Business Case Study (New Dawn Drilling)

in South-africa

Abstract

This report is a business case study on New Dawn Drilling (NDD). NDD is a successful South African company in acquiring geological information from underground gold and platinum ore bodies by means of drilling the host rock and retrieving core samples from the ore bodies. The report consists of five sections; Intelligence Phase, SWOT (intelligence), SWOT (Design), Recommendations for an integrated business strategy and Recommendations for an information strategy. NDD intends to implement a five-year strategic plan and a system that will provide it with information on the company's costs and drilling outputs. This report also includes design diagrams for the proposed Management Information System.

Introduction

New Dawn Drilling operates in South Africa's gold and platinum mines. The firm is employed by mining companies to obtain geological information from the underground ore bodies by drilling the host rock and extracting core samples from the ore bodies. The company operates two types of drilling operation; Surface drilling which is carried out for exploration purposes and underground drilling which produces core samples. Presently, NDD operates underground drilling in six South African towns; Orkney, Phalaborwa, Randfontein, Rustenburg and Steelport. NDD has its head office in Johannesburg with regional offices in each of the mining centers listed above. The firm has approximately 400 employees, the majority of whom are miners. The Johannesburg office has two administrators while each regional centre has one. The company also has two directors. The firm's day to day management revolves around 4 main aspects; paying staff, invoicing customers, paying suppliers and complying with government legislation.

Intelligence Phase

South Africa is known as a treasure trove all over the world and possesses a wealth of mineral resources, owning and producing a major percentage of the world's minerals (Tcha, 2003, p. 78). The wealth of South Africa has been built on its vast resources - approximately 41% of the gold metals on Earth, 45% of the vanadium, 73% of the chrome, 80% of the manganese and 90% of the platinum (SAinfo, 2008). The country is a chief producer of precious metals like gold and platinum, in addition to coal and base metals. Experts believe that there is still substantial likelihood for the discovery of more world-class deposits in regions that have yet to be exploited fully.

For over a century, South Africa was the largest gold producer in the world. However, in   2007, it was usurped by China. Gold has reduced in importance as the South Africa's economy has diversified. Gold exports were the major source of foreign exchange earnings in the 1970s and 1980s, with mining contributing approximately 14% of overall value added in the economy. Over time, this has shifted and in 2007, quarrying and mining contributed around 5.8% to South Africa's gross domestic product (GDP). Nonetheless, mining is still very crucial to the country, with precious metals making a contribution of 65% to South Africa's mineral export earnings in 2006. About 80% of the world's platinum is supplied by South Africa.

The mining industry is also the country's biggest employer, with approximately 460,000 workers and an additional 400,000 working for the suppliers of goods and services to the mining industry. Two of the world's leading mining companies have their origin in South Africa. The world's biggest mining company, BHP Billiton, came into existence after a merger between Billiton (a South African company) and BHP (an Australian firm) (bhpbilliton, 2009). Anglo American Plc has its primary listing in London Stock exchange and its secondary listing in Johannesburg Stock exchange (AngloAmerican, 2009). The company owns several major subsidiaries, such as Anglo Coal, Anglo Platinum, Kumba Iron Ore and Impala Platinum.

Although NDD currently operates underground drilling in six South African towns, it has the potential and opportunity to extend its operations to other towns within the country as well as to the global market. Considering the size of the company in terms of number of employees (400 workers), NDD provides employment opportunities for a considerable number of South Africans. The company's turnover of $20 million last year also indicates that it contributes significantly to the country's gross domestic product. NDD has long term contracts for each shaft it is drilling with the mining company who owns that shaft. The long term contracts i.e. for eight to ten years enable the firm to plan ahead as well as maintain its business. NDD has a governance structure that is solid and it has put in place measures to ensure compliance with government regulations and legislation.

PEST Analysis

Political: The post-apartheid governments of South Africa have made significant progress in strengthening the nation's peaceful shift to democracy. As a result, access to better opportunities in business, particularly the mining industry, is becoming more widespread.

Economic: The economy of South Africa has been growing steadily and the consumer inflation has been declining. This implies that more people can invest in the mining industry. Additionally, the country's industrial and financial infrastructure is well developed and has exceptional growth potential.

Socio-cultural: There is high demand for gold and Platinum in South Africa. Gold is used in making jewelry, coins, electronic components and dental alloys. Platinum on the other hand is highly valuable due to its scarce production and is used in making laboratory equipment, dentistry equipment and jewelry. Members of middle class in South Africa are predominantly white and have lifestyles comparable in many ways to that of people living in North America, Western Europe and Australia. Members of this class are inclined to purchase gold and platinum products.

 

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Business Case Study (New Dawn Drilling)

This article was published on 2011/02/23