History, founding and ownership
In today’s business environment it is very important that companies operate with a clear strategic path. It is this clear strategic path that will enable a company continuously search for new entrepreneurial opportunities and seize them with much effectiveness.
It is the result of this strategic process combined with the human workforce together with other resources that will determine which corporation crosses the finish line in first place or closes shop. This is therefore why management audits are carried out within department to bring out a clear picture of what is going on.
BHP Billiton came into existence in 2001 when to companies namely the Australian broken hill proprietary company (BHP) and the Anglo-Dutch Billiton plc decided to merge. Broken hill is an Australian company that was an Australian company that was incorporated back in 1885 and concentrated its business in steel manufacturing.
Later oil, copper it was later caught by global inefficiencies and closed down its steel production in the late 1990’s.On the other Hand Billiton was formed back in the 1860’s and concentrated on minerals like iron, titanium, nickel and coal before the two companies merged in June 29 2001 to form BHP BILLITON.
BHP BILLITON is currently the largest mining company which deals with a large variety of minerals. BHP Billiton which has its dual head quarters in Melbourne Australia and London England and presence in London and corporate centers in Johannesburg and Huston Texas.BHP Billiton is the world’s top mining company in terms of market capitalization, with capitalization of approximately 191 billion dollars.
According to BHP website (www.bhpbilliton.com) BHP Billiton is listed in the Australian securities exchange and London stock exchange and is a constituent of the FTSE 100 Index. Meaning it is owned by numerous shareholders who purchase their shares in the form of nominees, institutional investors and individuals.
The company operates hundreds of mines across the world and has a workforce of about 41,000 employees from about 25 different countries it is therefore evident and clear that there is large diversity among the employees that BHP Billiton has employed.
Furthermore the company made a profit of about US$ 6.3 billion in 2009 from the sale of its main products and services which fall under the mining industry. Some of these services and products include Iron ore, Diamonds, Coal, Gold, Petroleum, Aluminum, Copper, Nickel, Uranium, and Silver.
Appendix A: summary of BHP Billiton history (source www.bhpbilliton.com)
Innovation, risk taking and pro-activeness of BHP Billiton
BHP Billiton is a very large company and it has vast resources it therefore has a fairly complicated organizational structure. The company faces a lot of risk in its entrepreneurial ventures.BHP Billiton is innovative because it searches for mines across the world that offers opportunities to their business.
BHP Billiton had the first oil and gas production in deep water Gulf of Mexico; it also had the first production from the angostura in Trinidad and Tobago. Its innovation often involves being a dominant first mover and forming alliances with other companies to enter certain business areas.
BHP Billiton, often sales of its strategic business units at the right time and moves on to areas which offer more business potential. Of course this is with the help of its extremely talented research and development department that works on coming up with better mining techniques that will not destroy the environment.
BHP Billiton faces a lot of risks in its which include workforce strikes, natural disasters such as typhoons and stiff competition other big mining companies together with changing economic times. Consumer needs are continuously changing and therefore the company must adhere to this by sending out the best individuals within the organization to gather relevant research data that will help the company adapt to its environment.
BHP Billiton also faces resistance from, activists and environmental groups whom have led governments to set tight laws that govern the business of mining in various countries. This has potential effect on the market dominance and expansion plans and strategies that BHP Billiton have put in place. Therefore this affects its entrepreneurial spirit of finding new opportunities of business and making profits.
An organizational structure is a systematic arrangement of job and job groups within an organization. Therefore BHP uses CSG’S (Customer Sector Groups) which mean its organizational structure job groups are arranged by grouping the leadership and staff according to the various customer groups into various sectors which are Diamonds and specialty products, base metals, energy and coal, metallurgical coal, manganese, stainless steel and steel products and petroleum.
Therefore BHP Billiton has flat structure which allows for fewer managers a wider span of control to the managers which leads to a faster flow of communication better team spirit of employees and less bureaucracy therefore easier decision making.
The fewer levels of management means that the company will save costs. The disadvantage is that the function of each department may get blurred and roles may end up being duplicated, workers in different departments may report to one boss thus overloading his duties and at the same time this may hinder growth.
It is this Customer Sector Groups that work together with the finance, research and development, legal and marketing transport and logistics functions to achieve the mission, vision and objectives of the organization and come up with new products. In such an organizational structure various divisions that handle special projects aiming to satisfy a particular group of customers work hand in hand with the various functional areas within the organization.
BHP Billiton has set a number of strategic, management and operational controls which are tight for example each and every employee is accountable for his duty or functional area and failure to which an employee or manager is punished, This Is Why Brian Gilbertson stepped down only after six months as the C.E.O back in 2003 because his leadership style seemed not to be in line with the strategic focus of BHP Billiton that the board had set. Therefore failure is not tolerated /taken well among the top management. (Kaye, 2005 52).
Entrepreneurial overview
Today’s business environment is full of challenges that may hinder corporations from achieving its main objective of high returns and profitability It is due to this that entrepreneurial quality of employees, management and investors that decide if businesses will thrive or die.
The porter’s model can be very useful in conducting such analysis because it looks at various industry factors comprehensively to create a reliable report. Porter’s model is a model that looks at five forces which shape any industry it is this forces that will determine how well a company can operate in a give n environment and be able to satisfy its customers and realize a profit. The forces in porter’s model include
Threat of new entrants– Barriers are placed by existing companies and regulatory authorities to prevent new entrants from causing abnormal profit flows for existing companies some of the threats including government policies, exploiting cost advantages, access to distribution, capital requirements. In this case the mining industry is known to be very capital-intensive since acquisition of mines and mining equipment is quite expensive. Making this venture of BHP Billiton a good one since the higher the capital structure of an industry the more harder is it for new entrants therefore existing companies such as BHP can earn returns to their investments.
Intensity of competitive rivalry among existing firms– firms within the same industry always compete for the available market this can be trough powerful competitive strategies, innovation, structure of industry costs, switching costs, degree of product differentiation and so on Which BHP Billiton is known to apply by scanning for mines in far regions like DRC Congo, South Africa, Brazil, Indonesia and Canada.
Threat of substitute products or services-consumers can opt to go for substitute products if quality is better, price is relatively better, or the cost of switching is favorable. There are relatively few substitutes to the kind of minerals and products that BHP Billiton offers for example Iron is iron and it has no substitute the same goes for silver and minerals such as oil. This therefore means that the mining industry which is the core business BHP Billiton is highly entrepreneurial and profitable because some of the minerals they mine do not have close substitutes.
The bargaining power of customers-the bargaining power of buyers depends on number of buyers within the industry who purchase from the available suppliers, differentiation of products, the profit margin of buyers especially if they are resellers, switching costs that are associated with switching brands and the importance quality and service to the buyers.
BY providing high quality and highly differentiated products and the large number of customers demanding their products as compared to its competitors BHP Billiton is able to increase its bargaining power and reduce that of customers.
The bargaining power of suppliers-Suppliers who provide raw material can determine the profitability and viability of an industry by setting prices of implements which in turn affect the profit margins. “The concentration and number of suppliers affect their bargaining power, the importance of the industry to them, the ability of suppliers to integrate forward and the role of quality and service in the industry.” (Casson, 1982 45)
According to IBIS Australia’s largest provider of Industry Based research the Australian Mining industry occupies a vital place in the nation’s economy.
The Mining division is anticipated to make AN income of approximately $179 billion in 2010-11, A hoist from $120 billion in 2005-06. Revenue is anticipated to spike by about 20% in 2010-11, having fallen by over 15% in 2009-10 in response to the global economic meltdown. Regardless of that fall, revenue is projected to go up by an average yearly rate of about 7.9% over the five years ending in 2010-11. The division is expected to contribute over 7.1% of Australia’s GDP in 2010-11.
According to the linker mining report (Q2 2010) “an industry forecast following the 2009 recession suggests that the Business Monitor International is highly optimistic on Australia’s mining trade over the newly-extended forecast period to 2014. It is believed that expansion can average just above 6% over the coming five years”. It is expected that mining’s role to GDP rising from 6.79% in 2009 to some 8.17% by 2013, although it may drop slightly in 2014.
Competition is also very tight with BHP Billiton having almost over 25 competitors who include heavyweights such as Mobil Exxon, Xstrata, Anglo American and Rio-Tinto. The rise of china also poses a big threat to big corporations such as BHP Billiton. It is therefore right to say the industry presents opportunities and threats threat could either mean do or die for a BHP Billiton but in this case it is vital that the best of the best human resource should be acquired.
It is these people who will set strategy and policies that will primarily seize the advantages arising from porter’s model and minimize the shortcomings that arise out of this model.
Strategy is a set of long term goals and plans formulated, implemented, evaluated and corrected to achieve positive results that are directly linked to mission, vision, goals and objectives of BPH Billiton.
A firms corporate strategy can be of three type these are either growth (dominance), stability, or retrenchment (Bryson 2004 89) in BHP Billiton it is quite clear that it pursues a Growth Corporate directional strategy that insists on diversification of it different products which all fall under the same mining industry be it gold, silver, oil, manganese or iron.
A company may be run by its overall corporate strategy but it is its business strategies that can bring business strategy into reality. There are overall two types of business strategies which are either cooperative or competitive in this case BHP has used both of them.
In 2001 June BHP Billiton was formed from a merger this is a business strategy that is cooperative. Currently the company either acquires other companies via negotiations or hostile takeovers this is a good example of a competitive business strategy.
Without such business level strategies the top management won’t achieve their goals and the company will not grow and survive in such a competitive industry.
Casson (1982 78) notes “in this hierarchy of strategy the lowest level of strategy is the functional strategy that is formulated and implemented in every functional area to achieve corporate and business unit objectives by maximizing resource productivity.” BHP ensures that all its employees and lowest levels of management deliver unique high quality innovative products.
BHP Billiton performs better than its rivals when it comes to delivering products and services thus making it one of the largest and top mining companies. Functional business strategy ensures that functional areas of finance, mining, transport and procurement, marketing, Human resource work smoothly and efficiently.
An entrepreneurial audit is an all-inclusive assessment of a firm’s entrepreneurial and innovative distinctiveness. It takes a glance at the ability to recognize and seize when opportunities arise, crafting and sustaining an entrepreneurial environment, analyze the utilization of resources, and comprehend organizational efficiency to maximize time-to-profits.
In order for an internal audit to be conducted a critical look of the Internal Environment, Entrepreneurial Culture, Innovation practices, Team Dynamics, and Resource distribution (Campbell 2002 88)
Competencies of BHP Billiton
BHP Billiton key competencies include a large operating capital, its product quality, a large number of rich mines scattered across the world together with a tough human resource team fostering innovative products.
The acquisition of Athabasca Potash in Canada this year and the eight year supply contract to deliver over 20 million tons of iron ore to Hyundai motors from 2009 is some of the latest entrepreneurial ventures that BHP Billiton has achieved. Currently BHP Billiton is among the most profitable mining companies with the highest return rates.
It is therefore right to say that BHP Billiton is a profitable entrepreneurial venture that jumps ahead of other mining companies to be a fast mover and seize opportunities better. A large capital base enables BHP Billiton be able to operate huge mines that offer huge business potential to them. (Campbell ,2002 48)
Current human resource systems in BHP Billiton
The human resource purpose is to focus on recruitment, administration, and providing direction for the human resource who work in the organization. Such a department handles a wide array of tasks which include hiring, firing, performance management, handling of benefits, employee motivation, and training.
The presence of a good human resource system ensures that health and safety in workplace is there, no harassment occurs, and that gain sharing is individualized to reward the ones responsible for success.BHP Billiton has a good human resource system that many multinational companies desire to acquire.
BHP has systems and policies that are put in place to ensure equal employment opportunities and the same goes for promotion. “The management style of BHP Billiton aims to ensure safety among its workforce, integrity, high performance, win-win relationship together with respect for each other.” (Appelbaum, et al 1998 79).
BHP Billiton has both internal and external systems of recruiting employees. Graduates once a year have a chance to join the organization, these also applies to other first time employees.
But in order to encourage employee participation and motivation BHP Billiton also gives a lot consideration to internal employees while giving promotions. It is by use of software that the company ensures equal opportunities in employment, and management of its diverse workforce and be able to manage its vast talents to achieve its impeccable status to date.
BHP Billiton has put in place superior human resource management practices which include software HR SAP and other human resource information systems (HRIS) that aim to Manage Personnel, Administer Recruitment, manage Time, manage Payroll Compensation, Planning Budget for human resource Development Training. Individual personal information of every employee including their key competencies is stored to assist in implementing the human resource strategies, and allocating them to places where they are best needed.
The should be picture
The biggest challenge to date is the inability of BHP Billiton to successfully handle the problems related to its workforce diversity. It seems mine workers in regions liked Africa and South America have complained that the gain sharing structures do not favor them, and therefore they see some in equality. (Porter, 2004 89).A company an efficient Human resource system should therefore be able to manage its workforce diversity faultlessly.
Recommendations and implementation issues
The should be picture contains the following recommendations, for a manager to successfully handle workplace diversity, Camillus, (1986, 89) suggests that a HR Manager needs to alter from an ethnocentric managerial style (“our way is the best way”) to a multi-ethnocentric perspective of (“let’s take the best of a variety of ways”).
In addition, the human resource managers must guarantee the local professionals that these foreign talents pose no risk to their career advancements Kourdi, (2009, 26).The entrepreneurial culture is a culture of working hard and moving resources from an area of low utility to an area of high utility to realize profits.
BHP Billiton should strive to create a good gain sharing technique that aims to reward the best of their employees no matter what their cultural diversity. Gains are calculated and distributions are made regularly through a prearranged formula. Because organizations create programs that reward employees only when gains are realized by the company thus creating a win- win situation therefore adversely affect company costs. (Worthington & Britton, 2009 90)
Therefore a mentorship program should be put in place to mentor employees and let them know that their cultural diversity is aligned to the entrepreneurial spirit to the company but talent is all that counts therefore controlling and measuring performance should be at the backbone of BHP Billiton’s policies. Human resource management systems should strive to organize talents and locate them where needed accurately and lead from the front by preaching water and drinking water. (Carsrud, et al 2007, 26).
Handling resistance to change
To overcome resistance to change managers may often involve the people who will be affected by the change. Communicate a good reason that has lead to the change people will always resist change that lacks a good reason.
Choose a champion for the change, (It is vital to have a respected person in charge of the process) who will therefore marshal other employees to accept change for its good. Create a transition management team. (No one personality is compelling or talented enough to execute an organizational change).
Provide training in new values, skills, and behaviors. (Change normally involves new competencies) and by training employees you increase their moral and the faith they have in themselves therefore making them accept change. Bring in outside help if necessary. (Most superior managers are not trained in facilitating organizational change and therefore outsourcing may be necessary).
Reward people in a way that is proportionate to the gain they are expected to bring to the organization as soon as they embrace the change (This is because reward systems motivate people towards changing).
References
Appelbaum, A. 1998. Strategic organizational change: the role of leadership, learning, motivation and productivity. Management Decision Vol. 36, no. 5 pp. 289–301.
Bryson, J., 2004 Creating and implementing your strategic plan: a workbook for public and nonprofit organizations, 2nd edition. Hoboken,NJ: Wiley and Sons.
Camillus, J., 1986. Strategic planning and management control: systems for survival and Success Lexington, KY: Lexington Books.
Campbell , D. 2002. Business Strategy An Introduction, New York: A Butterworth-Heinemann .
Casson, M. 1982. The entrepreneur: an economic theory, Illustrated edition, Manhattan: Rowman & Littlefield.
Carsrud, A., Malin E. 2007. Entrepreneurship,Illustrated edition, Melbourne: Greenwood Publishing Group.
Kaye, J., 2005. Simplified strategic planning, a no-nonsense guide for busy people who want results fast. Worcester, MA: Chandler House Press.
Kourdi, J., 2009. Business Strategy: A Guide to Effective Decision Making, 2 editions, New York: Economist books.
Porter, M., 2004. Competitive advantage, Northampton, MA: Free press.
Worthington, I., Britton, C., 2009. Business environment, 6th edition, Vancouver, Canada: Pearson Education