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Bhp revitalizes its global management

BHP Revitalizes Its Global Management

Summary of the article by David Forman "BHP REVITALISES ITS GLOBAL MANAGEMENT,"

Business Review Weekly, April 17 1995, page 24-26.

BHP is setting up the required management to handle a rapid global expansion.

They have done this by appointing a network of regional corporate

representatives and a corporate general manager, international.

Representing BHP across the world, these managers will facilitate new

developments, and assist global expansion. This overseas focus of expansion

requires new systems and processes, to take on projects in different countries

around the world.

BHP has taken advice from other companies, that have expanded outside their home

countries, also background advice from consulting firms. BHP have taken this

advice, and created a management model to suit their operations.

By providing regional representatives to deal with governments, bureaucracies

and coordinators of cross divisional activities, this model expects BHP to be

able to find expansion opportunities. Particularly where opportunities exist

that involve more than one divisional group.

An example of this is BHP Power, which develops power stations using the most

appropriate energy source for the circumstances. Power is an independent group,

drawing on the skills of the Mining and Petroleum divisions where necessary.

The company is looking at other possible new businesses, that are natural

developments of the company's existing businesses, in the same way Power has

evolved from Petroleum and Mining. One of these is Manufacturing, using the

skills developed in the Steel division.

In 15 years BHP has gone from being a domestic steel producer with small

petroleum and mining operations, to having a significant international presence

in the steel, oil and mining industries. (Forman, D. 1995, pp. 24-26)

MANAGEMENT PRINCIPLES

After a six month review of their business position into the next century BHP

has developed a strategic plan.(Forman, D. 1995)

The strategic management process uses nine steps to create a strategic plan.

1: Identify the organisations current mission, objectives and strategies.

BHP operates steel, mining and petroleum businesses.

2: Analyse the environment.

They have recognised that many areas that they operate in are suitable

for expanding existing operations.

3: Identify opportunities and threats.

The opportunities are to develop businesses that are not yet operating

in a particular area. The threats are competitors who move in quicker, and a

lack of understanding of the specific environment.

4: Analyse the organisation's resources.

BHP have recognised that they have many skilled people within the steel,

mining and petroleum operating divisions.

5: Identifying strengths and weaknesses.

The strength of BHP is in its traditional steel, mining and petroleum

operations. The weaknesses are the lack of a co-operative link between the

divisions.

6: Reassessing the organisation's mission and objectives.

Merging the organisations' resources with the opportunities in the

environment shows the organisation's opportunities.

FIGURE: 1.

ORGANISATIONS OPPORTUNITIES (Robbins,S & Murkeji, D.1994 page 142)

The opportunities are to develop new businesses using the skills of

the steel, mining and petroleum people.

The organisation's objectives were to operate these divisions

as separate businesses. New objectives will be needed to direct the

organisation into these opportunities.

7: Formulating strategies.

Using the eight step decision making process, a strategic plan was

formulated. The objective of this plan is worldwide growth, through

diversification and direct expansion.

8: Implementing strategies.

Once the strategic plan was decided, the process was implemented to

develop an operational plan to achieve the objectives.

9: Evaluating results.

The performance results of this plan, measured by the

international growth of the organisation, will show whether the plan

requires adjustments or not. (Robbins,S & Murkeji, D.1994. pp 141-

143)

BHP has then used the eight steps of decision making to develop the operational

plan.

1: Formulating a problem.

The problem was to find a management model that will help achieve the goal of

global expansion and diversification.

2: Identifying decision criteria.

BHP wanted a stronger presence overseas, to be able to recognise and

develop opportunities for new projects, with greater co-operation between the

steel, petroleum and mining divisions.

3: Allocating weights to the criteria.

Weighting these criteria, divisional co-operation would have

scored highest, then the need to have people that can develop new

opportunities, followed by the need for regional representatives. All of these

criteria would have scored highly.

4: Developing alternatives.

BHP studied other successful global companies, as well as seeking

advice from consulting firms, looking for alternative management systems.

5: Analysing alternatives.

Studying the management systems of other international companies, BHP

could then select certain systems that would meet the criteria.

6: Selecting an alternative.

Using the selected systems BHP developed a management model that is

suitable for their own operations.

7: Implementing the alternative.

An operational plan was then developed to implement this new

management model.

8: Evaluation of decision effectiveness.

The decision's effectiveness will be gauged by how well the

company develops new international business. (Robbins,S & Murkeji, D.1994.

pp 79-83) Part of BHP's operational plan, was to make changes to its

organisational structure by appointing regional corporate representatives, these

representatives are positioned alongside existing operating divisions.

By adding ‘geographic departmentalisation' to the original ‘product

departmentalisation', BHP is able to monitor regional environments more closely,

by liaising with local governments, bureaucracies and BHP's divisional managers.

(Robbins, S & Mukerji, D. 1994, page 208.) By understanding the ‘specific

environment' better BHP's managers can recognise opportunities within that

environment for new projects and businesses. They can also make quicker, and

more informed decisions when running operations in that environment as well as

making the needs and timing for expansion clearer.

All of these changes are designed to facilitate international growth, in an

entrepreneurial way, without jeopardising the traditional operating divisions,

or ‘cash cows' as in the BCG matrix shown in figure 3.

Using this matrix shows that if BHP converts its new businesses from ‘question

marks' to ‘stars', without creating ‘dogs', this will lead to rapid growth.

To control profitability and cash flow, they must also keep maintaining and

expanding their ‘cash cows' which are the steel, mining and petroleum divisions,

these are the backbone of the organisation.

BHP is planning this by developing new businesses using the resources of the ‘

cash cows' and then adding value to the products that they produce, creating new

customers for their own products.

An example of this is that BHP Power is building power stations using the skills

and resources of the mining and petroleum operations, and in turn these power

stations use either coal, produced by the mining division, or gas, produced by

the petroleum division.

BIBLIOGRAPHY

Forman, D. 1995, ‘BHP revitalises its global management', Business review weekly,

April 17, 1995, pp. 24-26.

Robbins, S & Mukerji, D. 1994, Managing Organisations, 2nd edn, Prentice Hall,

Englewood Cliffs, NJ.



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