Overview of Rio Tinto
The report deals with the Rio Tinto mining corporation. It is the Australian based company and among the metals and the mining corporations, it is one of the world’s largest companies (Tinto, 2014). The company produces many commodities and it has placed itself among the world leaders through series of mergers and acquisitions. It produces various commodities such as aluminium, iron, copper, coal, uranium diamond. Although the company is primarily focused on extraction of minerals, it has significant operations in refining bauxite and iron ore (Salkield, 2012). ). The report presents the critical issues of the company and overview of the contextual factor innovations and entrepreneurship. The report recommends as to how this contextual factor can be used by the company to enhance business practice.
Operational excellence remains central goal of Rio Tinto. In order to achieve true operational excellence the leaders of the industry are leveraging best practices and trying to handle to difficult issues. Some of the critical issues are discussed in this section.
As per Seagle (2012) Rio Tinto has been widely criticised for environmental implication of its mining activities. Australia is world leader in carbon emission although it accounts for 1.4% of the world pollution. The critical issue faced by the company is its accountability for global warming due to is coal operations. Other than that uranium operations have contributed to both environmental and nuclear technology concerns. Due to the environmental concerns and repeated criticisms, the government of other countries have withdrawn itself from the Rio Tinto Shares. For instance, the government of Norway have banned its investment in the company after the rise of these criticisms. Rio had suffered severe loss due to its engagement in the Grasberg mine in Indonesia. This investment was followed by claims of the environmental damages. This engagement has led to its exclusion from the investment portfolio of the Norway government. The government pension fund is the world’s second largest fund. It sold the shares in Rio worth 4.85 billion kr to prevent from contributing to the environmental damage. This led to huge financial loss of the company due to reduced revenue. In addition to environmental damage, the other major concern is ability of Tinto to rehabilitate and restore the used up mining facilities. Further, the depletion of the Australian mining quality added to loss of revenue (Salkield, 2012).
The other prime issue of the company since the last decade is that it is going lean and trying to tackle its labour relations. Rio struggles to attract the minority group worker. There were several concerns expressed by the activist group particularly in relation to the company’s operation in Papua New Guinea. It was alleged that the operations at Rio group was catalyst to “Bougainville separatist crisis” (Lasslett, 2014). Further, the company has faced charges related to violation of human rights. Further, the company has allegation related to corruption and for using illegal means to obtain secret information from biggest still mill companies in China. It led to damage of the company’s reputation and loss of work force and investment sources. Labour shortage has led to increasing cost burden. The social stigma has severely affected the production and consumption rates of Rio (Ellem, 2014).
Environmental Concerns in Rio Tinto
Rio is facing serious debt crisis due to political and economic factors. Rio is facing drop in the iron ore income due to super profit tax on resources owing to Chinese inflammatory policy and the clean technology program initiated by the Australian government (Fernández-Caliani et al., 2013). Rio’s performance in the market is deteriorated due to falling commodity prices and dependency on China for its iron ore demand. This dependency on China is making Rio vulnerable to downturn in the commodity prices. Further, the growing iron ore prices have caused decreased in the income of the Rio’s iron ore groups by 20% since 2012 (Ellem, 2014). Rio Tinto has not updated itself with the technological advances in the market. It has not implemented any cost effective solutions. The future of the mining company has been affected by recent advances such as driverless trucks, and other automated trains and the rolling out of the National Broadband Network (Yao, Sutherland, & Chen, 2010).
According to Wang et al. (2010) innovation is the critical theme for miners. Rio Tinto is too facing the issue with the innovation. It has highly focused on technological optimisation of outdated techniques. It is not looking for new methods of configuration. It has slowed external engagement and meet the needs of the multiple groups. According to Martinez-Fernandez (2010) it has become harder than ever for Rio to attract capital. It has segments of industry that are running at a loss. The company is not updating itself with the innovative strategies to seek alternate sources of financing even if it is not entirely favourable. Further, there is a high chance that the tax challenges will influence the present management. It is difficult for the company to keep up with the new tax rules. The company is not assessing the operational and the corporate structures regularly. It is failing to engage with the government stakeholders even when the tax rules related to the production or stability threatened to change.
It is because of the industry leaders that the economy is surviving and is able to adapt to the changing times. Entrepreneurship keeps the economy afloat by producing financial gains. This also gives risk to the innovation in entrepreneurship. Entrepreneurs are the “innovators of the economy” (Drucker, 2014). The new way to develop a product and increase its production indicates the significance of innovation in entrepreneurship. The key to enhance the longevity of the business is innovation in entrepreneurship.
Labour Relations in Rio Tinto
The term innovation refers to creation of new services or product by exploiting new ideas. In business, there are different types of innovation such as product innovation, supply chain innovation, and marketing innovation (Galindo & Méndez, 2014). Innovation is important in business because it is a major factor in influencing strategic planning. Often the combination of measured and well-planned ideas, people and objects leads to innovation of new technological revolutions and new business ideas. This highlights the importance of innovation as it leads to creation of wealth (McLuskie & McLuskie, 2017). In this century of stiff competition and strong demand and this intensity is the driver of innovation. Innovators are needed in very business due to increasing impact of migration, globalisation, technological, migration, technological revolutions and climate change issues. Entrepreneurship is the process of reviving of existing businesses and starting of new business by obtaining funding from venture capitalist. Entrepreneurship is the key to building sustainable economic growth. Entrepreneurs create business opportunities for accountants, financiers, lawyers, and others. Entrepreneurs are risk takers, allocators, and innovators. It is the with the ability to innovate that the entrepreneurs are able to stimulate the financial gain for the company (Nanda, Younge & Fleming, 2014).
Entrepreneurs come up with a solution when they identify a need among themselves and in the community thereby making the life of the individual comfortable. The role of the entrepreneurs is to work in pace with the current trends and demands. The role of the entrepreneurs is to constantly innovate without compromising on the quality (Drucker, 2014). For instance, Apple is the great example of entrepreneurial expertise and new innovative products. Entrepreneurs focus on innovation as it contributes to success of the business. They are innovators because they do not find one solution to a crisis but invent multiple solutions. Entrepreneurs are creative and stimulate the employees of their organisation to enhance creativity to add value to business that is the financial gain. The importance of innovation comes from completion where the entrepreneurs are stimulated to act smarter than their competition to ensure qualitative and cost effective solution at lower price. It is due to the innovation in entrepreneurship that helps every country to change with time and come up with better products than the existing ones (McLuskie & McLuskie, 2017).
In Australia, the mining sectors give the entrepreneurs a general boost. It is because of the creation of financing sector that is not threatened by the high reward or high-risk projects. However, in mining industry innovations are implemented very slowly and are resisted in many cases. Despite, the technological advancement several mining companies continue to use age-old techniques. However, Rio with the help of strategic decisions have turned to be a leader in mining industry. It has accelerated its technological development and reaping th benefits of higher productivity (Salkield, 2012). The critical issues faced by Rio has declined its productivity in recent times. Therefore, the entrepreneurs are recommended to increase their innovation to overcome the challenges and enhance sustainability
Debt Crisis of Rio Tinto
This section discusses recommendations for entrepreneurs to enhance the business practice of Rio Tinto using innovation.
The short-term strategies recommended for Rio Tinto to prepare for exponential change is to adopt enhanced innovation. The company should develop collaborative ecosystem (Fonseca, 2010). Digital workforce engagement would be fruitful in this century of technological advancement. It will help in improving the asset management as well as managing the work process with the energy availability. Strategies like sensor technologies, 3D printing and modularization is required to increase mechanisation and enhance the business practices. Technology and innovations are core competencies. Without technology there is no innovation. Rio should indulge and investment in devising new technologies which will minimise negative environmental impact and ensure efficiency and productivity at mining site (Salkield, 2012). Thus, the entrepreneurs are recommended to build more comprehensive understanding of the resource base, optimise equipment low, monitor performances in real time,
The miners in China is about to take innovative step in response to the global impact of the domestic market trend of the country. It is necessary for the miners in the China to take innovative step because the Chinese government follows an interventionist path. Due to currency weakness, related concerns the mining enterprises in China are aiming to buy overseas assets. Therefore, the miners must consider extreme scenarios. It is recommended that Rio Tinto should also implement similar strategies. It must develop plans similar or relative to investment initiatives of china. Rio Tinto must prepare for these incipient shifts and leverage Chinese expertise in the areas of construction, design and financing (Tan, 2013).
Rio is recommended to adjust to the new normal. Rio Tinto must develop plan to eliminate cost related to shutting down of older mines. Therefore, the strategy should be to prevent production from falling even commodity demand is down (Yao, Sutherland, & Chen, 2010). Rio Tinto must prepare for inevitable change as the outlook for thermal coal is threatened with the global move towards renewables. It is inevitable to move to alternate power sources even though fossil fuels continue to play a vital role in global energy mix. An alternate strategy is to increase the renewable energy patents (Nanda & Fleming, 2014).
The entrepreneurs must avoid outdated methods and instead implement a new stakeholder engagement technique. It is needed to meet the demand of multiple groups. Rio Tinto is recommended to align its investment with the desperate needs of the stakeholders for profit maximisation. The entrepreneur of Rio must act like a captain of ship and prevent threats due to security issues and strict regulations being imposed on environment. It may act to prevent the volatility in the commodity market (Martinez?Fernandez et al., 2012).
Lack of Innovation in Rio Tinto
Conclusion
The report has discussed the critical issues of Rio Tinto mining company. The prime area of concern for Rio is the high debt and operational inefficiencies due to interference by the government. The report has provided overview of the innovation and entrepreneurship in business. The report has provided recommendation to Rio Tinto for enhancing business practice using innovation and entrepreneurship in financial monitoring, capital spending and technological investment in automated machinery. The recommended steps offer opportunities to the mining company which together represent a fundamental shift in capturing value in mining sector and potential safety outcomes.
References
Drucker, P. (2014). Innovation and entrepreneurship. Routledge.
Ellem, B. (2014). A battle between titans? Rio Tinto and union recognition in Australia’s iron ore industry. Economic and Industrial Democracy, 35(1), 185-200.
Fernández-Caliani, J. C., De La Rosa, J. D., de la Campa, A. M., González-Castanedo, Y., & Castillo, S. (2013). Mineralogy of atmospheric dust impacting the Rio Tinto mining area (Spain) during episodes of high metal deposition. Mineralogical Magazine, 77(6), 2793-2810.
Fonseca, A. (2010). How credible are mining corporations’ sustainability reports? A critical analysis of external assurance under the requirements of the international council on mining and metals. Corporate Social Responsibility and Environmental Management, 17(6), 355-370.
Galindo, M. Á., & Méndez, M. T. (2014). Entrepreneurship, economic growth, and innovation: Are feedback effects at work?. Journal of Business Research, 67(5), 825-829.
Lasslett, K. (2014). State crime on the margins of empire: Rio Tinto, the war on Bougainville and resistance to mining. Pluto Press.
Martinez-Fernandez, C. (2010). Knowledge-intensive service activities in the success of the Australian mining industry. The Service Industries Journal, 30(1), 55-70.
Martinez?Fernandez, C., Wu, C. T., Schatz, L. K., Taira, N., & Vargas?Hernández, J. G. (2012). The shrinking mining city: urban dynamics and contested territory. International Journal of Urban and Regional Research, 36(2), 245-260.
McLuskie, P., & McLuskie, P. (2017). Innovation and Entrepreneurship. International Journal of Entrepreneurial Behavior & Research, 23(1), 159-162.
Nanda, R., Younge, K., & Fleming, L. (2014). Innovation and entrepreneurship in renewable energy. In The changing frontier: Rethinking science and innovation policy (pp. 199-232). University of Chicago Press.
Salkield, L. U. (2012). A technical history of the Rio Tinto mines: some notes on exploitation from pre-Phoenician times to the 1950s. Springer Science & Business Media.
Seagle, C. (2012). Inverting the impacts: Mining, conservation and sustainability claims near the Rio Tinto/QMM ilmenite mine in Southeast Madagascar. Journal of Peasant Studies, 39(2), 447-477.
Tan, X. (2013). China’s overseas investment in the energy/resources sector: Its scale, drivers, challenges and implications. Energy Economics, 36, 750-758.
Tinto, R. (2014). Rio Tinto Mine of the Future, Next-Generation Mining: People and Technology Working Together. Rio Tinto plc and Rio Tinto Limited.
Wang, C. H., Chin, Y. C., & Tzeng, G. H. (2010). Mining the R&D innovation performance processes for high-tech firms based on rough set theory. Technovation, 30(7), 447-458.
Yao, S., Sutherland, D., & Chen, J. (2010). China’s outward FDI and resource-seeking strategy: a case study on Chinalco and Rio Tinto. Asia-Pacific Journal of Accounting & Economics, 17(3), 313-325.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
