BHP Billiton Case Study Example | Topics and Well Written Essays - 3500 words

BHP Billiton - Case Study Example Apart from some specific small scale mining especially in high value low volume minerals, extraction of mineral resources usually requires large scale, capital intensive investments, Most projects are technologically challenging and investments are characterized by high degree of uncertainty and long gestation periods. In most developing countries except China and India, extraction industry seems to be export focused with significant scope of revenue creation but limited scope of employment generation. Mineral extraction also involves considerable threat to an ecosystem, and could have adverse social implications. Finally, mineral resources are non-renewable and often of strategic, geo-political importance. As a result, governmental influence tends to be high, which can interfere with the business operations. Owing to the huge capital investments required for extraction, this market has seen emergence of state-owned enterprises, which can depend on the government for the huge capital investments that they incur. Not all developing and least developed countries can afford the high capital investment. Therefore, this market is also characterized by the presence of large multi national corporations (MNCs), which have the financial power to make huge financial commitments. Exploration activities for minerals can not only take up long gestation periods, but can als... Exploration activities for minerals can not only take up long gestation periods, but can also result in unsuccessful attempts. Even after successful exploration, the investor needs to face the technical risk (involved in extraction at sometimes difficult sites), and market risk (demand and supply risks), political risks (nationalization). Political risks can be higher if the host country has a weal constitutional framework. This is a risky business and the investor should have the expertise necessary to handle such risks. Once investment is committed, the cost of pullout is very high (United Nations Conference on Trade and Development, 2007). Section-III About BHP Billiton The largest extractive company, BHP Billiton was chosen as the subject of this case study. Its mission, marketing strategies are explored in the subsequent sections. The mission statement of BHP Billiton is "to create long-term value through the discovery, development and conversion of natural resources, and the provision of innovative customer and market-focused solutions". BHP Billiton is a global resources company in the extractive sector headquartered in Australia. It is a dual listed company and consists of BHP Billiton Limited Group in Australia, and BHP Billiton Plc group in the UK. IN addition, American Depository Receipts (ADRs) of both companies are listed Ney York Stock Exchange (NYSE). It was created in 2001 by the merger of Australia's Broken Hill Proprietary Company (BHP) and the UK's Billiton, which had a Dutch and South African background (Wikipedia, 2009). It is the world's largest diversified natural resources company, and has significant businesses in alumina and aluminum, copper, energy (thermal) coal, iron ore, nickel, manganese,