Rio Tinto Organizational Behaviour
Rio Tinto | June 26
2013
Executive Summary
When the Oyu Tolgoi mine commenced its operations in 2010[1], it appeared to be a very promising opportunity. One that will lead to both the development of the Mongolian economy and the profitability of Rio Tinto. However, subsequent disagreements between the Mongolian Government and Rio Tinto regarding the distribution of wealth, employment, and financial transparency have become extremely pervasive. These issues stemmed from citizen pressure to regulate foreign investment after past exploitation from foreign investors (SOURCE). In addition, the recent decline in commodity prices [2] has led to increased pressure for Rio Tinto to increase value for its shareholders. Since devoting capital to improving the local economy and resources reduces short term profits, it is becoming increasingly difficult to balance shareholder value and stakeholder interests in the face of declining prices. In an effort to mitigate these problems, a committee should be formed to ensure that the interests of all parties are being appropriately considered. This will eventually foster a strong, mutually beneficial relationship between all parties. The high interdependence of the parties involved – due to resulting significant contributions to Mongolia’s GDP and Rio Tinto’s bottom line – means that they are interested in ensuring that the relationship is effective. Although they are not currently collaborating effectively, a mutual relationship is in the best interest of all stakeholders. An overarching desire to improve independent positions will result in responsiveness to action taken to improve the partnership. Definitive action regarding the aforementioned issues needs to be taken immediately. A committee must be formed with equal representation of the government, citizens, and the company. The committee will organize a public relations campaign with focus on supporting the local community. The next objective is to
2013
Executive Summary
When the Oyu Tolgoi mine commenced its operations in 2010[1], it appeared to be a very promising opportunity. One that will lead to both the development of the Mongolian economy and the profitability of Rio Tinto. However, subsequent disagreements between the Mongolian Government and Rio Tinto regarding the distribution of wealth, employment, and financial transparency have become extremely pervasive. These issues stemmed from citizen pressure to regulate foreign investment after past exploitation from foreign investors (SOURCE). In addition, the recent decline in commodity prices [2] has led to increased pressure for Rio Tinto to increase value for its shareholders. Since devoting capital to improving the local economy and resources reduces short term profits, it is becoming increasingly difficult to balance shareholder value and stakeholder interests in the face of declining prices. In an effort to mitigate these problems, a committee should be formed to ensure that the interests of all parties are being appropriately considered. This will eventually foster a strong, mutually beneficial relationship between all parties. The high interdependence of the parties involved – due to resulting significant contributions to Mongolia’s GDP and Rio Tinto’s bottom line – means that they are interested in ensuring that the relationship is effective. Although they are not currently collaborating effectively, a mutual relationship is in the best interest of all stakeholders. An overarching desire to improve independent positions will result in responsiveness to action taken to improve the partnership. Definitive action regarding the aforementioned issues needs to be taken immediately. A committee must be formed with equal representation of the government, citizens, and the company. The committee will organize a public relations campaign with focus on supporting the local community. The next objective is to
Bibliography: Daft, R., & Armstrong, A. (2012). Organization Theory and Design. Toronto: Nelson Education. Mendee, J. (2013, May 11). Major Revision of Mongolian Mining Regulations Is Underway. Retrieved from Mongolia Focus: http://blogs.ubc.ca/mongolia/2013/major-revision-of-mongolian-mining-regulations/ Rio Tinto. (2012). 2012 Annual Report. Retrieved from Rio Tinto: http://www.riotinto.com/documents/rio_tinto_2012_annual_report.pdf Rio Tinto. (2013). Our Approach. Retrieved from Rio Tinto: http://www.riotinto.com/ourcommitment/our-approach-4802.aspx Tinto, R. (2012). Our Business - Oyu Tologi. Retrieved from Rio Tinto: http://www.riotinto.com/ourbusiness/oyu-tolgoi-4025.aspx Washington Post. (2013, May 04). Mongolia, amid influx of foreign money, clashes with a major partner, mining giant Rio Tinto