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Strategic Management, LTE 307

Assignment – Individual Essay 1

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DATE DUE:

DATE OF SUBMISSION

ASSESSMENT

TITLE UNIT CODE & NAME: LTE 307 – Strategic Management

TUTORIAL TIME, DAY & ROOM:

TIME: 3:30 DAY: Tuesday ROOM # LA206

TUTOR’S NAME: Dr. Aharon Factor

STUDENT NUMBER: 7208774

STUDENT NAME: Justin Engelke

EMAIL ADDRESS: 7208774@student.swin.edu.au

& PHONE NO: 0417317962

DECLARATION

I declare that this assignment is an original piece of work and does not contain any

material that has previously been submitted for assessment in this or any other subject. I

declare that no part of it has been copied from another student’s work or from any other

source except where due acknowledgement is made explicit in the text. I further declare

that no part of this submission has been written or completed by persons other than

myself.

Signature: __________________________________________________

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Assignment 1/ Essay

Length: 1500 Word (excluding: Reference list)

Format: Essay format

Due Date: Week 6 in Tutorial.

Assignment question:

It is sometime suggested that Corporate Social Responsibility activities are increasing

strategic in that it affects that core business of the firm and its growth, profitability and

survival?

Drawing on an example of a corporation/company (National/ International), discuss this

in the context of business strategies, in particular on the issues of competitive advantage

and firm performance.

Guideline:

You are expected to write an analytical discussion or argumentation, not a presentation of

summary information that demonstrates your understanding of CSR and strategic

management concepts. Using the criteria discussed by Porter, evaluate the CSR activities

of one of the organisations (national/International Company) with regard to that

organisation's mission, business objectives, and competitive business strategy. Does the

organisation’s CSR activity contribute to organisational success? If so, how and how is

that demonstrated in terms of firm performance? Could it be improved? If the

organisation's CSR activities do not contribute to organisational success, what

recommendations would you make to link CSR activities to the firm's mission and

business objectives?

To do so you will need to draw on relevant organisational documents, many of which

should be accessible on the organisation's website. You will also find it useful to consult

relevant newspaper and business publication coverage of the organisation you select.

You will need to draw appropriately on academic journal articles for your discussion of

CSR and strategic management issues and concepts.

The essay must also provide a discussion of key concepts and theories and issues using

examples with adequate reference. You have to substantiate your argumentation with

credible academic reference materials. You must use 4 academic journal articles and

other materials to substantiate your argumentation.

BHP Billiton is one of the worlds largest most diversified resource companies. They are

among the world’s top producers of major commodities, including aluminium, energy

coal, metallurgical coal, copper, manganese, iron ore, uranium, nickel, silver and titanium

minerals, and have substantial interests in oil and gas (BHP Billiton Resourcing the

Future 2001).

BHP Billiton was created in 2001 through the merger of the Australian Broken Hill

Proprietary Company Limited (BHP) and the Anglo-Dutch Billiton plc. The result is a

dual-listed company. BHP Billiton Limited, which is the majority partner, has its primary

listing on the Australian Securities Exchange and is the largest company in Australia

measured by market capitalization. BHP Billiton Plc has its primary listing on the

London Stock Exchange.

The Company’s exploration program is essential to its growth strategy and is focused on

identifying and capturing new world-class projects for future development or projects

that add significant value to existing operations. ‘Targets for exploration are generally

large low-cost mining projects in a range of minerals, including diamonds, copper, nickel,

bauxite, iron ore, manganese, coal and potash. The process of discovery runs from early-

stage mapping through to drilling and evaluation. The program is global and prioritises

targets based on its assessment of the relative attractiveness of each mineral’ (Market

Watch (2011) BHP Billiton Ltd).

“BHP Billiton’s strategy is clear and remains unchanged since 2001. They focus on large,

long-life, low-cost, upstream, high-quality assets, diversified by commodity, geography

and markets” (BHP Billiton (2011) Our Strategy Delivers). This disciplined approach to

capital deployment has enabled BHP Billiton to both invest in the expansion of high-

quality assets and further diversify its portfolio.

The Company’s corporate objective is to create long-term value for shareholders through

the discovery, development and conversion of natural resources, and the provision of

innovative customer and market-focused solutions. The long term outlook for BHP

Billiton is strong. Their focus is on delivering strong production and cost performance as

well as investing in new growth opportunities. They aim to operate at full capacity and

stay focused on eliminating low-value activities to maintain our low-cost position and our

ability to generate robust cash flows. This strategy means more predictable business

performance over time, which, in turn, underpins the creation of value for their

shareholders, customers, employees and importantly, the communities in which we

operate. “Value-adding mergers and acquisitions was a strategy used from the very

beginning in 1915, BHP ventured into steel making, commissioning its first steelworks at

Newcastle, New South Wales. This represented its first vertical integration venture, a

growth strategy the company would continue to use well into the 20th century” (Barille,

S. (2011) BHB Billiton p.6). The disciplined approach to capital deployment has enabled

them to invest in the expansion of high quality operations and further diversify its

portfolio.

“Sustainability has many touch-points across the Company and we continue to work

collaboratively across disciplines to ensure the best outcomes” (BHP Billiton. 2010. Our

Sustainibility Framework).

At BHP Billiton there objective is to be the company of choice, creating sustainable value

for shareholders, employees, contractors, suppliers, customers, business partners and host

communities. “We aspire to Zero Harm to people, our host communities and the

environment and strive to achieve leading industry practice. Sound principles to govern

safety, business conduct, social, environmental and economic activities are integral to the

way we do business..." (Kloppers, M BHP Billiton CEO).

'It is a well-known fact that the biggest companies in the world manage their reputation

well by spending a lot of money on PR. The question is whether BHP Billiton has earned

the right to its good environmental reputation - or have they earned a good reputation for

doing excellent PR?' (Rist, L. 2004 p.2.)

BHP Billiton required innovative solutions with best practice operations in mind. This

was to reduce the total cost of operations and deliver a comprehensive health, safety and

environment plan. Linfox is the supply chain partner of choice for BHP Billiton at the

Olympic Dam mine. Logistics analyses revealed operational efficiency improvements

and use of Linfox fleet development expertise led to vehicle design changes which

delivered additional safety and efficiencies (Linfox 2011). BHP could further analyze

their logistics and continue to decrease their carbon footprint with some research and

development.

The operations done by BHP Billiton could be further developed and changed to increase

efficiency not only in the outputs produced but also in the activities required to produce

them. ‘Olympic Damn is the world's largest uranium deposit and fourth largest copper

deposit. Specifically, they deliver uranium oxide concentrate to utility customers

exclusively for the generation of electricity in civil nuclear reactors. The expanded

Olympic damn operation would consume more energy particularly in the form of diesel

and electricity’.

(BHP Billiton. 2009 Olympic Damn Expansion Draft Environmental Impact p.4.)

Instead of the investment in the mining of uranium BHP could look at alternative

resources to provide a renewable sustainable energy that is more environmentally

friendly and that could potentially be recycled.

Strengths

There are several strengths in BHP Billiton, which are financial,

organizational/management, strategic, and technology. Within these areas we can locate

in details its strengths. The company’s leveraging strategic to acquire human resource

with competitive skills and expertise contribute to the successful execution of its projects

and effective implementation of its cost efficiency productivity programs, its decision to

merge with Billiton is one of the great strengths of its early foundation. On the other

hand, its effective strategic framework that capitalizes on a strong market customer

direction, capacity to generate value from its assets, unlocking value through a more

creative approach to owning assets, lowering the cost of capital, and optimizing the

efficiency of balance sheet further support its financial strength. With a great financial

strengths and flexibility, it is not surprising to acquire self-efficient and effective

technology to further strengthen the company’s operations and exploration business.

Weaknesses

Although there was a scarcity of sources that cited the inabilities or weaknesses of the

company, under my analysis on this issue were gained from my research. One of the

weaknesses of the company is the threat to new entrants in other countries like Africa and

Mongolia where they can enter the market a lot easier as they don’t have to answer to the

societal norms of those in Australia. Although, the company assures the strength of its

financial status, it has a weak resolution and policies in terms of its financial risk

management strategy wherein in case such as market depression, high price commodities,

and global economic crisis, it cannot in long term support its financial strength.

Moreover, its prioritization selection skills on its resources can bring significant effect to

the whole of its financial structure.

Opportunities

The demands of many importing countries on the manufacturing industry like BHP

Billiton of steel, aluminum and other metallurgical and metal ores are high and intense.

China and Africa are countries that had an explosive, rapid, and dramatic economic

growth that continues to establish industrialized expansion. With such economic growth

and with intense development to establish an industrialized society is needed with

materials that has something to do with metal ores, aluminum, manganese and others.

The opportunity is global with the existence of free trade in some parts of the regions,

their products are easily sold.

Threats

The most that we can underline with regards to its threats are the global socio-political

and economic conditions. The global economy plays an important role on the status of

any global, international, or local business markets, especially on the matter of business

financial records. Additionally, a fierce competition and rivalry among similar businesses

can be a force of threat to the company. Moreover, in a global scale there are constraints

that threaten the trading market operations of the company even if it is a member of

certain regional trade union. The local economic and market policies can be a threat to

company’s desire of exploring and venturing into business especially to countries which

economy are not totally open for business ventures such as this.

BHP Billiton claims to be doing all they can in the fight to be sustainable and socially

responsible in carrying out there duties in mines all over the world. They are seen as one

of the more socially acceptable mining companies in the world by setting up policies and

procedures the company ultimately wants to provide a zero harm Sound principles to

govern safety, business conduct, social, environmental and economic activities in the way

they do business. However some studies show that majority of their investments towards

being socially responsible go towards further mining investments such as the expansion

of the Olympic damn uranium mine in South Australia and other profitable long term

investments toward public relations. I feel as though the money spent on these

investments could get spent on further research and development towards finding a way

to reduce the amount of commodities they need to meet there suppliers demands all

around the world or to find alternative ways of being more sustainable so that as a

company they can continue to be one of the worlds largest suppliers of global resources

for decades to come.

At BHP Billiton there objective is to be the company of choice but with other mines

showing up in different regions of the world like Africa and Mongolia, the threat to BHP

is how can it continue to survive and strive to be the supplier of choice if the Chinese

mine coal can run without paying the environmental and social costs that have to be paid

in Australia. For example there was an incident occurred in West Ujimqin Banner, when

a herder, led a group of 40 men who sought to block a convoy of coal trucks. The herders

had been protesting because the vehicles were taking a short cut across grazing land,

killing their stock. Supposedly a 100-tonne coal hauler reportedly crushed one of the men

under its wheels and dragged his body for 150 meters’ (Chan, J. (2011) p.1).

This is the kind of thing that these mining companies don’t take into account whereas for

a company in Australia like BHP safety is one of their top priorities that has to be taken

into account as one of the most utmost important policies.

‘We believe that once Australia’s uranium enters China, it will disappear from the

safeguards radar’ (Wallace , P. and Smiles, V. (2011) p.2 – 3).

However I feel as though BHP Billiton will continue to strive, as one of the most well

known trustworthy mining companies and has been providing quality resources since the

merger of Broken Hill Proprietary Company Limited and Billiton in 2001.

CSR is often claimed as a unique proposition for businesses to gain and sustain

competitive advantages. If it could be proven that responsibility pays off, a strong push

for dissemination of good CSR practices could be expected and CSR policies that focus

on voluntary instead of command and control would be encouraged (Martinuzzi, A. et al.

(2010). If companies like BHP Billiton can continue to grow and strive to achieve a

quality strategic CSR approach within their oranisation and further continue to develop

new and more sustainable ways to operate and run their business not only to be perceived

as a socially responsible company but to generally care then they will continue to

successfully grow and be among the worlds leaders top quality resources.

References:

BHP Billiton Resourcing the Future (2001) About BHP Billiton , [online] Available at:

http://www.bhpbilliton.com/home/aboutus/Documents/companyProfile2010.pdf

[Accessed: 11th September 2011].

BHP Billiton. (2009) Olympic Damn Expansion Draft Environmental Impact Statement ,

BHP Billiton Resourcing the Future, 1(1), p.4.

Barille, S. (2011) BHB Billiton: Global Growth, Mergers and Acquisitions , BusiDate,

1(1), p.6.

BHP Billiton (2011) Our Strategy Delivers , [online] Available at:

http://www.bhpbilliton.com/home/aboutus/strategy/Pages/default.aspx [Accessed: 11th

September].

Chan, J. (2011) Heavy Chinese police presence after Mongolian protests, The World

Socialist Web Site , 3rd June, p.1.

Linfox (2011) Linfox Logistics and BHP Billiton, [online] Available at:

http://www.linfox.com/Services-and-Solutions/Case-Studies/BHP-Billiton.aspx

[Accessed: September 13].

Market Watch (2011) BHP Billiton Ltd. ADS, [online] Available at:

http://www.marketwatch.com/investing/stock/bhp/profile [Accessed: 11th September].

Martinuzzi, A. et al. (2010) Does Corporate Responsibility Pay Off? , Research

Institute for Managing Sustainability, 1(1), p.1-5.

Rist, L. (2004) BHP Billiton and their environmental effort: a genuine attempt or clever

public relations?, Mining Australia , 1(1), p.2.

Thinking made easy (2009) BHP Billiton SWOT analysis, [online] Available at:

http://ivythesis.typepad.com/term_paper_topics/2009/01/bhp-billiton-swot-analysis.html

[Accessed: 13th September].

Wallace , P. and Smiles, V. (2011) Uranium mining and the question of corporate social

responsibility, Ecos, 1(1), p.2 - 3.