Fortescue Metal Group Strategic Analysis Essay

3626 Words May 14th, 2012 15 Pages
Allocated firm: Fortescue Metal Group

Memorandum

DATE: Monday 23 May, 2010
TO: The Board of FMG
FROM: Truman Chun Wai , a senior financial officer
SUBJECT: Future growth strategy analysis

Dear the Board,
I am glad to present to you the future growth strategy analysis report for Fortescue Metal Group.
This report had been prepared requested by the Board. The content of this report concentrated on evaluating the performance of Iron Ore Mining and providing a recommendation of any potential financial justified growth strategies for the next strategic planning horizon (3 years).
Should you have any inquires in regard to this report, please do not hesitate to contact me.
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However, Australia government has increasing imposed restrictions on the industry recently.

2.1 Major competitors

BHP Billiton Ltd
BHP is a leader amongst global resource companies, with the key differentiating factor being its Petroleum division. All other diversified resource companies are focused on mining, whilst oil companies tend to divest mining assets. This gives BHP exposure to a commodity that provides a natural hedge against increasing energy prices that have a negative impact on mining company profit.

Rio Tinto Ltd Rio Tinto's management sets the company apart from other resource companies, with an impressive track of profit growth. Due to the high-quality assets, with most of the core operations being very low cost, reliable and likely to contribute for a long time yet. Rio Tinto's management has applied new technology, innovative industrial relations practices and astute acquisition strategies, which have served to enhance the operations and, therefore, shareholder value. |

3) Internal Analysis
Fortescue Metals Group Ltd is one of the youngest iron ore mining company operating in Australia, however, has generated excellent growth for the past two years. Its’ underlying strength is because of the rich resource in Pilbara region and a strong customer base in China. Lack of diversity in products, high level of debt and lack of capital is their weaknesses. Potential threats come from the price bubble

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