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 - – challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, central banks are concerned over increasing inflation,
increasing transportation and logistics costs, increasing commodity prices, 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 -
Successful track record of launching new products
– Iron Ore has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Iron Ore 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.
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.
Ability to recruit top talent
– Iron Ore is one of the leading recruiters in the industry. Managers in the Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
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.
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.
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.
Learning organization
- Iron Ore 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 Iron Ore is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to lead change in Strategy & Execution field
– Iron Ore 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 Iron Ore 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 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.
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 -
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.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry, is just above the industry average. Iron Ore needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High operating costs
– Compare to the competitors, firm in the HBR case study Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Iron Ore 's lucrative customers.
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.
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.
Interest costs
– Compare to the competition, Iron Ore 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.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry, it seems that the employees of Iron Ore don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
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.
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.
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 -
Developing new processes and practices
– Iron Ore 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.
Creating value in data economy
– The success of analytics program of Iron Ore has opened avenues for new revenue streams for the organization in the industry. This can help Iron Ore to build a more holistic ecosystem as suggested in the Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry case study. Iron Ore can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
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.
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.
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.
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.
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.
Loyalty marketing
– Iron Ore 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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Iron Ore in the consumer business. Now Iron Ore can target international markets with far fewer capital restrictions requirements than the existing system.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Iron Ore 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 Iron Ore to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Iron Ore can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Rio Tinto Iron Ore: Challenges of Globalization in the Mining Industry 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.
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 -
Stagnating economy with rate increase
– Iron Ore can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Iron Ore in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
High dependence on third party suppliers
– Iron Ore 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.
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 .
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.
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.
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.
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 Iron Ore.
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.
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.
Increasing wage structure of Iron Ore
– 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 Iron Ore.
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.
