How Political Environment Impacts on Business Operation

Summary:

Sydney Morning Herald (2013) discusses US traditionally bans crude exports for the purpose of ‘energy independence’. However, recent shale boom results in BHP Billiton chairman Jac Nasser and US regulators urging government to phase out restrictions. Encouraging US to take a global approach, BHP hopes to export oil and gas from its US base.

Besides, BHP criticizes Australia’s mining industry, saying enormous mining tax and heavily regulated industry impede productivity, concluding any future revenue increase is challenging even though with Australia’s luck in natural resources.

Application of concept:

This article discusses transnational corporation BHP Billiton copes with threats and opportunities arising from political and regulatory environment. Political environment is defined as how power is exercised to deliver outcomes (Robson 2013). As a political actor, U.S. Democrats passed the law-Mineral Leasing Act of 1920, which strictly bans crude export (Osipovich 2012), clearly not favorable for BHP’s operation in Gulf of Mexico. However, recent shale boom encourages US regulators to ask for crude export permit, this offers a potential opportunity for BHP to deliver products offshore (Ker 2013).

Regulatory environment is defined by set of forces guiding business for legal and appropriate manners (Robson 2013). Despite Council of Australian Governments (2011) asserts that regulatory reforms boost business productivity, the introduction of Mineral Resources Rent Tax (MRRT) is putting BHP Australia at comparative disadvantage in competing with foreign energy suppliers (‘A taxing month for Australia’s mining industry’ 2011). Additionally, Julia Gillard’s $25 per ton carbon tax scheme is in processing; despite BHP claims such further constrains operation innovation (Chris 2011). On the other hand, although Gillard’s Labor party appears to be ‘big government’ as National Disability Insurance Scheme Bill is in schedule (Farr 2013), few initiatives are made towards mining industry.

Analysis:

Clearly both external political and regulatory environment threaten BHP’s growth opportunity. Calls for ‘energy independence’ proposed by United States government as a political force, is making BHP in its America site less feasible to deliver supplies. The Energy policy and Conservation Act of 1975 that bans crude oil export (Congressional Research Service 2012), is challenging BHP’s $20 billion shale acquisition in the Gulf of Mexico. At regulatory side, the undergoing regulatory enforcements in mining sector and the introduction of MRRT and carbon tax, clearly is harming BHP’s confidence at Australia stage (Keane 2012). Following