Internal Environment Analysis of BHP Billiton

Write a report on “Bhp Billiton Internal Environment and Strategic Issues”. 

In running an organization, its growth and development is always the key thing. The growth and development is important because it determines whether the organization is fulfilling its mission and vision, which are always the organization’s reasons for existence. Furthermore, most of these strategies and the decision made in an organization are always aimed at improving its growth and development. An organization’s growth and the development is influenced by its performance which in turn is influenced the organization’s surrounding. The three key performance indicators of an organization include; sales, marketing and financial resources.

The main way of assessing an organization’s performance is through conducting an environmental analysis. Environmental analysis involves identifying factors, both external and internal that may in one way or another affect an organization’s performance. This analysis is used to show which factors brings opportunity to the organization and which factors poses threats to the organization. It also shows what strategies are put in place by the organization to help how to manage these factors.

This report is about the environmental analysis of BHP Billiton. It is majorly on the internal environment analysis and the strategies put in place for the organization that would influence both the external and internal environment of the organization. The report is made up of a title page, table of contents that shows the page numbers for the headings and sub-headings, an introduction, the main content which is the analysis and a conclusion.

Internal analysis of the environment involves analyzing factors, events, requirements and entities within an organization that influences its performance. In most organizations, the factors that form part of their internal environment include; the leadership style, traditions and mission of the organization. From the internal environment analysis of BHP Billiton, the following factors and their influence on the organization were analyzed (Kemp, 2010, p.123).

A resource refers to any element that is productive and its aim is to support an activity or means by which a useful and desired outcome is achieved. There are for types of resources and these are; financial resources, human resources, material resources and the non-material resources such as information.BHP Billiton is an organization that deals with the extraction and production of mineral commodities, petroleum, and gas.  An example of the mineral commodities includes copper and iron core. BHP Billiton is a big organization and has several mineral resources in different countries. These mineral resources are examples of the organization’s material resources and they are assets which are very important to the organization since, without them, there would be no mineral to extract and produce. The organization’s employees and workers constitute the human resources. These too are important in improving the performance of the organization. Financial resources include the capital the organization has that would support its projects. All the resources are very important since they have an impact on the performance of an organization and thus its success (Glinsky, & Hansen, 2006, p.42).  

Resources

The capability of BHP Billiton is measured by the quantity of production it makes. High production means high capability while law production means law capability. BHP Billiton’s capability has been majorly influenced by the available mineral resources, how they extract, produce and transport minerals and the policies they have put in place for their employees. From BHP Billiton’s production capacity, it is quite evident that its capability has been positively influenced by listed factors above (Painterâ€ÂMorland, 2006, p.231).

Competence refers to the ability, commitments, knowledge and skills that enable an organization to its work in an effective and successful way. This can because of high knowledge about it or being very skillful at it. The following are the core competencies of BHP Billiton that has led to its success; (i) its numerous mineral resources. (ii) the remuneration policies put in place (iii) the strategies put in place to pursue the core strategy and (iv) the employee policies put in place to manage the employees activities (Mallin, 2011, p.78).

VRIO is a tool used analyzing the resources of an organization. It is an acronym of four letters and these letters are; value, rarity (rareness), imitability and organization. Value is used to assess how expensive a resource can be and how easily it can be obtained through the market for example by buying or renting. Rarity is used to analyze how rare a resource can be. Imitability is used to analyze how hard it is to imitate a resource. Organization is used to analyze any resource whose existence is supported by the arrangements of an organization. All these four steps make up the VRIO a technique for analysis. In the analysis of BHP Billiton using the VRIO technique, the material resources were analyzed. The major material resources of this organization are the mineral resources. Some mineral resources have value, some have value but are rare and those that are rare are either hard or easy to imitate. In line with the organization’s competitive advantage, the organization is to choose those resources that benefit them and leave out those that do not benefit them. 

Value of chain is a series of activities that leads to the development of an organization’s value at every step. The value of chain is used to analyze the activities of an organization and later come up with a concept that separates meaningful activities from those that are meaningless. Meaningful activities usually allow the organization to acquire a competitive advantage. A value of chain constitutes; logistics, operations, marketing and sales, and service. A good example of value of chain of the BHP Billiton is creation of the four business units from the separation of assets and their operations. This ensured that the decisions made remained as close to the business as possible. Thus limitations and challenges could be easily identified and tackled. After creating the business units, group functions were made to support the businesses and enable them operate under set accountabilities authorized by the Group Management Committee (GMC). Marketing strategies were also put in place that ensured; secured sales of product, realization of the worth of the product, good supply of chain from the resources to the market, assistance in decision-making through market insights and minimization of the production cost (Mallin, 2011, p.112).

The capabilities of BHP Billiton

Culture refers to the ways created and developed by an organization to help it tackle the problems and challenges it faces. These problems normally come about during the interactions of the organization’s members, either among themselves or their surroundings. The culture of an organization usually determines what it is that the members should and what they should not do. A good culture ensures a good environment in which the members can work in. BHP Billiton’s members are mainly employees and contractors. The culture of BHP Billiton puts the employees and contractors in an environment where they all have common goals and values. It also provides directions on how the business is to be operated. The major aims of BHP Billiton’s culture include, building diversity, this is a case where the members appreciate each other and also to provide opportunities where the members can develop their skills. The culture of an organization usually influences its performance and thus it should be highly considered if any organization wants to succeed.

In line with the strategy of BHP Billiton, which is to own and operates large, long-life, low-cost, expandable, upstream assets diversified by commodity, geography, and market, the following strategies have been put in place (Jenkins, 2004, p.178).

This business model comprises of four parts, these are; (i) exploration and evaluation, (ii) development, (iii) extraction, processing and transportation and (iv) marketing and logistics.

Exploration and evaluation involves discovering natural resources through Brownfield and Greenfield exploration. The evaluation of the results of the Brownfield and Greenfield exploration, are used to identify future growth projects consistent with the organization strategy. Development involves creating and evaluating projects. The development and expansion of projects is very important for BHP Billiton. In the development of project, a project can only progress through after it has been approved both internally and externally. These approvals are very important since they would adequately determine which project is fit to have the capital within BHP Billiton for its development (Kemp, 2010, p.96).

The main issue in extraction, processing and transportation is to safely operate all the organization’s assets at a capacity. BHP Billiton’s marketing organization duties are; growing the view of markets and the organization’s future planning, help the business to raise the value of upstream resources, selling the products and buying raw materials and to manage the price risk.

This entails a review of the organization’s strategy against the factors of the external environment. Corporate planning is meant to widen the organization’s opportunities and at all cost prevent those threats posed to it. Corporate planning is usually done by the core principles of the organization; these are the board and the GMC. BHP Billiton’s corporate planning has a framework that consist of three issues which are; board strategic planning, business directional plans and strategy reviews and business delivery appraisals. The corporate planning of the organization is the foundation of its performances, thus a good corporate plan would ensure that the organizations accomplishes its strategy.

These are strategies that are prioritized by the company to help in achieving the common strategy. Some of these strategies include; (i) ensuring that the BHP Billiton’s employees are safe and protected during the operations. This also includes ensuring that their health status is good. The wellbeing of the employees is one of the major key things to success  of the organization, thus getting rid of fatal incidents is and will always be the organization’s focus.(ii) support sustainable development of the host community. This is a strategy by the organization to be a valued partner by the host community. The ways through which the communities gain from the organization include; employment opportunities, taxes, economic development and development of infrastructure leading urbanization. (iii) strategic approach to climate change. The three ways the organization has for addressing climate change includes; mitigation, adaptation and low emission technology. Mineral extraction has a major effect on climate change thus taking a stand to address a climate change is very important for the organization. 

Conclusion

From the environmental analysis of BHP Billiton, the following findings were made;

• Every existing organization has its resources and it is the role of the organization to ensure for it be successful, these resources have to be assets to the organization and not a liability.
• The culture of an organization is an internal environment element that influences the organization’s performances. The culture affects how the employees and workers perform their duties which in turn affects the organizations overall performance.
• Key performance indicators are ways of measuring a an organization’s success thus their analysis is very important
• Most organizations always have strategies that help them widen the opportunities brought by the environmental elements and also strategies that help them avoid risk posed by some of those factors.
• The strategies put into place by the organization may lead to a value of chain which influences the organization to involve in activities that raises their competitive advantage. 

References

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