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International Business Strategy

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Performance Report on Rio Tinto’s International Operations
Submission Date:February 18, 2014
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With proven strategy and strong business model Rio Tinto Group approached the global market. Through a thorough study for the Group’s approach tointernationalize the operations and structure of its production groups, it is found that this approach suits the strategy set by the group to achieve its objectives in maximizing shareholders returns and creating opportunities for improving many communities in the global. Also, it is found that Rio Tinto developed a strong risk-management & decision-making processes that enabled the group to compete against the limitations on its trades & operations.
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Considering further investment to make joint ventures with technical research institutes to enhance the outcome of the technology group in Rio Tinto and accordingly reduce the cost in is the most important suggestion among many others put in this report.
Considering a wide expansion in the GCC countries is one of the recommendations introduced in this report which may be adopted by the group to enhance the profitable global expansion.
Table of Contents
Table of Contents. 3

………………………………………………………………………………………………….. PERFORMANCE ANALYSIS   5

Approach to Internationalisation / Globalization  5
Market Entry Strategies  6
Trades Limitations / Barriers  7

…………………………………………………………………………………………… PERFORMANCE ASSESSMENT   9
………………………………………………………………………………………………………………………. SUGGESTIONS   10
…………………………………………………………………………………………………………………………. CONCLUSION   10
……………………………………………………………………………………………………………………… BIBLIOGRAPHY   10
………………………………………………………………………………………………………………………….. APPENDIXES   13

This report provides a brief analysis for the performance of Rio Tinto Group which used to generate an evaluation on how well the organization is performing and highlighting some recommendations to support Rio Tinto.
The report utilizes a thorough research on Rio Tinto, toconcentre on the following aspects:

Identifying, explaining & evaluating Group’s Approach to Globalization, Market Entry Strategies & Limitations/barriers (and how the group deal with these limitations)

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Putting a clue from an investor perspective on the opportunity of achieving future growth for the group

Rio Tinto Group Profile:
“Rio Tinto is a leading international mining group headquartered in the UK, combining Rio Tinto plc.a London and New York Stock Exchange listed company, and Rio Tinto Limited, which is listed on the Australian Securities Exchange.
Rio Tinto’s business is finding, mining, and processing mineral resources. Major products are aluminium, copper, diamonds, thermal and metallurgical coal, uranium, gold, industrial minerals (borax, titanium dioxide and salt) and iron ore. Its activities span the world and are strongly represented in Australia and North America with significant businesses in Asia, Europe, Africa and South America.(Rio Tinto Group, 2012)
Approach to Internationalisation / Globalization
Rio Tinto Group’s approach to globalisation summarised bythe diversity in geography and product/service to create and sustain the most valuable business for the stakeholders in line with the group’s objective, which will maximise shareholder’s return, maximize the economic benefits for host government/communities, maximise the successful delivery of customer’s needs, creating worldwide growth opportunity for employees and creating an attractive destination for investors.
Rio Tinto Group’s approach to globalization is represented in the following main characteristics and actions:

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Global code of business conduct: It is what the group call it “The Way We Work” and which is considered the group’s conscience(Rio Tinto annual report, 2012).Actually, this code is another global approach to business by consolidatingthe principles, standards and polices to form a mandatory reference for the group’s global operational structure and external parties (consultants-agents-contractors-suppliers). Through whichthe group ensures that its core values (accountability-respect-teamwork&integrity) are expressed and maintained while managing the economic, social and environmental challenges of its operation.


Improvement of industry-leading capabilities:

The aim of this improvement is to increase the group’s competitive advantages.
o    Sustainable development (CSR involvement): increasing the global competitive’s advantages through noticeable developmentsto the economic prosperity (economic contribution), social wellbeing (Safety-health-community-people), environmental stewardship (Biodiversity-Greenhouse-gas emission-land-water) and strong governance systems (human rights – integrity & compliance).
o   Marketing and operational excellence:efficient marketing leads the group to expand its chain of supply based on better selection of long-term opportunities, and the operational excellence leads the group to leave leading footprint in the industry at all the working areas and accordingly adds more competitive advantages.
Market Entry Strategies
Group Strategy:“Invest in and operate large, long-term, expandable, low-cost mines and businesses, driven not by choice of commodity or region but rather by the quality of each opportunity in the most attractive industry sectors”(Rio Tinto annual report, 2012)
The group follows the systematic/strategic approach in market entry as it seeks opportunities with long-term positive impact, and thereforethey framed a business model that ensures in all of its steps an achievement of the group’s global objectives. The following table illustrates the market entry strategies in the business model:

Business model elements

Explore And Evaluate
Find and study geological targets, classify them based on their characteristics and prioritize them based on perspective value. (Greenfields)
Increase the long-term benefits of the group and hosted country/community.
Concentrate and limit the process to find large-scale & long-life orebodies.

Evaluate additional values to the new market/community Vs. group’s benefits from expanding the existing extraction and/or processing assets. (Brownfields)

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Market and deliver
Identify the desired customers in promising sectors and regions and has an engagements with their needs
achieve the desired recognition of product’s value
Long-term partnership agreements with customers.

Define the required supply chain and any required developments
Have the highest capability in covering supply destinations
Invest in long-term infrastructure’s expenditures (railways-ports-roads-power supply facilities) and utilize existing facilities under long-term agreements.

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Trades Limitations/ Barriers
The group faces many barriers in sustaining their operations and commencing future investments as well as in the trades of their products, and we can summarise the main limitations by:
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To defeat such limitation, the group emphasized on joint ventures with national leading Chinese companies to enhance its chances and presence in the region likethe joint venture with Chinalco which granted Rio Tinto a better chance in market share as well as more access to Chinese customers.

Financial position & low earnings: The group encountered bad financial position & earnings due to significant impairments of assets in Aluminium business (case of Alcan’s acquisition) and the coal business in Mozambique (case of Moatize Basin) as well as the increase in operational cost (as shown in (Rio Tinto annual report, 2012)); which as a result caused lower capability in financing their operations and future investments. Clear example is the case of Simandou Project in Guineawhich has been halted for financial issues (as illustrated by (Trefis, 2013))

To cope this limitation, the group emphasized on enhancing the performance through adopting automated operations and following cost-cut plan across its operational structure.

The increase of the international laws, regulations & standards in Health, safety, environment & reclamation: Such increase added more complexity to the operations, increased the cost and increased the opportunities of criticism by international environmentalist group which eventually caused a slowdown in operations. Clear example is the case of Grasberg mine in Indonesia which caused an exclusion of the group from the Government Pension Fund of Norwaybased on claims regarding severe environmental damage(as illustrated in (Wikipedia, 2014)).

To handle such limitation, the group invested in building up on their sustainable developments (CSR involvement) to maintain good reputation.

Increased community’s opposition to the presence of the group in some rich resources regions: such increase slow down the operations of the group and eventually limits its expansion and future investments. Clear example is the case of Madagascar’s Ilmenite where the effect of protecting the community & environment caused negative implications to the operations (as illustrated by (Clifton, 2014)).
Skills shortages: the shortage in skilled workers as a result of high competition caused a limitation for continuing the operations of the group as well as it increased the risk of workers disputes about their wages and rights.

To cover such limitation, the group invested in long term partnership agreements with universities like the University Of Western Australia and The University of Nottingham to increase the experienced workforce trades into the group and to the global mining sector (considered part of CSR contribution to the global mining sector).
Group’s approach to globalization is maintained to a successful growing trend.As in regard to the expansion in the geographic & product diversity which is clear from the operations map in (Appendix I), the groupperformed hugeacquisitions in the past few years and invested in many growth projects, despite that some of which were bad acquisitions in some sectors due to a negative financial impact.And in line with this expansion the group maintained solid internationally oriented operational structure, strong & improved regulatory code of businessconduct and enhanced its industry-leading capabilities through development’s investments in several fields.
For market entry, group strategy is being developed and maintained constant over many years and it is being structured to fit in the business model which is to be followed across its operationalgroups.However, the plan to deliver this strategy was developed to the meet the requirements of current circumstances, and recently it was dependable on strengthening capital allocation and discipline, reducing cost with improvement of the performance at the existing operations and delivering approved growth projects.
The results of delivering such solid strategy are reflecting the sustainable future growth; some of the recent announced results are highlighted in (Appendix II).
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Exporting existing competencies to give the group advantage in the international market

Rio Tinto isexporting existing competencies through operational structures distributed in the world based on the geographic concentration of the business, and they rely on information system’s technology to do so. I suggest that Rio Tinto shall consider further investment in expanding the operational communication network to assure a successful achievement in this aspect.
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 And regarding the labour, I suggest that Rio Tinto shall consider further investment in establishing more training schools for certain workforce categories and getting cheaper workforce into these schools before promoting them in the operations.
For materials requirement, I suggest that Rio Tinto shall seek the suppliers for long-term agreements with conditions that assure stability in prices (overcome price fluctuation) and assuring as much as possible exclusivity in supply to the group (overcome competition in sharing same source of supply).
By reviewing the general research and assessment done on Rio Tinto Group’s approach to globalization, market entry strategy and the associated limitations to the group’s operations I found that:
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In its global approach to achieve remarkable expansion in the geographic & product diversity through acquisitions, joint ventures and the associated global operational structure, the group confirmed its strategic commitment to Invest in and operate large, long-term, expandable business.
And through the improvements of its global industry-leading capabilities, the group delivered its strategic commitment of creating and efficiently operating low cost and profitable business.
Also, through its approach to have global code of business conduct and the successful adherence to this code, the group maintained its moral values integrated in all their actions and operations.
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In order to sustain growing trend in its expansion, the group shall concentrate on recovering & enhancing its financial position
Rio Tinto shall concentrate on GCC countries with its operations to capture prospective opportunities in many fields like nuclear fuels supply to the GCC countries following UAE in constructing nuclear power plants.

Books and Reports
Orr, S.2010. Unit 407 International Business Strategy. Chifley Business School
Rio Tinto annual report. 2012. Rio Tinto – Reporting center 2012. [Online]
Available at: http://www.riotinto.com/documents/rio_tinto_2012_annual_report.pdf[Accessed: 8 Feb 2014].
Trefis. 2013. Has Rio Tinto Halted The Simandou Project Over Financing Issues? — Trefis. [Online] Available at: http://www.trefis.com/stock/rio/articles/173717/has-rio-tinto-halted-the-simandou-project-over-financing-issues/2013-03-13[Accessed: 12 Feb 2014].
Wikipedia. 2014. Rio Tinto Group. [Online] Available at: http://en.wikipedia.org/wiki/Rio_Tinto_Group [Accessed: 12 Feb 2014].
Clifton, S. 2014. Mining Madagascar – forests. [E-book] London: Available through: Online https://www.foe.co.uk/sites/default/files/downloads/mining_madagascar.pdf [Accessed: 14 Feb 2014].
Rio Tinto Operations map. 2013. About_Rio Tinto_Brochure. [Online]
Available at: http://www.riotinto.com/documents/About_RioTinto_brochure.pdf[Accessed: 14 Feb 2014].
Riotinto.com. 2014. Rio Tinto announces record production for iron ore, bauxite and thermal coal in 2013 – Rio Tinto. [Online] Available at: http://www.riotinto.com/media/media-releases-237_9539.aspx
[Accessed: 14 Feb 2014].
Appendix I(Rio Tinto Operations map, 2013)
Appendix II(Riotinto.com, 2014)

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