Project on Australia

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Project on Australia

  1. 1. INTERNATIONAL ISLAMIC UNIVERSITY H-10, ISLAMABAD FACULTY OF MANAGEMENT SCIENCES IB & WTO PROJECT Country of origin Australia I confirm that this course work is my own effort and understand that evidence of plagiarism and collusion and late submission will result in a ‘fail’ grade. Student’s signature: __________________________ Hand written assignments will not be accepted. It is the Student’s responsibility to be fully-aware of all class announcements including assignment deadlines. Ignorance is not an excuse. Print this page in full without omissions and modifications For examiner’s use only:
  2. 2. Table of contents CHAPTER 1 Introduction……………………………………………………………………………………………1.1 History…………………………………………………………………………………………………..1.2 Location …………………………………………………………………………………………………1.3 Statistics…………………………………………………………………………………………………. 1.4 CHAPTER 2 Comparative Advantage……………………………………………………………………………2.1 a) Mining …………………………………………………………………………………………….  Porters diamond model………………………………………………………. Absolute advantage……………………………………………………………………………………2.2 b) Agriculture ……………………………………………………………………………………. CHAPTER 3 Oil and gas industry……………………………………………………………………………………..3.1 a. Company introduction…………………………………………………………………………. b. History……………………………………………………………………………………………….. c. Products……………………………………………………………………………………………… d. Operations…………………………………………………………………………………………... CHAPTER 4 Country of destination…………………………………………………………………………………..4.1 Theory of FDI……………………………………………………………………………………………….4.2 a. Seekers of advantage…………………………………………………………………………4.2.1  Market ……………………………………………………………………………….  Security………………………………………………………………………………  Resources……………………………………………………………………………  Knowledge………………………………………………………………………….. b. Market imperfection…………………………………………………………………………4.2.2  Access ……………………………………………………………………………………....  Factor mobility………………………………………………………………………….  Management………………………………………………………………………………  Internalizers …………………………………………………………………………….. c. Reasons and justifications…………………………………………………………………4.2.3 CHAPTER 5 Modes of expansion…………………………………………………………………………………………..5.1 a. Exporter…………………………………………………………………………………5.1.1 b. Franchising…………………………………………………………………………….5.1.2 c. Licensing………………………………………………………………………………..5.1.3 References:………………………………………………………………………………………………………. 5.2
  3. 3. INTRODUCTION Australia is a country in Oceania bordering the Indian Ocean and the Southern Pacific Ocean. Australia is comprised of mainland Australia, the island of Tasmania and several small islands in the Indian and Pacific Oceans. The terrain is mostly low plateau with deserts. The government system is a federal parliamentary democracy and a Commonwealth realm. The chief of state is the Queen and the head of government is the Prime Minister. Australia has a mixed economic system in which the economy includes a variety of private freedom, combined with centralized economic planning and government regulation. Australia is a member of Asian Pacific Economic Cooperation (APEC). Australia is having 6 states Australia is having 2 territories also Brief Introduction Sovereign: Queen Elizabeth II (1952) Governor-General: Quentin Bryce (2008) Prime Minister: Kevin Rudd (2013) Land area: 2,941,283 sq mi (7,617,931 sq km); total area: 2,967,893 sq mi (7,686,850 sq km) Population (2012 est.): 21,015,576 (growth rate: 1.13%); birth rate: 12.28/1000; infant mortality rate: 4.55/1000; life expectancy: 81.9 Capital (2009 est.): Canberra, 384,000 Largest cities: Sydney 4.429 million; Melbourne 3.853 million; Brisbane 1.97 million; Perth 1.599 million (2009) Monetary unit: Australian dollar
  4. 4. HISTORY The first inhabitants of Australia were the Aborigines, who migrated there at least 40,000 years ago from Southeast Asia. There may have been between a half million to a full million Aborigines at the time of European settlement; today about 350,000 live in Australia. Dutch, Portuguese, and Spanish ships sighted Australia in the 17th century; the Dutch landed at the Gulf of Carpentaria in 1606. In 1616 the territory became known as New Holland. The British arrived in 1688, but it was not until Captain James Cook's voyage in 1770 that Great Britain claimed possession of the vast island, calling it New South Wales. A British penal colony was set up at Port Jackson (what is now Sydney) in 1788, and about 161,000 transported English convicts were settled there until the system was suspended in 1839. Free settlers and former prisoners established six colonies: New South Wales (1786), Tasmania (then Van Diemen's Land) (1825), Western Australia (1829), South Australia (1834), Victoria (1851), and Queensland (1859). Various gold rushes attracted settlers, as did the mining of other minerals. Sheep farming and grain soon grew into important economic enterprises. The six colonies became states and in 1901 federated into the Commonwealth of Australia with a constitution that incorporated British parliamentary and U.S. federal traditions. Australia became known for its liberal legislation: free compulsory education, protected trade unionism with industrial conciliation and arbitration, the secret ballot, women's suffrage, maternity allowances, and sickness and old-age pensions. LOCATION Australia is located between the latitudes of 10 degrees south and 46 degrees south and between the longitudes of 110 degrees east and 160 degrees east. This places Australia directly south of the eastern part of Asia and east of Africa.
  5. 5. STATISTICS Economy Budget Expenditures $523.60 billion (2011 est.) Budget revenues $465.90 billion (2011 est.) GDP - purchasing power parity $915.10 billion Note: data are in 2011 US dollars GDP - real growth rate 2.1% (2011 est.) Imports $242.20 billion (2011 est.) Industrial production growth rate -0.1% (2011 est.) Inflation rate (consumer prices) 3.4% (2011 est.) Labour force 12.05 million (2011 est.) Natural Gas Consumption 27.56 billion cu m (2011 est.) Natural Gas Exports 25.53 billion cu m (2011 est.) Natural Gas Imports 8.102 billion cu m (2011 est.) Exports To (2011 Trade Value Share Growth (thousands) (%) (% 5yr) Japan 34,356,598 23.76 110.75 China 24,169,232 16.71 200.02 South Korea 13,936,736 9.64 106.44 India 10,997,943 7.61 176.14 United States 7,681,757 5.31 9.43 United Kingdom 6,890,688 4.77 85.65 New Zealand 6,022,057 4.16 (6.46) Singapore 4,452,301 3.08 85.68 Thailand 4,204,843 2.91 86.56 Malaysia 2,720,729 1.88 52.39 est.)
  6. 6. AUSTRALIAN ECONOMY Australia's economy is dominated by its services sector, yet it is the agricultural and mining sectors that account for the bulk of Australia's exports. Australia's comparative advantage in the export of primary products is a reflection of the natural wealth of the Australian continent and its small domestic market; 23 million people occupy a continent the size of the contiguous United States. The relative size of the manufacturing sector has been declining for several decades, but has now steadied at around 8.5% of GDP. The global recovery is putting upward pressure on prices for Australia's commodity exports, which caused a substantial rise in the terms of trade in 2011. GDP of Australia is $1.372 (in trillions)(as of January 2013) Since the 1980s, Australia has undertaken significant structural reform of its economy and has transformed itself from an inward-looking, highly protected, and regulated marketplace to an open, internationally competitive, export-oriented economy. Key economic reforms included unilaterally reducing high tariffs and other protective barriers to free trade, floating the Australian dollar, deregulating the financial services sector including liberalizing access for foreign banks, increasing flexibility in the labor market, reducing duplication and increasing efficiency between the federal and state branches of government, privatizing many governmentowned monopolies, and reforming the taxation system, including introducing a broad-based Goods and Services Tax (GST) and large reductions in income tax rates. Australia enjoys one of the highest standards of living in the G7. Australia's economic standing in the world is a result of a commitment to best-practice macroeconomic policy settings, including the delegation of the conduct of monetary policy to the independent Reserve Bank of Australia and a broad acceptance of prudent fiscal policy where the government aims for fiscal balance over the economic cycle. Economic recovery is strengthening, with GDP forecast to grow by 3.25% in 2011-2012 and 2012-2013. The success of monetary and fiscal stimulus is projected to return the budget to surplus in 2012. Net debt is forecast to peak at 8.9% of GDP in 2011-2012. The unemployment rate was 5.3% in November 2011. Labor market participation has remained at around 65%. Both the federal and state governments have recognized the need to invest heavily in water, transport, ports, telecommunications, and education infrastructure to expand Australia's supply capacity. The largest river system in Australia, the Murray-Darling, and related coastal lakes and wetlands in South Australia are threatened, although the long drought has broken, and the government has developed a plan to improve irrigation infrastructure and efficiency and buy back unused water allocations along the river. A second significant issue is climate change. A report commissioned by Prime Minister John Howard recommended a domestic carbon emission trading scheme and that Australia take an active role in developing a future global carbon emissions trading system. The Gillard government has passed legislation to price carbon at a rate of a$23 (about U.S. $24) per ton from July 2012, with free carbon credits provided to many companies. The Australia-U.S. Free Trade Agreement (AUSFTA) entered into force on January 1, 2005. The AUSFTA was the second free trade agreement (FTA) the United States concluded with a developed economy, following the U.S.-Canada FTA in 1988. Australia also has FTAs with New Zealand, ASEAN, Singapore, Thailand, and Chile, and is pursuing other FTAs, including with China, Japan, Malaysia, and South Korea. Australia is also involved in ongoing Trans-Pacific Partnership (TPP) trade negotiations.
  7. 7. Comparative advantage Mining is a comparative advantage of Australia. The mining sector earns 19 % of the total GDP of Australia and exports its products to the East Asian markets. Absolute advantage Agriculture is an absolute advantage of Australia.
  8. 8. COMPARATIVE ADVANTAGE Mining in Australia is a significant primary industry and contributor to the Australian economy. Historically, mining booms have also encouraged immigration to Australia. Many different ores and minerals are mined throughout the country. Mining has had a substantial environmental impact in some areas of Australia. Although mining services, equipment and technology are being exported, the mining sector employs 2.2% of the total labour force Mining contributed significantly to preventing potential bankruptcy for the early colonies in Australia. Silver and later copper were discovered in South Australia in the 1840s, leading to the export of ore and the immigration of skilled miners and smelters. The first economic minerals in Australia were silver and lead in February 1841 at Glen Osmond, now a suburb of Adelaide in South Australia. Mines including Wheal Gawler and Wheal Watkins opened soon after The value of these mines was soon overshadowed by the discovery of copper at Kapunda (1842), Burra (1845) and in the Copper Triangle (Moonta, Kadina and Wallaroo) area at the top of Yorke Peninsula (1861) Gold Rushes In 1851, gold was found near Ophir, New South Wales. Weeks later, gold was found in the newly established colony of Victoria. Australian gold rushes, in particular the Victorian Gold Rush, had a major lasting impact on Victoria, and on Australia as a whole. The influx of wealth that gold brought soon made Victoria Australia's richest colony by far, and Melbourne the island's largest city. By the middle of the 1850s, 40% of the world's gold was produced in Australia.[5] Australia's population changed dramatically as a result of the gold rushes: in 1851 the population was 437,655 and a decade later it was 1,151,957; the rapid growth was predominantly a result of the new chums (recent immigrants from the United Kingdom and other Commonwealth states) who contributed the 'rush'.[6] Although most Victorian goldfields were exhausted by the end of the 19th century, and although much of the profit was sent back to the UK, sufficient wealth remained to fund substantial development of industry and infrastructure
  9. 9. Australia has mining activity in all of its states and territories. Particularly significant areas today include the Goldfields, Peel and Pilbara regions of Western Australia, the Hunter Region in New South Wales, the Bowen Basin in Queensland and Latrobe Valley in Victoria and various parts of the outback. Places such as Kalgoorlie, Mount Isa, Mount Morgan, Broken Hill and Coober Pedy are known as mining towns. Major active mines in Australia include: Olympic Dam in South Australia, a copper, silver and uranium mine believed to have the world's largest uranium resource. Super Pit gold mine, which has replaced a number of underground mines near Kalgoorlie, Western Australia Mining Employment by Sector in 1000's Economics Total employment in metal ore mining (thousands of people) since 1984 Total employment in coal mining (thousands of people) since 1984 Total employment in oil and gas extraction (thousands of people) since 1984 A number of large multinational mining companies including BHP Billiton, Newcrest, Rio Tinto, Alcoa, Chalco, Shenhua (a Chinese mining company),Alcan and Xstrata operate in Australia. There are also a lot of small mining and mineral exploration companies listed on the Australian Stock Exchange (ASX). Overall, the resources sector represents almost 20% of the ASX market by capitalisation, and almost one third of the companies listed.[19] Mining contributes about 5.6% of Australia's Gross Domestic Product. This is up from only 2.6% in 1950, but down from over 10% at the time of federation in 1900.[20] In contrast, mineral exports contribute around 35% of Australia's exports. Australia is the world's largest exporter of coal (35% of international trade), iron ore, lead, diamonds, rutile, zinc and zirconium, second largest of gold and uranium, and third largest of aluminium.[21] Japan was the major purchaser of Australian mineral exports in the mid-1990s.[5]
  10. 10. Of the developed countries, perhaps only in Canada and Norway does mining play as significant a part in the economy; for comparison, in Canada mining represents about 3.6% of the Canadian economy and 32% of exports,[22] and in Norway mining, dominated by petroleum, represents about 19% of GDP and 46% of exports.[23] By comparison, in the United States mining represents only about 1.6% of GDP.[24] Despite its export importance, the mining sector employs only a small proportion of the workforce – roughly 129,000 Australians, representing only about 2.2% of the total labour force. PORTERS DIAMOND MODE L Factor conditions Large quantities of minerals and resources are extracted in Australia. These include: Iron ore – Australia was the world's third largest supplier in 2008 after China and Brazil, supplying 342 million metric tonnes.[7] Nickel – Australia was the world's second largest producer in 2006 after Russia. Bauxite/aluminium - Australia was the world's largest producer in 2011. Gold – Australia is the second largest producer after China. Uranium – Australia is responsible for 11% of the world's production and was the world's third largest producer in 2010 after Kazakhstan and Canada. Diamond – Australia has the third largest commercially-viable deposits after Russia and Botswana. Australia also boasts the richest diamantiferous pipe with production reaching peak levels of 42 metric tons (41 LT/46 ST) per year in the 1990s. Opal – Australia is the world's largest producer of opal, being responsible for 95% of production.[12] Zinc – Australia was second only to China in zinc production in 2008, producing just under 14% of world production. Coal – Australia is the world's largest exporter of coal and fourth largest producer of coal behind China, USA and India. Oil shale Petroleum – Australia is the twenty-eighth largest producer of petroleum. Natural gas - Australia is world's third largest producer of LNG and forecast to be world leader by 2020.
  11. 11. RARE EARTH ELEMENTS Much of the raw material mined in Australia is exported overseas to countries such as China for processing into refined product. Energy and minerals constitute two thirds of Australia's total exports to China, and more than half of Australia's iron ore exports are to China. COAL MINING Australian coal, coke and briquette quarterly exports ($A millions) since 1969. Coal is mined in every state of Australia. It is used to generate electricity and is exported. 54% of the coal mined in Australia is exported, mostly to eastern Asia. In 2000/01, 258.5 million tonnes of coal was mined, and 193.6 million tonnes exported, rising to 261 million tonnes of exports in 2008–09.[14] Coal also provides about 85% of Australia's electricity production.[16] Australia is the world's leading coal exporter.[17] URANIUM MINING Uranium mining in Australia began in the early 20th century in South Australia. Australia contains 23% of the world's proven estimated uranium reserves. In recent decades opposition to uranium mining in Australia has increased, resulting in many government inquiries into its extraction. The three largest uranium mines in the country are Olympic Dam,Ranger Uranium Mine and Beverley Uranium Mine. Future production is expected from Honeymoon Uranium Mine and the planned Four Mile uranium mine. NATURAL GAS Based on 2008 CSIRO report, Australia estimated to have stranded gas reserves with about 140 trillion cubic feet or enough to fulfil the needs of a city with one million people for 2,800 years.
  12. 12. LABOUR Despite its export importance, the mining sector employs only a small proportion of the workforce – roughly 129,000 Australians, representing only about 2.2% of the total labour force. Total employment in metal ore mining (thousands of people) since 1984 Total employment in coal mining (thousands of people) since 1984 Total employment in oil and gas extraction (thousands of people) since 1984 CAPITAL The mining industry's contribution to the Australian economy is now $121 billion a year. In terms of export income, it generates $138 billion per annum, which represents over half (54 per cent) of total goods and services. Across the nation mining employs 187,400 people directly and a further 599,680 in support industries. In wages and salaries that amounts to $18 billion; an additional $21 billion is contributed through company tax and royalty payments. Not least, the industry spends $35.2 billion on new capital investment, $5.7 billion on exploration, and $4.2 billion on research and development. ENTREPRENEURSHIP The Australian Centre for Entrepreneurship Research (ACE) at QUT Business School is seeking interested PhD candidates to work on a project that is concerned with the Australian mining industry. The project’s aim is to further develop a large scale longitudinal panel data set of companies in Australia’s mining industry, and to advance our knowledge of the “business side” of the booming resources industry. The primary data for this project is already collected and available for use. FIRM STRATEGY He report states that a national minerals strategy would deliver a coherent and responsible approach to ensure that mineral resources are used wisely to advantage Australia and complement work undertaken for the recent white papers on Energy and the Asian Century. The findings, released as one of a series of reports in Sydney today, are the result of a three-year collaboration between The University of Queensland, UTS, CSIRO, Curtin University, CQ University and the Australian national university.
  13. 13. Dr Damien Guirco, research director of the UTS institute said the current state of play in Australia is inadequate. “The minerals industry has always operated in an evolving global landscape, but it’s becoming clear that social and environmental factors will become more important to head off future vulnerability,” Dr Giurco said. “A national strategy would remove the complexities of differing regulations across states and territories and shift the focus towards maximising long-term social, economic and environmental benefits for communities, regions and the nation,” he said. Anna little boy, leader of CSIRO’s mineral futures research, said that the industry is working in an increasingly difficult environment. RIVALRY, RELATED AND SUPPORTED INDUSTRIES A number of large multinational mining companies including BHP Billiton, Newcrest, Rio Tinto, Alcoa, Chalco, Shenhua (a Chinese mining company),Alcan and Xstrata operate in Australia. There are also a lot of small mining and mineral exploration companies listed on the Australian Stock Exchange (ASX). Overall, the resources sector represents almost 20% of the ASX market by capitalisation, and almost one third of the companies listed.[19] Mining contributes about 5.6% of Australia's Gross Domestic Product. This is up from only 2.6% in 1950, but down from over 10% at the time of federation in 1900.[20] In contrast, mineral exports contribute around 35% of Australia's exports. Australia is the world's largest exporter of coal (35% of international trade), iron ore, lead, diamonds, retile, zinc and zirconium, second largest of gold and uranium, and third largest of aluminium.[21] Japan was the major purchaser of Australian mineral exports in the mid-1990s.[5] Of the developed countries, perhaps only in Canada and Norway does mining play as significant a part in the economy; for comparison, in Canada mining represents about 3.6% of the Canadian economy and 32% of exports,[22] and in Norway mining, dominated by petroleum, represents about 19% of GDP and 46% of exports.[23] By comparison, in the United States mining represents only about 1.6% of GDP.[24]Despite its export importance, the mining sector employs only a small proportion of the workforce – roughly 129,000 Australians, representing only about 2.2% of the total labour force. STRUCTURE Structure has two types Vertical structure: Australia does not have vertical structure as it is not independent. Horizontal structure: Australia has dependent structure as depends upon many factors discussed above. DEMAND CONDITIONS Australia has mining activity in all of its states and territories. Particularly significant areas today include the Goldfields, Peel and Pilbara regions of Western Australia, the Hunter Region in
  14. 14. New South Wales, the Bowen Basin in Queensland and Latrobe Valley in Victoria and various parts of the outback. Places such as Kalgoorlie, Mount Isa, Mount Morgan, Broken Hill and Coober Pedy are known as mining towns. Australia is having very big demand of coal or other minerals in producing electricity and other products. ABSOLUTE ADVANTAGE Australia is a significant player in world trade for several commodities and agriculture is a vital part of the Australian economy. Around 60% of Australia is devoted to agriculture, with three broad zones in which agricultural activity occurs, as illustrated in the map above. These are referred to as the pastoral, wheatsheep, and high rainfall zones. The three main zones: the high rainfall zone of Tasmania and a narrow coastal zone (used principally for dairying and beef production); wheat, sheep zone (cropping (principally winter crops), and the grazing of sheep (for wool, lamb and mutton) plus beef cattle) and the pastoral zone (characterized by low rainfall, less fertile soils, and large scale pastoral activities involving the grazing of beef cattle and sheep for wool and mutton). Agriculture and its closely related sectors earn $155 billion-a-year for a 12% share of GDP. Australian farmers and grazers own 135,996 farms, covering 61% of Australia’s landmass, so average farm size is high. There is a mix of irrigation and dry-land farming. Australia’s agriculture is market driven and export-oriented. Figure 1 shows the importance of exports for most major agricultural commodities produced. For some products, aggregations for values of production and for export values are not directly comparable because export values reflect the value of more highly processed products such as sugar and wine. Overall, about 65% of Agricultural production is exported, representing about 25% of total merchandise exports. Australian agriculture continues to be responsive to market signals and consumer preferences and has leveraged this to realize positive gains.
  15. 15. `Australian agriculture continues to be responsive to market signals and consumer preferences and has leveraged this to realize positive gains. Western Australia Agriculture is Western Australia’s second major export industry. The state’s vast area provides soils and climates suited to a variety of agricultural production from open grazing and broad acre cereal cropping to irrigated pastures and horticulture orchards and vineyards. Wheat, wool, beef and lamb are its main products and stock feed are also important. Farmers and investors are identifying new specialised markets in Asia and taking advantage of seasonal differences with the northern hemisphere. A diverse and efficient agriculture sector provides the raw material for a rapidly growing range of processed exports. These include wine, ice-cream, barley malt, noodles and fine leather. New South Wales Agriculture is spread across throughout the eastern two thirds of New South Wales. Cattle, sheep and pigs are the predominant types of livestock produced in New South Wales and they have been present since their importation. Economically the state is the most important state in Australia, with about one third of the country’s sheep, one fifth of its cattle and one third of its small number of pigs. New South Wales produces a large share of Australia’s hay, fruit, legumes, lucerne, maize, nuts, wool, wheat oats, oilseeds (around 51%), poultry, rice (about 99%), vegetables, fishing and forestry including wood chips.
  16. 16. Victoria Victoria provides almost a quarter of Australia’s total rural output. Agriculture and pastoral products include wool, sheep meat and beef, wheat, oats, barley, maize, tobacco, hops and fodder crops, citrus, grapes, apples, stone fruits and vegetables and dairy products. Victoria is Australia’s main producer of mutton and lamb, dairy products and dried vine fruits and substantial amounts are exported. Victoria is also an important producer of timber from its 8 million hectares of forests. This includes 223,000 hectares of forest plantations. Queensland Queensland agriculture industry is made up of plant industries including field crops, horticulture and forestry and animal industries including livestock and livestock products. Queensland has the largest area of agricultural land of any Australian state and the highest proportion of land dedicated to agriculture. About 30,500 businesses carry out agricultural activity in Queensland. Agricultural industries contribute more than $10 billion to the state’s economy each year.
  17. 17. INDUSTRY: OIL AND GAS Oil and gas companies list BHP Billiton Orbital Corporation Origin Energy Woodside Petroleum And I have selected BHP Billiton for further proceedings:
  18. 18. BHP BILLITON INTRODUCTION OF COMPANY BHP MELBOURNE Billiton Centre, 171 Collins BHP Billiton is one of the world's largest mining and resource companies with roughly 100,000 employees in over 25 countries. The company is headquartered in Melbourne, Australia and listed on the Australian Securities Exchange (as BHP Billiton Ltd.), as well as on the London Stock Exchange and the Johannesburg Stock Exchange (as BHP Billiton Plc). Financial Summary (2010): Market Capitalization: US$ 166 billion Revenue: US$ 52.8 billion Net Operating Cash Flow: US$ 17.9 billion HISTORY BHP Billiton was formed in 2001 as a result of a merger between Broken Hill Proprietary (BHP) and Billiton. Billiton originated as a tin mine on Indonesia's Belitung Island in the 1860s, while BHP was first incorporated in 1885 as a silver, lead andzinc producer in Broken Hill, Australia. The two companies merged in June 2001 to become one of the world's largest diversified resource companies. PRODUCTS BHP Billiton is among the world's largest producers of aluminum, copper, manganese, iron ore, uranium,nickel, silver and titanium minerals. The company also has petroleum and coal assets.
  19. 19. ALUMINIUM OPERATIONS: BHP Billiton's is the world's seventh largest aluminium producer. The company's aluminium portfolio includes bauxite production, bauxite refining for the production of alumina, as well as the smelting of aluminium metal. Aluminium assets include: The Alumar refinery and smelter - Brazil (36-40% ownership) The Boddington bauxite mine and Worsley refinery - Australia (86%) The Mozal smelter - Mozambique (47.1%) The Hillside and Bayside smelters - South Africa (100%) Mineração Rio do Norte - Brazil (14.8%) BASE METAL OPERATIONS: BHP Billiton base metal production includes copper, silver, lead and zinc. The Escondido mine in Chile is the world's largest single producer of copper. Base metal assets include: Antamina - Peru (33.75% ownership) Pinto Valley - USA (100%) Spence - Chile (100%) Cerro Colorado - Chile (100%) Cannington - Australia (100%) Escondida - Chile (57.5%) URANIUM OPERATIONS: The company's uranium assets include Olympic Dam in South Australia and the Yeelirrie uranium deposit in Western Australia. According to BHP Billiton, Olympic Dam is the world's largest uranium deposit and fourth largest remaining copper deposit. Uranium oxide from the project is used for the generation of electricity, while copper cathodes are produced and supplied to customers Europe, Australia and Asia. NICKEL OPERATIONS: BHP Billiton is the world's fourth largest producer of nickel, producing and selling nickel briquettes, powders, and ferronickel granules, as well as nickel matte and concentrate. The company's nickel assets include Cerro Matoso in Colombia and Nickel West in Australia.
  20. 20. IRON ORE OPERATIONS: BHP Billiton's iron ore operations are concentrated in Western Australia and Brazil. Producing fine and lump iron ore, the Mt. Whaleback mine in Western Australia is the biggest single-pit open-cut iron ore mine in the world and is more than 5 kilometres long and nearly 1.5 kilometres wide. More than 1000 kilometres of rail infrastructure and port facilities connect this with BHP's six adjacent mines. The Samarco operation in Brazil produces more than 21 million tonnes of iron ore pellets and one million tonnes of concentrates. MANGANESE OPERATIONS: Manganese products include ores, alloys and metal from locations in South Africa and Australia. BHP Billiton is the largest producer of seaborne manganese ore and one of the world's largest producers of manganese alloy. Manganese assets include: The Hotazel mines - South Africa The Groote Eylandt Mining Company (GEMCO) - Australia Tasmanian Electro Metallurgical Company (TEMCO) - Australia Wessels - South Africa Mamatwan - South Africa Metalloys - South Africa Note: South African interests are held through a 60% holding in Samancor Manganese Proprietary Ltd., a partnership with Anglo American. OTHER OPERATIONS: BHP Billiton produces titanium minerals at their Richards Bay operations in South Africa. These include titanium slag, high-purity pig iron, retile (ZrO2) and zircon. Gold and silver are produced as by-products at the Olympic Dam uranium and copper mine in Australia. BHP BILLITON is a global organization, with over 100 locations in more than 70 countries across the WORLD
  21. 21. Algeria Ohanet gas field ROD gas field Angola Diamond exploration Australia Appin, New South Wales Area C mine, Western Australia Bass Strait, Victoria (50 percent owned) Broadmeadow, Queensland Cannington Mine, Queensland Dendrobium, New South Wales Eastern Ridge, Western Australia Elouera, New South Wales Goonyella Riverside, Queensland Gregory/Crinum, Queensland Griffin, Western Australia (45 percent owned) Groote Eylandt, Northern Territory Hunter Region, New South Wales Jimblebar, Western Australia Kalgoorlie, Western Australia Kambalda, Western Australia Kwinana, Western Australia Leinster, Western Australia Minerva offshore, Victoria (90 percent owned) Mount Keith, Western Australia Mount Whaleback, Western Australia Nickel West operations North West Shelf Venture, Western Australia (16.67 percent LNG phase, 8.33 percent domestic gas phase) Norwich Park, Queensland Olympic Dam, South Australia Orebodies 18, 23 and 25 mine, Western Australia Peak Downs, Queensland Port Hedland, Western Australia Saraji, Queensland
  22. 22. Temco George Town, Tasmania West Cliff, New South Wales Worsley, Western Australia Yandi mine, Western Australia Yarrie mine, Western Australia Brazil Alumar aluminium smelter/refinery – Sao Luis Samarco iron ore mine and pelletising plant – Belo Horizonte Canada Potash Development, Saskatchewan Chile Escondida Cerro Colorado Spence Colombia Cerrejón coal mine in Guajira department (33.3 percent owned) Cerro Matoso, ferronickel mine in Córdoba department Guinea Sangaredi bauxite mine and alumina refinery (currently in feasibility study) (33.3 percent interest) Indonesia Wetar gold mine Mozambique Mozal, aluminium smelter Pakistan Zamzama gas field Peru Antamina South Africa Bayside, 100 percent owned aluminium smelter in Richards Bay Hillside, 100 percent owned aluminium smelter in Richards Bay BECSA (BHP Billiton Energy Coal South Africa), comprises several coal mines in theWitbank/Emalahleni area in Mpumalanga Metalloys manganese production facility in Meyerton, Gauteng HMM (Hotazel Manganese Mines) including Mamatwan and Wessels mines near Hotazelin the Northern Cape Suriname Trinidad & Tobago
  23. 23. Angostura oil and gas field United Kingdom Liverpool Bay oil and gas field United States Permian Shale, Texas Eagle Ford Shale, Texas Haynesville Shale, Louisiana Fayetteville Shale, Arkansas, shale natural gas fields, including the associated midstream pipeline system New Mexico Coal Company, coal mine in New Mexico consisting of San Juan and Navajo mines Southwest Copper, Arizona San Manuel, Arizona Pinto Valley, Arizona Gulf of Mexico, oil and gas field (Shenzi & Neptune fields) Resolution Copper, near Superior, Arizona
  24. 24. COUNTRY OF DESTINATION KAZAKHSTAN Kazakhstan is a major oil producer, and estimated total liquids production was 1.64 million barrels per day (bbl/d) in 2013. The key to its continued growth in liquids production from this level will be the development of its giant Tengiz, Karachaganak, and Kashagan fields. Development of additional export capacity also will be necessary for production growth. Although Kazakhstan became an oil producer in 1911, its production did not increase to a meaningful level until the 1960s and 1970s, when production plateaued at a nearly 500,000 bbl/d, a pre-Soviet independence record production level. Since the mid-1990s and with the help of major international oil companies, Kazakhstan's production soared to more than 1 million bbl/d in 2003. Rising natural gas production over the past decade has both boosted oil recovery (as a significant volume of natural gas is re injected into oil reservoirs) and also decreased Kazakhstan's reliance on natural gas imports. Natural gas development has lagged oil due to the lack of domestic gas pipeline infrastructure linking the western producing region with the eastern industrial region, as well as the lack of export pipelines. Kazakhstan is land-locked and lies a great distance from international oil markets. The lack of access to a seaport makes the country dependent mainly on pipelines to transport its hydrocarbons to world markets. It is also a transit country for pipeline exports from Turkmenistan and Uzbekistan. Kazakhstan consumed a total of 2.3 quadrillion Btu of energy in 2010, with coal accounting for the largest share of energy consumed at 64%, followed by oil and natural gas at 19% and 14%, respectively.
  25. 25. List of Top 11 Oil Reserves Countries in the World 1 Venezuela 297,570 Reserves (MMBBL) 2 Saudi Arabia 267,910 3 Canada 173,625 - 175,200 4 Iran 157,300 5 Iraq 140,300 6 Kuwait 104,000 7 United Arab Emirates 97,800 8 Russia 80,000 9 Libya 48,014 10 Nigeria 37,200 11 Kazakhstan 30,002
  26. 26. THEORY OF FDI SEEKERS OF ADVANTAGE First of all we will see the advantages for this we will follow the theory. So we will start from Markets. Markets: Security: Resources: Knowledge: Seekers of Advantage Resources Kazakhstan is estimated to have around 30 billion barrels (4.8×109 m3) of crude oil reserves, which place it eleventh in the world. In 2000s, the oil production has increased rapidly due to foreign investment and improvements in production efficiencies. In 2006, Kazakhstan produced 54 million tons of crude oil and 10.5 million tons of gas condensate 565,000,000 bbl (89,800,000 m3), which makes Kazakhstan eighteenth-largest oil producer in the world. At these production levels Kazakhstan is thought to have approximately 50 years of remaining production. According to the president Nursultan Nazarbayev, Kazakhstan is planning to increase its oil production up to 3.5 million barrels (560,000 m3) of oil a day, of which 3 million will go to export. This will lift Kazakhstan into the ranks of the world's top 10 oil-producing nations. Kazakhstan's proven oil reserves were estimated at 30 billion barrels by the Oil and Gas Journal in January 2013. The country's main oil reserves are located in the western part of the country, where the five largest onshore oil fields (Tengiz, Karachaganak, Aktobe, Mangistau, and Uzen) are located. These onshore fields account for about half of current proven reserves, while the offshore Kashagan and Kurmangazy oil fields, in Kazakhstan's part of the Caspian Sea, are estimated to contain at least 14 billion barrels, with Kashagan accounting for around 9 billion barrels. The main production sites are the Tengiz field 290,000 bbl/d (46,000 m3/d), located on the northeast shores of the Caspian, and the Karachaganak field 210,000 bbl/d (33,000 m3/d), and located inland near to Russian border. In future Kazakh oil production will also rely on the Kashagan field, the largest oil field outside the Middle East, which possess anywhere from 7 Gbbl (1.1×109 m3) to 13 Gbbl (2.1×109 m3)in recoverable reserves, and the Kurmangazy field in Northern Kazakhstan. There are some smaller oil fields neat to Chinese border, which not developed yet. 76% of Kazakhstan's oil and gas production and remaining reserves are concentrated in these three oil fields as well as the Uzen Field; a further 14% of reserves and production are located in 6 further fields
  27. 27. Largest currently producing oil fields Tengiz is currently Kazakhstan's largest producing oil field with an output of approximately 540,000 bbl/d through August 2013, accounting for nearly a third of total production. The field is located onshore in northwestern K azakhstan. It is the world's deepest operating giant field at 12,000 feet. It has been in development since 1993 by the Tengizchevroil (TCO) joint venture, which includes Chevron (50%), ExxonMobil (25%), KMG (20%), and LukArco (5%). According to Wood Mackenzie, production at Tengiz is expected to increase to 854,000 bbl/d by 2021. Tengiz output is currently exported through the Caspian Pipeline Consortium (CPC) oil pipeline, which runs from Tengiz to Novorossiysk, Russia on the Black Sea. In addition, smaller volumes of the Tengiz oil are transported via rail to Odessa and Feodosiva, Ukraine, as well as to Aktau, Kazakhstan.
  28. 28. Exploiter of imperfection a) b) c) d) Access Factor mobility Management Internalizers EXPLOITERS OF IMPERFECTION Management: Management is about getting things done. Managers work in different ways to achieve many diverse and often specific objectives. Theorists have tried to identify the functions and processes that all managers carry out. The oil and gas industry contains many layers of management within many types of organization. Hierarchies are organizations that are structured in layers. The managers in the higher levels have more seniority than those further down. Everything from geological exploration, drilling, technical and scientific support, human resources, finance, maintenance, welding, sales, logistics, safety and emergency planning falls within management responsibilities. Henri Fayol, an early theorist, said that management had the following elements: Planning looking ahead, consulting with others, setting objectives for staff Organizing arranging people and things so that objectives can be achieved Commanding giving instructions to workers Coordinating bringing activities together into a common approach Controlling measuring what is happening and adjusting activities to achieve goals. In the oil and gas industry, a variety of management styles may be used in different contexts: A manager working offshore might be supervising important or dangerous high voltage maintenance work. In this context matters that are basic to health and safety are not open to debate. The manager will simply instruct workers in an autocratic style. In another context a manager who is based onshore could be coordinating the supply of LPG, gas or oil from the fields to buyers. Here, managers can be more democratic consulting or discussing with colleagues the best ways to proceed. Leadership differs from management. Leadership encompasses the skills and qualities needed to inspire others to achieve goals. Leaders can see the heart of a problem and suggest (sometimes unusual) solutions; they have a positive self image; they tend to be creative; they are often experts in a field and can sense change and respond accordingly. Many managers are also leaders, but people in the oil and gas industry are encouraged to show leadership at every level. The industry has an inclusive and involving culture so that even the newest Trainee Instrument Technician may spot a better way of doing something and will be able to influence positive change. A key role in the industry is the Offshore Installations Manager (OIM). This experienced manager has vital responsibilities such as the safety and well-being of everyone on board the installation. Employees must comply with instruction at all times due to the nature of the work. An offshore facility must be fit for its purpose; the working environment on it must be managed; every worker must have completed the correct safety training. In this context the management style must be autocratic. Rules and procedures must be followed to assure safety
  29. 29. MODES OF EXPANSION Modes of Expansion Exporting Franchising Licensing EXPORTING Kazakhstan is an important exporter of light, sweet crude oil. In 2012, Kazakhstan's net total liquids exports totalled nearly 1.4 million bbl/d. The current infrastructure delivers the oil to export markets by pipelines to the Black Sea via Russia; by barge and pipeline to the Mediterranean via Azerbaijan and Turkey; by barge and rail to Batumi, Georgia on the Black Sea; and by pipeline to China. According to Kazakhstan's Customs Control Committee of the Ministry of Finance, the largest share of its exports was destined for Italy in 2012 (355,000 bbl/d). Other notable importers of Kazakhstan's liquid fuels included China, the Netherlands, France, and Austria. The United States did not import any oil from Kazakhstan in 2012, the first time this happened since at least 2004. Kazakhstan's exports likely will expand in the coming years, as new fields, particularly Kashagan, come online. However, the rapid growth of oil production and exports will require an expansion of export capacity. Most of the current pipeline system was developed as part of the Soviet system, and its goal was to maximize transport of oil to Russia. Following the break-up of the Soviet Union, Kazakhstan was wholly dependent on Russia for its exports, giving Russia complete control over Kazakhstan's exports. Over time, however, Kazakhstan has been able to reduce its dependence on Russia's infrastructure by utilizing trans-Caspian tankers and rail, and by building a pipeline to China. Still, a majority of its exports have to be shipped via Russia's pipelines. Kazakhstan engages in oil swaps with Iran, where oil is shipped to the Iranian port of Neka and sent further to refineries in Tehran and Tabriz. In return, Iran delivers the equivalent amount of oil through its Persian Gulf ports on behalf of Kazakhstan. However, despite a number of agreements to increase swap volumes between Kazakhstan and Iran, volumes have declined over the years, and according to some reports were as low as 25,000 bbl/d in 2012. In the past, trading firms Vitol, Select Energy, Litasco, Silk Road, and Ocean Energy all had swap arrangements with Iran. so we can have much of options to expand our business internationally or globally by exporting our products to other countries nearer to our country of destination by using their resources. Due to this we can earn profit and also can save a lot of expenses. Here is a figure which shows the exports of the country in global market.
  30. 30. Advantages:     Involves less financial risk Little cost or investment associated with the exception of establishing distribution networks or local advertising Allows business to enter the global market gradually Agents are used as they have better understanding of local markets n assist in the marketing strategies Disadvantages:   Loss of control over the product once it has been sold to the distributor or agent Lack of understanding of the firm’s history and product range Types are:   Direct – this involves a business selling directly to an overseas buyer (not really the end user). They use their own sales representatives based in foreign markets or agents Indirect – is where businesses use intermediaries to get their products into overseas markets. Adv is that its easy and inexpensive and using the agents experience. Dias is that the agents may be handling more than one customer so negligence can occur and ending contracts can be a very expensive and time consuming process. Now the reasons and justifications: As I have shown the details I select Kazakhstan my country of destination because Kazakhstan has a lot of minerals and other reserves to be invested easily by drilling minerals out from land. Kazakhstan exports more of its oil and gas products to USSR, Europe, Asian countries including the south Asia and Middle East countries, and I proposed my future developments given below in the area of Kashagan. Future and proposed developments Development of Kashagan and other future projects requires significant expansion of Kazakhstan's export capacity. To this end, Kazakhstan is promoting the Kazakhstan Caspian Transportation System (KCTS), which includes the construction of an 515 -mile, 600,000 bbl/d capacity onsh ore pipeline from Eskene in western Kazakhstan to Kuryk onthe Caspian near Aktau, where a new 760,000 -bbl/d oil terminal is to be built. This system also includes a maritime link to Baku, Azerbaijan, new port facilities, and a transfer station in Baku, whe re the crude oil will be put into an expanded BTC pipeline to Turkey. The total cost of the KCTS is estimated at $4 billion. The Kazakhstan -China oil pipeline is currently upgrading to accommodate expected oil from the Kashagan oil field. Other proposals include the construction of the Trans -Caspian oil pipeline, which would provide a western export route for both Kazakhstan and Turkmenistan.
  31. 31. References: http://www.boredofstudies.org/wiki/Methods_of_International_Expansion gulfbusiness.com/.../top-10-countries-with-the-worlds-biggest-oil-reserve http://www.infoplease.com/country/australia.html#ixzz2fGdqzB4l http://en.wikipedia.org/wiki/Economy_of_Australia www.abc.net.au/news/2013-09-04/gdp-figures/4934100 www.bhpbilliton.com/home/businesses/Pages/GlobalOperationsMap.aspx www.linkedin.com http://www.eia.gov/countries/analysisbriefs/Kazakhstan/kazakhstan.pdf en.wikipedia.org http://www.pwc.com/id/en/asia-school-of-mines/assets/opportunities-in-india-mining-sector_kameswara_rao.pdf http://en.wikipedia.org/wiki/Energy_policy_of_Kazakhstan http://www.mapsofworld.com/world-top-ten/world-top-ten-oil-reserves-countries-map.html http://www.investindia.gov.in/?q=mining-sector http://businesscasestudies.co.uk/opito/management-styles-in-the-oil-and-gasindustry/management-and-leadership.html#ixzz2pB7MFzzm

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