Finding

Plans and tactics or the process of planning, monitoring, assessing, and all the requirements that are considered as significant for in the attainment of goals and adjectives can be defined as strategic management. Innovation at a fast pace, the emergence of technological trends, expectations of the customers tend the business corporations to think and take decisions in remaining strategically successful. BHP is a multinational mining which deals with extraction of oil, gas, and minerals and then processes them. BHP operates under two parent companies that are, BHP Billiton Plc. and BHP Billiton Limited. Therefore the company structure is dually listed. To run the BHP both the parent companies work through a unified management system and board system (BHP 2018).  BHP’s headquarters are present in Melbourne, Victoria in Australia. The type of the company is public. It’s an Anglo- Australian company that works in different countries. Products of the company mostly include iron ore, petroleum, uranium, coal, nickel several metals and natural gases. According to 2017 estimates, the revenue of the company is US$ 38.285 billion and net income is US$ 6.22 billion (BHP 2018). Around 60,000 or more than that employee work under this organization. BHP is one of the top firms in Australia and also the world’s top leading resource and mining company.

Porter’s model of competition is the approach that offers a great way of analyzing the practices of the company and specifically its competitive external environment factors (Stead and Stead, 2014). Porter five forces is a great way to identify the strength of the company’s strategies with compare to the competitive forces.

Bargaining power of buyers- Natural resources are in a huge demand and due to limited supply their price is always high compared to other things, therefore, buyers always try to find the best offerings at the minimum price possible. Therefore it can put pressure on BHP and affect the profitability as well (Zacks 2016). There are very few substitutes available therefore that does not affect the bargaining power of the customers. Buyers setting the amount of everything or discounts can be a harmful move for the company in the long run and can also affect the business (Wheelen, Hunger, Hoffman and Bamford, 2017).

The threat of new entrants- Threat of new entrants is quite low because of the low availability of the natural resources and a high amount of money is required to set up the mining business. Since BHP is one of the largest resources company, therefore, any new entrant cannot reach the level of BHP’s current business (Grant, 2016). Many new kinds of equipment are used by BHP for resource extraction along with the latest technology; therefore, any new entrant is not any kind of danger for BHP. Geographical locations used by BHP are also some of the great locations with a good amount of natural resources.

A threat of substitute- This industry is basically associated with extraction of natural product or raw material, therefore, the threat of substitution is very low or almost nil (Barney and Hesterly, 2010). The raw material or natural products cannot be obtained easily by artificial methods; therefore, it is not at all a big deal for the company. Also, BHP is a big brand and works on an international level also strongly placed therefore it does not affect the company.

Overview and critique of Porter’s models of competition

A threat of existing rivalry- Natural resources cannot be found anywhere so many companies are trying to get the resource reserves, therefore, the competition is very high (Barney and Hesterly, 2010). BHP is a strongly placed company; therefore, it is very unlikely to get affected by any such minute issues. It also has one of the world’s largest uranium reserves in which indicate lots of business growth in the future. On the other hand, even the low prices also are not going to affect the company because of their affirmative stand.

Bargaining power of suppliers- This factor really affects the BHP’s business in several ways. Transportation, materials, energy and energy cost and also labor is the few factors that determine this factor (Cassidy, 2016). All these factors do not have any kind of alternative or substitutes, therefore, it encourages the strong bargaining power of the suppliers. All kind of operations in this industry requires a great amount of enhanced equipment, technology and, therefore, every project cannot be done without any of these factors because they determine the whole process.

To analyze the company in a better way, SWOT analysis is one of the best approaches. SWOT analysis gives a better perspective towards the behavior of the company. SWOT stands for Strength, Weaknesses, Opportunities, and Threats associated with the particular company. In a way, it can also be called situational analysis since it analyses each and every important area of the company. To analyze the internal and external strategic factors of the BHP it can be very beneficial (Channon and Jalland, 2016). The main purpose of SWOT analysis is to identify all the important factors that can be used by the company to strengthen the business strategies and then using them to eradicate and fight all kind of threats let be competition or any other thing that affects the company in any adverse way possible. SWOT analysis of BHP company is as follows:

BHP is one of the leading mining company in the world and also in its industry as well. BHP has a great team of managers and staff that lays out a great business strategy for the company and decides what is best for the company. BHP has the largest uranium reserves in the world along with that lead, copper, aluminum, and silver are also supplied by BHP in a very large amount. Another strengthening factor of BHP is that it is also one of the largest producers of coal, raw iron, and manganese etcetera (David, 2011). BHP is a multinational company it deals with many countries such as the United States, Africa, Brazil, also in South America as well.

Dealer community of BHP is very powerful. Because of BHP’s continuous hard work, suppliers have developed a great relationship with the company and therefore the dealers invest in the company along with promoting the products and services of the company (Haines, 2016). Due to its great culture and behavior, BHP has established many great collaborations and mergers with many well-established technology companies. This has allowed BHP to facilitate its operations as well as the supply chain smoothly.

Company analysis

Another strength of BHP is the great number of financial returns to its investors on the capital expenditure which gives a strong and loyal base of investors to BHP and therefore BHP does not face any kind of issue while executing a new project (Wolf and Floyd, 2017). Also, the track record is comparatively high according to starting a new project. Cash flow of the company is also strong and free.

Weaknesses of BHP really require some improvements in order to strengthen the competitive advantage. In the past, several mishaps have occurred which could have harmed the company’s image. BHP has a poor image for merging with such companies which have different work cultures, although BHP is good at integrating with small companies it has failed to merge with different work culture companies (Daspit, Chrisman, Sharma, Pearson and Long, 2017). Another weakness of BHP is that the company has not developed any kind of future plans and even the structure of the organization also supports the present business model, therefore, no such arrangements are done for any other kind of adjacent project.

BHP has not made any kind of improvement in the research and development field despite spending the huge amount of money many other companies are way ahead of BHP in this matter. BHP‘s innovation game is not at all strong and can not compete with other leading companies in this industry (Sung and Park, 2018). Human resources department of BHP consists of semi-skilled or unskilled persons which have impacted the company’s progress in an adverse way. Financial planning of BHP is also no good. All the factors make BHP weak even corporate communication is poor.

BHP can improve their way of working by introducing some creative and innovative business strategies and also strengthening their research and development team, it will make the brand more powerful (Wambui, 2018). Due to some new environmental policies, many other companies will try to use different types of equipment that fit under the policies but since BHP is already ahead in this field, therefore, it is a great opportunity for BHP.

BHP also serves online which gives the company an amazing advantage to know it’s customers in a much better way and therefore the company will be able to analyze the data and produce the products as per the demands (Helms and Nixon, 2010). BHP has a free and stable cash flow which gives a huge opportunity for the company in many ways. But more importantly, due to this feature, the company will be able to invest in another project while doing its current project. Many new technologies, equipment, skilled staff and labors can be arranged with a huge amount of budget which would be a whole new level of improvisation for the company (Eden and Ackermann, 2013). The economy has also shown a positive progress that means many people will be interested in investing or buying the products, either way; it would be a win-win situation for the company. since at the end of the day, the great economy will result into the great profitability for the company. Also, the new taxation policy is a game-changing policy it can impact many great businesses in different positive ways if used properly.

SWOT analysis

The biggest threat of this industry is the increasing cost or in simpler words “ the bargaining power of the suppliers. In this industry, major factors required for getting the work done are energy cost, energy production, labor cost, transportation charges, and many other things (McKiernan, 2017). All these factors require many different kinds of suppliers who can deliver all the things and since these factors have no alternative, therefore, the suppliers demand a huge fee. Another factor that affects the working of BHP is the random fluctuations in the political world. Any little change in political laws and regulation can affect the way of working in this industry severely. In Australia, many threats from the political point of view are being faced by BHP. Even the government of Australia is not in the favor of BHP regarding the political dynamics. China is the largest buyer of BHP that can also change due to any unfavorable condition.

Porter five forces is a very simple tool and very easy to use as well but it is a strong tool as well because it allows one to examine many important factors about the business (Rothaermel, 2015). Five factors are the bargaining power of suppliers, bargaining power of buyers, a threat of new entrants, existing rivalry, a threat of new entrant and threat of substitution. Success and failure of porter five forces in BHP’s business have been explained below.

One of the forces is the bargaining power of the suppliers; it helps to determine the power of the suppliers while determining the prices of the services.  This feature also allows the business entity to decide which buyer would be beneficial for the company. Under this approach, one shall be able to compare between different buyers and their products. This feature is very beneficial for BHP since it determines the potentiality of buyers and compare with other buyers and then choose the best for the company (Morden, 2016). This approach is successful for the business because through this, the company will be able to choose the best kind of products and services from the best buyer. Since in a business due to high competition, many other suppliers provide better or same quality product at comparatively low prices, therefore this approach compares all the suppliers and chooses the most appropriate for the business.

Another approach of Porter’s five forces is the ability to determine the bargaining power of the customers. It will allow the business entity to know the bargaining power of the customers that is, that how easily can the customers drive the prices down of the products?. It can be decided few evaluations like, evaluating the number of orders, number of customers and the price difference between a company’s services and other company’s services. It also helps to determine the strangeness of the buyer while dictating the prices. This framework gives the company a chance to know their customers in a much better way (Jenkins and Williamson, 2015). This tool is also very beneficial for the business to produce a strategy according to the customers in such a way that the negotiations will not harm the profitability level of the company in any way.

Threats of existing rivalry or competition can be determined by Porter’s five forces. This is one of the most beneficial tools for the BHP since it allows the company to know the competition they are facing or any pre-existing rivalry that can harm the business. This lets BHP compare their products and services with their competitors and then produce the products better than their rivals by modifying the old products or launching new products. This feature allows the company to know their rivals in a much better way and then lay out the business strategy in a better way than them so that the customers can get the better services from BHP and do not change the brands (Durand, Grant and Madsen, 2017). Some rivalry companies take this very seriously and give so many offers to the customers to increase the competitive advantage; therefore, this feature allows the BHP to choose the better strategies in order to maintain the customer base.

A threat of new entrants is also the beneficial form of analysis for the BHP Company because it tells about the new entrants in this industry and whether they affect the business in any way possible. This approach already warns the impact of the new entrant’s business model on the company and then allow the company to design a new business strategy in order to increase their level and downtick the new entrant’s business and also to maintain the brand’s position on the top. It is a successful approach for the business and BHP can get so many benefits by using this approach. Also to avoid any kind of issues it already warns the company about the upcoming problem.

The last force is a threat of substitution which refers to the alternatives of the products that are manufactured by the company. Many customers find the cheap alternative to the services or products or any different way of getting the same service as, therefore, this feature warns the company about it. Therefore it also allows the company to design their products in such a way that imitating them shall not be possible in any way. BHP is a mining company and extracts the natural resources, therefore, this threat is comparatively low but still many companies copy the work style of BHP in order to increase their profitability and increase the customer base. It is a successful approach because it warns the company about severe consequences of producing a cheap product, therefore, forces the company to produce a better quality product for maintaining the competitive advantage among rivalries.

Despite all these successful features sometimes porter’s five forces model can affect the business in adverse ways such as:

Porter’s five forces do not focus on internal factors like strengths and weaknesses of the business that can also help to gain competitive advantage but rather than focusing the actual organization it focus more on the external environment.

Porter’s five force model is most suitable for such a market which is successful according to the economy. This model overlooks many kinds of important information in the business. Another way it affects the company’s business is that it does not focus on actual data rather focuses on estimated data. Also while using the model the market is considered as stable which is not at all a good way because market conditions are dynamic and are always changing and no one knows what is going to happen in the next minute. Also, this model does not include the value of a company’s asset while doing the competition analysis which is a great drawback. Porter’s five forces model also does not consider any kind of strategies and the impact of strategic alliances. All these factors can make it a failure.

Conclusion:

After analyzing the overall scenario it is concluded that the report is based on BHP Billiton Company and the impact of Porter’s model of competition. BHP is an Anglo Australian company which deals on an international level. The main business of the company includes mining and resource extraction. BHP is one of the top companies in Australia and generates a very high amount of revenue. BHP owns many great reserves of natural resources which is a great thing for the future as well as a competitive advantage in the market. BHP works under two parent company and both the companies’ works in a unified manner along with boards and management.

This report also consists of Porter’s five forces model of competition. This model describes the situation of a market of this industry and explains different factors regarding it. It mainly emphasizes the competition in this industry. Porter’s five force model is a great way to analyze many different things regarding the market so that the strategies can be designed for the business accordingly. This explains many features such as the bargaining power of both suppliers as well as the buyers, threats associated with the new entrants, threats due to substitution and threats due to existing rivalries etcetera. All these factors allow the company to know major things affecting the company and then choose the better option for the business. It is a great model for BHP mostly to analyze the competition level in the market. This model does not focus on internal factors of the company or industry like other analysis, for instance, SWOT does. SWOT is also mentioned in this report for the company analysis. SWOT shows the strengths, weaknesses, opportunities, and threats regarding the company. SWOT gives a better chance to analyze the company’s internal and external environment, unlike Porter’s competitive model which focus only and only on the external environmental factors.

Porter’s competitive model is a great approach to analyze the existing market competition. But this model lacks some important factors such as internal environment analysis, changing the situation of the market and the impact of the strategic alliance. It can be improved to make the observation more realistic and more actual with proper analysis of data and statistics.

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