Analysis of BHP Billiton Company - Case Study Example

MARKET ENTRY ASSESSMENT OF BHP BILLITON COMPANY Course Professor’s Name Name of the Institution Date MARKET ENTRY ASSESSMENT FOR BHP BILLITON COMPANY Introduction Market assessment involves the evaluation of the capability of a new idea related to business, new product, or new investment. It, therefore, entails the analysis of the environment forces, competition, entry barriers, and trends of market, opportunities, as well as constraints and Company resources. The report under consideration involves the analysis for BHP Billiton Company regarding its SWOT analysis and as well evaluation of Singapore as a potential host market for international expansion using the PESTEL analysis. Analysis of BHP Billiton Company BHP Billiton is a diversified natural resources company involved majorly in the exploration and production of minerals. Their primary area of focus includes oil and gas, nickel, iron ore, aluminum, metallurgical coal, manganese, and energy coal, with further dealings in gold, uranium, zinc, lead, diamonds and silver (Gillespie 2007). It comprises of both BHP Billiton Plc and BHP Billiton Ltd. The company deals globally with exceedingly 100 operations in 25 countries. The headquarters for the company is in Melbourne, Australia and offers employment to more than 41,000 people. SWOT analysis involves the identification of organization‘s strengths, weaknesses, opportunities, and threats. The model, therefore, assesses what an organization is capable of doing and those that it cannot do as well as its potential opportunities (Jurevicius 2013). Strengths The company enjoys a stronger market position in the metal and mining industry since it has got a global presence with operations exceeding more than 100 in 25 countries. Its organization structure has enabled it operates and manage mineral resources all over the globe profitably. The company has diversified streams of revenue regarding geographies and business lines. It has got nine business segments through which it generates revenue including iron ore, metallurgical coal, petroleum, base metals, energy coal, aluminum, manganese, stainless still materials and diamonds and specialty products. The diversified income source shields the company against adverse market conditions. The centralized marketing activities are one of its biggest strengths. Its marketing operations are centralized in Singapore, Antwerp, and The Hague. Apart from these, there are specialized marketers distributed worldwide in 20 regional offices. These operations ensure increased efficiency of the marketing activities and likewise enhance company’s product offerings through expertise in logistics capability and transaction structuring and trading. The company has three major projects that have been completed and are ready to bring in additional revenue including the Escondida Oxide Leach Area Project (OLAP), expansion of the Hay point Coal Terminal and Escondida Organic Power Project. Weaknesses The company has been grappling with issues related to safety at Western Iron Ore (WAIO) operations. Some remedy actions have been announced by the company to address these concerns including improving management of contractors, moving rail services to the Rail Safety Act from the initial Mine Safety and Inspection Act, improving the current strategies to curb excess working hours, reducing access to site, and also the non-important work outside daylight hours is suspended. Opportunities The company has been putting measures in position to ensure that potash operations in Canada are expanded (Osemeke, Adegbite & Adegbite 2016). Since the demand for fertilizer has been on the rise and the Greenfield potash developments have been capital intensive in nature, potash has proved a viable additional portfolio to the company. It is aligned with the game plan of growing Tier 1, low cost. Consolidation of WAIO(Western Australian Ore) assets of the company and Rio Tinto in which an agreement has been signed to establish a joint venture for the two companies. The joint venture would result in reduced cost as it would combine adjacent mines into one operation and ensure that allocation of port capacity is efficient (Gillespie 2007). The company is further entering a binding agreement with a subsidiary of PT Adaro Energy TBK (Adaro) to create a joint venture for its Indonesian Coal Project (ICP). Through the venture, the group will be capable of leveraging the expertise of a better local player for the successful expansion of the metallurgical coal interests in Indonesia (Bonn & Fisher 2011). The company on 19 Aug 2014 made an announcement of intending to create new business through the demerger of a selection of BHP Billiton assets that included energy coal south Africa, integrated aluminum business, manganese industry, and other. This will create more opportunities. Threats Since the commodity market globally is affected by Chinese demand, any slump in the economy of China negatively impacts on the prices of goods as it is a vital consumer of copper and ore. The company, therefore, ought to look for more opportunities for products in other nations. The company poses a lot of environmental issues since during production; there is the emission of carbon dioxide which significantly contributes to climate change, greenhouse effects, and global warming. There is the significant threat posed by intense competition in the industry being that mining and metal industry is moving towards concentration. In every segment, there is domination by large multinational companies. Changes in raw materials prices and increase in ore prices expected in the future years and possibility of a rise in energy price are threatening the industrial margins. Analysis of Singapore Famed as the Garden City or the Lion City, the Republic of Singapore is one of the world’s most standout nations in Asia Continent. Tsang and Hendricks (2015) described it as the only city-state in the entire world, a beauty to behold, and the place to set up and run a business. Ideally, these projections were based on the nation's geography as well as the political, economic, and social environs that collectively build an aura that would favor productivity. Singapore is a nation of 63 islands with some connected by man-made facilities. This beauty is further bolstered by its resources like the Botanic Garden that has been shortlisted by UNESCO a heritage site, the only tropical garden in the world to be given this status. Besides, as Koninck, Drolet, and Girard (2014) noted, in economic measures, the nation boasts financial resources that have facilitated its growth and position as one of the world's most important business harbors. Economic Environment Singapore boasts of an excellent and highly developed market economy. Its position as one of the most innovative, freest, dynamic, and business-friendly nations was bolstered by the fact that it was one of the first four Tigers of Asia that were positioned to be podiums from which inroads into the rest of the continent would be made. Considering that it has continually advanced and achieved a strong GDP that compares to some of the world's most economically dominant nations, the nation has, for the past four consecutive years, received credit ratings of AAA. Its prime location close to the Suez Canal, its low tax rates, skilled workforce, advanced infrastructural development, and a zero-tolerance against corruption are the factors that have significant role played in positioning the country as the most preferred destination for foreign investors (Koninck, Drolet, and Girard 2014). Legal Environment Singapore's legal framework is similar to the British Westminster's Model in which administrative and governing powers are divided between the Legislative, Executive, and Judiciary branches of the government. The judiciary, as is required in the model, operates autonomously without influence from either branch. The nation's primary sources of law are the case laws, which are the deliberations, and propositions that have been projected in previous judgments and the legislations, which are the acts that are deliberated and passed in parliament (Leasor, 2015). Mitigation, mediation, and arbitration are the nation's preferred mechanisms for handling and negating civil disputes. Tsang and Hendricks (2015) stated that these measures were outlined as a step of ensuring that the government avoids plunging into a civil conflict. Regarding employment, the government has implemented an Industrial Relations Act that regulates collective negotiation and bargaining which are mechanics that have been significant in averting labor unrests. This, as Palmer (2014) stated, has been considerable in positioning the nation as the investors’ most preferred destination. Political Environment Singapore is a democracy in which the people elect political representatives to push for their course. This has created stability, which has consequently translated to peace and a standardized set for living in the nation. Other than that, the stability has been vital for its transformation into a business hub. According to Koninck, Drolet, and Girard (2014), the Political and Economic Risk Consultancy, PERC, rates the country as the nation with the lowest political risk in the entire world. However, despite these political positives, the nation has many negatives that limit its political development. For instance, the government limits freedom of speech for the opposition citing that they can cause unrest and affect the nation’s economic development and social cohesion (Leasor 2015). Besides, the government controls the media and determines the kind of information that is shared with the public. The other notable political factor in Singapore is its approach to foreign policies that it believes a significant determinant of peace and development. To this effect, the nation ensures that it has formidable relations with as many countries as possible (Palmer 2014). Socio-cultural Environment Singapore has a novel culture based on the principles that support the nation before the community. In the nation, the family is the basic unit of every society while the society is constructed such that it respects individuals. Moreover, consensus and harmony are favored over conflict (Bercuson and Carling 2015). The environment in Singapore also supports an intense competition that limited by the cooperation and peace. This manner of competition ensures that the competition over political and economic aspects do not override the nation's well-founded issues (Leasor, 2015). Market Entry into Singapore According to the KOF index of globalization, Singapore ranks as a fifth country in the entire world with a reliable index of 87.49 (Bercuson and Carling, 2015). Ahead of it are Ireland, Netherlands, Belgium, and Austria. The market penetration Grid also ranks the country as a better investment destination since there are higher conditions favoring business. Factors that were taken into consideration and that have approved this high level are inclusive of the business environments that the nation has created, and that favor both foreign and local investments. Singapore is a country that is supported by investors as it strives to ensure that it climbs the ranks and becomes the world's most preferred destination for investors. By BHP Billiton Company making a decision to enter this market is a good decision with greater opportunities to growth. Considering that the business environment in Singapore favors this business, the company can initiate the strategies for making an entry in this nation through Australian Department of External Affairs and Trade and necessary authorities in Singapore. The mode of entry may be in the form of acquiring an existing player, forming an alliance with an existing player or begin Greenfield operations either singly or by partnering with another player. The company can make entry into as a subsidiary just like its other branches, its operations being controlled by the central office and can later form agreements aimed at bettering its performance in Singapore. The company should begin by bringing employees on board and familiarize them with the company’s core beliefs and practices. It should also get to understand how unique the market local market is, review the parts of its business model that require some changes and those that needs full reinvention to be able to adapt to the local market. It can, therefore, carry lots of experiments on its product to confirm the customers appeal. Since there are companies that already do the same business, the company should work out ways of countering its competitors. Anticipating and responding to competitive threats is important and this can be done through acquiring a weak player in this local market, or launching a head-on attack with the competitors since the company is well equipped regarding resources and technology (Jurevicius 2013) It is also necessary resources to be considered including raw materials, the source of labor supply and financial resources for the establishment. This must be considered regarding home and host country and the relative cost of their acquisition. The management policies and practices should be provided to regulate the general operations of the company and ensure that there are guidelines and rules for running the business. The policies and practices must conform to the stipulated rules of Singapore as the host Country. Conclusion After making a comprehensive overview of the company regarding SWOT analysis and the economy of Singapore, it can be confirmed that the corporation is relatively better off in taking the necessary stem to expand internationally. The experience the company has in handing diversified business situations in the different nation is enough impetus to move on with its operations. The nature of the competitive environment in which it operates should be carefully monitored and remedy strategies put in place to counter the threats and seize the available opportunities. Looking at the Singapore’s business environment that is luring, attractive, and favorable to foreign investors and local entrepreneurs alike and the most definitive factors of the environment are inclusive financial markets that favor young investing enterprises just as it supports the established ones and the onerous regulations that do not support corruption the Company should be more motivated to explore its expansion. The social setup, enhanced by religious practices that demand morality, respect, and equity, has created an aura that limits labor unrests while at the same time favoring productivity through motivation and amicable approaches to the solution of disputes and enigmas. Further, some political factors also support the business environment (Tsang & Hendricks 2015). These are especially the policies that the country has adopted as a measure of promoting relations with other nations and for creating favorable laws for commerce and trade. 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