MGMT6011 Strategic Management | Northern Star Resources Limited
Objectives:
- Apply strategic management theory into practice;
- Development understanding of theories, concepts and models to support operations form a strategic perspective;
- Identify and analyse strategic issues;
- Assess organisational strengths and limitations;
- Build awareness of ethical and social considerations for strategic issues;
- Evaluate information in support of the development of a case study report; and
- Gain global perspectives in the analysis of strategic issues.
Instructions:
Refer to the Hubbard paper on how to analyse a case study. Use it as the basis for analysing the case study provided. Be sure to integrate your understanding of the theory from the subject. It is expected that you will use a minimum of 20 academic journal references in putting your case study report together. Be sure to include a one-page executive summary, as well as formal document sections.
You are expected to produce an academic report that includes an executive summary, formal document sections such as a table of contents, introduction and conclusion. As this is the capstone (or equivalent) subject, it is expected you will be very used to and comfortable with using external sources to validate your thinking and to demonstrate substantial wider reading.
Students should use the brief to inform what is required in the assignment and the following rubric to inform the standard of work required to earn your desired grade.
Strategic management involves the formulation and implementation of the important goals and initiatives that are taken by the top level management on the behalf of the owners of the company. In the current era, this is the fact that every company need to analyse the strategies that are incorporated by the companies.
The company on which the analysis has been done in Northern Star Resources Limited. The findings of the report show that there are different issues which are faced by the company such as technological risk, political risk, environmental risk and many other factors. These factors influence the working of the company and also made them bring the changes within the working of an organisation.
Along with this, the analysis related to the organisational internal working has been done which reflects the strategic issues that are required to be removed. The recommendations for the same has been discussed which will help in improving the performance of the company.
Answer:
Introduction
The aim of the academic report is to present the recommendation or consultant to the company after analysing the organisation issues. The organisation that has been selected for this report is Northern Star Resources Limited. The strategic management theory applied to the company is done to identify and analyse the strategic issues faced by the company. Along with this, the organisational strengths and limitations are assessed which will help the company in improving the working or operations of the business. The analysis related to the organisational context is done with the help of the PESTLE, SWOT and five forces model. In addition, the analysis of the strategic issues which is faced by the company is done with the help of the value chain and VRIO analysis which shows the operations and competitive advantage of the company. These two models show the working of the Northern Star Resources Limited. In the end, some of the suggestions are given to the company which helps them in improving the operations.
Overview of company
Northern Star Resources Limited is a global scale ASX 100 gold producer with the world-class projects that are located in highly prospective and low sovereign risk regions of Western Australia and the Northern Territory. The company is considered the third largest Australian gold producer and the company produces approx. 514,735 ounces of gold in the year 2017 from its West Australian operating business units. The core values of the company are STARR which stands for safety, teamwork, accountability, respect and results (Northern Star resources limited, 2018).
Vision: - The vision of the company is to continue building a safe, quality mining and exploration company that mainly focuses on creating the value for the stakeholders (Northern Star resources limited, 2018).
Mission: - The mission of the company is to form the earning accretive value for the stakeholders through the effectiveness of operational, growth opportunities and the exploration with a prime focus on the success to deliver on the targets.
Strategic issues faced by the company
The company face the numerous issues whole managing the operations and these issues vary according to the activities, processes and working of the company.
Issues related to the performance
- Achievement of the performance hurdles at the end of the three years
- Employment within the company continuously
- Personal performance reviews are not satisfactory in the three years
Issues related to the prices
The company found the issues related to the market prices as there is an opportunity that the market prices of the gold and silver that are currently produced might take place. These issues can affect the profit and loss of the company.
The details related to the strategic issues faced by the company are discussed further with the help of the organisational analysis.
Assessment of organisational context
Environmental analysis
PESTLE Analysis
PESTLE framework is a strategic tool that is used by most of the companies for evaluating the environment in which they are performing their business operations (Hollensen, 2015). Northern Star Resources Limited Company need to analyse the market so that they can identify the forces that affect the working and can take the required steps to overcome the issues faced by the company.
Political factors
The political factors include the tax, interest, changes in policy, rule and regulations by the government. The Australian government have some criteria for the taxes on the gold producers. Northern Star Resources Limited which is a wholly owned Australian controlled entity has implemented the tax consolidation legislation of tax (IBIS World, 2017). Along with this, the company has the political risk because there is the possibility of the changes in the policy of the government related to the tax or for the dealing of gold that can affect the working and profit of the company. Though, this has been found that the government is also getting the benefit of the gold sales as it will contribute to the development of the nation.
Economic factors
The economic factors of the country include the interest rate, GDP of the country, inflation rates and some other factors. These factors directly affect the working of the Northern Star Resources Limited Company. The Australian treasury predicts the growth in the GDP by 3% as it expects the household consumption to rebound. This has been found that the agriculture and mining sector are one of the most essential elements for the exports. Moreover, in the year 2016-2017 gold was Western Australia’s second most valuable mineral sector with the 10.8 billion in sales which represent approx. 12.3% of the total mineral sales. According to the report, this has been found that more than 75% of the state’s gold sales come from just ten producers (Santander trade, 2018). Though, this is also the fact that the producer of gold gets affected due to the change in the purchasing power of the customers. The customer purchasing power can reduce the consumption of the gold in the market because there is a rise in the expenditure of the people.
Social factors
The social factors include the social environment of the market, current trends, patterns, demographics and population analytics towards the goods and services that are offered to them. Northern Star Resources Limited gold is consumed by numerous numbers of people in the Australian market due to quality products. Along with this, the company export the gold to other nations which help them in increasing the profit (Jamasmie, 2011). Northern Star Resources Limited builds on our commitment to engage the aboriginal people through employment and business opportunities. The company do have the risk of change in the buying behaviour of the Australian people which might make them shift from one seller to another.
Technological factors
The technological factors include the update or advancement of the technology that can affect the working of the company. Northern Star Company does have the technical team who continue to stay at the leading edge of underground mining. The company make use of the technology for the mining purpose and the change in technology affects the working of the company. Technology change includes the new machinery and equipment that can be used by the company for the purpose of mining this will reduce the time as well as the efforts of the workers.
Legal factors
The legal regulation includes the rules and laws that can affect the working of the company. Northern Star Resources Limited Company is legally obliged to take the permission from the law for the place where they are willing to perform their operations related to the mining. All the places where the mining process takes place are approved through law so that company doesn’t face the major challenges (Northern Star resources limited, 2016). Northern Star Resources Limited Company needs to take the licence from the Australian government for the activity of mining. The government doesn’t give the approval to each and every company for the mining because will leads to many issues. This is the reason Northern Star Resources Limited Company need to follow the obligations of the law. The company might face the risk of changes in the laws and regulations of the government.
Environmental factors
The environment factors include the aspects that are related to the atmosphere, surroundings and other determinants. Northern Star Resources Limited understand that a primary area of the stakeholder's interest rest with the ability to identify responsible environmental stewardship (Northern Star resources limited, 2017). Northern Star Resources Limited Company is committed to releasing a sustainability report for the financial year 2017. This is done by the company in order to improve the environmental, social and the governance performance disclosure and transparency (Northern Star resources limited, 2018). The company might face the numerous risk related to the environment because mining includes certain factors that can affect the environment.
Industry environment
Porter’s five forces
Porter’s five forces framework is a tool for analysing competition that is present within the business market. Northern Star Resources Limited needs to analyse the industry competitors that can affect the working of the business (Kotler, 2015). The analysis related to Porter's five forces is given below: -
Bargaining power of customers: - In the Australian market, there is a different gold producer is available due to which the bargaining power of the customers is high. The gold mined by the one company is not very different from the other companies due to which the buyers can get the different options in the industry. This is the reason that the buyers will always favour the company who can provide the lower prices or favourable contract terms. Northern Star Resources Limited needs to keep the best and affordable price as this is the only way through which they can retain the customers that are present within the market.
Bargaining power of suppliers: - The gold miner like Northern Star Resources Limited needs the land on which they can perform the activity of mining. The sourcing of the land needs the huge amount as the capital which is difficult for the owner to pay. Hence, they need to source the same from banks o borrowing. Along with this, the permit by the government for the land is also must as this is the only way through which they can start working on the land. In addition, issues related to the environmental risk possess tough challenges in securing the approval of the government.
The threat of substitutes: - The threat of the substitutes is low for the Northern Star Resources Limited because there is the availability of very less substitute of the product which includes silver, diamonds, platinum and some others. Though, the acceptance of these products by the customers is less comparing it with the gold. Currently, Gold is acquiring the benefit of the world currency as all over the world because it is used as an investment. Thus, the threat of the substitutes is reducing day by day across the world.
The threat of New Entrants: - The threat of new entrants is less in the market of Australia because this kind of business requires huge amount which is not possible for the newcomer to expand (Lovelock and Patterson, 2015). Along with this, the market of Australia includes many gold producers which leads to the difficulty for the new entrant as they won’t be able to deal with the competitors who are present within the market.
Competitive rivalry: - Northern Star Resources Limited found intense competitive rivals as there are numerous rivals are present in the market that is performing their business operations in the same industry. The major rival of the company is Newcrest Mining Limited as the company is an Australia based corporation which engages in the exploration, development, mining and sales of the gold-copper corporation (Motley Fool, 2017). The company can give the tough competition to the Northern Star Resources Limited which becomes tough for the company while dealing with the customers at times.
SWOT analysis
|
Strengths |
Weaknesses |
|
Northern Star Resources Limited mainly focus on the increasing the returns of the stakeholders as they play a vital role in the business operations of the company. The company is an Australian mid-cap gold miner that has acquired the position among the top 25 gold mines across the globe with the low quartile cost of its peer group (Seeking Alpha, 2018). The company has formed the record of the net profit after tax of A$215.3 m up 42% from the previous corresponding period (PCP) |
The debt took by the high as compared to the other companies because the company is offering the good returns to its stakeholders. The high in debt create the problems in the decision making of the company which is considered as one of the biggest weakness of the company. This shows that the company is not able to make its investment decisions properly (Mayes, 2018). |
|
Opportunities |
Threats |
|
The company has the opportunity to expand their business operations in the other markets. In addition, the company can acquire other companies who are dealing in the market as this will help the company in earning the high returns and expanding the business (Government of Western Australia, 2018). |
The threats related to the change in the legal and political aspect is one of the major threats. In addition, the industry in which the company is operating its business is full of threats related to the environmental factors. |
Analysis of strategic issues
Strategy
The company is following the growth strategy in which they are willing to invest the amount in either acquiring the other companies or by opening the new mining station in the near future. The company is enacting and delivering on its organic growth strategy which includes the creation of new concentrated centres. Though, the company is not able to effectively implement the strategy within the organisation due to which the issues are increasing. This is possible with the new strategy of retaining the employees within the organisation. This has been found that the employees in the mining are not only difficult to recruit but also to retain as most of the people don't retain in the industry.
Performance
The performance of the organisation is one of the major criteria which lead to the success of the company. The performance is categorized into the four categories which include financial, customer, internal and internal long-term development. The performance for the year 2017 has been generated by the company from the Jundee, Kundana, Kanowna Belle, Paulsen and Plutonic gold mines. According to the report, this has been found that a total of 526,515 ounces of gold was sold at an average price of A$1,675. This shows that the company is able to manage its performance effectively (Government of Western Australia, 2018).
Value chain analysis
A value chain is the set of activities that are performed by the firm while operating in a specific industry performs in relation to deliver a valuable product or service within the market (Luca and Suggs, 2010). The value chain analysis of the Northern Star resources limited company is given below: -
Primary activities
These activities include the functions that are directly related with the conversion of input into output along with the activities related to the distribution of the product.
Inbound logistics: - These activities include receiving, storing and distributing the products and services. Northern Star resources limited company need to search for the ground on which they can perform the operations of searching for raw gold. The gold is mined by the worker on the site from the mud and then they store the pieces of gold in the container which is further distributed. Though, this takes time which is a big issue for the company.
Operations: - The activity shows the transformation of input raw material to final product. The equipment is used by Northern Star resources limited to clean the muddy water on which they find the pieces of gold. This process includes the processing of the rock and ore into a metallic alloy of the substantial purity (South Australia, 2018). The purity of the gold is one of the essential processes that are performed by Northern Star resources limited.
Marketing and sales: - The marketing and sales activity is performed by the Northern Star resources limited as this is the way through which they can grab the attention of people. In addition, this helps the company in dealing with the competitors present within the market (Business Jargons, 2018). Along with this, the company has appointed the sales executive who helps in performing the functions of sales.
Service: - Service is offered to the customers to improve or maintain the value related to the product. Northern Star resources limited company ensure that they are offering the quality products to their customers with the assurance and guarantee because generally the people who make the purchase of the gold ensure that they are getting a guarantee of products.
Support activities
These activities provide the support to the primary activities in accomplishing the objectives of the company.
Procurement: - Company needs to procure the machinery and equipment with the help of which the gold is produced. These equipment include large machinery which helps in extracting the gold from mud and then cleaning it. Along with this, sometimes there is a need for the traditional tools as well which include shovels, pickaxes, hammers, chisels which becomes difficult for the company to arrange it.
Technology development: - Technology development also plays a vital role for Northern Star resources limited company as they keep tracking or checking the activities with the help of the software and the computer devices. Though, the company face the issues when they bring the change in technology because they need to provide the training to their employees for new technology.
Human resource management: - Northern Star resources limited company finds one of the major issues in sourcing for the skilled employees who can handle the machinery effectively.
Infrastructure: - Company ensures that the infrastructure doesn’t create an impact on the working but somehow the planning for the product remains ineffective which affects the company.
VRIO analysis
VRIO analysis is an analytical technique brilliant for the evaluation of the company resources and the competitive advantage. VRIO stands for value, rareness, imitability, and organisation (Knott, 2015).
Northern Star resources limited VRIO analysis
|
Value chain analysis |
Is it valuable? |
Is it rare? |
Difficult to imitate? |
Is the organization capable? |
Competitive consequences |
|
Inbound Logistics |
Yes |
No
|
No |
Yes |
Competitive |
|
Operations |
Yes |
Yes |
No |
Yes |
Sustainable |
|
Outbound logistics |
Yes |
No |
Yes |
Yes |
Temporary |
|
Marketing and sales |
Yes |
No |
No |
No |
Competitive |
|
Services |
Yes |
Yes |
No |
Yes |
Sustainable |
|
Procurement |
Yes |
No |
No |
Yes |
Temporary |
|
Technology development |
Yes |
Yes |
Yes |
Yes |
Sustainable |
|
Human resource management |
Yes |
Yes |
No |
Yes |
Sustainable |
|
Infrastructure |
Yes |
Yes |
No |
Yes |
Sustainable |
This framework shows that the competitive advantage of the company is its quality of the products with the marketing activities that are performed by the Northern Star resources limited. Northern Star resources limited are acknowledged in the market of Australia because of its quality product and the assurance that they offer to their customers. The operations that are performed by the company are very rare that is difficult to be performed by the other companies in the same market.
Recommendations
It is suggested to the company to take the actions which will help them in resolving the issues faced by the company. The major issue which is faced by the company is related to the political aspect but this is the fact that the company can't take any steps to stop the changes in the political elements. The change in the purchasing power of the customers is one of the issues which might be faced by the company for which it is suggested to bring the fluctuations in the prices according to purchasing power. The company find the major issues due to the management of the environment as the risk related to the environment can affect the working. The company should follow all the required laws and regulations that can help the company to maintain the sustainable environment. The company is not clear about the strategy which they are willing to implement within the organisation. Northern Star resources limited needs to form the strategy that supports them for expanding the business. It is suggested to the company to follow the market development strategy in which is a growth strategy that determines and develops the new market for the available products (David, 2011).
Conclusion
In the end, it can be concluded that the Northern Star resources limited is facing some of the strategic issues but the solution for the same has suggested to the company which will help them in improving the performance of the company. The analysis of the strategic issues has been done with the help of some of the frameworks which include PESTLE analysis, Porter’s five forces and SWOT analysis. This analysis reflects the issues which are faced by the company due to the external factors. Along with this, the internal analysis shows the organisational issues that can affect the working and operations of the business. The internal analysis is supported by the value chain analyses and the VRIO analysis. Northern Star resources limited needs to plan the strategy according to the goals and objectives of the company.
References
Business Jargons. (2018). Value Chain Analysis. Retrieved from: https://businessjargons.com/value-chain-analysis.html
David, F.R. (2011). Strategic management: Concepts and cases. India: Pearson/Prentice Hall.
The government of Western Australia. (2018). Gold. Retrieved from: https://www.dmp.wa.gov.au/Investors/Gold-1480.aspx
Government of Western Australia. (2018). Latest Statistics Release. Retrieved from: https://www.dmp.wa.gov.au/About-Us-Careers/Latest-Statistics-Release-4081.aspx
Hollensen, S. (2015). Marketing management: A relationship approach. India: Pearson Education Limited.
IBIS World. (2017). Northern Star Resources Limited - Profile Company Report Australia. Retrieved from: https://www.ibisworld.com.au/australian-company-research-reports/mining/northern-star-resources-limited-company.html
Jamasmie. C. (2011). Mining industry affected by escalating social, economic and political issues: Deloitte. Retrieved from: https://www.mining.com/mining-industry-affected-by-escalating-social-economic-and-political-issues-deloitte/
Knott, P. J. (2015). Does VRIO help managers evaluate a firm’s resources?. Management Decision, 53(8), 1806-1822.
Kotler, P. (2015). Framework for marketing management. India: Pearson Education.
Lovelock, C. and Patterson, P. (2015). Services marketing. Australia: Pearson.
Luca, N.R. and Suggs, L.S. (2010). Strategies for the social marketing mix: A systematic review. Social Marketing Quarterly, 16(4), 122-149.
Mayes, B. (2018). With An ROE Of 27.13%, Has Northern Star Resources Limited’s (ASX:NST) Management Done A Good Job?. Retrieved from: https://simplywall.st/stocks/au/materials/asx-nst/northern-star-resources-shares/news/with-an-roe-of-27-13-has-northern-star-resources-limiteds-asxnst-management-done-a-good-job/
Motley Fool. (2017). The Northern Star Resources Ltd share price just hit a 52-week high. Retrieved from: https://www.fool.com.au/2017/09/05/the-northern-star-resources-ltd-share-price-just-hit-a-52-week-high/
Northern Star resources limited. (2016). Northern Star Resources. Retrieved from: https://www.nsrltd.com/wp-content/uploads/2016/08/5.-Results-Presentation-Full-Year-Report-for-Period-Ended-30-June-2016-22-8-2016.pdf
Northern Star resources limited. (2017). 2017 Annual report. Retrieved from: https://www.nsrltd.com/wp-content/uploads/2017/08/Annual-Report-2017-Amended-Final-22-08-2017.pdf
Northern Star resources limited. (2018). Corporate Governance. Retrieved from: https://www.nsrltd.com/about/corporate-governance/
Northern Star resources limited. (2018). Home. Retrieved from: https://www.nsrltd.com/
Northern Star resources limited. (2018). Vision & Strategy. Retrieved from: https://www.nsrltd.com/about/vision-strategy/
Santander trade. (2018). Australia: Economic And Political Outline. Retrieved from: https://en.portal.santandertrade.com/analyse-markets/australia/economic-political-outline
Seeking Alpha. (2018). Few Signs That Northern Star Resources Has An Exciting Pipeline Of Growth Opportunities. Retrieved from: https://seekingalpha.com/article/4151063-signs-northern-star-resources-exciting-pipeline-growth-opportunities
South Australia. (2018). Minerals industry value chain. Retrieved from: https://minerals.statedevelopment.sa.gov.au/invest/minerals_industry_value_chain
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