Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry
In 2006, Rio Tinto Iron Ore (RTIO) faced a number of challenges. The iron ore business had traditionally been dominated by a few large suppliers, who sold to a relatively few large steel producers. The business environment was changing, however, with the rapid development of China. Demand was growing faster than supply, causing increased prices, particularly on the spot market. Most of RTIO's production was committed to fulfilling long-term contracts, so it could not fully benefit from the high spot market prices. New entrants, however, were not committed to long-term contracts and were attracted by these high prices. In addition, many new Chinese iron and steel mills were small operations, geographically disbursed, and did not secure their iron ore supplies before building their plants. An important part of the iron ore supply chain was transportation. Traditionally, customers were responsible for shipping, but this did not meet the needs of small, remotely located Chinese mills. In addition to these changes in the marketplace, RTIO had developed new steelmaking technology that enabled the use of lower quality iron ore and also generated substantially fewer greenhouse gas emissions than conventional technology. There were a number of possible approaches to commercializing this technology, ranging from vertical integration to licensing.
Swot Analysis of "Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry" written by Hau Lee, David W. Hoyt, Samir Singh includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Iron Ore facing as an external strategic factors. Some of the topics covered in Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry case study are - Strategic Management Strategies, and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry casestudy better are - – talent flight as more people leaving formal jobs, technology disruption, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, cloud computing is disrupting traditional business models,
increasing commodity prices, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Iron Ore, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Iron Ore 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 Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry can be done for the following purposes –
1. Strategic planning using facts provided in Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry case study
2. Improving business portfolio management of Iron Ore
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 Iron Ore
Strengths Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Iron Ore in Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry Harvard Business Review case study are -
Diverse revenue streams
– Iron Ore is present in almost all the verticals within the industry. This has provided firm in Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry 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.
Highly skilled collaborators
– Iron Ore 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 Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Iron Ore 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 Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy in the Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Analytics focus
– Iron Ore is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Hau Lee, David W. Hoyt, Samir Singh can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Organizational Resilience of Iron Ore
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Iron Ore does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Cross disciplinary teams
– Horizontal connected teams at the Iron Ore are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Training and development
– Iron Ore has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry 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.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Iron Ore digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Iron Ore 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.
Superior customer experience
– The customer experience strategy of Iron Ore in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Iron Ore has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Strong track record of project management
– Iron Ore is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry are -
Slow to strategic competitive environment developments
– As Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry HBR case study mentions - Iron Ore 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.
Slow decision making process
– As mentioned earlier in the report, Iron Ore has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Iron Ore even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Capital Spending Reduction
– Even during the low interest decade, Iron Ore 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 Iron Ore 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 - Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the segment, Iron Ore needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Low market penetration in new markets
– Outside its home market of Iron Ore, firm in the HBR case study Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High bargaining power of channel partners
– Because of the regulatory requirements, Hau Lee, David W. Hoyt, Samir Singh suggests that, Iron Ore is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
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 Iron Ore supply chain. Even after few cautionary changes mentioned in the HBR case study - Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Iron Ore vulnerable to further global disruptions in South East Asia.
Lack of clear differentiation of Iron Ore products
– To increase the profitability and margins on the products, Iron Ore needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring
– The stress on hiring functional specialists at Iron Ore 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.
Increasing silos among functional specialists
– The organizational structure of Iron Ore is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Iron Ore needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Iron Ore to focus more on services rather than just following the product oriented approach.
Opportunities Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry | 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 Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry are -
Manufacturing automation
– Iron Ore can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Iron Ore 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, Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Low interest rates
– Even though inflation is raising its head in most developed economies, Iron Ore can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Iron Ore can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Iron Ore can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Leveraging digital technologies
– Iron Ore 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.
Using analytics as competitive advantage
– Iron Ore 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 Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Iron Ore to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Iron Ore 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Iron Ore can use these opportunities to build new business models that can help the communities that Iron Ore operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Iron Ore can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Iron Ore can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
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 Iron Ore 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.
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. Iron Ore can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Better consumer reach
– The expansion of the 5G network will help Iron Ore to increase its market reach. Iron Ore 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.
Threats Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry are -
Environmental challenges
– Iron Ore 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. Iron Ore can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Iron Ore business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Iron Ore demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Shortening product life cycle
– it is one of the major threat that Iron Ore is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Iron Ore needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
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. Iron Ore 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.
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 Iron Ore in the Strategy & Execution sector and impact the bottomline of the organization.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry, Iron Ore 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 .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Iron Ore with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Iron Ore can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Iron Ore has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Iron Ore 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Iron Ore 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 Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry .
Weighted SWOT Analysis of Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry 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 Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry 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 Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry 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 Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry 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 Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry 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 Iron Ore needs to make to build a sustainable competitive advantage.