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Goals and Strategy

As a major global diversified mining group, Xstrata has maintained a strong position in several mining commodities composing of copper, coking coal, thermal coal, ferrochrome, vanadium and zinc. Additional interest includes gold, lead and silver mining. To maintain the strong position in the market, Xstrata aims at growing and managing a diversified portfolio of metals and mining businesses with the single aim of delivering industry-leading returns for our shareholders (Xstrata PLC, 2006).

To achieve the objective, Xstrata continuously conduct partnerships with employees, customers, shareholders, local communities and other stakeholders, which are based on integrity, co-operation, transparency and mutual value-creation (Xstrata PLC, 2006). II. Business Analysis of Xstrata PLC Any organizations especially one dealing with business environment must encounter an era where the success of their operation depends on both internal and external factors.

Under such circumstances, it is useful to carry out an analysis that takes into account not only the company’s internal factors, but also external factors such as activities of the company’s competitors and current industry situation as well. In this paper, we will discuss three types of business analyses: Porter’s Five Forces, SWOT, and PESTLE analysis. While SWOT analysis employs both external and internal factors, the PESTLE pays more attention to solely external factors.

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In addition to the explanation of each analysis, we would employ the three type of business analysis for Xstrata PLC. Porter’s Five Forces Analysis At the heart of this analysis is the industry analyzing model known as Porter’s five forces model which details the threat of new entrants, power of buyers, power of suppliers, rivalry among existing competitors, and the threat of substitute products for wine industry that satisfies following diagram: Figure 1 Porter’s Diagram of Five Forces

Source: Mallon, Chris, ‘Porter’s Five Forces Analysis. Executive Coaching Studio’, [Online] Available at: http://www. executivecoachingstudio. com/fiveforces. htm II. 1. 1 Rivalry Like in other market, competitive advantage plays a significant role in winning a competition. Technological leadership and brand awareness do not have to make a company to lead a market if the company cannot employ the advantage fully. In mining industries, like ones Xstrata operates, the use technology is quite similar across the operators (Xstrata and competitors).

Therefore, the key point in mining industry is how to use the advanced technology to support the productivity. In coal market, for instances, Xstrata still leads the Australia’s coal export market with more than 25 million tones of coal production per annum, far exceeding Rio Tinto who produced about 23 million tones of coal annually (Freyberg, 2006). II. 1. 2 New Entrants The threat of new entrants rises as the barrier to entry is reduced in a marketplace.

As more firms enter a market, we will see rivalry increase, and profitability will fall (theoretically) to the point where there is no incentive for new firms to enter the industry. One of common barriers to enter a new market is brand loyalty or in terms of multinational business, the main barrier could be the nationalism. Concerning the Xstrata case, I see the nationalism become the threat of new entrants for Xstrata Coal. This is because as a Switzerland-based company, Xstrata operates coal mines in more than 30 location in South Africa and Australia.

It is prone to contractual termination due to the forces to operate by local companies. This situation is now happened in Indonesia where citizens ask government to terminate contract of Freeport, which operate gold mines in Papua Island (Coates, 2005). Products Substitution This is probably the most overlooked, and therefore most damaging, element of strategic decision-making. It’s imperative that business owners (us) not only look at what the company’s direct competitors are doing, but what other types of products people could buy instead.

In Xsrata case, I see that oil still becomes the strongest threat for coal since the demand of coal, amidst the increasing needs, grows slower than other fossil fuels (Freyberg, 2006). Buyer Power There are some factors affecting buyer power: size of buyer (larger buyers will have more power over suppliers), number of buyers (when there are a small number of buyers, they will tend to have more power over suppliers), and purchase quantity (When a customer purchases a large quantity of a suppliers output, it will exercise more power over the supplier).

In case of Xstrata, I see that the increasing needs of coal in US market have driven Xstrata to search for new coal mines. Therefore, the acquisition of Cerrejon, which has about 900 million of proven and probable reserve and 25 million-export capacity per annum, becomes new star in fulfilling the U. S. market demands (Davis, 2005).

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