Organizational Culture In Manufacturing Company (BHP Billiton) – An Analysis

Strategic Partnership

BHP Billiton was formed as a merger between BHP and Billiton in the year 2001. This company is the world’s largest mineral and mining firm with broad portfolios in different sectors of the economy around the globe. This company has made huge advancements both in the domestic markets in Australia and international markets. According to Hitt et al. (2012), BHP Billiton has grown both in sales revenues, financial consolidation as well as market share. Furthermore, the sale of petroleum products and mineral products has continuously matched the expectations of the consumers.

The merger between Billiton and Broken Hill Proprietary Company(BHP) enabled the company to adapt to the new ventures and challenges that affected the operation of the business (Dastory, 2009). Mergers are one of the most appropriate strategies to increase the financial capability of the firm to increase their operating and investing finance. According to Richard Daft, (2016) strategic partnership and alliances create a competitive advantage for firms to compete fairly with other competitors in the industry.

A contingency approach to management states that managers activities or actions undertaken in different situations must be aligned to the situation itself and that an action is only valid under certain conditions. Managers are faced with significant process, behaviors, and systems which did not integrate with the external environment. Management, this theory proposes that managerial action is contingent upon the external environment and that no best approach is expected in each circumstance.

BHP superior management team propelled the company towards successful business strategies through contracting of Heidrick & Struggles to support the board with a CEO transition. The transition process was planned for 18-36 months which was equally an extended period to deliberate on this delicate matter. The company board sought to employ a highly professional chief executive officer consistent with the increasing demand in the business internal and external environment
The board was furnished with detailed strategies on the leadership and experience requirements of the senior team members and individual managers.  

Heidrick & Struggles transformed the leadership through talent management of BHP for the top 150 executives on succession planning and leadership development program.

BHP Billiton has applied the five forces analysis as suggested by Michael porters to overcome the competitive operating environment. This strategy enables a firm to assess its opportunities, strengths, and threats from external factors that are beyond the control of the business. Nonetheless, this is a critical strategic tool for realizing the goals and objectives of a company (Richard Daft, 2016)

• The bargaining power of buyers is low. This is because the company shifts forward any increase in price to the consumer due to high demand and a limited supply of the natural resources in the market.
• BHP company is ever seeking to build a strong consumer relationship with its customers, therefore, reducing any impact of the price increase.
• There are scarce natural resources in the environment. Therefore, fewer substitutes are available in Bulk which reduces the bargaining power of buyers.

• BHP Billiton is mainly affected by the bargaining power of suppliers in, raw materials, human labor, shipping, and energy costs. Though the company tries to reduce the capacity of production through enhanced operations, the overall costs from suppliers have increased as well. Consequently, due to fewer substitutes available the bargaining power of suppliers is enhanced.

Contingency Approach

• The threat of new entrants to the market is low. This happens since the natural resources used in the production are very limited in capacity as well as supply available in the global market. This, therefore, restricts new entrants into the market.
• Fluctuations in demand especially from developing economies such as China due to drop in commodity prices made from iron ore. This leads to a fall in demand which is likely to create barriers to new entrants into the market (Bloomberg, 2012)
• BHP Billiton has a vast investment in infrastructure, technology and human capital which enhances production of quality products to the market. This creates a barrier to new entrants which might take a while to upgrade to the same level.
• BHP Billiton geographical location is strategic due to best natural resource in the located areas of its operations. New entrants to the market can be disadvantaged in getting such locations with more natural resources.

• There is low threat of substitute products in the market since there is no vast substitute for natural raw materials used in the company to generate minerals and metals. BHP Billiton has a strategic advantage due to its vast and diversified portfolio of natural resource assets that can combat any threats of substitutes.

• There is high rivalry among the competitors selling the energy products and metals. Competition to the scarce resources is too high along with maintaining competent staff as well as investing in mega capital projects that can comfortably compete with the rivals.
• However, amidst strong rivalry, the mining and metal industry is still profitable and have high growth potential. Therefore, low natural prices likely cannot influence the industry players.
• The industry has also suffered from hostile- takeover speculations. For example, in 2005, BHP Billiton acquired WMC Resources of Australia which had the largest uranium reserves in the world during a takeover battle.

BHP environmental policies over severally years have been questioned as to its effectiveness in ensuring the safety of the public. BHP faced litigations charges as to the safety of community due to pollution activities to the environment and displacement of community in the natural resource mining areas without adequate compensation to the community involved (Nyland, et al., 2011). Moreover, the company’s shareholders have been involved in tussles with the board and managing directors of the company on its corporate social responsibility. The shareholders are fully aware that if the company public image is compromised it is a detriment to their overall company corporate value.

Recently, criticism from the media on the commitment of the company to conserve the natural resources of its broad portfolio of business around the world (Bellis, 2016)

1. Opportunities
2. Expansions and growth- BHP financial position has led to various operations around the globe. The high demand for fertilizers has led the company to venture into potash mining in Canada as an addition to their group’s portfolio.
3. Mergers and acquisitions-BHP has a potential of joining strategic partnerships and alliances with other small related companies and gain a competitive advantage in both financial and human resource capabilities.
4. Global ventures- the company presence in various countries in the world create a vast market for its products and enhances the brand image of the company attracting global ventures.
5. Innovation in marketing- today’s marketing pegs on innovativeness and creativity to compete favorably in the global market. BHP Billiton company though it is a business to business company, good marketing through innovative market channels is essential to sustainable growth
6. Strength
7. Strong market position-BHP Billiton is a dominant market leader in the metal and mining industry. The companies group has a portfolio of more than 100 operations in 25 countries(Smith & Clinton, 2009)

1. Marketing position-the group’s marketing operations centralized in Singapore has increased the proficiency of the marketing activities.
2. A strong financial capability which enhances the growth of the company by making significant capital projects investments.
3. Weaknesses
4. History of safety issues with Western Australia Iron Ore operations which have led to a reduction of site access
5. Weak corporate communications- the staff does not respond to the investors and stakeholders corporate inquiries in a timely manner. The company has not adopted an effective group communication using media.
6. limited human capital skills capacity that matches with the increasing demand for innovative methods of mining
7. Threats
8. Increasing cost of production- the cost of raw materials used by the company is ever increasing. The labor cost, production cost and depletion of natural resources decrease the overall profits of the company.
9. Increasing competition threats- BHP Billiton is facing adverse competition from various organizations including ExxonMobil Corporation, Chevron Corporation, Anglo American Plc
10. Fluctuation in demand- BHP Billiton is facing increasing fluctuations in the demand of its products China and India due to the uncertainty of the market situation.
11. Political threats- Threats from existing Australian government on the legal structures in the operating environments can prove to be harmful to the effectiveness of company operations.

The organizational culture of a company comprises of its values, mission, belief and work ethics that guides the working environment. A good management values and visions of the company enhances a good working environment that support the growth of the employees (Lestari, Ismail & Mansur, 2014). Billiton mission is to capitalize on the diversification of the company’s operations in the global market to maximize profits and revenue generation. This helps the company to attract highly qualified employees committed to the excellence of the organization (Adkins et al., 2013).

The mission as set out by Billiton is to use the diversification of the business in the market and gains maximum profit. This helps them to attract high caliber people who are more committed to the success of the organization. According to Schmeck, (2013), apart from the visible culture, there is a hidden culture of an organization in which the success of an organization greatly depends.

BHP Billiton has adopted an efficient corporate structure believed in developing the skills and capabilities of the employees. The culture believes in safe production operations and the application of simple methods in the job duties. Employees working in the company are given special medical attention since they are the priority of the company. Billiton ensures that the employees work, duties and assignments are simple (Giannoni, 2014). Furthermore, the employees are given specialized training and skill evaluations at regular times to increase their skills and competency in the job processes. Capital discipline is another culture at Billiton attracts the company as an excellent platform for employees to work. The company sets aside finances at 10% to enable growth in their current annual production and eventually increase the regular flow of cash that sustains the business operations.

M. Porter’s Generic Strategies

The leadership style in the company is keen on maintaining the culture of the organization. The financial committee has the duties to account for the audit issues in financial accounts as well as business in securities. Nevertheless, BHP Billiton long-term plans for executive leadership are managed by the independent directors this allows the management executives to act in the best interest of the shareholders and other stakeholders (Grant, 2015). BHP Billiton employees work in operational function groups with clear accord to the company managerial leadership. Moreover, the executive leadership is fully furnished with competent skills and expertise about the changing economic environment.

Conclusion

The BHP Billiton company strategies to be an outstanding market leader in Australia and several countries in the world is incredible. The various environmental analysis reveals that the BHP Billiton board of director, managers and other stakeholders all support the operations of the company entirely. The culture and leadership styles in the company promote conducive working conditions for the employees though their work is demanding. Moreover, the appointment of the top managers is rigorous exercise aimed at appointing the right person to spearhead the company. However, though the business environment is dynamic and natural resources are scarce, this company innovativeness in a strategic partnership and mergers strategies has paid them off in maximizing their financial strength. Finally, the company’s efforts in creating fairness and implementation trust and openness among the employees help the company achieve consumer’s wants differently as compared to other companies in the industry.

References

Adkins, C. L., Samaras, S. A., Gilfillan, S. W., & McWee, W. E. (2013). The Relationship between Owner Characteristics, Company Size, and the Work–Family Culture and Policies of Women Owned Businesses. Journal of Small Business Management, 51(2), 196-214.

Bellis, J.-F., 2016. The Iron Ore Production Joint Venture Between Rio Tinto and BHP Billiton: The European Angle of a Multinational Antitrust Review. [Online]
Available at: https://link.springer.com/chapter/10.1007/978-4-431-56426-3_10
[Accessed 6 9 2018].

Bloomberg 2012. BHP Says Pace of China Iron Ore Demand Has Slowed by Half (September 2012) https://www.bloomberg.com/news/2012-09-19/bhp-says-pace-of-china-iron-ore-demand-has-slowed-by-half.html (Accessed 06/10/2012)

Dastory, L., 2009. An event study of the merger proposal between BHP-Billiton and Rio-Tinto. [Online]
Available at: https://diva-portal.org/smash/record.jsf?pid=diva2:1024797
[Accessed 6 9 2018].

Eklund, E., 2012. The Big Fella: The Rise and Rise of BHP Billiton [Book Review]. Labour History, , (102), p. 241.

Grant, R.M., 2015. Contemporary Strategy Analysis 9e Text Only. John Wiley & Sons

Hitt, M., Ireland, R. D., & Hoskisson, R. (2012). Strategic management cases: competitiveness and globalization. Cengage Learning.

Nyland, C., Forbes-Mewett, H. & Thomson, S. B., 2011. Sinophobia as Corporate Tactic and the Response of Host Communities. Journal of Contemporary Asia, , 41(4), pp. 610-631.

Lestari, H., Ismail, R., & Mansur, A. (2014, April). Organizational Culture in Manufacturing Company: Study Case of Small and Medium Sized Enterprises in Central Java, Indonesia. In Applied Mechanics and Materials(Vol. 493, pp. 486-491).

Richard Daft, A. B., 2016. Management: International Edition. 1st Edition ed. Australia: south west cengage learning.

Smith, A. D. & Clinton, S., 2009. Case studies of successful location strategies and their operational effectiveness. International Journal of Management and Enterprise Development, , 6(3), pp. 322-343.

Schmeck, R. R. (Ed.). (2013). Learning strategies and learning styles. Springer Science & Business Media.

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