Sydney Morning Herald, 24 August, viewed 1 September 2012, Summary Ker and Manning’s (2012) article discusses the implications faced by BHP Billiton, as a result of the Australian carbon and mining taxes which has caused foreign investors to substantially decrease their investment into the Australian coal industry, that has resulted in the delay of the expansion of Olympic Dam mine.
This article reflects the political and regulatory influences that occur in the business environment and how companies must respond to changes in rules and regulations enacted by the government even if there are repercussions. Application of Concepts This article contains concepts relating to political/regulatory factors. ‘Evaluating a companies exposure to risky political events and assessing their impact should be key components of any company’s strategy’ (PwC 2006).
This process is vital because political risk must be avoided as it affects the profitability of a business (Robson 2012a).
With BHP Billiton, the federal opposition is blaming the carbon and mining tax for the delay in the expansion which has made Australia less competitive in the international market (Milman 2012).
Thermal coal prices have declined due to shareholders demand for higher returns (Ker and Manning 2012), this exemplifies the impact political factors can have on a business, as it has decreased profits for BHP Billiton (Fitzgerald and White 2012).
With the growing number of corporations taking over small businesses, and the belief that becoming a proprietor is associated with being wealthy, one must decide which type of business to become involved with. There are several differences between these two types of business. A corporation is a business organization having a continuous existence independent of its members (owners) and power and ...
Globalisation has also led to greater political risk exposure (PwC 2006).
Exchange rate fluctuations especially for the Australian dollar, South African Rand and US dollar have a significant impact on BHP Billiton (BHP Billiton 2011), which is said to be another cause for the delay in the expansion, as the strong dollar is making Australia less competitive (Kloppers 2012) and combined with the news taxes, ‘turning Australia into a high cost environment’ (Bolt 2012).
CSR is essential for a business to succeed as it improves the image of a brand and ‘it is in the business’s long-term self-interest’ (Carroll and Shabana 2010).
BHP Billiton is a pioneer in Corporate Social Responsibility (Hodge 2012).
BHP Billiton continuously invests more in CSR compared to other mining companies (Gaete 2009).
BHP has community programs across the globe and has also created various foundations helping local communities such as the Montelibano Educational Foundation in Colombia (Blowfield 2011).
For BHP Billiton, CSR is a critical part of maximizing shareholder returns (Goodyear 2006).
Therefore it is CSR embedded. Analysis
BHP Billiton strategy to delay its project was essential since their funds were limited, as taxes constrain the activities of a business (Robson 2012b) through high operating costs associated with the mining tax and also ‘due to the concerns surrounding the stability of the Eurozone and decline in economic activity’ (Coopes 2012).
However, with the introduction of this government tax policy, BHP Billiton action to delay their expansion project has come with much criticism, as it has resulted in a number of job losses (Stewart 2012).
It has affected South Australia substantially and is a major disappointment for the nation as a whole, stated by Iggulden (2012).
This shows that ‘political developments have significant implications for the real economy’ (Caliskan and Koksal 2011).
... . com-bbccontentrepositary/docs/aboutus/BGF. pdf BHP Billiton, “Our Business”, www. bhpbillition. com-bbccontentrepositary/docs/ourbusiness ... a halt all its activities concerning mining uranium and there is a movement ... by governmental bodies that could levy heavier taxes or introduce strict regulations. Such measures ... impacts on food and water supplies (CSR Network). Strength and Weakness The company ...
Nevertheless, BHP Billiton cannot be blamed in their response since it is not the only mining company to respond to the government tax policy this way. As stated by Stewart (2012), ‘Major mining companies around the world are revisiting their investment plans and refocusing on cutting costs. Hence, BHP Billiton responded to the political/ regulatory influences on their businesses in the most effective and efficient manner, as it was necessary and therefore adapting to the changes in the business environment.