International management is a significant term in the management of profitable multinational enterprises. In order to be effective in managing emerging markets, administrators need to consider the activities of the place where the company operates. Relevant considerations include the linguistic, ethnic, economic and political climate of the countries in which the company exists. However, companies in emerging markets can not be used to run in the face of these hurdles. The study of international relations, therefore, helps in countering these difficulties so that businesses can prosper in new countries.
Globalization and internationalization have significantly impacted companies which seek to expand to new markets. For example, BHP Billiton is a company that has opened up operations in more than one country. The company operates in countries such as Algeria, Australia, Brazil, Canada, Chile, Colombia, Mexico, Peru and the United States in spite of the company being formerly founded in Australia. BHP Billiton has the potential of expanding to other new locations since it can be awarded with mining contracts. Operations in different countries are affected by macroeconomic factors due to the difference in markets. These include economic factors such as growth rate inflation, and unacceptable trade practices pose a significant threat to BHP Billiton operations in new locations. Other macroeconomic factors faced by BHP Billiton include social, political and technological issues.
International management refers to the practice of managing a firm, company or business operations in two or more countries (Deresky, 2016). Managers, thus, have to be equipped with some basic aspects of management skills and aspects. In particular, such professionals do not only have to be in one way or another familiar with the language and culture but also have to be able to work in varying economic and political environments. The professionals should be in a position to embrace business practices including regulation and provisions of various international policies as provided for by the countries in which multinational business operations are actively traded and invested (Deresky, 2016). This paper, therefore, has identified the company BHP Billiton for insightful understanding and conceptualization of intricacies of international management while focusing on its operations in Algeria.
Summary of BHP Billiton Background Information
BHP Billiton formerly Billiton Plc. is a mining company which can be traced back to 1860. In the early years, the company majorly invested in Tin and Lead smelting in Netherlands and later the mining of Bauxite in Indonesia and Suriname (BHB, n.d). Over the years, the company experienced growth, expanding its services to more countries such as South Africa, Mozambique, Australia, Colombia, and Brazil in the 1990s. The merging of Billiton Plc. and Broken Hill Proprietary Company in 2001 gave rise to BHP Billiton (BHB, n.d). In 2016 the company announced its intentions to explore more new markets. The company today deals with offering products including aluminum, manganese, iron ore, copper, uranium, nickel silver, lead, and titanium minerals, not forgetting its petroleum and coal assets.
BHP Billiton considers venturing new markets as it is part of the growth plan. Investing in new markets is necessary since competition is not likely to be high. Opening up new branches in different parts of the world is also a part of marketing as it makes the company a household name. Algeria, therefore, provides the best oversea market to study as far as the expansion of BHP Billiton is concerned.
BHP Billiton is currently based in Australia with the headquarters in Melbourne (BHB, n.d). However, this paper focusses on its operations in Algeria. Algeria is the ideal choice to study international management under BHP Billiton since it provides a business environment where the livelihood of people differs from that of the country of origin Australia. Algeria, therefore, gives a chance for deep analysis of macroeconomic factors and their impact on businesses as it is a business environment with a unique culture and unique political factors.
Brief Introduction to Algeria
Algeria is located next to the Meditteranean sea and borders countries such as Tunisia and Libya in the North of Africa. The country has a population growth rate of 2.2 % with an estimated population of 29.2 million (Machín, 2010). The country is a republic with the president as its head. Majorly, the economic system in the country is a mixed economic system which constitutes individual freedom, centralized economic planning, and regulations by the government. Algeria is a member of the Arab league. The most dominant religion is Islam which greatly influences the culture of the people (Abdelkrim, 2015). Arabic is the primary spoken language in the country.
Algeria is open to international trade as it welcomes foreign investors. The country recognizes and appreciates the significance as well as the role of investors in creating opportunities for economic growth, developing competitive industries, creating employment for the citizens and increasing the overall exports and balancing imports (Ferraro & Briody, 2017).
Political and Legal Analysis
It is vital to understand BHP Billiton Company as far as international management is concerned, since there is a need for a wider conception of the general macro environment for business operations. Political analysis of the external and internal environment of business operations considers the national and the international factors that impact the business operations (Howell & PRS, 2013). Hence, BHP Billiton as an internationally recognized business is susceptible to the political risks associated with its line of operations and other attributed risks that are often prevalent in all markets. Political aspect comes along with risks that can be detrimental and deleterious in aspects of the company’s identified key drivers. Some examples include licenses to operate, the project pipelines, growth options, and opportunities as well as the acquisition of world class assets (Howell & PRS, 2013). Political analysis, therefore, reveals that BHP Billiton has committed capital set aside for the exploration and development of feasible projects in respective countries of interest that could be experiencing political instability.
BHP Billiton Company has always been prepared in its operations in Algeria to deal with any political factors which may pose a risk to the company such as political instability as it is a common problem in Muslim countries (Howell & PRS, 2013). Despite the fact that Algeria has remained stable, the future is unknown so precautions ought to be taken. Major factors which can lead to risks include terrorism which is one of the common characteristics in such countries as well as historical conflicts most notably the civil war of the 1990s.
Another challenge that is likely to be faced by BHP is an increase of mining taxes by the Algerian government. Such steps may have adverse effects on the general business operations of the company as they lead to decreased profit margins (Machín, 2010). Nevertheless, there are legal factors that Billiton Company has to account for through acting by the provisions and regulations stipulated. In this regard, analysis makes it clear how the company has faced certain legal liabilities against failure to observe environment protection and conservation acts over the years. (Howell & PRS, 2013). Despite the fact that this not having happened in Algeria, it is a possible threat to the company as it took place in other parts of the world. For instance, the company was charged with a lawsuit in Brazil for collapsing of a dam that killed more than 19 people and also polluted a major river. Such events have led to losses as in the case of Brazil; BHP Billiton had to pay the state $58.2 billion (Machín, 2010).
The economic analysis shows that BHP Billiton is exposed to dangers of inflation and fluctuating energy costs, unstable exploration expenses, the labor costs as well as instrumentation costs. The changes are disadvantageous in regards to operational cost increases (Machín, 2010). Political and legal factors also lead to high operational costs. The implications are that the company gets to a situation where production costs increase leading to shrinking in projected profit margin and gross output. In countries like Algeria, inflation and fluctuation of the cost of energy is greatly possible with the country’s market already flocked (Machín, 2010). The highlighted economic risk factors have the overall effect of hindering the company’s expansion plans, adversely impact the development plans as well as the decrease in company profitability.
The company furthermore depends on global commodities prices which it considers to be healthy. Unfortunately, the company is exposed to the dangers of fluctuating currency valuations as well as other relevant and correlated economic risks including exchange rates that affect the general industrial economies (Machín, 2010). The international professional managers ought to be informed as of the findings that any identified major weakness in respect to the global economies has a higher probability to result into a fall off in commodities demand (Machín, 2010). One of the noted challenges is an increased supply of goods which leads to price fall hence losses in the business.
Algeria as the environment in which the corporation operates, the economic conditions are not as good as compared to those of western countries. Still, economic risks are common since inflation and fluctuations are possible. Worker strikes in demand for better wages are a common happening in the country (Olawuyi, 2015). The strikes demonstrate that Algeria is still not an economically stable country.
Algeria is a country dominated by Islam culture. 99% of the population are Muslims, hence the livelihood is guided by laws of Islam (Abdelkrim, 2015). International managers from BHP Billiton Company should, therefore, make sure that they are accustomed to the Islam way of life as it will help create a good working environment where all the employees work well, increasing profits.
Cultural dimension theory as put forward by Hofstede can be used to evaluate Algerian culture which can be classified as power distance index, collectivist, masculine and pragmatic (Ferraro & Briody, 2017). The society in Algeria accepts their position in the system leading high power distance index Islam culture teaches people to be submissive to power, the reason behind the high index. The society practices collectivism as people have a strong belief in the Islam religion which is majorly the Sunni. People always stick together, as unity is one of the major teachings in the culture dominated by Islam religion (Thowfeek & Jaafar, 2012). The society is masculine as the roles of men overlap those of women. Men are assertive while women are seen as servants who should always be submissive. The society is also pragmatic since believing in education, live modesty lives and emphasize on certain virtues and obligations as taught In Islam (Thowfeek & Jaafar, 2012). International manager in Algeria should, therefore, understand these cultural dimensions as they will help in establishing good relationships with the employees which will increase productivity.
Ethics and Social Responsibility
Ethics and social responsibility in every company outline the desired codes of conduct that regulates and control individuals and the employee’s behaviors. BHP Billiton has its ethics and social responsibilities derived from the company’s core value and mission statements. For example, the company is obliged to foster courage among individual to lead to change, encourage win-win relationships, promote integrity, and create a safer environment for company operations and above all the respect for each other.
BHP Billiton has made tremendous steps towards ensuring that the company meets the ethical considerations in its operations in Algeria. Some of the measures include the adoption of low emission technology which is aimed at reducing environmental pollution by the emission produced from the company operations as well as its products (Stimpson et al, 2015). Also, the company has actively participated in curbing the problems of climate change through supporting afforestation programs in Algeria.
The company also complies with corporate social responsibility through actively participating in the development of infrastructure in Algeria such as social amenities, roads, educational facilities and recreational facilities (Stimpson et al, 2015). The management of the company also ensures that the procedures in the operations of the company in Algeria are reflected in the cultural values of the people of Algeria.
International management study is very vital in understanding how business operations should be conducted in oversea countries. It provides the knowledge necessary to successfully run a business in a new culture, new economic system, and also a new political system. BHP Billiton is an example of how international understanding management can help a company penetrate new markets all over the world. Despite the fact that Algeria has a different culture compared to that of most of the countries BHP Billiton operates in, the company has found success in the new environment. The success can be attributed to a clear understanding of macro economic factors which can affect the company, thus developing strategies to counter them as seen in the paper.
Abdelkrim, Y. (2015). Algerian National Culture and TQM. Journal of Economics and Business Research, (21)2, 145-152.
BHB. Our History. Retrieved from http://www.bhp.com/our-approach/our-history
Deresky, H. (2016). International management: Managing across borders and cultures, text and cases, global edition. London: Pearson.
Ferraro, G. P., & Briody, E. K. (2017). The cultural dimension of global business. Abingdon, Oxon: Routledge.
Howell, L. D., & PRS, G. (2013). The handbook of country and political risk analysis. East Syracuse, N.Y.: The PRS Group, Inc.
Machín, Á. A. (2010). Rentierism in the Algerian economy based on oil and natural gas. Energy Policy, 38, 6338-6348. doi:10.1016/j.enpol.2010.06.025
Olawuyi, D. S. (2015). Legal strategies and tools for mitigating legal risks associated with oil and gas investments in Africa. OPEC Energy Review, 39(3), 247. doi:10.1111/opec.12043
Stimpson, s., Tedesco, j., & Maginley, a. (2015). Strategies for risk management and corporate social responsibility for oil and gas companies in emerging markets, Albert Law Review, 53(2), 259. doi:https://www.albertalawreview.com/index.php/ALR/article/viewFile/404/401
Thowfeek, M. H., & Jaafar, A. (2012). Instructors’ view about implementation of e‑learning system: An analysis based on Hofstede’s cultural dimensions. Procedia – Social and Behavioral Sciences, 65, 961-967. doi:10.1016/j.sbspro.2012.11.227