Strategic Management 313 Semester 1, 2013 An example of assignment News Critique

Bella Butler, School of Management, Curtin University March, 2013

The sources which published the news item

1. Chambers, M. BHP taps new boss for new era. The Australian, February 21, 2013, p. 1 and p. 4.
2. Chambers, M. Kloppers last act is on costs. The Australian, February 21, 2013, p. 17.
3. Fitzgerald, B. Shale push may refefine BHP. The Australian, February 21, 2013, p. 17.
4. Batholomeusz, S. Kloppers shows rest how it should be done. The Australian, February 21, 2013,
p. 20.
5. Smith, S. Linguists call-up to BHP helm. The West Australian, February 21, 2013, p. 18.
6. White, A. Mariuss legacy may be picking successor. The Australian, February 21, 2013, p. 20.


A brief summary of the event

The biggest Australian company BHP Billiton appointed new ECO Mr Andrew Mackenzie. The
announcement about BHP leadership change was perceived by the market analysts as a sharper focus on
the cost-cutting phase that already seen coalminers closed, projects abandoned and job losses (Chambers,
2013: 1). The BHP leadership change was announced only four weeks after BHPs major competitor Rio
Tinto also replaced its CEO with the newly appointed CEO Sam Walsh as well as recent appointment of
new chief executives at big rival miners Vale of Brazil.

BHP Billitons announcement coincided with news of a 58 per cent fall in its first-half profit in the wake
of last years sharp fall in commodity prices. The $US4.2 billion profit is nonetheless the biggest so far of
the largest corporate reporting season (Smith, 2013: 18).

How does a news item illustrate the topic assigned for your presentation?
The assigned topic for this assignment is . This news event focuses on leadership Corporate Governance
change at the nations biggest company. This leadership change also reflects on sharper focus on
cost-cutting measures which will allow a company to deal with lower iron ore and coal prices and
decreasing demand on resources from China. Although, the succession planning is one of the top
responsibilities of a board, in the case of BHP the outgoing CEO Marius Kloppers gave the companys
chair Jac Nasser and the board a number of strong internal candidates for the job. Marius Kloppers
pursued Andrew Mackenzie, senior BP and Rio Tinto executive, relentlessly until he convinced him to
join BHP. Marius Kloppers, the outgoing BHPs CEO, followed the advice which he received nearly 6
years ago from former BHP CEO Paul Anderson that he should immediately start thinking about his
successor (Batholomeusz, 2013: 20).
Corporate governance is the process of how important strategic decisions are made and controlled in
organisations. The leadership change at BHP demonstrates that the decision to appoint a new CEO was
mutually made by the outgoing CEO Marius Kloppers and the companys board. Corporate governance
is closely related to the sustainability of an organisation. New CEO of BHP Andrew Mackenzie will, as
he explained, pick up where Mr Kloppers left off, working within BHPs long-term strategy of
concentrating on low-cost, long-life, expandable assets and sharpening its cost-cutting focus (Fitzgerald,
2013:17).
Strong succession plan of the outgoing CEO and his collaboration with the board regarding timing of his
departure create positive conditions for sustainable development of the company and continuity of the
implementation of its long- term strategy in the best interests of shareholders and the society. The
Kloppers tenure is viewed as extremely successful for BHP and its shareholders even despite the
extraordinary volatility of the market created by the global financial crisis (Batholomeusz, 2013). BHP has
produced total shareholder returns of nearly 50 per cent since 2007-08 as opposite to its major rivals who
destroyed shareholder value during the same period. Strong succession plan and the new CEO
recommended by the outgoing CEO are also important conditions of the implementation of the legacy of
the outgoing CEO. Mr Kloppers is leaving the company in very strong shape and with considerable
Strategic Management 313 Semester 1, 2013 An example of assignment News Critique
Bella Butler, School of Management, Curtin University March, 2013
options, for example, such as expansion of the US shale gas presence and building the potash business in
Canada ((Batholomeusz, 2013). Mr Kloppers had also started to implement costs-cutting initiatives in
response to the changing industry and market conditions.

Can you predict the further development of the situation? What might happen next?
According to the mining industry analysts, an important element of Mr Kloppers legacy may be[came]
picking [his] successor (White, 2013: 20). Indeed, leadership change could become a very bitter
experience for those who are involved if this is not conducted in the right way. Leadership change
potentially could create some uncertainty both within the company and among its shareholders and within
a more distant network of business associates. It could also result in managerial opportunism the use of
corporate resources, whether they are tangible or intangible, for a managers benefit at the expense of the
companys investors.

Marius Kloppers has been in the position of BHPs CEO for 5.5 years when the announcement about his
stepping down was made. He held his position longer than the 4.4-year average for an Australian chief
executive (White, 2013). Mr Klopper will be recognised for leading the company to $24 billion in
dividends, $10 billion in buybacks, facilitating the development of the onshore US shale oil and gas
business, conducting high-profile acquisitions, but his biggest contribution may yet prove to be bringing
[his successor] Mackenzie into the company for the difficult years ahead (White, 2013:20).

Linkages to other topics of the course Strategic Management
This news can be used to illustrate the following topics* of the course:

Evaluating External and Industry Environment (the external changes in the industry call for new ways to
implement a companys strategy and this includes cost-cutting measures and focus on growing markets);

Analysing Resources and Capabilities (new leadership skills will be required in different market and
industry conditions);

Corporate Strategy (restructuring of the corporate portfolio in response to market and industry changes);

International Strategy (focus on growing regional markets, e.g. the USA and Canadian markets as
opposite to other regional markets).
*These topics are listed as examples; the news can be used to illustrate any topic of this course.