Rio Tinto has multiple businesses, producing the various commodities, which includes the
following: iron ore, aluminum, copper, energy, diamonds and minerals. They have multiple
entities all around the world for mining and processing of these resources for the market.
The company aims to improve business performances by reducing capital and saving costs
in operations. Chief executive Sam Walsh said “Our long-held strategy of investing in and
operating large, long life, long-cost mines and businesses in the most favorable industry
sectors is the right strategy to maximize returns for shareholders in a volatile economic
environment.” In addition to his speech, he would like to strengthen the existing
management systems, by bringing greater clarity and accountability to decision-making,
and clearer line of sight to the critical business issues that exist across organization.
In this challenging market, there are various internal and external factors that would affect
the business. Thus, company would need to strategize to overcome the hurdles that arise
from these factors. Thee factors that would contribute to decision making includes price,
exchange rates, volumes , inflation, energy and other cash cost. For instance, price and
exchange rate sensitivities give the estimated effect on underlying earnings assuming that
the individuals moved in isolation.
In year 2012, there is a decrease in the underlying earnings for most commodities due to
the fall in prices. Furthermore, in the first quarter of 2012, there is a severe weather
disruption that would affect the mining production of these commodities.
These are the following strategies that the company came out with to target the individual
