BHP Billiton
Discuss about the Aspect of International Business Enterprise.
Due to globalisation and digitalisation, it is easier for organisations to expand their operations over worldwide which increase the number of multinational companies. International corporations have to comply with domestic and international regulatory frameworks that are established by the government. A firm can gain competitive advantage and increase its brand image by effectively comply with its regulatory framework. This report will analyse the regulatory framework of ‘BHP Billiton’ and evaluate various laws that are necessary to comply by the corporation while operating its business in Australian market. ‘BHP Billiton’ is a multinational mining, petroleum, and metals company which was founded in 1885. The firm performs a wide variety of oil and gas, mining and processing producing operations in more than 25 countries (BHP, 2017). Further, the report will focus on analysing various treaties, agreements, and conventions that influence the business of ‘BHP Billiton’.
Broken Hill Proprietary Company Limited merged with Billiton PLC in 2001, and the new corporation was established called BHP Billiton; it is an Anglo-Australian international metal, petroleum, and mining firm. It is a dual listed company, and it is listed on both London Stock Exchange and Australian Securities Exchange (BHP, 2017). The corporation focuses on establishing an utmost level of governance fostering a culture which incorporates corporate integrity and ethical standards into the business structure of the firm. The company values sustainable development of its stakeholders and give utmost importance its safety and health of its employees; the enterprise has prioritised its responsibility towards protecting the environment, and it contributes towards the development of local communities. According to Forbes (2017), BHP Billiton is one of the world’s top multinational performer companies with a market capitalisation of US$98.3 billion.
The corporation operates in metal and mining industry, and it is one of the world’s largest depositors of uranium, gold, coal, nickel, iron, and copper. The operations of the company are situated in more than 25 countries, and it is one of the leading resource firms worldwide. In 2016, the enterprise had revenue of AU$30.9 billion from its operations worldwide (Owler, 2017).
BHP Billiton is a world-leading resource firm with more than 65,263 employees, and contractors situate throughout the world. In 2017, the corporation has more than 26,146 employees in Australia which include employees from all subsidiaries; the CEO of the enterprise is Andrew Mackenzie (IBIS World, 2017).
Industry of BHP Billiton
BHP Billiton’s global headquarters is located at 171 Collins Street, Melbourne, Australia (BHP, 2013). The main operations of the corporations are situated in Australia, United States, United Kingdom, Brazil, and Canada.
BHP Billiton is a key player in the Australian market, and various provisions influence its operations. The current Australia regulations require corporations to maintain transparency in their operations and focus on sustainable development. Following are various provisions and regulations that influence the operations of BHP Billiton.
As per the provisions of Australian Jobs Act, 2013, the developing and manufacturing firms of major projects and products with a capital expenditure of more than AU$500 million are compulsorily required by the government to execute and draft an ‘Australian Industry Participation Plan’ (AIPP). The motive of this plan is to ensure that corporations are providing “full, reasonable and fair” opportunities to other enterprises while operating in the industry of Australia relating to supply goods and services (Competition Policy Review, 2014). The intention of government increases the regulatory and administrative burden on producing corporations such as BHP Billiton. The firm has to claim that it is ethically complying with various regulations relating to penetration of competition. BHP Billiton has undermined productivity due to compliance with regulations, and it further increased the expenses of firm and project delays. The corporation might face detrimental impact because of disclosing sensitive information to third party suppliers and competitors.
The government of Australia has imposed 30 percent tax on mineral resources which resulted in imposing 22.5 percent additional tax on profits of corporations which deals in coal and iron ore operations. BHP Billiton’s import and export operations are also affected by Petroleum resource rent tax (The Australian, 2015).
The Australian government has introduced Western Australia’s Domestic Gas Policy, 2006 (DomGas) with the intention of lowering the prices of domestic gas than compared to free-market equilibrium rates; due to the regulations of policy, the gas supply investment in Australia has reduced considerably. BHP Billiton is Australia’s largest gas and oil producers, and its operations are directly affected by the policy (Domgas, 2010). The policy introduces new economic burden for corporations such as BHP Billiton, which will eventually decrease their investment in gas supply and production. Due to this policy, the completion will reduce in the industry which will negatively influence Australia’s economy.
The Coastal Trading (Revitalising Australian Shipping) Act, 2012 has introduced new infrastructure for issuing license whereby it is significantly difficult and expensive for non-Australian vessels to provide intrastate and interstate shipping services. The new regulations have reduced the competition for BHP Billiton in the industry (Parliament of Australia, 2012). The shipping cost for outside country’s vessels has increased substantially due to this act which resulted in reducing the competition for Australian products that are transferred through this form of transportation. Through, the act has a negative impact on the profitability of BHP Billiton as well because it has surged the coastal shipping costs.
Number of Staff in Australia and Globally
The present competition law of Australia is significantly complex that focuses on statutory form. The law has negatively influenced the operations of BHP Billiton which affects its expenses and consistency among international regulations (BHP, 2017).
Agreement on Iron Ore Production Joint Venture between BHP Billiton and Rio Tinto
On 5th June 2005, BHP Billiton entered into an agreement with Rio Tinto for production joint venture. The agreement focuses the iron ore business of both the corporations and their assets (BHP, 2009). The agreement provides guidelines for various current and future assets and liabilities which are relating to iron ore business of both the firms. Both the enterprises will own similar roles and responsibilities relating to their iron ore production operations. The agreement assists in developing substantial cooperation between both the corporations while operating their iron ore business in Western Australia. The main objective of the agreement is to produce low-cost iron ore. As per the calculations of BHP Billiton and Rio Tinto, the development and production of their joint venture will result in generating more than 10 billion dollars for the corporations in the future.
This agreement between the government of Western Australia and BHP Billiton cover various business operations of the enterprise relating to a royalty payment on iron ore shipment. The Western Australian Mining Regulations will specify the new rate of royalty for the iron ore consignment. BHP Billiton and the government of Western Australia have made amendments to various other documents, such as infrastructure for Rio Tinto’s permit sharing (IOL, 2010). After its amendment, this agreement will assist BHP Billiton in increasing the efficiency of its operations. The complexity of regulations will be reduced after this agreement which is beneficial for the enterprise since it increases its productivity and performance. The operating capabilities of the firm will be improved with the use of rail and infrastructure; the corporation will be able to produce more goods in the Australian market with the help of rail and infrastructure.
On 18th September 2012, BHP Billiton has entered into an agreement with Australian government for development of iron ore mines. The agreement focus on strategically assessing the planned evaluation of the influence of iron mines development in the future and analyse how it is associated with the national environmental significance. The agreement was constructed as per the provisions of the Environment Protection and Biodiversity Conservation Act 1999. The agreement is based on section 146(1) which provides provisions that are related to the policies and plans of the corporation and their implementation (Environment, 2017). In order to increase its effort in the protection of environmental resources, the enterprise has designed and set up the activities in iron ore operations to increase their efficiency. The agreement will assist BHP Billiton in strategically identifying and measuring various possible impacts of its on-going programs related to protection and management of practices.
Location of Global Headquarters
The information collected from the strategic measuring will assist the corporation in developing new plans that will assist in reducing their negative impact on the environment. These policies will assist the enterprise in maintaining their integrity and reputation in the industry and provide them various opportunities to enhance their support for developing its business. Strategic improvement in operation will increase the future business opportunities for the enterprise and assist them in fulfilling their corporate responsibilities (BHP, 2017). Therefore, the agreement assists BHP Billiton in developing quality products by improving their existing procedures. The corporation can easily provide high-quality products and offer better services to its customers with the help of this agreement which increases the profitability of the firm.
BHP Billiton has entered into an agreement with Banjima people in Western Australia. The all-inclusive agreement provides the guidelines for business operations of the enterprise’s iron ore plant which is situated in Pilbara, and it covers the area of more than 8263 square kilometers. According to BHP Billiton, the agreement will assist in increasing the uniqueness and transparency in engaging with local indigenous communities. Due to this agreement, the Banjima people will get good opportunities to improve their future with the help of various projects and programs of the corporation (Shepherd, 2015). The programs assist in overall development of the indigenous people and improve various social, health and economic issue. The mining process will be done in areas which are selected by BHP Billiton which result in increasing the productivity of iron ore. Due to this agreement, the products of BHP Billiton will be easily available in the market at considerably low cost.
In, 2016, BHP Billiton contracted with its equity partner PT Alam Tri Abadi (Adaro) to sell 75 percent of its interest in IndoMet Coal (Hobbs, 2016). Although IndoMet Coal could support a large-scale development, BHP Billiton has various other growth options that are more attractive for its future investment. IndoMet Coal comprises seven leading coal contracts of work situated in Central and Eastern Kalimantan, Indonesia. The agreement was initiated to increase company’s focus on the crucial area of business. The agreement will assist in bringing more future investment for the corporation that will influence the productivity and performance of the business. After this agreement, the enterprise is focusing on other future investment that will assist them in increasing their market share and sustain their future development.
Conclusion
Conclusively, multinational corporations deal with various regulatory frameworks which influence their business operations. BHP Billiton is one of the leading companies in diversified metal and mining industry. The firm’s operations are affected by the regulatory framework which is provided by the government of Australia. Effective compliance with regulatory framework ensures that corporations are complying with necessary legal requirements, and they are performing their duties ethically. The regulatory framework of BHP Billiton in Australia includes the Australian Jobs Act, the Coastal Trading (Revitalising Australian Shipping) Act, Western Australia’s Domestic Gas (DomGas) Policy, Australian Competition Law and many others. BHP Billiton has entered into various agreements which influence their business such as an agreement with the government of Western Australia, PT Alam Tri Abadi, Banjima People, Rio Tinto and many others. BHP Billiton should effectively comply with its regulatory framework since it results in increasing brand image and sustainable future development.
References
BHP. (2009). BHP Billiton and Rio Tinto sign binding agreements on Iron Ore Production Joint Venture. Retrieved from https://www.bhp.com/media-and-insights/news-releases/2009/12/bhp-billiton-and-rio-tinto-sign-binding-agreements-on-iron-ore-production-joint-venture
BHP. (2013). BHP Billiton Opens New Global Head Office. Retrieved from https://www.bhp.com/media-and-insights/news-releases/2013/11/bhp-billiton-opens-new-global-head-office
BHP. (2017). About Us. Retrieved from https://www.bhp.com/our-approach/our-company/about-us
BHP. (2017). BHP Billiton Iron Ore Pilbara Strategic Assessment. Retrieved from https://www.bhp.com/-/media/bhp/regulatory-information-media/iron-ore/western-australia-iron-ore/0000/western-australia-iron-ore-pilbara-strategic-assessment-commonwealth/bhp-billiton-pilbara-strategic-assessment-program-final-4-may-20171.pdf
BHP. (2017). Competition law compliance. Retrieved from https://www.bhp.com/our-approach/operating-with-integrity/competition-law-compliance
BHP. (2017). Minerals Australia. Retrieved from https://www.bhp.com/our-businesses/minerals-australia
Competition Policy Review. (2014). BHP Billiton submission to the Competition Policy Review Panel. Retrieved from https://competitionpolicyreview.gov.au/files/2014/06/BHP_Billiton.pdf
Domgas. (2010). Western Australia’s Domestic Gas Security. Retrieved from https://www.domgas.com.au/pdf/Other_reports/DomGas_Report_2010.pdf
Environment. (2017). Agreement to undertake a strategic assessment of the impacts of a Plan for mining iron ore in the Pilbara region, Western Australia. Retrieved from https://www.environment.gov.au/system/files/pages/c59ed6a7-e955-4df9-a8da-156ddd76e0eb/files/bhpbio-strategic-assessment-agreement.pdf
Forbes. (2017). Top Multinational Performers. Retrieved from https://www.forbes.com/companies/bhp-billiton/
Hobbs, H. (2016). BHP selling its interest in IndoMet Coal. Retrieved from https://www.worldcoal.com/coal/07062016/bhp-selling-its-interest-in-indomet-coal-913/
IBIS World. (2017). BHP Billiton Limited – Premium Company Report Australia. Retrieved from https://www.ibisworld.com.au/australian-company-research-reports/mining/bhp-billiton-limited-company.html
IOL. (2010). BHP in deal with Australian government. Retrieved from https://www.iol.co.za/business-report/international/bhp-in-deal-with-australian-government-804125
Owler. (2017). BHP Billiton. Retrieved from https://www.owler.com/iaApp/12105325/bhp-billiton-company-profile
Parliament of Australia. (2012). Coastal Trading (Revitalising Australian Shipping) Bill 2012 [and] Coastal Trading (Revitalising Australian Shipping) (Consequential Amendments and Transitional Provisions) Bill 2012. Retrieved from https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd1112a/12bd151
Shepherd, B. (2015). Banjima people celebrate after Pilbara native title deal signed in Kings Park ceremony. Retrieved from https://www.abc.net.au/news/2015-11-04/bhp-billiton-and-banjima-people-sign-pilbara-native-title-deal/6913522
The Australian. (2015). Minerals Resources Rent Tax raised more than expected. Retrieved from https://myaccount.news.com.au/sites/theaustralian/subscribe.html?sourceCode=TAWEB_WRE170_a_GGL&mode=premium&dest=https://www.theaustralian.com.au/business/mining-energy/minerals-resource-rent-tax-raises-more-than-expected/news-story/50b67cf186009a3efcd6e38e876d11ca&memtype=anonymous
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