CASE STUDY

Case Study

Case Study

Introduction

BHP Billiton is an Australian global resources company, headquartered in Melbourne, Australia. It has eight Customer Sector Groups. These are Petroleum, Stainless Steel Materials, Diamonds and Specialty Products, Aluminium, Energy Coal, Iron Ore, Manganese, Base Metals, and Metallurgical Coal. Stainless Steel Materials and Aluminium are now taken as one customer sector group. Its workforce consists of approximately 125,000 employees and contractors. They are working in 100 locations around the world. For the financial year 2012, the group reported underlying EBIT of US$27.2 billion. It reported operating cash flow of US$24.4 billion (BHP annual report, 2012, pp. 3-6).

Rio Tinto Group is a British-Australian multinational metal and mining corporation. It is headquartered in London, United Kingdom. Its management office is in Melbourne, Australia. The group has approximately 71,000 people. They are working in more than 40 countries around the world. The company has five product groups. These are Aluminium, Diamonds & Minerals, Copper, Energy, and Iron Ore. For the financial year 2012, the group reported underlying earnings of US$9.3 billion and cash flows from operations of US$16.5 billion (RioTinto annual report, 2012, p. 8).

Key Success Factors

Six factors are crucial for success for BHP Billiton and Rio Tinto. These are Urbanisation and Industrialisation, Global Outlook, Emerging Economies, Divestment, Political Stability, and Exploration & Development.

Urbanisation and Industrialisation

The rising urbanisation and industrialisation of emerging economies attract mining product demand. Quality of life is improving, and people are migrating from rural areas to urban areas for the socio-economic development of their families. Also, rural areas are being developed to make them modern cities. This phenomenon will support long-term growth of development projects across diverse commodities and geographies. The diversification of the product portfolio will continue to be the defining attribute for both companies. As a result of urbanisation, there will be increased demand for the metals and minerals. There are two types of urbanization: one with industrialization and employment creation and the other without. The latter urbanization will not necessarily bring economic efficiency or welfare gains (Wang & Weaver, 2013, pp. 84-97).

Global Outlook

From a global perspective, the world is witnessing uncertainty and volatility arising from European debt crisis. This crisis made the world turn to recession. Its effects are still visible. Economic activities are slower in pace and employment opportunities are shrinking with it. Although such challenges are often short-lived, some have longer durations. Variations exist in the magnitude of their impact, and there are regional differences in the severity of a downturn and the strength of a recovery (Byrd et.al, 2012, pp. 6-10). The mining sector has been facing an increase in cost for the past five years. Until the European debt crisis is resolved, the region will remain uncertain in terms of financial prospects. However, the global economy ended the year 2012 on a positive note as compared to the forecasts.

Emerging Economies

Both organizations can focus on emerging economies of the world. In the past two decades, developing and emerging economies have become ...