Corporate dissonance

According to Elisabeth Knight at the SMH:

If BHP’s management is to be criticised for this offer it should be on the basis of potentially under- estimating the political backlash from the Canadians. It is too early to make that call, given the final adjudication has not yet been made. BHP knows from recent experience how the best-laid business plans can be scuttled by governments and regulators.

Fair enough, this blogger supposes.

But then again, the deal looks pretty shot. Not least because of the ominous silence emanating from Matthew Stevens at The Australian who chooses to write on NAB today. Given his spectacular sources at BHP, (as Crikey revealed, Stevens is married to “BHP Billiton media relations chief Sam Evans”) if there was a positive story to tell, he would have it.

So assuming the deal is stuffed, the question has to be asked, why has BHP learned nothing form its two previous failures with regulators?

Indeed, this is a broader question that should also be asked of corporate Australia.

Why, for instance, is the ASX pursuing a sellout strategy (if it can be called that) to SGX, which also looks seriously doomed at the regulatory level. Why, first, did they not see this backlash coming? And second, why did they not pursue a JV? (There is the possibility that the takeover is a straw man designed to get a JV approved, but that seems a stretch).

This blogger puts it down to a globalising of Australian corporate culture. Australian corporates have been operating in a competition-free environment for so long that they no longer consider, or even have the skill set for, the regular day-to-day operations of green-fields commerce.

They are specialists at asset-trading. Not really businesspeople at all. Certainly not entrepreneurs. More like corporate bureaucrats trading footy cars with their mates. For years they have faced little or no regulatory opposition to the point now where regulatory acquiesence is assumed.

And now they’re taking it global, either buying or selling and running into a little trouble. It is tempting to see the failed Macquarie model as the ultimate expression of this phenomenon.

When the resources boom dies, we’ll need to be looking elsewhere than corporate Australia for new industry formation.

Houses and Holes
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  1. Although I agree with most of your criticisms of Aussie businesses, can you really apply the same to BHP-B?

    Kloppers is South African, and lots of "not very nice" things happen in Africa. Jac Nasser ran Ford in the US, and has Lebanese origins.

    I'd guess BHP-B's Potash initiative came from BHP-B trying to answer the question "Just how DO we grow from here?"

  2. David Llewellyn-Smith

    Couple of fair points there.

    I have no problem with the Potash strategy. In fact, think it really quite clever. It's the way in which its been executed that's the issue, trying to buy a controlling market share.

    It's the same strategy used in iron ore. And Don Argus was also central to creating it.

  3. Great article. I have long considered Australian business very much like a public service with better pay. The banks exist in a competition vacuum, and most other "successful" companies operate in an industry where they have a high level of market control, as opposed to brand strength. With the exception of Westfield and News Corp, which for better or worse are led by two exceptional businessmen, Australian companies have a dismal overseas expansion record.

  4. Your observations are spot on – and I think particularly apply to bank execs. Worked for several years in support role at CEO/GM level and was dismayed by the calibre of most of the incumbents – yes, very well paid individuals of a non-intellectual bureaucratic bent, and very self-satisfied to boot! never venturing from an extremely narrowly defined comfort zone, and prone to equating big numbers with their own perceived worth. wined and dined in superlative fashion by big names which further reinforced their own sense of (inflated) worth. doubt a single one of them could build an enterprise from scratch.

    also worked for some years for a true entreprenuer, magnificently successful for a period, and what a contrast – brilliantly exciting, forwarding thinking, challenging, from very little to an organisation employing thousands, and the bankers were putty in his hands!

    (My first comment, but think this is a first rate blog – thanks).