as drainage of acidic mine along with toxic coal sludge are likely to contaminate the groundwater and local stream. Removal of mountaintop leads to forest destruction, erosion, wildlife destruction along with land subsidence. With relation to greenhouse gas emission and air pollution the effect of China coal has impacted globally resulting in international pressure to reduce carbon emission in its coal value chain (Tu & Reiser-a, 2012). Legal In China, the constraints in consideration of energy demand growth is not based on humanity but the ability of the country to make use of fossil fuels without creating environmental impacts. Therefore with greater transparency and accountability Curragh aim to expand into China will be profitable as it will allow reliable delegation to a lower level of the government in China as they are perquisite towards proper functioning of the existing environmental laws and will help in deployment of clean coal technologies. Conclusion It can be concluded that Curragh entering China will be beneficial for both Australia as a whole including the Westfarmers and China. China the second largest importer of coal and imports mainly from Australia and Indonesia has a huge opportunity for Curragh to explore and expand into the Chinese’s coal market. Based on the external analysis it can be said that the Chinese government is in support and encourages import of coal which in turn reduces the carbon footprint and ensure a healthy living for the Chinese population along with other factors which have given rise to China coal industry and import business. Reference Curragh, 2011. About Us. [Online]. Available at: [Accessed 1 October 2012]. EIA, 2012. Economic growth continues to drive China's growing need for energy. [Online]. Available at: < http://www.eia.gov/todayinenergy/detail.cfm?id=8070> [Accessed 1 October 2012]. Tu, K. J., and Reiser, S. J., 2012. Understanding China’s Rising Coal Imports. [Pdf]. Available at: [Accessed 1 October 2012]. Tu, K. J., and Reiser, S. J-a., 2012. Coal to Newcastle? Understanding China’s Coal Importing Behavior. [Online]. Available at: < http://www.jamestown.org/single/?no_cache=1&tx_ttnews%5Btt_news%5D=39142> [Accessed 3 October 2012]. World Coal Association, 2011. COAL'S VITAL ROLE IN CHINA. [Online]. Available at: < http://www.worldcoal.org/resources/ecoal-archive/ecoal-current-issue/coals-vital-role-in-china/> [Accessed 1 October 2012]. Read More