Systematization of methods of strategic management of the companies in mature mining and chemical branch

Above the considered concept of development of the mining and chemical companies in the conditions of a maturity of branch imposes certain specifics on processes of strategic management of the mining and chemical companies at this conjuncture. We will consider methodical and practically bases of strategic management of the mining and chemical companies in mature mining and chemical branch.

Stages of process of strategic management can be presented in a general view as follows (the figure 4.5.) [37,61,63].

To each of the presented stages there correspond the methods of strategic management. However, despite sufficiency of methods, it should be noted that many of them have universal character and don't allow estimating adequately specific features of specific industry and concrete company, and also a stage of life cycle of branch. In this regard adaptation of the existing methods to conditions and features of mining and chemical branch, and also to life cycle of branch - a maturity is represented especially important.

Fig. 4.5. Stages of process of strategic management

The predetermining and proving stage in the course of strategic planning and development of strategy is the strategic analysis. His main objective is interpretation of strategic position of the company in the market and in branch by means of identification of tendencies and changes which arose in her external environment, and definitions of their impact on the enterprise and its activity, taking into account his advantages and resources. The main approaches to carrying out the strategic analysis have been presented in the previous chapters. As it has been noted, SWOT analysis, PEST analysis, the analysis of competitive forces (according to M. Porter), Event-the analysis, SWN - the analysis, GAP - the analysis and so forth belong to the main methods of the strategic analysis. In more detail these methods were described by the author earlier.

After the detailed strategic analysis the company starts a stage of formation and a formulation of a mission and the key purposes of the company. It should be noted that this stage plays an important role in the course of strategic management as correctly and precisely formulated purposes are a basis of effective strategy.

At a stage of formation of a mission and the purposes the company has the following methods:

1. "Brainstorming" is the productive method of the solution of various tasks based on promotion by participants of various versions of decisions due to stimulation of creative activity. This method gains the increasing popularity in view of efficiency of application recently. The most expedient get out of the proposed solutions (the purposes, options of missions) on the basis of method of expert evaluations and potentially effective. As a result of realization of this method the company receives projects of future purposes and the mission of the organization.

  • 2. "The tree is more whole" - this method represents structuring hierarchical system of the purposes of the company with allocation of a main goal and its decomposition on the purpose of lower order. This method allows to define the paramount purposes of the organization, and also to present the purpose in the form of more concrete local goals for their delegation on various levels of administrative system.
  • 3. SMART method - use of this method at a goal-setting means existence limited, but enough the purposes for effective functioning of the company, at the same time the purpose is answered five key principles - they are concrete, measurable, achievable, realistic and determined by time.

Use listed, applicable to the companies of a mining and chemical complex, methods in the course of a goal-setting will allow the mining and chemical companies to plan effectively the activity and it is correct to formulate the purposes.

Currently by the companies it is used, generally a brainstorming method. Below examples of missions of the largest domestic mining and chemical companies are given (table 4.3).

Table 4.3

Examples of missions of the largest mining and chemical companies of Russia





"We produce potash fertilizers to provide people around the world with food. We effectively and responsibly develop unique potash fields to provide growth of the company, wellbeing of workers and society".

"Helping agricultural producers to increase productivity, we help to feed the world"

"It is active to participate in development of world agriculture. To promote ensuring needs of increasing population of the planet for food, sterns, production of the textile industry and fuel".

The following stage of strategic management is formation of strategic alternatives which includes development of a series of strategic alternatives, proceeding from the formulated purposes of the company, advantages and shortcomings, external opportunities and threats revealed as a result of the strategic analysis. This stage of strategic management is carried out generally by means of matrix methods. Their range is rather wide [37,63,82]: method of the Boston consulting group, McKinsey method, ADL/LC, I models. Ansoff, G. Steyner, D. Abele, Shell/DPM, method of curves of development (skilled curves), method of life cycle of goods, analysis of "gaps" (GAP analysis), PIMS analysis, etc.

However, in view of the fact that the mining and chemical branch currently is at a maturity, this set of methods is subject to adjustment and adaptation. Especially important the models considering a stage of life cycle of branch are represented. In market and branch conditions of mining and chemical branch the ADL/LC and Shell/DPM models which are developed for oligopolistic branches what is mining and chemical are the most applicable.

It is also necessary to note that, despite existence of methods of development of strategy, existence of highly skilled management is necessary for development and adoption of effective organizational and administrative decisions.

Besides, it is necessary to consider interests of the main stakeholders of the mining and chemical companies which also partially have been considered (figure 4.5) [117] earlier.

Fig. 4.5. Main stakeholders of the mining and chemical companies

The following stage is the choice of the most suitable of the generated strategic alternatives. Classical approaches assume use of methods of the factorial analysis, modeling, scenarios, the analysis of liquidity, a settlement constructive method, comparative, expert and other [63].

However, in the conditions of high dynamism of the external environment [22], and also a significant amount of the factors exerting impact on activity of the companies of a mining and chemical complex, process of the strategic choice has to be followed by development of the system of criteria and the choice on their basis of the most effective strategy. Thus, the problem of the strategic choice, according to the author, comes down to a problem of the multicriterial choice. At the same time, the most methodically difficult moment is development of criteria of the choice as they have to be formed proceeding from branch and market features of branch, the purposes and prospects of the company, and also taking into account external restrictions and a possibility of their assessment. As an example of criteria for the strategy of the mining and chemical companies such criteria as coherence can make the strategy of development for the region (or compliance to interests of the region and country), creation of competitive advantage before competitors, risk of decrease in world demand for mineral fertilizers and so forth [32] at the same time these criteria need to be chosen taking into account a maturity of mining and chemical branch.

Having created criteria of the choice, it is necessary to carry out the choice on the basis of drawing up adequate model that can be made by means of the following methods [68,100]: multicriteria theory of usefulness (MAUT); methods of analytical hierarchy (AHP); the methods based on the theory of indistinct sets; groups of methods

ELECTRE; verbal analysis of decisions (VAD); method of a simple multicriteria assessment SMART.

The stage of realization of strategy is insufficiently worked in respect of methodical providing. Often in the companies there is a problem at this level - at the level of transition from strategy to specific actions. Especially this problem is particularly acute in the large vertically integrated companies where there is a need of decomposition of the purposes and tasks of various strategic units of business, strategic zones of managing, economic units, levels of management, etc.

Uniform approach to strategy realization methods currently doesn't exist. Some authors allocate two methods of realization of strategy: budgeting and management on the purposes [34].

Budgeting means scheduling of distribution of resources under articles of their receipt and use on the basis of determination of sales volumes, drawing up and updating of operational estimates on departments and divisions.

Management on the purposes (MBO method) means within strategy realization development of the accurate, briefly formulated purposes and realistic plans for their achievement, systematic control of results and the correcting measures in case of need.

Also methods of network planning (the network chart, Gant's chart), business - engineering and so forth belong to modern methods of realization of strategy.

Besides, some modern writers offer the "soft" approaches to realization of strategy [75] based on historical, political and human aspects. Allocate model (Asses, Analyze, Act). The idea of this model is that before to start direct realization of strategy, it is necessary to estimate at first architecture of the organization, her strategic context (resources, history, an environment), key dependences. Then it is necessary to analyze historically developed schemes and mechanisms of decision-making in the companies, available resources, spheres of influence, etc. In the conclusion use the technician and the methods directed to involvement of personnel of the company in strategy realization process and also "an algorithm of introduction of changes" which will allow to carry out the planned changes is supposed, and also to successfully fix them.

It is possible to refer use of the balanced system of indicators, strategic and internal audit to methods of strategic control.

The assessment of efficiency of strategy currently is methodically badly worked aspect of strategic management. The increasing number of publications on this matter speaks about relevance of this subject [65].

Some authors offer to consider efficiency of strategy of the mining and chemical companies as set of three components: qualities of strategy, strategic efficiency and extent of achievement of goals (performing efficiency) [32].

We will analyse process of strategic management of the largest domestic mining and chemical companies.

Acron - one of the leading vertically integrated producers of mineral fertilizers in Russia and in the world which product range includes complex and nitrogen fertilizers, and also industrial products. In general, the company pays sufficient attention to strategic management. The company develops long-term strategy which is reconsidered by once a year.

In 2014 the development strategy of the Akron Company hasn't undergone serious changes, and increase in efficiency and competitiveness of the company remains a main objective of her realization. Due to vertical integration and expansion of capacities Akron seeks to become one of the most effective producers of fertilizers in the world.

The development strategy of the company is aimed at the balanced development. The company seeks to realize dynamically the long-term investment program, but at the same time tries not to accept excess risk of the raised financial loading in the short and medium-term period. So, thanks to application of flexible approach in planning of investments and to weakening of ruble exchange rate in relation to US dollar in 2014, the Akron company has reduced a net debt by 11 % in a dollar equivalent.

The strategy of the company consists of six main reference points is presented in the figure 4.6. [106]:

Fig. 4.6. Six main reference points of strategy of the company

These reference points, on the one hand, have to lead to increase in efficiency of activity of the company in strategic prospect, on the other hand, from the point of view of features of mature branch and for increase in competitiveness, need adjustment. For example, construction of new production capacities can lead to production surplus in the market. The company makes a mistake, considering branch as developing. In mature branches the strategy of expansion of production capacities has to be considered with extra care.

Besides, vertical integration in mining and chemical branch has stopped being steady competitive advantage as all main participants of the market currently - the large vertically integrated structures controlling everything production stages - from production before realization.

Strategy for improvement of operational performance in mature branches shouldn't be based only on decrease in expenses as this potential in branch is almost exhausted. Low cost of products of the companies as competitive advantage has also lost the stability. Expenses of the companies in general remain at one level, and minor changes, mainly, are connected, for example, with increase in expenses on fuel and electric energy in connection with increase in production and the prices of energy resources, increase in expenses on repair and maintenance owing to earlier carried out input of new capacities, increase in costs of materials and components, increase in depreciation charges because of commissioning of capital construction projects, reduction of prices of potash raw materials and reduction of costs of phosphatic raw materials within transition to consumption of own apatite concentrate, and also decrease in costs of production personnel.

PhosAgro - the company also is the large vertically integrated enterprise having the extracting, refinery capacities, the developed logistic infrastructure and distributor network in structure.

The main competitive advantage of the company is existence in assets of the unique field apatite - nepheline ores. However, as it has been already noted, in the conditions of a maturity of branch traditional competitive advantages lose the appeal.

In strategic prospect the company develops new activities for increase in competitiveness, for example, proposes to farmers ready solutions due to the best understanding of the market of the fertilizers recommended for the main agricultural cultures consumers of phosphatic fertilizers worldwide [127].

Also development of decisions and recommendations about volumes, quality and terms of introduction of main types of mineral fertilizers for various regions and types of agricultural production became one of new activities of the company.

These actions of the company partially correspond to the strategy of segmentation which can become one of the perspective directions of strategic development of the mining and chemical companies in the conditions of mature branch. The strategy of segmentation of the market can provide to the company rather steady competitive advantage.

For her development by the author drawing up the strategic map of segmentation for the company which can look as follows (table 4.4 is recommended.).

The strategic map of segmentation of the market for the mining and chemical company (on the example of the PhosAgro Company)




Latin America



Features of the market

Risk of increase in content of dangerous heavy metals in soils because of wide circulation of high-intensity farming practices and use of low-quality fertilizers. Introduction of restrictions for the maximum content of cadmium in phosphorus-containing fertilizers.

Growth of the areas sowed by the soy, when ripening consuming insignificant amount of nitrogen

Increase in requirement of agricultural producers for fertilizers in view of restrictions of import of production from the countries of Europe

The non-uniform region with various types of soils, the grown-up cultures and climatic conditions

Strategic opportunities in a segment

Increase in sales in this segment since the content of cadmium and other toxic metals (arsenic and lead) is in the produced fertilizers at the minimum level.

Start in production of new brands of fertilizers with the minimum content of nitrogen (for example, PKS)

Growth of sales in the region, including due to investments into development of distributive infrastructure

Diversification of production for production, suitable practically for all species of the crops which are grown up in the region


Increase in profitability of the company at the expense of the bigger volume of realization, also maintenance of competitiveness due to production of the corresponding standard

Increase in competitiveness in the long term in one of the main regions of consumption

Increase in sales by 22% in the region. Providing domestic agricultural manufacturers with production

Receiving more advantageous strategic positions due to diversification and modification of production

Thus, forming the similar card, each mining and chemical company, proceeding from own interests, will be able to allocate strategic segments of the market, to define features of each of them, to determine strategic reference points by each segment that will lead to strengthening of positions of the company on world and the regional markets.

The strategy of the PhosAgro Company currently consists of the following directions:

  • 1. The staticized strategy of sales - the company defines as the main the prospects of rapprochement with consumers in the priority markets of Latin America, Europe and Asia. As for domestic market, the company became the largest supplier of mineral fertilizers for crops in 2013 and continues to increase a market share.
  • 2. Organic growth - the company is focused on increase in production and increase in security with own raw materials; being the international producer of fertilizers with low expenses and qualitative resource base, PhosAgro can use essential opportunities for expansion of production of bonus brands of fertilizers for the purpose of satisfaction of the growing international demand and replacement from the world markets of the companies with high costs of production.
  • 3. Increase in operational efficiency - this direction is implemented on three segments of activities: to production, processing and logistics. At the same time, a main goal on production - increase in a share of production apatite - nepheline ore in JSC Apatit an underground method up to 80% of production total volumes by 2016. After start of the principal trunk No. 2 in 2015 production capacities of the Kirov mine will increase up to 14 million t of ore a year with the subsequent increase up to scheduled 16-16,5 million t of ore a year. to a basis of strategy for increase in efficiency in a segment of processing lie plans for commissioning of the new aggregate for production of ammonia and new capacities for production of fertilizers. For implementation of these projects the company intends to use the new technologies capable to provide efficiency of productions and to minimize impact on the environment in case of accumulation of total volumes of production.

As for a logistic segment, in the long term the manual of the company expects lowering of expenses as a result of switching on in vertically integrated structure of the transshipment terminal in the port of Ust-Luga near St. Petersburg.

4. Consolidation - in 2014 the company finished consolidation of 100% of stocks of JSC PhosAgro Cherepovets that became the first stage of implementation of one of Basic Elements of strategy of the company after carrying out the IPO. It eventually allowed the company to receive complete control over all production subsidiaries.

In the future the manual plans to enhance and simplify structure of the company further. In more long term the manual of the company considers the possibility of complete consolidation of production assets within one legal entity.

However, in spite of the fact that the company achieved the considerable progress in implementation practically of all strategic objectives, adjustment of long-term strategy of PhosAgro according to the recent market trends, and also tasks on increase in cost of the company for the benefit of all stakeholders and system is necessary for solidifying of its competitive advantages in the conditions of a maturity of branch.

Uralpotash - the leading vertically integrated global manufacturer and the exporter of potassium. The main strategic objective of the company - to provide stable supply of potash fertilizers to all key markets. Flexible production capacities, developed logistics and a wide area network of sales allow the company to maintain the competitiveness in the world market [109].

The strategy of the company is aimed at the following main reference points:

  • Solidifying of leader line items in branch
  • Emphasis on interaction with end users
  • Saving line items of the leader in product cost
  • Balanced approach to investments into extension of production and return of the free money to shareholders
  • Care of people, local communities, safety and environment
  • Commitment to the best practicing of corporate management

At the same time, in a potash segment, as well as in all mining and chemical branch, also there came the maturity period when search of new sources of competitive advantages is necessary. For this purpose the company in Russia realizes the project on enhancement of recommendations about introduction of potash fertilizers when using intensive technologies of cultivation of crops. Experiences are put in Central-Black Earth and North - Caucasian regions in farms with productivity level above an average on black earth with the average and high content of potassium. Influence of the increasing potassium doses against the background of optimum doses of nitrogen and phosphorus in case of absolute monitoring is studied (without fertilizers).

EuroChem - the agrochemical company with the vertically integrated business model combining access to cheap natural resources and production assets, own logistic infrastructure, divisions on rendering consulting services both the international marketing and distributor network.

The basis of strategy of the company is made by value creation which will be carried out in the following contexts:

  • at a stage of extraction of raw materials
  • by means of the wide product range
  • by means of distributor network of the international scale
  • by means of the thought-over investment strategy
  • by means of vertical integration and low cost of production.

EuroChem company has access to more than to one billion tons of the proved

and probable reserves of potash ore on two main fields. Input of assets in operation is planned for 2017.

Thus, it is possible to draw a conclusion that in spite of the fact that the mining and chemical companies of Russia seek to provide highly effective strategic management, there are problems of methodical providing which need to be solved. The companies partially come to formation of new competitive advantages, significant in the conditions of mature branch. However lack of system approach to formation of such advantages, not adapted ness of the main methods and tools, lack of complexity and scientific study of these questions takes place. For this purpose development new or adaptation of the existing methods of strategic management to mature mining and chemical branch with her market and branch features is necessary. As a result of a research the author has carried out systematization of various methods of strategic management and the corresponding card (table 4.5) is made.