Competitive Analysis and Strategic Decision-Making in Global Mining Firms

Article excerpt

ABSTRACT

The global mining industry entered an era of unparalleled uncertainty, and today is faced with a business environment so dynamic and unpredictable that firms have to manage strategic risk emanating from the external environment in a continuous manner. In this complex environment the struggle to create a sustainable competitive advantage has become a common denominator for many mining firms. It is critical that firms establish a capability to continuously monitor and analyse the dynamics of the external environment. This capability can be established by applying competitive analysis, as an important part of a competitive intelligence system in firms. With a study involving most of the largest global mining firms it was found that these firms do experience, and are often surprised, by the actions of competitive forces. However, there is to some degree evidence in these firms of a "laissez faire" approach to reduce strategic risk. The study confirmed that competitive analysis as part of a comprehensive competitive intelligence system could play an important role in reducing strategic risks for global mining firms.

INTRODUCTION AND BACKGROUND

Globalization has established new dynamics in many well-established industries. This has been the case in the automotive, communications, clothing, electronic, home appliance, photographic, steel, and virtually every other industry around the world (Hill 1994:5-11). This also applies to the global mining industry, as it has seen some of the greatest changes in its history. Mining industry players have consequently experienced an increased level of strategic risk over the last number of years. Amidst this complex environment, the struggle to create a sustainable competitive advantage has become a common denominator for many mining firms (Skirrow 2000:1). The need for these firms to become and remain competitive in such dynamic circumstances is understandable. It is, however, a fact that competitiveness is not a natural property of an organization. Becoming and remaining competitive requires a conscious and continuous design for competitive advantage (Dean 1995). This also applies to firms active in the global mining industry.

To succeed in such circumstances, it is critical that firms establish a capability to continuously monitor and analyse the dynamics in the external environment. Such a capability could assist a firm to act in time upon any changes that may impact on its strategic thrust into the future. Hamel and Prahalad (1993:84) concur with this view when they argue that business risk recedes as a firm's knowledge about its external environment grows, and as knowledge grows, so does the firm's capacity to advance.

ENVIRONMENTAL FORCES IMPACTING ON THE COMPETITIVENES OF GLOBAL MINING FIRMS

According to Fleisher and Bensoussan (2003:5), organizations compete in an increasingly global, post-industrial, knowledge- and information-based competitive environment. Understanding the myriad and sometimes subtle nuances of competing in global markets or against global corporations is thus rapidly becoming a required competency in many organizations (Pearce & Robinson 2003: 96).

In recent years, there have been dramatic, transforming changes in the global mining industry. One of the most important changes experienced were the realization that mining is influenced by a myriad of external forces and events (Clifford 2004:3). Klinger (2002) contends with this view that in the past, global mining firms were not that skilled at reading competitive trends and forces affecting the industry. In this regard, commodity price and exchange rate fluctuations, regulatory influences, global opportunities, global competition, mergers, takeovers, strategic alliances, restructuring and even a departure from the business scene are some of the critical issues that global mining firms currently have to face on an ever-increasing scale.

Accordingly, a new breed of global mining firms is emerging in an industry where acquisition of other firms rather than 'green-field' developments has become the norm. …

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