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Organizational Analysis: A Case Study of BHP Billiton

Organizational Analysis: A Case Study of BHP Billiton 2018

An analysis and research by PRAJJWAL SUBEDI.

Organizational Analysis: A Case Study of BHP Billiton

Contents Executive summary .................................................................................................................... 3 Introduction ................................................................................................................................ 4 An overview of the company ..................................................................................................... 4 Strategies deployed by the company.......................................................................................... 4 Controversies of the business and their outcomes ..................................................................... 5 An ecological analysis of the company ..................................................................................... 6 Organizational culture and leadership style ............................................................................... 6 Conclusion ................................................................................................................................. 7 References .................................................................................................................................. 8

Organizational Analysis: A Case Study of BHP Billiton

Executive summary The main aim of this report was to carry out an organizational analysis of BHP Billiton Company. This analysis encompassed its strategies, issues facing criticism in the company, environmental analysis to come up with some of its significant threats and opportunities as well as its leadership style and culture. This report has established a better understanding of the factors affecting an organization's performance and even those that may lead to its downfall regarding its environment, both internal and external. It was found that strategic planning is very imperative as it gives a company the direction in which it should operate to ensure that it reaches its long-term goals. The organizational leadership was found to be very crucial in determining the profit margin earned by a particular company as poor leadership may lead to the registry of significant losses and stagnation in the price of investor's shares. The report also established that the company has the opportunity of turning its threats into opportunities and core competencies into competitive advantages to outdo their rivals. Some of the recommendations were the expansion of potash and shale industry as well as using the online channel to fetch a broader market for its commodities. If the opportunities discussed in this paper are seized and the threats dealt with, then the company has the potential of remaining the largest and the global leader in the mining industry.

Organizational Analysis: A Case Study of BHP Billiton

Introduction For a company to operate and flourish in the contemporary business market, it is obliged to coming up with strategies that will enable it to reach its strategic goals. That is because operating without goals is equivalent to traveling without establishing a destination. For this reason, therefore, organizations set goals that they target to meet within a specific period. These goals are evaluated regularly to establish the likelihood of meeting them within the specific time frame. On top of goals, organizations have a vision and mission statement that guide them in their operation in the zeal of achieving their long-term goals and prevailing in the market. This paper focuses on a case study of BHP Company whose strategies will be explored. The paper will also dig deep into some of the company’s criticism, its environmental analysis as well as its culture and leadership style. An overview of the company BHP, initially going by the name BHP Billiton is “the trading identity of BHP Billiton Limited and BHP Billiton plc.” The company was formed after the merging of Billiton Hill Proprietary Company Limited that was founded in 1885 and Billiton Plc which was formed in 1860 (Barney, 2016). BHP and Billiton merged in 2002 to result to what is currently known as BHP. This company has its headquarters in Melbourne, Australia and it is regarded as the world’s leading company in asset diversification (Henri, 2016). It is also considered to be the world’s largest mining company with 125,000 employees and contractors. Its operations expand in more than 26 countries and thus is considered to have been successful in diversification and entering new countries in the global market. Strategies deployed by the company Like every other company, BHP has well-laid strategies that it has put in place in the toil of meeting their long-term goals. These strategies are generally aimed at ensuring that the set goals and objectives of the company are achieved. This company achieves its strategies by having every department carry out its roles as required and being accorded the necessary support as well as employee training (Marcoulides, 2017). One of the strategies is operating by the mission and vision statement. This company missions to “becoming the company of choice, creating sustainable value for our stakeholders ,” aspiring to “zero harm to people, our host communities and the environment and strive to achieve industry leading practice.” Tracing the history of the company, it is evident that the company is achieving its mission of being the company of choice. According to (Hartnell, 2016), BHP is one of the most renowned companies around the world for whose success is attached to the inspiration behind its mission statement. This statement regularly reminds them that they have a goal to achieve. Employees and stakeholders are obliged to ensuring that they work in the best interest of the company, focusing on maintaining the reality of the mission (Prajogo, 2017). Among the critics faced by the company, very few, if not none, is related to environmental issues, indicating that the company, through its mission has been able to attain zero harm to people and the environment. The company vison is to “create long-term shareholder value through the discovery, acquisition, development and marketing if natural resources (Gordon, 2015).” Regarding this strategy, value creation has been achieved by successful efforts of increasing the shareholders' monetary value. Fetching a broader market and diversification of activities has seen the company earn large amounts of income which translates to increment in the price of the investor’s shares.

Organizational Analysis: A Case Study of BHP Billiton BHP Company also turns its core capabilities and competencies into competitive advantages. The company has a highly diversified asset portfolio such as shares, bonds, cash, property, and commodities. That means that it can produce products and meet the different customer requirements, unlike its rivals. It also has a highly qualified workforce which enables it carries out its activities with precision and easily achieve its strategic goals (Jones, 2016). Size, as one of its core competencies, enables it to reach out to a large number of potential customers across the globe and grow to enter other countries in the global market. The company also uses the Ansoff's diversification strategy. Unlike its competitors, its products are diversified by both commodity, market and geography. It has embraced horizontal integration into potash and shale by having a 100% equity in the Canadian Jansen potash project and acquiring Petrohawk energy in 2011 aimed at expanding the shale natural gas (Shahba, 2014). It also cuts cost by 18% by stopping expansion during low-income periods. For instance, in August 2012 it halted the “USD 20 billion Olympic Dam Copper and Uranium mine project in South Australia." That step was taken after the commodity price decreased. Controversies of the business and their outcomes Even though BHP Company has gotten a lot of praises for its successful diversification, growth and performance strategies, it has gotten some critics for obligations and goals not achieved. BPH leadership is one of the factors in the company that has gotten a good number of weighty critics. For instance, in August 2017, the former chairman Grant king who succeeded Jac Nasser was accused of poor leadership that saw the company lose a substantial amount of income and the decrease in value of the “Origin Energy liquefied gas project” that he approved while he was the company’s chief executive officer (Homburg, 2017). King is alleged to have made decisions without the board’s input in decision making, a decision that bore adverse effects as far as the company’s value of assets is concerned. As a result, the former chairman was not in a position to vie for any position in the following BHP annual meeting. He was also forced to retire in the same month so that the company gets another leader who would thrust the company forward in an attempt to reach its long-term goals and operate within its mission and vision statement. To cool down the critics and see the company progress, Ken Mackenzie assumed the position of the company’s new chairman. BHP Company has also been criticized for not increasing the value of investors’ shares for quite a long period even with a substantial increase in the company's net worth and successful diversification strategies. In August 2017, a criticism framed “share price today is where it was a decade ago” was laid against the company. The shareholder complained that “an investor who had fallen asleep and awoken now would be unaware that the world’s largest miner had wasted the world’s greatest resources boom (Tsai, 2016).” According to the media, analysts, and investors the company wasted the substantial boom resources. The critics alleged that the company poorly spent assets earned in the boom years than a triple of what was misspend since the year 2006 to 2016. They further had it that the company spend USD 140 billion inform of capital expenditure whereas the revenue generated in half the previous year was less than half of earning per share of what used to be earned a decade ago. This critic saw potential investors shy away from purchasing shares in the company (Hogan, 2016). A few of those who had shares in the company withdrew their investment as a result of unpromising future of their investment.

Organizational Analysis: A Case Study of BHP Billiton An ecological analysis of the company Environmental analysis is very imperative in an organization as it gives the organization a piece of knowledge on both the internal and external factors affecting it. In the zeal to analyze the environment of BHP Billiton, the SWOT analysis tool (Byles, 2017) will be used as it can be used to do an organizational situation analysis by its managers. This tool will look at the strengths, weaknesses, opportunities, and threats in Billiton's current environment. This tool is the most preferable as it not only looks at the internal but also the external environment. To begin with, some of its strengths are having a strong dealer community that is trained on how to convince prospective buyers that their commodities are the best (Bass, 2018). It also has a good performance upon entry into new markets which has enabled it to acquire new revenue streams and consequently increase its revenue. It also has a good return on expenditure due to successful execution of new projects thereby earning more income. The company has several weaknesses. For instance, it has higher inventory days in comparison with its rivals thereby investing more capital in the channel thus impacting its long-term growth (Barney, 2017). Again, the company is not successful in the integration of firms having a different culture. It also has improper financial re-planning as evident from the current asset and liquid asset ratio. Even with the above-mentioned weaknesses, the company has several opportunities to explore in the present and the future. BHP Billiton has an opportunity of getting more customers from the online channel. Many businesses have known their customers better by working with data analytics through online channels and have maneuvered. BHP has the same opportunity that has not been tapped. Decreasing the transportation cost is also an opportunity that can be used by the company to get more profits or sell its products at lower prices to invite more customers (Ogbonna, 2017). The organization also has an opportunity of turning its core competencies like size and experience into competitive advantages. There are also several threats associated with the company. The rising pay levels and price in some places like China may pose a significant threat to the amount of revenue earned by the company (Gregory, 2016). The likelihood of an increase in the price of raw material is also a big challenge and threat to the profitability of the company. Again, its competitors are developing new technologies in droves, and this is a threat to the company in the near future. Organizational culture and leadership style According to (Fonseca, 2017), “understanding the entity culture is vital in the description of the immediate organizational phenomena to which glues and aligns the operational elements into a shared system that delivers desired results.” Understanding the culture of BHP Billiton will reveal the shared values and norms that are leaned and shared from employee generation to generation concerning the business environment. In an attempt to remain the leading world’s mining company, BHP Billiton has upheld several values which its members rely on during the performance. One of its core values is accountability where managers are responsible for their misconduct. The employees are required to embrace the virtue of “diligent leadership and workmanship behavior (Lean, 2017).” The employees are also subjected to training on how to deal with customers with the virtue of politeness and how they can achieve a safer working environment. On the part of leadership, though the company had received several critics during the tenure of Jac Nasser, the reign of Andrew Mackenzie saw things change for the better. Since Mackenzie took the position of the new CEO in August 2017, the price of the shares has increased as opposed to the trend before his entry. The increase was achieved by decreasing the production cost to see the company earn more revenue even without an increase in sales.

Organizational Analysis: A Case Study of BHP Billiton Conclusion BHP Billiton has proven to have a significant strategic performance. It has been able to diversify its activities and market to more than 26 countries in the world, still focusing on harvesting more in the global market. In spite of a few leadership challenges that led to the stagnant price of shares for a decade, the company has gotten a new leadership that is promising in taking the company to another level that will enable it to achieve more and diversifies its market through operating following its strategic goals, mission, and vision statement. The company has been able to adequately deal with staffing by replacing underperforming staff and carrying out employee training to instill the company’s culture and values into them for sound decision making and improved performance. It had also been able to cut costs of production thus increasing the profit margin and consequently the price of shares. The company has a potential of expanding the potash and shale industries, increase the future demand for potash and shun diversifying into resources highly sensitive to carbon dating.

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