BHP, an Australian mining company, threatens to enter the potash mining industry through a hostile takeover of the Potash Corporation of Saskatchewan. Complicating matters is the fact that the Canadian potash industry has operated as a legal cartel in which the provincial government has a stake. This case enables students to assess BHP's strategy in terms of value creation and value capture, how it relates to its existing investments in the industry, and the risks and rewards of alternatives to BHP's strategy.
Swot Analysis of "BHP: Mining Potash" written by Thomas N Hubbard, Michael J Moore includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Potash Bhp's facing as an external strategic factors. Some of the topics covered in BHP: Mining Potash case study are - Strategic Management Strategies, Competitive strategy, Economics, International business, Policy and Strategy & Execution.
Some of the macro environment factors that can be used to understand the BHP: Mining Potash casestudy better are - – increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, geopolitical disruptions, increasing transportation and logistics costs, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies,
increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of BHP: Mining Potash
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in BHP: Mining Potash case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Potash Bhp's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Potash Bhp's operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of BHP: Mining Potash can be done for the following purposes –
1. Strategic planning using facts provided in BHP: Mining Potash case study
2. Improving business portfolio management of Potash Bhp's
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Potash Bhp's
Strengths BHP: Mining Potash | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Potash Bhp's in BHP: Mining Potash Harvard Business Review case study are -
High brand equity
– Potash Bhp's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Potash Bhp's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Potash Bhp's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Potash Bhp's has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Training and development
– Potash Bhp's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in BHP: Mining Potash Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Sustainable margins compare to other players in Strategy & Execution industry
– BHP: Mining Potash firm has clearly differentiated products in the market place. This has enabled Potash Bhp's to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Potash Bhp's to invest into research and development (R&D) and innovation.
Ability to lead change in Strategy & Execution field
– Potash Bhp's is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Potash Bhp's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Potash Bhp's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Potash Bhp's has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Effective Research and Development (R&D)
– Potash Bhp's has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study BHP: Mining Potash - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management
– Potash Bhp's is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– Potash Bhp's is present in almost all the verticals within the industry. This has provided firm in BHP: Mining Potash case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Innovation driven organization
– Potash Bhp's is one of the most innovative firm in sector. Manager in BHP: Mining Potash Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Learning organization
- Potash Bhp's is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Potash Bhp's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in BHP: Mining Potash Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Potash Bhp's has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in BHP: Mining Potash HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses BHP: Mining Potash | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of BHP: Mining Potash are -
Low market penetration in new markets
– Outside its home market of Potash Bhp's, firm in the HBR case study BHP: Mining Potash needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As BHP: Mining Potash HBR case study mentions - Potash Bhp's takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
High cash cycle compare to competitors
Potash Bhp's has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Interest costs
– Compare to the competition, Potash Bhp's has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Skills based hiring
– The stress on hiring functional specialists at Potash Bhp's has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
No frontier risks strategy
– After analyzing the HBR case study BHP: Mining Potash, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Capital Spending Reduction
– Even during the low interest decade, Potash Bhp's has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Products dominated business model
– Even though Potash Bhp's has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - BHP: Mining Potash should strive to include more intangible value offerings along with its core products and services.
Aligning sales with marketing
– It come across in the case study BHP: Mining Potash that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case BHP: Mining Potash can leverage the sales team experience to cultivate customer relationships as Potash Bhp's is planning to shift buying processes online.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Potash Bhp's supply chain. Even after few cautionary changes mentioned in the HBR case study - BHP: Mining Potash, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Potash Bhp's vulnerable to further global disruptions in South East Asia.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the BHP: Mining Potash HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Potash Bhp's has relatively successful track record of launching new products.
Opportunities BHP: Mining Potash | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study BHP: Mining Potash are -
Loyalty marketing
– Potash Bhp's has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Potash Bhp's is facing challenges because of the dominance of functional experts in the organization. BHP: Mining Potash case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Using analytics as competitive advantage
– Potash Bhp's has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study BHP: Mining Potash - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Potash Bhp's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Potash Bhp's can use these opportunities to build new business models that can help the communities that Potash Bhp's operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Learning at scale
– Online learning technologies has now opened space for Potash Bhp's to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Potash Bhp's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Potash Bhp's to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Potash Bhp's can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, BHP: Mining Potash, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Potash Bhp's to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Potash Bhp's to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help Potash Bhp's to increase its market reach. Potash Bhp's will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Buying journey improvements
– Potash Bhp's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. BHP: Mining Potash suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Developing new processes and practices
– Potash Bhp's can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Leveraging digital technologies
– Potash Bhp's can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Threats BHP: Mining Potash External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study BHP: Mining Potash are -
Regulatory challenges
– Potash Bhp's needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study BHP: Mining Potash, Potash Bhp's may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Potash Bhp's can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study BHP: Mining Potash .
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Potash Bhp's in the Strategy & Execution sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Potash Bhp's is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Potash Bhp's.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Potash Bhp's needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Potash Bhp's high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Environmental challenges
– Potash Bhp's needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Potash Bhp's can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Potash Bhp's will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Technology acceleration in Forth Industrial Revolution
– Potash Bhp's has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Potash Bhp's needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing wage structure of Potash Bhp's
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Potash Bhp's.
Weighted SWOT Analysis of BHP: Mining Potash Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study BHP: Mining Potash needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study BHP: Mining Potash is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study BHP: Mining Potash is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of BHP: Mining Potash is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Potash Bhp's needs to make to build a sustainable competitive advantage.