Marketing objectives and strategies
Since PEST analysis solely determines the external factors, it could be classified as description of Opportunities (O) and Threats (T) in SWOT analysis. The PEST, as the name suggest, composes of Political, Economic, Social, and Technological factors. Political Factors includes employment laws, political stability, and tariffs, to name a few. Economic Factors include economic growth, interest rates, and inflation rate, for instances. Social Factors deal with age distribution, literacy of society and many more. Technological Factors deal with technology changes, Research and Development progress.
Since operating coal mines depend on the contractual agreement between operator and the government, political factors often become driving force in determining the continuity of coal mines exploration. For example, the decreasing production volume of Xstrata’s copper is because of the third party unplanned closures of acid plant (Davis, 2005). Global economic condition become favorable factor for Xstrata since coal, as the company’s star product, shows strong demand. This situation drives Xstrata to acquire one-third of Cerrejon to strengthen the operations.
In addition, the improved performance at Mount Isa and Oaky North also gives birth to the increasing production in 2006. Another important note is that Xstrata has successfully reduced the costs of production since 2002 (Davis, 2005).
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In addition, Xstrata officials also play roles in serving various local community structure, both government and civil, such as Local Economic Development forums in Witbank and Ermelo (Houston, 2006). The use of advanced technology plays important role in determining the success of mines operations. For this reason, Xstara provides full service including test work and circuit design, access to our operating installations and expertise, ongoing operating support and service, and continuous improvement through user groups (Xstrata PLC, 2006)
As a producer of coal, Xstrata understand the need to comply with legislation where they operate. In Africa, for instances, Xstrata has shown commitment to comply with local government legislation includes Mineral & Petroleum Resource Development Act, Charter and Scorecard for Broad Based Socio-Economic Development in Mining, and Royalties Bill. The Xstrata respond on this legislation includes the implementation of human resource and Employment Equity Strategy, Housing and Accommodation etc (Houston, 2006).
As a common situation, any company operates in mining industry have great concerns about safety and environmental impacts. This situation also applies to Xstrata PLC who operates in mining industry especially coal. In order to comply with the need to place safety and clean environment in the first place, Xstrata has absolute commitment to be a leader in the areas of health, safety, environment and the community. The result of the company’s commitment to environment is the achievement of being a low rate fatality business, which is in line with HSEC obligations (Freyberg, 2006).
Market size and trends with a minimum of 3 years data The fact that coal as an alternative energy besides oil has driven the demand of coal. According to Mick Davis (2005), Xstrata maintain strong records for three parameters as following a) compound annual growth of EBITDA: 123% b) compound annual growth in cash from ops: 105% c) compound annual growth in EPS: 87% Xstrata has set up diverse marketing objectives and strategies according to commodity they market. For example, Xstrata sees the slowdown needs from the construction and automobile industries in zinc market is the result of economic slowdown in 2001.
Therefore, Xstrata decides to market Zinc aggressively in 2002 since they believe there would be an upturn in the US economy (Xstrata, 2001). In contrast, Xstrata do not speed up the production of Vanadium since they see there is a large imbalance in the market in which supply exceeds the demand. Therefore, the marketing strategy for Vanadium would be postponing the large production until a material reduction takes place in order to lift up the market price for Vanadium (Xstrata, 2001).