Pestel Analysis for Bhp

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Political Factor

• BHP Billiton is a global resources company that is susceptible to political risk factors in all markets. Political factors can have a big impact on the company’s stated key drivers: license to operate, project pipeline, growth options and world class assets. Governments have the ability to increase taxes which can adversely affect operations. Chile introduced a new 5% mining tax “royalty” which applies to operating taxable income from mining.BHP owns and operates the Escondida cooper mine in Chile, which the company states is the largest source of cooper in the world. The mandated tax adds uncertainty to profit projections for the base metals product division of the company.

Economic Factors

• BHP Billiton is susceptible to the economic factors of inflation in energy costs, exploration expenses, labour costs, operations costs, materials costs. These increases could adversely impact the company expansion plans, development projects and company profitability. Any major weakness in global economies could cause a fall off in commodities demand resulting in increased supply and reduced prices which could impact company profitability.BHP Billiton is heavily dependent on the China economy for 16.8% of company revenue ($6.6b). China global demand for commodities accounts for 41% of   seaborne iron ore, 22% of copper, 22% of aluminum   and 16% of nickel demand.

Socio-Cultural Factors

• BHP Billiton is susceptible to socio-cultural factors in all operations and stakeholder relationships. These factors require the company to financially support local communities and provide resources for infrastructure such as schools, roads and housing. New mining and development projects often require ‘social approvals’ which can add to development costs and impact profitability.
• The Company has taken steps to build on its reputation in Chile by focusing on improving worker conditions and the quality of life in the city of Antofagasta, near the Escondida...

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