Introduction to Aspect of Implementation on Strategic Management
Strategic management is mainly about the identification as well as the description of all the strategies that are carried out by the manager of the organisation for improving the performance and achieving competitive advantages for the organisation. The strategic management process, the implementation part is the most important and difficult one, as it mainly defines whether the strategies decided by the management team would work or not.
In the context of the study, BHP Billiton, a metal and mining organisation has been chosen. A brief discussion on the background of the organisation has been provided including the strategic Business unit of the organisation. The Porter’s generic strategies, corporate strategies and Porter’s value chain framework of the strategies have been discussed. For the evaluation of the strategy implementation, Hubbard’s model has been used. In addition to that, the strengths and weakness of the strategy implementation have been discussed in this study.
Background information of the company
BHP Billiton is an Australian based multinational organisation on metals, mining and petroleum. Headquarter is in Melbourne, Australia and founded in 1860. It is one of the world’s largest companies on mining and the fourth largest company in Australia based on the revenue income of the organisation with a revenue income of Australian $61.2 billion. The organisation has more 29,670 employees within the organisation. The organisation deals with several products such as iron ore, petroleum, coal, natural gas, copper, nickel and uranium.
The CEO of BHP Billiton is Andrew Mackenzie and Jacques Nasser is the chairpersons of the organisation (Bhpbilliton.com, 2017).
Billiton was established on 29 September 1860, as a mining company, when the shareholders at a meeting had approved articles of the association. Broken Hill Proprietary Company Limited (BHP Co.) is also known as Big Australian. The organisation started its petroleum business in 1960 and began to diversify the organisation worldwide. BHP merged with Billiton in 2001 and formed BHP Billiton.
The newly formed organisation then started another mining organisation named, WMC Resources and further purchased a rival mining organisation named Rio Tinto Group in 2007 in an all-share deal. The shares had risen to A$48.90 in 2008. In 2009, BHP Billiton had to sell its Ravensthorpe nickel mine, which had cost A$2.4 billion for building, to First Quantum Minerals, which was a Vancouver-based organisation for US$340 million. The organisation took a hostile takeover bid in 2010 worth US$40 billion for Potash Corporation of Saskatchewan. The organisation announced to pay $4.75 billion to Chesapeake Energy Corp for all the Fayetteville shale assets of the company on 22 February 2011. On 14 July 2011, the organisation made an announcement of acquiring Petrohawk Energy, the United States for an amount of $12.1 billion. In 2012, BHP Billiton decided to shelve its Olympic Dam copper of US$20 billion and expand its uranium mine project in South Australia due to the fall in the commodity prices and slowing in the global economic growth. In 2014, the organisation decided to create its independent global mining and metals company. The organisation has its offices in USA, Houston, Perth, Santiago, Kuala Lumpur, Singapore, Brisbane and Shanghai with headquarter in Melbourne, Australia (Bhpbilliton.com, 2017).
Identifying and evaluating a strategy
Porter’s Generic strategies
- Cost leadership strategy: The cost leadership strategy allows the organisation to develop an edge that enables the organisation to lead the market from the competitors by taking away the sales from the competitors (Brenes, Montoya, & Ciravegna, 2014). For achieving the cost leadership strategy, the organisation should follow two main methods. First is the increasing in the profit through the reduction in the cost of the product and on the other hand, charging prices that are industry-average. Second, is the increasing in the market share by charging the lower price and on the other hand, making a profit on the sales due to the reduction in the costs (Young, Rao & Rosamilia, 2016).
- Differentiation strategy: The differentiation strategy includes differentiating the products of the organisation from the products of the competitors under the same industry by making the products more attractive and of good quality in comparison to the other products. The differentiation of the products mainly depends on the nature of the industry as well as its functionality, support, brand image and durability that the customers value. Schneider & Jordan (2016) commented that for differentiating the products, the organisations are required to perform a good market research, innovation and development of the products. The organisation needs to have ability for delivering the products or services of high quality. Developing effective marketing and sales of the products is important for the organisation for understanding the benefits.
- Focus strategy: The organisations following this strategy mainly focuses on the market and understands the dynamics of the market along with the requirements of the customers, by developing well-specified or low-cost products for the market. The focus strategy includes the cost focus and the differentiation focus.
Value-creating strategy: In this strategy, the organisation edges out the competitors by achieving increased market share. These strategies help the organisation to add value to the products (Donovan & Manuj, 2015).
Value-reducing strategy: When the customers or the stakeholders that it is growing bigger have perceived it, the organisation uses the value-reducing strategy.
Porter’s Value chain framework
- Inbound logistics: These processes are related to storing, receiving and distributing the inputs internally.
- Operations: Steinbach, Holcomb, Michael Holmes, Devers & Cannella (2016) opined that these involves the transformation activities that changes the inputs into the outputs sold to the customers.
- Outbound logistics: In accordance with the opinion of Roche, Propeck-Zimmermann & Mericskay (2013), these activities are involved in delivering the products or services to the customers.
- Marketing and sales: These involve the processes used for persuading the clients for purchasing the products.
- Service: These activities are related to the maintenance of the value of the products or services to the customers.
- Support activities
- Procurement: The organisation does procurement for purchasing the required resources for the operation.
- Human resource management: In this process, the organisation recruits, trains, hires, rewards, motivates and retains the employees in the organisation.
- Technological development: These activities are related to the management and processing of the information by protecting the knowledge base of the organisation.
- Infrastructure: According to Jin, Liu & Austin (2014), the infrastructure of the organisation is considered as the support system of the organisation.
Discussing the rationality of each strategies
Porter’s Generic Strategy
The strategy undertaken by the organisation to maintain a long run in the mining sector plays an important role. The organisation undertook the use of Porter’s generic strategy, which in turn helped the company to develop the better strategy and to work in a more appropriate manner. This strategy undertaken by the organisation is divided into four groups such as the effectiveness of leadership, discrimination of the business from other industry involved in the mining sector, the point of focus and discrimination of focus of BHP Billiton from the other industry.
This is considered as points that will provide the organisation to make a long run in the market and provide an advantage over their competitors. The steps involve various essential ingredients such as the way to minimise the cost of production and effectiveness in the market competition while competing with the other competitors.
- Corporate strategy: Corporate strategies play an important role in shaping the organisational structure in a various matter such as economic matter, HRM management and in various other divisions of the organisation.
- Value creating strategy: This is an important strategy undertaken by BHP Billiton to gain an advantage in the market. This strategy helps to gain more market share while competing in the market with other organisation. Gaining of more market share will enhance the financial matter of the organisation and will provide support to the organisation.
- Value Neutral Strategy: This is another strategy undertaken by the organisation BHP Billiton to gain an advantage over the competitors. In this field, the company focuses on gaining more economic strength that concentrating on the manpower and resources. The organisation emphasises on the smooth flow of cash.
- Value reducing strategy: This interesting strategy was undertaken by the organisation named BHP Billiton to maintain its focus on the stakeholders as well as its customers. The focus is to maintain the interest of the customers in the organisation. The management performs such strategy to secure the vast growth of the company in the international arena.
Porter’s Value Chain
The value chain described by Porter played an important role in the shaping of the organisational structure of BHP Billiton. Porter’s value chain depicts the use of different strategies for the manufacturing process. According to value chain system of Porter, the management needs to see the manufacturing unit of the company from primary level to final output stage as a system. The system depicted in the value chain is divided into various forms for the advantage of the organisation as well as for the employees involved in the organisation. BHP Billiton takes into account the value chain process in an effective manner and utilised it in the structural framework of the company.
Suitability of best strategy
The Porter’s Value chain framework would be the best suitable strategy for BHP Billiton. This strategy has several advantages. This strategy helps the organisation to understand the activities, which leads the organisation to a competitive advantage and increase the profit level.
Along with the advantages, the strategy also has a disadvantage as it forces an organisation to break itself into segments, which would result in losing the brand image of the organisation (Roche, Propeck-Zimmermann & Mericskay, 2013).
For enforcing the strategy, several resources are required by the organisation such as finance, market research, raw materials, etc.
Evaluating the strategic implementation issues
There are different strategic plans that the organisation follows to make the strategic decisions in the organisation. The above-mentioned organisations are taking the help of the Hubbard Model for evaluating the key factors that are influencing the implementation of the strategies and they are discussed in the paragraph. Hubbard’s Model is standing on three factors that are the environment, resources and the strategies used by the business (Grahamhubbard.com.au, 2017).The environment of the business organisations is focusing on the macro environment and the microenvironment.
BHP Billiton is engaged in the production of the iron ores and other products like as the coal, petroleum, natural gas and many other products. Here the management team have to take the help of the better technologies in the production of the goods and services. If organisations are using the advanced technologies then it will help in increase in the production of the goods and services. Moreover, if an organisation uses the technologies, which are not upgraded, then there will be a loss of time and low production.
Political factors are one of the most important factors that are affecting the business and this is the interference of the government. If government wishes then the government officials can indulge themselves in taking the active part in decisions about the management (Zhao et al. 2017). Additionally, the government also observes that whether the marketers are paying the tax or not when they are running their business successfully. Moreover, proper regulations of Australia have to be followed and if they fail to do this then they will be penalised accordingly.
The main aim of the business is to earn the profit by satisfying the customers and while following legal rules and regulations that are framed by the government of Australia. They have to comply to the Data protection Act, Sex discrimination act, and the Consumer Protection Act. This act states that customers have to be protected from the malpractices that are adopted by the marketers. Additionally, the data of the employees needs to be protected.
There are different economic factors that are the inflation, deflation, recession and boom. The expertise team have to produce better quality goods at reasonable prices. If the organisations are satisfying the customers by providing them reasonable quality goods then it will be easier for the organisations to face any type of economic factors. That is related to the business.
Organisations are learning the entire amount of profits from their buyers only (Price, 2015). So, they have to be satisfied first and they can be satisfied if they are provided with the better goods at a low price. Proper assistance to the customers needed to be given. It has been observed by the reports of different organisations that the customers are not assisted properly due to untrained employees who are working there.
Suppliers can be termed as one of the major role players of the organisations. They are engaged in supplying of the raw materials to the organisations. If the suppliers fail to supply the product on time then the production will be hampered. The suppliers have to meet the needs of the producers also.
Entrants of the competitors
Marketers have to focus on new entrants of competitors. The marketers have to make the quality of the products better so they can gain a larger share of the market (Brenes, Montoya, & Ciravegna, 2014). If it is seen that organisations have failed to satisfy the customers then they will shift to other brands those who are present in the market.
The vision statement of BHP Billiton is to establish their markets in the selected overseas nations and the mission statement is they are the one who is producing the best quality of petroleum products.
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There are different stakeholders of the organisation who are managing the business effectively and they are discussed below.
The internal stakeholders of the organisations can be categorised as the employees, chief executive managers and the managers of the different department (Antràs & Chor, 2013). This stakeholder helps organisations to implement any type of decisions in organisations. If the organisation thinks that there will be the implementation of any decisions then they are the ones who will be consulted first and then the decisions will be implemented.
They are ones who have helps to run the business successfully. They are categorised as the customers, government, suppliers and many others. They play a vital role for commencing the business smoothly. Other than that the investors or the creditors are also ready to help the organisations in the time of need and they provide the financial help to the organisation.
As it is one of the mining and extraction industries. They are appointing the expertise teams or the manpower to do their work efficiently. They are hiring the employees who are having the experience in doing this type of works. In Australia, they are getting the manpower at a low price and it can be considered to be one of the competitive advantages of this industry and due to this, they have become successful.
Due to the advanced technologies by BHP Billiton they have made the organisation in an advantageous state. This has also focused that while using this production have increased and this have boosted their sales margin.
If these strategies are followed in an organisation then better decisions will be taken the management team. This decision can help in framing better plans in organisations. If organisations are successful in making effective plans then the desired goals can be achieved.
It is considered as one of the expensive processes. When the management is hiring, providing training to employees and meeting other expenses of organisations then these costs are too high for the organisations to bear and it can be classified as one of the greatest disadvantages. When it comes to hiring the managers then it is considered to be as an expensive process of management.
Identification of the key issues with recommendations
As opined by Antràs & Chor (2013), there are three major stages of strategic management such as Strategy formulation, implementation of business technique and the evaluation and control.These stages are briefly outlined in the context of BHP Billiton.
- Strategy formulation: The initial stage is concerned with the building of the mission and aims of the respective business unit. This procedure deals with the selection of alternative business techniques. Strategy formulation is also termed as Strategic planning.
- Strategy implementation: This is considered the second stage of strategic management. In this particular stage of strategic management, installation of new techniques takes place or reinforcement of the current strategies takes place. It deals with the undertaking of the final decisions regarding the allocation of resources and estimation of budget takes place by the managerial section of BHP Billiton. Along with this, a setting of the annual aims and objectives are decided and finalised by the management of the respective manufacturing unit.
- Evaluation and control: In this final stage of strategic management, it is the responsibility of BHP Billiton to analyse the fact that whether the selected technique is effective enough for fulfilling the objectives of the respective business unit. Apart from this, the organisation also considers the fact that the chosen strategies requires modifications or not because the internal factors and external factors of the business environment are frequently changing.
Challenges of the planning of business strategies
It has been observed that this organisation is a partnership organisation thereby merging two separate organisations namely BHP and Billiton. While the senior managers of the company are planning to formulate new strategies, there is a possibility to pay the total amount of corporate taxation. In this context, it can be stated that this full payment of corporate tax leads to the less profitability from the business practices conducted by the respective organisation.
Allocation of fund
Allocation of budget plays a crucial role in formulation and implementation of strategic management. The managers and the senior executives may face problem from the inadequate allocation of capital by the potential stakeholders and the government of Australia (Wagner, & Meyer, T. M. (2014). If they want to restructure the organisational policies and business objectives, shortage of budget would not help in the installation of the strategies. Along with this, insufficient monetary assistance by the Australian government would restrict in the effective implementation and evaluation of the formulated strategies.
Renewal of Trade License
While planning for strategic management, the managers of BHP Billiton can face problems from the difference of opinions. This internal conflict can cause this particular partnership organisation for not renewing the trade license. In this context, it should be stated that renewal of the license is necessary for the development of new business techniques and implementation of strategies in an efficient way. The internal conflict is capable of delaying in renewing the trade license, which will restrict in increasing the workflow of the respective organisation.
At the end of the study, it can be concluded that, the implementation part is the most difficult part of the strategic management of an organisation. The implementation process involves several activities of management, which are important for putting the strategies in action and achieve the objectives of the organisation. Sometimes, due to the change in the strategies, the organisation also faces difficulty in reorganising all the employees for implementing the revised strategies. The implementation of the strategies needs contribution of all the employees and several departments within the organisation.
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