Assignment for IBS (1)

8/10/2019 Assignment for IBS (1)

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2 Unit 407International Business Strategy

EXECUTIVE SUMMARY

With proven strategy and strong business model Rio Tinto Group approached the global

market. Through a thorough study for the Groups approach tointernationalize the operationsand structure of its production groups, it is found that this approach suits the strategy set by

the group to achieve its objectives in maximizing shareholders returns and creating

opportunities for improving many communities in the global. Also, it is found that Rio Tinto

developed a strong risk-management & decision-making processes that enabled the group to

compete against the limitations on its trades & operations.

Sample Assignment: Part of the content removed

Considering further investment to make joint ventures with technical research institutes to

enhance the outcome of the technology group in Rio Tinto and accordingly reduce the cost in

is the most important suggestion among many others put in this report.

Considering a wide expansion in the GCC countries is one of the recommendations

introduced in this report which may be adopted by the group to enhance the profitable global

expansion.


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Table of Contents

EXECUTIVE SUMMARY .................................................................................................................. 2

Table of Contents .................................................................................................................................. 3

INTRODUCTION ................................................................................................................................ 4

1. PERFORMANCE ANALYSIS .................................................................................................... 5

Approach to Internationalisation / Globalization ................................................................................ 5

Market Entry Strategies ...................................................................................................................... 6

Trades Limitations / Barriers .............................................................................................................. 7

2. PERFORMANCE ASSESSMENT .............................................................................................. 9

3. SUGGESTIONS .......................................................................................................................... 10

4. CONCLUSION ........................................................................................................................... 11

5. BIBLIOGRAPHY ....................................................................................................................... 12

6. APPENDIXES ............................................................................................................................. 13


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INTRODUCTION

This report provides a brief analysis for the performance of Rio Tinto Group which used to

generate an evaluation on how well the organization is performing and highlighting some

recommendations to support Rio Tinto.

The report utilizes a thorough research on Rio Tinto, toconcentre on the following aspects:

Identifying, explaining & evaluating Groups Approach to Globalization, Market Entry

Strategies & Limitations/barriers (and how the group deal with these limitations)


Putting a clue from an investor perspective on the opportunity of achieving future growth

for the group

Rio Tinto Group Profile:

Rio Tinto is a leading international mining group headquartered in the UK, combining Rio

Tinto plc.a London and New York Stock Exchange listed company, and Rio Tinto Limited,

which is listed on the Australian Securities Exchange.

Rio Tinto's business is finding, mining, and processing mineral resources. Major products are

aluminium, copper, diamonds, thermal and metallurgical coal, uranium, gold, industrial

minerals (borax, titanium dioxide and salt) and iron ore. Its activities span the world and are

strongly represented in Australia and North America with significant businesses in Asia,

Europe, Africa and South America.(Rio Tinto Group, 2012)


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1.PERFORMANCE ANALYSIS

Approach to Internationalisation / Globalization

Rio Tinto Groups approach to globalisation summarised bythe diversity in geography and

product/service to create and sustain the most valuable business for the stakeholders in line with the

groups objective, which will maximise shareholders return, maximize the economicbenefits for

host government/communities, maximise the successful delivery of customers needs, creating

worldwide growth opportunity for employees and creating an attractive destination for investors.

Rio Tinto Groups approach to globalization is represented in the following main characteristics and

actions:


Global code of business conduct: It is what the group call it The Way We Work and which

is considered the groups conscience(Rio Tinto annual report, 2012).Actually, this code is

another global approach to business by consolidatingthe principles, standards and polices to

form a mandatory reference for the groups global operational structure and external parties

(consultants-agents-contractors-suppliers). Through whichthe group ensures that its core values

(accountability-respect-teamwork&integrity) are expressed and maintained while managing the

economic, social and environmental challenges of its operation.

Improvement of industry-leading capabilities:

The aim of this improvement is to increase the groupscompetitive advantages.

o Sustainable development (CSR involvement): increasing the global competitives

advantages through noticeable developmentsto the economic prosperity (economic

contribution), social wellbeing (Safety-health-community-people), environmental


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stewardship (Biodiversity-Greenhouse-gas emission-land-water) and strong governance

systems (human rightsintegrity & compliance).

o Marketing and operational excellence:efficient marketing leads the group to expand its

chain of supply based on better selection of long-term opportunities, and the operational

excellence leads the group to leave leading footprint in the industry at all the working areas

and accordingly adds more competitive advantages.

Market Entry Strategies

Group Strategy:Invest in and operate large, long-term, expandable, low-cost mines and

businesses, driven not by choice of commodity or region but rather by the quality of each

opportunity in the most attractive industry sectors(Rio Tinto annual report, 2012)

The group follows the systematic/strategic approach in market entry as it seeks opportunities with

long-term positive impact, and thereforethey framed a business model that ensures in all of its steps

an achievement of the groups global objectives. The following table illustrates the market entry

strategies in the business model:

Business

model

elements

Function objectives Strategy

ExploreAnd

Evaluate

Find and study geological

targets, classify them based on

their characteristics and

prioritize them based on

perspective value. (Greenfields)

Increase the long-

term benefits of thegroup and hosted

country/community.

Concentrate and limit theprocess to find large-scale

& long-life orebodies.Evaluate additional values to the

new market/community Vs.

group's benefits from expanding

the existing extraction and/or

processing assets. (Brownfields)



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Market and

deliver

Identify the desired customers in

promising sectors and regions

and has an engagements with

their needs

achieve the desired

recognition of

product's value

Long-term partnership

agreements with

customers.

Define the required supply chain

and any required developments

Have the highest

capability in

covering supplydestinations

Invest in long-term

infrastructure's

expenditures (railways-

ports-roads-power supplyfacilities) and utilize

existing facilities under

long-term agreements.


Trades Limitations/ Barriers

The group faces many barriers in sustaining their operations and commencing future

investments as well as in the trades of their products, and we can summarise the main

limitations by:



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To defeat such limitation, the group emphasized on joint ventures with national leading

Chinese companies to enhance its chances and presence in the region likethe joint venture

with Chinalco which granted Rio Tinto a better chance in market share as well as more

access to Chinese customers. Financial position & low earnings: The group encountered bad financial position &

earnings due to significant impairments of assets in Aluminium business (case of Alcans

acquisition) and the coal business in Mozambique (case of Moatize Basin) as well as the

increase in operational cost (as shown in (Rio Tinto annual report, 2012)); which as a

result caused lower capability in financing their operations and future investments. Clear

example is the case of Simandou Project in Guineawhich has been halted for financial

issues (as illustrated by (Trefis, 2013))

To cope this limitation, the group emphasized on enhancing the performance through

adopting automated operations and following cost-cut plan across its operational

structure.

The increase of the international laws, regulations & standards in Health, safety,

environment & reclamation: Such increase added more complexity to the operations,

increased the cost and increased the opportunities of criticism by international

environmentalist group which eventually caused a slowdown in operations. Clear

example is the case of Grasberg mine in Indonesia which caused an exclusion of the

group from the Government Pension Fund of Norwaybased on claims regarding severe

environmental damage(as illustrated in (Wikipedia, 2014)).

To handle such limitation, the group invested in building up on their sustainable

developments (CSR involvement) to maintain good reputation.

Increased communitys opposition to the presence of the group in some rich

resources regions: such increase slow down the operations of the group and eventually

limits its expansion and future investments. Clear example is the case of Madagascars

Ilmenite where the effect of protecting the community & environment caused negative

implications to the operations (as illustrated by (Clifton, 2014)).

Skills shortages: the shortage in skilled workers as a result of high competition caused a

limitation for continuing the operations of the group as well as it increased the risk of

workers disputes about their wages and rights.

To cover such limitation, the group invested in long term partnership agreements with

universities like the University Of Western Australia and The University of Nottingham


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to increase the experienced workforce trades into the group and to the global mining

sector (considered part of CSR contribution to the global mining sector).

2.PERFORMANCE ASSESSMENT

Groupsapproach to globalization is maintained to a successful growing trend.As in regard to the

expansion in the geographic & product diversity which is clear from the operations map in

(Appendix I), the groupperformed hugeacquisitions in the past few years and invested in many

growth projects, despite that some of which were bad acquisitions in some sectors due to a

negative financial impact.And in line with this expansion the group maintained solid

internationally oriented operational structure, strong & improved regulatory code of

businessconduct and enhanced its industry-leading capabilities through developments

investments in several fields.

For market entry, group strategy is being developed and maintained constant over many years

and it is being structured to fit in the business model which is to be followed across its

operationalgroups.However, the plan to deliver this strategy was developed to the meet the

requirements of current circumstances, and recently it was dependable on strengthening capital

allocation and discipline, reducing cost with improvement of the performance at the existing

operations and delivering approved growth projects.

The results of delivering such solid strategy are reflecting the sustainable future growth; some of

the recent announced results are highlighted in (Appendix II).



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3.SUGGESTIONS

Exporting existing competencies to give the group advantage in the international market

Rio Tinto isexporting existing competencies through operational structures distributed in the

world based on the geographic concentration of the business, and they rely on information

systems technology to do so. I suggest that Rio Tinto shall consider further investment in

expanding the operational communication network to assure a successful achievement in this

aspect.\


And regarding the labour, I suggest that Rio Tinto shall consider further investment in

establishing more training schools for certain workforce categories and getting cheaper

workforce into these schools before promoting them in the operations.

For materials requirement, I suggest that Rio Tinto shall seek the suppliers for long-term

agreements with conditions that assure stability in prices (overcome price fluctuation) and

assuring as much as possible exclusivity in supply to the group (overcome competition in

sharing same source of supply).


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4.CONCLUSION

By reviewing the general research and assessment done on Rio Tinto Groups approach to

globalization, market entry strategy and the associated limitations to the groups operations I found

that:


In its global approach to achieve remarkable expansion in the geographic & product diversity

through acquisitions, joint ventures and the associated global operational structure, the group

confirmed its strategic commitment toInvest in and operate large, long-term, expandable business.

And through the improvements of its global industry-leading capabilities, the group delivered its

strategic commitment of creating and efficiently operating low cost and profitable business.

Also, through its approach to have global code of business conduct and the successful adherence to

this code, the group maintained its moral values integrated in all their actions and operations.


Recommendations:

In order to sustain growing trend in its expansion, the group shall concentrate on recovering &

enhancing its financial position

Rio Tinto shall concentrate on GCC countries with its operations to capture prospective

opportunities in many fields like nuclear fuels supply to the GCC countries following UAE in

constructing nuclear power plants.


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5.BIBLIOGRAPHY

Books and Reports

Orr, S.2010. Unit 407 International Business Strategy. Chifley Business School

Websites

Rio Tinto annual report. 2012.Rio Tinto - Reporting center 2012. [Online]

Available at:http://www.riotinto.com/documents/rio_tinto_2012_annual_report.pdf[Accessed: 8 Feb 2014].

Trefis. 2013.Has Rio Tinto Halted The Simandou Project Over Financing Issues? -- Trefis. [Online]

Available at:http://www.trefis.com/stock/rio/articles/173717/has-rio-tinto-halted-the-simandou-project-over-financing-issues/2013-03-13[Accessed: 12 Feb 2014].

Wikipedia. 2014.Rio Tinto Group. [Online] Available at:http://en.wikipedia.org/wiki/Rio_Tinto_Group

[Accessed: 12 Feb 2014].

Clifton, S. 2014.Mining Madagascarforests.[E-book] London: Available through: Onlinehttps://www.foe.co.uk/sites/default/files/downloads/mining_madagascar.pdf[Accessed: 14 Feb 2014].

Rio Tinto Operations map. 2013.About_Rio Tinto_Brochure. [Online]Available at:http://www.riotinto.com/documents/About_RioTinto_brochure.pdf[Accessed: 14 Feb 2014].

Riotinto.com. 2014.Rio Tinto announces record production for iron ore, bauxite and thermal coal in 2013 -

Rio Tinto. [Online] Available at:http://www.riotinto.com/media/media-releases-237_9539.aspx[Accessed: 14 Feb 2014].
http://www.riotinto.com/documents/rio_tinto_2012_annual_report.pdfhttp://www.riotinto.com/documents/rio_tinto_2012_annual_report.pdfhttp://www.riotinto.com/documents/rio_tinto_2012_annual_report.pdfhttp://www.trefis.com/stock/rio/articles/173717/has-rio-tinto-halted-the-simandou-project-over-financing-issues/2013-03-13http://www.trefis.com/stock/rio/articles/173717/has-rio-tinto-halted-the-simandou-project-over-financing-issues/2013-03-13http://www.trefis.com/stock/rio/articles/173717/has-rio-tinto-halted-the-simandou-project-over-financing-issues/2013-03-13http://www.trefis.com/stock/rio/articles/173717/has-rio-tinto-halted-the-simandou-project-over-financing-issues/2013-03-13http://en.wikipedia.org/wiki/Rio_Tinto_Grouphttp://en.wikipedia.org/wiki/Rio_Tinto_Grouphttp://en.wikipedia.org/wiki/Rio_Tinto_Grouphttps://www.foe.co.uk/sites/default/files/downloads/mining_madagascar.pdfhttps://www.foe.co.uk/sites/default/files/downloads/mining_madagascar.pdfhttp://www.riotinto.com/documents/About_RioTinto_brochure.pdfhttp://www.riotinto.com/documents/About_RioTinto_brochure.pdfhttp://www.riotinto.com/documents/About_RioTinto_brochure.pdfhttp://www.riotinto.com/media/media-releases-237_9539.aspxhttp://www.riotinto.com/media/media-releases-237_9539.aspxhttp://www.riotinto.com/media/media-releases-237_9539.aspxhttp://www.riotinto.com/media/media-releases-237_9539.aspxhttp://www.riotinto.com/documents/About_RioTinto_brochure.pdfhttps://www.foe.co.uk/sites/default/files/downloads/mining_madagascar.pdfhttp://en.wikipedia.org/wiki/Rio_Tinto_Grouphttp://www.trefis.com/stock/rio/articles/173717/has-rio-tinto-halted-the-simandou-project-over-financing-issues/2013-03-13http://www.trefis.com/stock/rio/articles/173717/has-rio-tinto-halted-the-simandou-project-over-financing-issues/2013-03-13http://www.riotinto.com/documents/rio_tinto_2012_annual_report.pdf


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6.APPENDIXES

Appendix I(Rio Tinto Operations map, 2013)


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14 Unit 407 International Business Strategy

Appendix II(Riotin to.com, 2014)


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