Ker and Manning’s (2012) article discusses the implications faced by BHP Billiton, as a result of the Australian carbon and mining taxes which has caused foreign investors to substantially decrease their investment into the Australian coal industry, that has resulted in the delay of the expansion of Olympic Dam mine. This article reflects the political and regulatory influences that occur in the business environment and how companies must respond to changes in rules and regulations enacted by the government even if there are repercussions.
Application of Concepts
This article contains concepts relating to political/regulatory factors. ‘Evaluating a companies exposure to risky political events and assessing their impact should be key components of any company’s strategy’ (PwC 2006). This process is vital because political risk must be avoided as it affects the profitability of a business (Robson 2012a). With BHP Billiton, the federal opposition is blaming the carbon and mining tax for the delay in the expansion which has made Australia less competitive in the international market (Milman 2012). Thermal coal prices have declined due to shareholders demand for higher returns (Ker and Manning 2012), this exemplifies the impact political factors can have on a business, as it has decreased profits for BHP Billiton (Fitzgerald and White 2012). Globalisation has also led to greater political risk exposure (PwC 2006). Exchange rate fluctuations especially for the Australian dollar, South African Rand and US dollar have a significant impact on BHP Billiton (BHP Billiton 2011), which is said to be another cause for the delay in the expansion, as the strong dollar is making Australia less competitive (Kloppers 2012) and combined with the news taxes, ‘turning Australia into a high cost environment’ (Bolt 2012).