BHP Billiton SWOT Analysis / Matrix

Essays, Term Papers & Research Papers

SWOT analysis is a vital strategic planning tool that can be used by BHP Billiton managers to do a situational analysis of the company . It is a useful technique to evalauate the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) BHP Billiton is facing in its current business environment.

The BHP Billiton is one of the leading organizatations in its industry. BHP Billiton maintains its prominent position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the company such as – marketing, finance, operations, management information systems and strategic planning.

The SWOT Analysis framework helps an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the BHP Billiton to develop four types of strategies:

SO (strengths-opportunities) Strategies
WO (weaknesses-opportunities) Strategies
ST (strengths-threats) Strategies
WT (weaknesses-threats) Strategies

SWOT Matrix Strategies Objective

The central purpose of SWOT matrix is to identify the strategies that an organization can utilize to exploit external opportunities, counter threats, and build on & protect BHP Billiton strengths, and eradicate its weaknesses.

Step by Step Guide to BHP Billiton SWOT Analysis

Strengths of BHP Billiton – Internal Strategic Factors

As one of the leading firms in its industry, BHP Billiton has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of BHP Billiton are –

Highly successful at Go To Market strategies for its products.
Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
Superb Performance in New Markets – BHP Billiton has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
Good Returns on Capital Expenditure – BHP Billiton is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
Automation of activities brought consistency of quality to BHP Billiton products and has enabled the company to scale up and scale down based on the demand conditions in the market.
Successful track record of developing new products – product innovation.
Strong Free Cash Flow – BHP Billiton has strong free cash flows that provide resources in the hand of the company to expand into new projects.

Weakness of BHP Billiton – Internal Strategic Factors

Weakness are the areas where BHP Billiton can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of BHP Billiton
Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
Investment in Research and Development is below the fastest growing players in the industry. Even though BHP Billiton is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.
The profitability ratio and Net Contribution % of BHP Billiton are below the industry average.
Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, BHP Billiton needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
Not highly successful at integrating firms with different work culture. As mentioned earlier even though BHP Billiton is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.

Opportunities for BHP Billiton – External Strategic Factors

New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for BHP Billiton to drive home its advantage in new technology and gain market share in the new product category.
New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for BHP Billiton. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
Government green drive also opens an opportunity for procurement of BHP Billiton products by the state as well as federal government contractors.
Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
Decreasing cost of transportation because of lower shipping prices can also bring down the cost of BHP Billiton’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for BHP Billiton to capture new customers and increase its market share.
Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for BHP Billiton in other product categories.
The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as BHP Billiton to increase its profitability.

Threats BHP Billiton Facing - External Strategic Factors

Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of BHP Billiton
Rising raw material can pose a threat to the BHP Billiton profitability.
Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.

Limitations of SWOT Analysis for BHP Billiton

Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.

Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of BHP Billiton
SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.

Weighted SWOT Analysis of BHP Billiton

In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.

This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis BHP Billiton managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.

Limitation of Weighted SWOT analysis of BHP Billiton

This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.

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Example of Weighted SWOT Analysis

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SWOT Worksheet & Template

If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.

References / Citations & Bibliography

M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)