The slowdown in China’s growth has had a rippling effect with consequences seen in the Australian Government, Domestic Firms and even Multinational Firms. Due to the slowdown, implications that have been placed on the Australian Government have been ones such as a need for the restructuring of certain policies to be able to handle the increased exposure to the volatility of the commodity market. The government should ensure appropriate policies are in place to facilitate the management of risk in regards to this volatility. Seeing as how the price of iron ore has fallen by more than what the government expected at the time of the May budget, there is a need to look at the budget again as this may hinder any planned spending due to predicted government investment and income.

With the Australian mining industry being held at such a high standard from the rest of the world, there is a need for Australia to retain as much revenue as possible. With the super-sized profits being reeled in by resource companies operating in Australia, it is up to the Australian Government and the implementation of the mining tax, as this would reduce the damage being felt by the exports industries such as manufacturing and tourism which has suffered due to the increased Australian Dollar (Jessica Irvine 2010).

Other implications seen by the Government include a potential volatility in the relationship between the Australian Government and the Chinese Government due to a reduction in the imports of iron ore and other natural resources from Australia to China as well as the Government having to strongly stay on top of resource nationalism. Resource nationalism is still ranked no. 1 top strategic business risk in the global mining and metal sector (Ernst & Young 2012), this is due to uncertainty and destruction of value caused by sudden changes in policy by the governments of resource rich nations causing projects to be deferred or delayed, as well as the degraded risk and reward equation (Ernst & Young 2012).

Implications that can be seen by domestic firms are ones such as a reduction in work opportunities as well as direct investment from domestic firms. Direct investment is on the decline due to the reduction in investment opportunities available. With the commodity market currently so volatile, major mining organisations such as BHP and Rio Tinto are pulling out of planned projects with the weight of risk just too high. Due to an increase in international competition from South America, and Africa, the price of Iron Ore has dramatically fallen from $US191.90 in February 2011 to $US90.30 in September 2012 (Australian Financial Review 22/8/12). This dramatic decrease in the price of iron ore has seen a decrease to company profits in domestic mining firms as well as a decrease in profits for exporters due to lower sale prices.

However, on the positive side, the Government is stepping in to protect the Australian mining industry as resources nationalism has been acknowledged to be such an important factor in the mining industry. Even though there is hardship to some extent being seen by domestic firms, with the implementation of new policies and regulations regarding the mining industry, domestic firms will come out on top and strive as they always have.

Implications for multinational firms such as RIO Tinto include; distinct increase in global competition from South America and Africa due to a number of reasons such as the strength of the Australian dollar, volatility of the Australian commodity market and the amount of risk currently associated with the Australian mining industry.

If the Australian government goes ahead with the mining tax, multinational corporations will be more hesitant to do business in Australia mainly due to the fact they would see a significant increase in the cost of production. If multinational corporations have to pay more in costs of production their annual profit would see a reduction, thus having a negative impact on shareholders. The shareholders would put the pressure on those organisations to seek alternative means and go to other countries such as South American and Africa for iron ore.

My second article is based on BHP Billiton’s decision to not proceed with the planned $US20 billion expansion of its Olympic Dam copper-uranium mine in South Australia. There are many implications on all sectors including the Australian Government, domestic firms and multinational firms.

With BHP Billiton canning the expansion of the Olympic Dam project, the Government sector will see many changes / challenges. They will see an overall reduction in revenue from the mining tax if implemented, as well as on overall fall in the confidence in the Australian mining industry from other nations due to such a large figurehead organisation deferring their project plans are it could be said that the industry is currently going through a rough patch. The huge $US20 billion dollar project would have seen great advancements for the mining industry and would have greatly helped the current economic situation. The government would see increases in areas such as net exports from Australia on the balance sheet as well as an increase in Australia’s GDP.

One of the main effects that the government will see is the lost opportunity cost of BHP Billiton’s decision to can the expansion. If BHP were to continue with the expansion and go ahead with the project as planned a fairly substantial change would be seen. The lost opportunity cost is that currently we are producing 180,000 tonnes of iron ore a year, however with the expansion of the Olympic dam we would be able to produce 750,000 tonnes of iron ore, that’s an increase of 433%. This would have seen a decline in the level of unemployment with more jobs available, a rise in national GDP, a rise in net exports, an increase in the level of overall satisfaction, an increase in confidence in the Australian mining industry and an increase in foreign direct investment.

Implications seen by domestic firms and individuals include; “a major disappointment from workers and businesses who had set themselves to work on the expansion project” (Jay Weatherill 2012), missed opportunities for domestic firms in regards to exporting and production of the copper-uranium with the +400% increase of natural resource, missing out on royalties associated with the mammoth task and a loss to the state with a loss of foreign direct investment that would significantly help the tourism industry. However, this being said, BHP Billiton are still planning on going ahead with the expansion of the Olympic dam as the environmental approvals don’t run out until 2016, so when their cash-flow situation and other impending factors improve, the project will go ahead. The gains and benefits have just been delayed for a year or two, however they have not disappeared altogether.

With the delay in the expansion of the Olympic dam, alongside the implications on the Government and domestic firms, there are many implications on multinational firm. This delay will cause limitations to investment opportunities that bring money directly into the country through foreign direct investment. Ultimately, without the increase in availability of copper-uranium, it is likely that exports will become more expensive for other countries due to the restriction of resources available, potentially seeing overseas corporations moving their business to other countries and leaving the Australian mining industry helpless, but that is only a very worst-case scenario.

To add to the worry that multinational firms may look elsewhere besides Australia is the opportunity cost that not only the mining industry is missing out on, but Australia as a whole. If BHP were able to continue with the expansion, there would be significant gains to all aspects, such as GDP, decrease in unemployment, substantial foreign direct investment as well as more monetary injections into the economy from the Government due to economical growth.

Globalisation can be defined as the movement towards a more interconnected and reliant world economy (Robert Jack 2012). Both of these articles I have chosen are based around the mining industry, which is only of the most globalized and profitable industries. Thus, this is why the highly relevant topic of globalisation is the most fitting business concept / theory to discuss.

When we discuss the globalisation of production, we look at sourcing goods from different locations from around the world to benefit from national differences such as cost and quality of factors of production (Robert Jack 2012). Consider the Olympic Dam, located in South Australia, the world’s largest uranium resource. The company who produces the giant trucks, Caterpillar, has manufacturing facilities all throughout the world, including; The United States, Australia, Canada, china, England, France, Indonesia, Mexico, Netherlands, Russia, Singapore and many more. Caterpillar has 110 facilities worldwide (Caterpillar Worldwide Locations 2008).

As we can see from the first article, the slowdown of the Chinese economy has had significant influence on all other parts of the world. This just goes to show how integrated the world is and to what level we are dependent on each other. With a heavy reliance being placed on exports of metal to China, Australia is very much so affected by fluctuation and changes to the level of exports. This has been seen in recent time with a reduction of iron ore being demanded in China due to their economy slowing down, which has had a rippling effect in Australia by not being able to export in the quantities required to maintain the perfect level of business.

When we look at globalisation, we see the drivers of globalisation and how they impact on certain businesses. The two main factors in the drivers are the decline in trade barriers and the increase in technological change. With the decline in trade barriers, nations are able to freely trade on all markets, such as the commodity market presented to us in my first article. As well, advancements in technology have seen drastic improvements to all sectors, whether it is getting information across the globe, or strategically working out the best way to excavate certain areas, technology has had outstanding improvements in all aspects and has been one of the key drivers to globalisation and the interconnectedness of the world.

Another important factor of globalisation is foreign direct investment. It can be defined as money invested into production by an international source, giving the international source part-ownership (Isabel Faeth 2011). Multinational organisations such as that of BHP would invest large sums of money into the Australian mining industry that would see them receive large profits from such ventures.

In regards to my second article, about BHP Billiton pulling out of the Olympic dam expansion project, globalisation is very evident. With the canning of the expansion, BHP and Australia has seen the consequences on a global scale. Due to the project not going ahead, Australia has not been able to use the uranium for production and sale and thus not being able to make a profit of resources, which are just sitting in the ground when there are buyers lined up.

Historically there has been distinct and separate markets for individual nations, however nowadays, we talk about the ‘global market’, such as the resources sold by companies such as BHP Billiton and RIO Tinto are sold on the commodity market, which is a worldwide commodity market. This has been enabled due to a decline in trade barriers, increase in technological capabilities and global norms converging in one market. With the current situation of the economy, BHP decided it was the smartest idea to re-think their strategy, and develop a less capital-intensive option to replace the Olympic dam.

Without the global market, industries such as that of mining would not have the means or capabilities to succeed. If there were no ‘global market’, what would Australia do with all its natural resources? We don’t have the means necessary to produce and develop it. Hence, by viewing the world as the market, and not just a single country, opportunities are endless.

Globalisation is about the world moving towards becoming an interdependent, integrated global economic system. Globalisation allows organisations to fully succeed in the global market. Globalisation is clearly evident in industries such as that of mining, and it is because of this globalisation that the industry is so successful and one of the most profitable.