Based on various researches at Oak Spring University , BHP Billiton Ltd is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, there is backlash against globalization, wage bills are increasing, increasing household debt because of falling income levels, increasing energy prices, technology disruption,
geopolitical disruptions, cloud computing is disrupting traditional business models, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that BHP Billiton Ltd can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the BHP Billiton Ltd, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which BHP Billiton Ltd operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of BHP Billiton Ltd can be done for the following purposes –
1. Strategic planning of BHP Billiton Ltd
2. Improving business portfolio management of BHP Billiton Ltd
3. Assessing feasibility of the new initiative in United States
4. Making a Metal Mining sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of BHP Billiton Ltd
Strengths of BHP Billiton Ltd | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of BHP Billiton Ltd are -
Sustainable margins compare to other players in Metal Mining industry
– BHP Billiton Ltd has clearly differentiated products in the market place. This has enabled BHP Billiton Ltd to fetch slight price premium compare to the competitors in the Metal Mining industry. The sustainable margins have also helped BHP Billiton Ltd to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that BHP Billiton Ltd has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Training and development
– BHP Billiton Ltd has one of the best training and development program in Basic Materials industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High brand equity
– BHP Billiton Ltd has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled BHP Billiton Ltd to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of BHP Billiton Ltd
– The covid-19 pandemic has put organizational resilience at the centre of everthing BHP Billiton Ltd does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of BHP Billiton Ltd in the Basic Materials sector have low bargaining power. BHP Billiton Ltd has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps BHP Billiton Ltd to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– BHP Billiton Ltd is one of the leading players in the Metal Mining industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Successful track record of launching new products
– BHP Billiton Ltd has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. BHP Billiton Ltd has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Highly skilled collaborators
– BHP Billiton Ltd has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Metal Mining industry. Secondly the value chain collaborators of BHP Billiton Ltd have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– BHP Billiton Ltd is one of the most innovative firm in Metal Mining sector.
Effective Research and Development (R&D)
– BHP Billiton Ltd has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – BHP Billiton Ltd staying ahead in the Metal Mining industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Metal Mining
– BHP Billiton Ltd is one of the leading players in the Metal Mining industry in United States. Over the years it has not only transformed the business landscape in the Metal Mining industry in United States but also across the existing markets. The ability to lead change has enabled BHP Billiton Ltd in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of BHP Billiton Ltd | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of BHP Billiton Ltd are -
Aligning sales with marketing
– From the outside it seems that BHP Billiton Ltd needs to have more collaboration between its sales team and marketing team. Sales professionals in the Metal Mining industry have deep experience in developing customer relationships. Marketing department at BHP Billiton Ltd can leverage the sales team experience to cultivate customer relationships as BHP Billiton Ltd is planning to shift buying processes online.
Products dominated business model
– Even though BHP Billiton Ltd has some of the most successful models in the Metal Mining industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. BHP Billiton Ltd should strive to include more intangible value offerings along with its core products and services.
Increasing silos among functional specialists
– The organizational structure of BHP Billiton Ltd is dominated by functional specialists. It is not different from other players in the Metal Mining industry, but BHP Billiton Ltd needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help BHP Billiton Ltd to focus more on services in the Metal Mining industry rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, BHP Billiton Ltd has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Metal Mining industry over the last five years. BHP Billiton Ltd even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Low market penetration in new markets
– Outside its home market of United States, BHP Billiton Ltd needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High bargaining power of channel partners in Metal Mining industry
– because of the regulatory requirements in United States, BHP Billiton Ltd is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Metal Mining industry.
Interest costs
– Compare to the competition, BHP Billiton Ltd has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Slow to strategic competitive environment developments
– As BHP Billiton Ltd is one of the leading players in the Metal Mining industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Metal Mining industry in last five years.
Employees’ less understanding of BHP Billiton Ltd strategy
– From the outside it seems that the employees of BHP Billiton Ltd don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Need for greater diversity
– BHP Billiton Ltd has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High dependence on BHP Billiton Ltd ‘s star products
– The top 2 products and services of BHP Billiton Ltd still accounts for major business revenue. This dependence on star products in Metal Mining industry has resulted into insufficient focus on developing new products, even though BHP Billiton Ltd has relatively successful track record of launching new products.
BHP Billiton Ltd Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of BHP Billiton Ltd are -
Buying journey improvements
– BHP Billiton Ltd can improve the customer journey of consumers in the Metal Mining industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. BHP Billiton Ltd can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for BHP Billiton Ltd in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Metal Mining industry, and it will provide faster access to the consumers.
Loyalty marketing
– BHP Billiton Ltd has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Manufacturing automation
– BHP Billiton Ltd can use the latest technology developments to improve its manufacturing and designing process in Metal Mining sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help BHP Billiton Ltd to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Redefining models of collaboration and team work
– As explained in the weaknesses section, BHP Billiton Ltd is facing challenges because of the dominance of functional experts in the organization. BHP Billiton Ltd can utilize new technology in the field of Metal Mining industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for BHP Billiton Ltd to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for BHP Billiton Ltd to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for BHP Billiton Ltd to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, BHP Billiton Ltd can use these opportunities to build new business models that can help the communities that BHP Billiton Ltd operates in. Secondly it can use opportunities from government spending in Metal Mining sector.
Creating value in data economy
– The success of analytics program of BHP Billiton Ltd has opened avenues for new revenue streams for the organization in Metal Mining industry. This can help BHP Billiton Ltd to build a more holistic ecosystem for BHP Billiton Ltd products in the Metal Mining industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Use of Bitcoin and other crypto currencies for transactions in Metal Mining industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for BHP Billiton Ltd in the Metal Mining industry. Now BHP Billiton Ltd can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Metal Mining industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. BHP Billiton Ltd can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. BHP Billiton Ltd can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Threats BHP Billiton Ltd External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of BHP Billiton Ltd are -
Regulatory challenges
– BHP Billiton Ltd needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Metal Mining industry regulations.
Technology acceleration in Forth Industrial Revolution
– BHP Billiton Ltd has witnessed rapid integration of technology during Covid-19 in the Metal Mining industry. As one of the leading players in the industry, BHP Billiton Ltd needs to keep up with the evolution of technology in the Metal Mining sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Easy access to finance
– Easy access to finance in Metal Mining industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. BHP Billiton Ltd can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of BHP Billiton Ltd.
Shortening product life cycle
– it is one of the major threat that BHP Billiton Ltd is facing in Metal Mining sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– BHP Billiton Ltd can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Metal Mining industry.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of BHP Billiton Ltd business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– BHP Billiton Ltd high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Environmental challenges
– BHP Billiton Ltd needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. BHP Billiton Ltd can take advantage of this fund but it will also bring new competitors in the Metal Mining industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for BHP Billiton Ltd in Metal Mining industry. The Metal Mining industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, BHP Billiton Ltd can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate BHP Billiton Ltd prominent markets.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for BHP Billiton Ltd in the Metal Mining sector and impact the bottomline of the organization.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Weighted SWOT Analysis of BHP Billiton Ltd Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at BHP Billiton Ltd needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of BHP Billiton Ltd is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of BHP Billiton Ltd is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of BHP Billiton Ltd to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that BHP Billiton Ltd needs to make to build a sustainable competitive advantage.
