Managerial Decision Making
“A man who does not plan long ahead will find trouble at his door.” Confucius said. Being one of the biggest mining companies, BHP Billiton’s managers at all levels have to make a ton of decisions every day to remain the company’s stability and growth. Frontline level’s decisions are usually about well-structured and repeated problems, which could be made by using the company’s procedures, rules and policies. However, the senior managers have to deal with non-programmed decisions, which are related to long-term strategies of the company, and required ability of judgment and creativity to make.
There are six current issues drawing the most concern of BHP Billiton’s top managers, in order of urgency and importance
1. Protection of margin and Improving Productivity:
A decade of good business due to high commodity prices has concealed the impact of huge operating cost and falling productivity in mining sector. However, the decrease of commodity prices in 2012 has revealed the huge impact of the high operating cost, and low productivity on the company’s margins, which resulted in significant drop of the stock prices. Over the past decade, mining sector has been suffered a lot from the shortage of most inputs such as skilled employees, sulphuric acid, and port access. In order to secure adequacy of inputs, mining companies have to pay extra for “scarcity premium”, which lead to a huge increase in cost of inputs.
According to Guy Elliott, CFO of Rio Tinto, the average annual increasing base cost of mining sector has risen to US$2 billion since 2009. In order to strive against the inflation in cost, a number of big companies, such as Rio Tinto and BHP Billiton, decided to renegotiate new long-term contracts i...
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...ning and metals sector due to promising pay rate of mining sector and falling of their business fields. According to Minerals Council of Australia, over the same period, there was an increasing of 85% in long-distance workers joining mining and metals sector in Australia. This could suggest a threat that when other industries recover from the effects of Global Financial Crisis and the pay rate of mining sectors is not as promising as it is before, these long-distance workers will return to their previous industries.
Since 2008, many mining and metals corporations, such as Rio Tinto and BHP Billiton, have realised the importance of having a long-term strategy to strive against the skill shortage. They decided to work with government and universities to
4. Price and Currency Volatility
5. Capital Project Execution
6. Cost of Infrastructure
7. Threat of Substitutes
BlueScope Steel Australia and New Zealand (BANZ) is a manufacturing company that produces a range of flat steel products for the Australian and New Zealand domestic market. BANZ was formed in July of 2011 which saw the amalgamation of company sections; Australia and New Zealand Steel Making Business (ANZSMB), LYSAGHT and Distribution Business. This amalgamation was followed by a major organisational restructure which ultimately led to the closing down of Number 6 Blast Furnace and resulted in around 800 job losses at the Port Kembla works and 200 job losses at the Western Port works in Victoria. The aim of this project is to outline the rationale for the restructure and to provide a strategic analysis of the impact of the restructure on BANZ’s current market position. This will be achieved by first analysing the economic climate pre-restructure and evaluating the managerial decisions that led to the restructure. It will then explore the current economic climate in relation to BANZ to determine whether these strategic managerial decisions were sound. Finally the report will outline BANZ future developments and determine if the company will continue to be competitive in the future.
Earlier 2002, the stock price of Agnico-Eagle Mines sharply decreased by $1 finally closed at $13.89. This price has reached one of the lowest level, from the company's historical perspective. As a professional equity portfolio manager, who has a large number of AEM stocks on hand. Acker and his team are necessary to find a proper way to estimated the fair value of AEM as well as its equity. Discounted Cash Flow (DCF) has been chosen to do this job. The theory behind DCF valuation approach is that the firm's value can be estimated by using the expected future free cash flow discounted by an appropriate discounted rate (Koller etc 2005). However several assumptions need to be clearly examined within this approach. The following sections are showing the process of DCF step by step.
Alpha Natural Resources’ total revenue earned during 2013 of $4.9 billion declined approximately 29% when compared to revenue earned during 2012. This is owed primarily to decreased coal revenues of approximately $1.8 billion. This decline in coal revenue is largely owed to lower sales volumes. Additionally during 2013, the company realized a 26.8% decrease in Freight and Handling revenues and Other Revenues declined a staggering 30.2%, resulting in the overall decrease of revenue. The decline in Freight and Handling revenues is directly attributed to the decrease in export shipments of coal in addition to declining freight rates. The decrease in Other Revenues is a result of significant changes in fair value adjustments for derivatives used
The driving forces of globalisation have a direct impact on the success of the iron ore mining industry in Australia in terms of the national and global economies. BHP Billiton and Rio Tinto Group, both as Transnational Corporations (TNCs), have further increased industry sales and exports, and reduced the costs of production by utilising economies of scale. Mine expansion and the opening of new mines in the iron-rich areas of Queensland, New South Wales and Victoria have resulted in great benefits for the Australian economy and rapid national growth in the global economy.
Within this approach, we are analyzing how does Rio Tinto use their resources and capabilities in order to create value and competitive advantage. Their consistent and longstanding strategy has been successful - investing in and operating low-cost, long-life and expendable operations (Rio Tinto, 2015).
BHP Billiton Limited (BHP) is the world’s leading diversified resources companies that major commodity businesses contain minerals probe, manufacture (primarily iron ore, coal, copper, etc), and considerable interests in gas and oil. It was officially listed on ASX on 13 August, 1885(ASX, 2014). BHP investors and shareholders probably include taxable or tax-exempt companies, small and large institutions, domestic and foreign companies, individual and pension fund. The leadership acts on behalf of the investors and make decisions so as to maximize the shareholder’s wealth. It is common for conflicts of interests arising between the two parties. BHP applies both debt and equity financing to raise funds for company growing business. Debt helps lower whole financing cost, but has to repay the loan and interest. Equity financing doesn't need to be repaid, but can confront relinquish business control or any ownership. BHP risk profiles are water supply, mining, energy, transport, also health risk of all employees. The stock price will continue rising above $38 in the future. BHP future projects will be the same as Petroleum Business. BHP focuses sustainability on governance, people, environment and sociery. BHP Billiton has a progressive dividend policy. BHP can continue to have higher EPS ratio.
2, Why has the leasing standard been changed? What will change? What does it mean for BHP and Rio Tinto? And how AASB 16 would benefit and or disadvantage the BHP and Rio Tinto?
In a typical year, the mining industry is responsible for almost 20 per cent of Canada's total export earnings3 (See Appendix A). As for the employment rate, over 70 per cent of the mines are owned by Canadians and approximately 108,000 Canadians are directly employed in the mining industry4. Mining is very important in Canadian life. Not only do the products power the family car and heat the family home, the manufacturing sector, the high tech industries and even the better known resource industries are all dependent, in some way, on the mining industry. The mining industry will continue to be an important support to the economy. Mining is taking full advantage of the quick expansion of computers and microelectronics.
- High external debts (Australia has an account deficit due to high amounts of money invest towards mining)
According to statistics, there are several benefits and disadvantages of mining related to the economic sector. Some of the main benefits of mining are that it leads the economy to expansion and decreases poverty. It also helps in improving and increasing employment by proving more jobs. Moreover, the economic demand for goods and services makes the economy of local communities thrive. However, when it comes to justice, there are many things in which the industry sector falls behind. For example, “Mor...
This company has come a long way into the sustainable and triple bottom line world. “Four wind turbines were erected in 2013 to reduce the use of diesel fuel, which had to be trucked in on a 550-km ice road at a cost of $70 million a year” (Hamilton, 2016). Wind turbines are put into place to create electricity through the spinning of the propellers. Mines are underground therefore it is extremely crucial to have electricity through renewable energy to create light for the miners underground because of the darkness being created. More importantly, if every corporation were to include the triple bottom line in their business goals, it would aid with climate change and global
As a natural resources company, BHP Billiton is vulnerable to changes in the environment and policies regarding the environment. With each environmental downfall, profit is jeopardized, which can push growth and innovation back. BHP Billiton has been heavily affected with blackouts in South Australia that has been interrupting production in Olympic Dam since September 28 during a two-week blackout. Without power supply security, BHP Billiton is having difficulty keeping power prices affordable in South Australia. The total estimated profit loss of the power outages was $450 million. These obstacles have disturbed BHP Billiton’s ability to compete globally with electricity price rises.
Making important decision is one of the toughest things to do in life. Brendan Francis observed, "Some persons are very decisive when it comes to avoiding decisions." When you look at some successful people, you may wonder how they can come up with a right decision. What are their "secrets" in the decision-making process? After performing an intensive research on the decision making topic in both theoretical and practical aspects, we discovered that the secrets are very simple: Activeness, Balance, and Checking, or the "ABC" secrets for short. So, what exactly are "Activeness", "Balance", and "Checking" in the context of decision making topic?
Managers should be ready to teach the importance of decision-making skills and reinforcing organizational policy. Avoiding hasty, careless decisions, which can have devastating results on the manager's unit or the entire organization. Decisions made with forethought, using the many managerial tools available will lead to better and more profitable operatio...
The indirect impact of the mining industry has been huge in terms of funding for things like skill development through education and training, there is also provision made for social services in the mines (e.g. health care for the employees of the mines and their families, housing, school etc.) and the contribution the national economy.