STRATEGIC MANAGEMENT ASSESSMENT 4 – PART B INTERNAL ENVIRONMENTAL ANALYSIS ON BHP BILLITON   TABLE OF CONTENTS Introduction……………………….....................................................................................................2 • Three facts of BHP Billiton...........................................................................................2 Importance of Internal Environmental analysis......................................................................2 • Strength and Weakness………………………………………………….…………………………………2 - 3 • Resources.....................................................................................................................3 • Organisational capabilities..........................................................................................3 • Core competencies......................................................................................................4 VIRO framework......................................................................................................................4 • Value............................................................................................................................4 • Rareness......................................................................................................................4 • Imitate.........................................................................................................................4 • Organisation................................................................................................................5 Value Chain analysis................................................................................................................5 Organisational Culture............................................................................................................6 Strategic issue.........................................................................................................................6 Conclusion...............................................................................................................................7 References........................................................................................................................8 - 9 Introduction This report is an analysis of the internal business environment of BHP Billiton according to its global business structure. BHP Limited and Billiton PLC were two separated companies who merged in 2001 and form a single organisation. BHP Billiton operates in the natural resources industry and deals on the mining and production of iron ore, copper, silver, aluminium, nickel, oil and gas (BHP Billiton, 2016). Being the global leader in natural resources industry BHP Billiton operates on 25 countries all over the world and have 80,000 employees (BHP Billiton, 2016). Three facts of BHP Billiton • To contribute to the long term environmental planning and management of BHP’s iron ore operations in Western Australia they lodges a Strategic Environmental Assessment (SEA) programme and it is the first of its kind in the Australian mining industry (BHP Billiton, 2016). • BHP Billiton’s nine month production of petroleum, crude oil and natural gas ended on March 2016 and all experienced a decline in production by 4 to 5 percentage (BHP Billiton, 2016). • BHP Billiton has planned an exploration program in petroleum sector with a budget of US$640 million to fund the future growth opportunities in the financial year of 2016 (BHP Billiton, 2016). Importance of Internal Environmental analysis “Scanning and analysing the internal environmental factors of organisation is of pivotal requirement for understanding the competitive advantage of the corporation. This is simply done by evaluating strength and weaknesses of the organisation” (Hunger, 2014, pp.52-53). Strength of BHP Billiton BHP Billiton is a leading organisation in the natural resources industry with a wide range of assets and a strong market position. They are the world’s largest supplier of uranium and the largest producer of copper. Moreover, the world’s largest source of copper mine in Chile belongs to BHP Billiton (Gordon, 2007). Weakness of BHP Billiton The lack of sufficient, skilled and qualifies employees in the mining sector is a major problem for BHP Billiton which affects their operations and distribution channels (Brandão, 2013).  Resources, Capabilities and Core Competencies • Resources: Resources are the basic building blocks of the organisation and these are very vital for an organisation to achieve their objectives. Resources are of two type’s tangible and intangible resources. Tangible resources are those which have the physical appearance that can observe and measured. For BHP Billiton the tangible resources are hydraulic pumps, drilling machines, building, employees, location and so on (BHP Billiton, 2016). The non-measurable things which cannot be seen by naked eyes are the Intangible resources. Therefore it is hard to imitate by the competitors. The scientific capabilities, brand name, perception of product quality and capability to innovate are the intangible resources of BHP Billiton (BHP Billiton, 2016). • Organisational capabilities: “Capabilities are the ability of the corporation to use the tangible and intangible resources in order to complete the organisational works which are necessary to produce and distribute the goods to the valuable customers” (Hitt, 2014, pp.83-84). In the natural resources industry BHP Billiton has a significant position in terms of project execution and quality service delivery. The skilled work force, distinctive leadership, sustainable productivity through a standard operating model are the main capabilities of BHP Billiton which helps them to provide simple, but effective solution to the challenges they face (Annual report, 2015). • Core Competencies: “A Core Competency is a deep proficiency that enables a company to deliver unique value to customers. It embodies an organization’s collective learning, particularly of how to coordinate diverse production skills and integrate multiple technologies” (Alai, David, Diana Kramer & Richard Montier, 2006, pp.47-50). In terms of BHP Billiton the competitive advantage are the worldwide operating locations, the advanced technologies (BHP Billiton, 2016) and the ground water risk management plan which prevents the loss of pressurised fluids during production (Annual report, 2015).  VRIO Frame work “It is the tool used to analyse firm’s internal resources and capabilities to find out if they can be a source of sustained competitive advantage” (Barney, J. B,1995, pp.49-61). The frame work consists of; Value, Rareness, imitability and organisation. • Value: a resource can be considered as valuable when it utilises the opportunities in the market to overcome the external threats (Barney, J. B, 1991, pp.99-120). The availability of high value assets and a strong supply chain of minerals are valuable resources of BHP Billiton (Annual report, 2015). • Rareness: “if a valuable resource of an organisation is not available to its competitors then it’s a rare one and it is an important source of competitive advantage. If the competitor possess the same resources then there is no advantage in having them therefore rarity is very important” (Chapman, R. J. 2011, pp587-588). For example, BHP Billiton owns the world’s largest copper mine in Chile and they have access to the world’s largest silver and lead mine in Australia (Gordon, 2007). • Imitate: “If the resources cannot be copied and performed by the competitors then that resource can be a potential source of competitive advantage. To be an inimitable resource, it should be expensive and difficult for the competitors to imitate” (Chapman, R. J. 2011, pp587-588). The brand recognition of BHP Billiton is an example for inimitable resource. • Organisation: It evaluates weather the firm is able to fully utilise its resources and capabilities to achieve sustainable competitive advantage. In terms of BHP Billiton, it takes complete advantage of its competencies and continues to be the leading organisation in the natural resources industry. BHP Billiton announced a new operating model to increase productivity and value creation by focusing on safety, learning and productivity (BHP Billiton, 2016). As being the author of this report, I found interesting that the VRIO framework to some extent can be related to me as well. Like the fourth variable I have to utilise all the opportunities and resources that I have, to create an acceptable report on BHP Billiton.  Value chain analysis “It is a process where a firm identifies its primary and support activities that add value to its final product and then analyse these activities to reduce costs or increase differentiation” (Grant, R.M. 2010, pp239-241). While applying value chain to BHP Billiton, there are five value chain primary activities which leads them towards the leadership in the natural resources industry such as; “supply chain management, operations, distribution sales and marketing and services” (BHP Billiton, 2016). These activities are performed by its employees in a systematic way as the organisation insists (Gordon, 2007). Supply chain management For a global leader like BHP Billiton, supply chain management and inventory management is one of the important tasks that they had to perform. BHP Billiton achieves its economy by organising its huge assets and transporting them in bulk (Gordon, 2007). The transportation charge for the firm is 20% of the total cost but as the petroleum price rises it created problem for the organisations economy (Gordon, 2007). For an organisations value chain there are some support activities which helps the primary activities to create values for the customers. Technology, HR management, Research and development, general administration and systems development are the support activities of BHP Billiton value chain (Gordon, 2007). “The ratio of profits earned to total sales receipts (or costs) over some defined period called margin” (Boone & Kurtz, 2005). According to annual report 2015, the profit margins of BHP Billiton are higher than the production and logistic costs.  Organisational Culture According to Needle (2004), “organizational culture represents the collective values, beliefs and principles of organizational members and is a product of such factors as history, product, market, technology, strategy, type of employees, management style, and national culture; culture includes the organization's vision, values, norms, systems, symbols, language, assumptions, beliefs, and habits”. The BHP Billiton is aimed to support a culture which values “ethical standards, personal and corporate integrity and respect for others” (BHP Billiton, 2016). The organisations corporate culture encourages shareholder pact and expression of views and follows a route of continuous improvement (BHP Billiton, 2016). An example can be BHP’s sponsoring of 2015 Back to Batoche Festival where the Métis culture will be celebrated (BHP Billiton, 2015). Importance of ICEBURG Analogy “If the culture of a society was the iceberg, then there are some aspects visible, above the water, but there is a larger portion hidden beneath the surface. The external, or conscious, part of culture is what we can see and is the tip of the iceberg and includes behaviours and some beliefs. The internal, or subconscious, part of culture is below the surface of a society and includes some beliefs and the values and thought patterns that underlie behaviour” (Hall, E. T, 1976).  Strategic Issues As a result of the Part A and Part B analysis the following is identified as the strategic issue of BHP Billiton; the major strategic issue is the impact on environment such as climate change due to greenhouse gas emission. The organisation deals with the production of coal, oil and petroleum which results in toxic gas emission. In order to manage the issue, BHP Billiton has to handle its operational activities in an environmentally friendly manner. The management, HR and R&D department of BHP Billiton has to work together to resolve this issue and all the employees should be familiarised and motivated towards an eco-friendly working culture. Conclusion According to the research conducted in Part A and following the discussion in this analysis it is clear that The internal environmental analysis is capable to point out the competitive advantage of a firm by assessing it’s various strengths and weaknesses. Moreover as a result of the discussion over BHP Billiton, the organisation possesses some resources, capabilities and competencies which support to sustain its market leadership. But BHP Billiton has some strategic issues which affects their operations globally, where the organisation needs to critically analyse and find out solutions to eliminate the threat. REFERENCES Needle, D. (2004). Business in context: An introduction to business and its environment. London: International Thomson Business. Barney, J. B. (1995). Looking Inside for Competitive Advantage. Academy of Management Executive, Vol. 9, Issue 4, pp. 49-61 BHP Billiton | BHP Billiton Announces Simplified Operating Model To Accelerate Productivity and Value Creation. (n.d.). Retrieved from http://www.bhpbilliton.com/investors/news/bhp-billiton-announces-simplified-operating-model Alai, David, Diana Kramer, and Richard Montier. "Competency Models Develop Top Performance." T + D, July 2006, pp. 47-50. Chapman, R. J. (2011). Simple Tools and Techniques for Enterprise Risk Management. Grant, R. M. (1991). Contemporary strategy analysis: Concepts, techniques, applications. Cambridge, Mass.: Blackwell. Hall, E. T. (1976). Beyond culture. Garden City, NY: Anchor Press. Billiton, BHP.(2008).Company facts. Retrieved from http://cnn.com/2008/business/05/29/bhp billiton.facts/ BHP Billiton | Company profile & Corporate Social Responsibility. (n.d.). Retrieved from http://www.bhpbilliton.com/aboutus/ourcompany Billiton, BHP.(2015).Resourcing global growth annual report. Retrieved from http://www.bhpbilliton.com/~/media/bhp/documents/investors/annual-reports/2015/bhpbillitonstrategicreport2015.pdf Hitt, M.A.(2014).Strategic Management- Competitiveness and Globalisation. Albay: cengage learning New Zealand Brandão, R. (2013). Editorial. DoisPontos, 9(3). doi:10.5380/dp.v9i3.30429 Boone, L. E., & Kurtz, D. L. (2005). Contemporary business. Mason, OH: Thomson/South-Western Barney, J. (1991). Firm Resources and Sustained Competitive Advantage. Journal of Management, 17(1), 99-120. doi:10.1177/014920639101700108 BHP Billiton | BHP Billiton Sponsors 2015 Back to Batoche Festival. (n.d.). Retrieved from http://www.bhpbilliton.com/society/communitynews/bhp-billiton-sponsors-2015-back-to-batoche-festival