BHP Billiton SWOT Analysis and Porter Five Force Analysis The WritePass Journal

BHP Billiton SWOT Analysis and Porter Five Force Analysis Introduction BHP Billiton SWOT Analysis and Porter Five Force Analysis ) Bargaining Power of Suppliers BHP Billiton is largely impacted by the bargaining power of suppliers in labour, materials, energy, shipping, and energy costs. As the company ensures reduced capacity through enhanced operations, the overall costs from suppliers have increased as well. In the above-mentioned categories, there are negligible substitutes available, which enhance the strong bargaining power of suppliers. Threat of New Entrants The threat of new entrants is relatively low. Due to dearth of natural resources there is very limited capacity and supply available in the global market, which restricts any new entrants in the market. Due to drop in commodity prices, the pace of demand of iron ore from China has slowed down by more than half. Demand will grow less, although still quite impressively and the producers, in general, are more prepared. These factors are likely to play significant barriers for the new entrants rather existing. (Bloomberg, 2012) Moreover, BHP Billiton, being the biggest mining company, holds enhanced infrastructure, latest technologies and trained staff to offer better quality products to the market. For the new entrants it will take a while to upgrade the level. In regard to geographic locations, BHP Billiton has best natural resource locations than new competitors entering the market. Several companies have made extensive moves across Arica, India and China for natural resources but the threat of these companies remains moderate to low. Threat of Substitutes The threat of substitutes is quite low, as there are not many substitutes for raw material products in the market. BHP Billiton is strongly placed, due to its broad, diversified portfolio of natural resource assets, to counter any threats of substitutes. Intensity of Existing Rivalry The rivalry among competing sellers is tough. This is due to the fact that several natural resources companies are competing for access to the reserves available across the world; along with retaining qualified staff; and building infrastructure, transportation and new development projects. On the reserves side, there is a geographic overlap in most areas worldwide, and to retain trained staff has augmented labour wages. However, despite the strong rivalry, the industry remains lucrative due to strong profit potential. As a result, the lowering natural prices are not likely to impact the industry players as they stand affirmative. Also, there have been takeover speculations in the natural resources industry. Mining titans BHP Billiton and Rio Tinto are to generate about $20bn in free cash flow, giving each substantial options for acquisitions and capital management. (Merril Lynch, 2011) In 2005, BHP Billiton purchased WMC Resources of Australia during a takeover battle. The company as a result has the largest uranium reserves in the world and secured a major source of future growth. REFERENCES FTSE All-Share Index Ranking (October 2012) stockchallenge.co.uk/ftse.php (Accessed 06/10/2012) Digital Look 2012. BHP looking for upturn in first half of 2013 (October 2012) digitallook.com/dl/news/story/20311406?username=ac=  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   (Accessed 06/10/2012) Hoovers, BHP Billiton, (2012) hoovers.com/company-information/cs/company-profile.BHP_Billiton_Plc.7649c747268ff225.html (Accessed 06/10/2012) Business With The Wall Street Journal, Michael Bennet, The Australian 2011. BHP Billiton, Rio Tinto well funded for takeover programs, says Merrill Lynch (June 2011) theaustralian.com.au/business/mining-energy/bhp-billiton-rio-tinto-well-funded-for-takeover-programs-says-merrill-lynch/story-e6frg9df-1226082744863 (Accessed 06/10/2012) Bloomberg 2012. BHP Says Pace of China Iron Ore Demand Has Slowed by Half (September 2012) bloomberg.com/news/2012-09-19/bhp-says-pace-of-china-iron-ore-demand-has-slowed-by-half.html (Accessed 06/10/2012) Pierre-Yves Benain (2007), BHP Billiton Presentation, International University in Geneva, http://pierre.benain.free.fr/MBA%20698%20BHP%20Billiton%20Presentation.pdf (Accessed 06/10/2012) Strategic Options, BHP Billiton, Jeremy L. Gordon (May 2007) http://pierre.benain.free.fr/MBA698%20BHP%20Billiton%20Report.pdf (Accessed 06/10/2012)