Alcoa: The Race to Light-Weighting SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

Case Study SWOT Analysis Solution

Case Study Description of Alcoa: The Race to Light-Weighting

The race to lightweighting is well underway with the introduction of the aluminum body Ford F150. Raj Reddy, vice president of strategy for global rolled products at Alcoa, one of the biggest aluminum manufacturers in the world, knows, however, that the competition in the aluminum market will get stiffer with the introduction of more stringent CAFE standards. The company could look to newer bonding technologies and customization of services for its prized clients like Ford to diversify or invest in R&D to increase the ductility and strength of its core products. Students are asked to find strategies to define and boost Alcoa's value proposition.

Authors :: Andrew Hoffman, Jordan Siegel

Topics :: Strategy & Execution

Tags :: International business, Research & development, Sales, SWOT Analysis, SWOT Matrix, TOWS, Weighted SWOT Analysis

Swot Analysis of "Alcoa: The Race to Light-Weighting" written by Andrew Hoffman, Jordan Siegel includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Aluminum Alcoa facing as an external strategic factors. Some of the topics covered in Alcoa: The Race to Light-Weighting case study are - Strategic Management Strategies, International business, Research & development, Sales and Strategy & Execution.

Some of the macro environment factors that can be used to understand the Alcoa: The Race to Light-Weighting casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, increasing energy prices, central banks are concerned over increasing inflation, etc

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Introduction to SWOT Analysis of Alcoa: The Race to Light-Weighting

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Alcoa: The Race to Light-Weighting case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Aluminum Alcoa, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Aluminum Alcoa 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Alcoa: The Race to Light-Weighting can be done for the following purposes –
1. Strategic planning using facts provided in Alcoa: The Race to Light-Weighting case study
2. Improving business portfolio management of Aluminum Alcoa
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 Aluminum Alcoa

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Strengths Alcoa: The Race to Light-Weighting | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Aluminum Alcoa in Alcoa: The Race to Light-Weighting Harvard Business Review case study are -

Analytics focus

– Aluminum Alcoa 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 Andrew Hoffman, Jordan Siegel 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.

Ability to recruit top talent

– Aluminum Alcoa is one of the leading recruiters in the industry. Managers in the Alcoa: The Race to Light-Weighting are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.

High switching costs

– The high switching costs that Aluminum Alcoa 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.

Learning organization

- Aluminum Alcoa 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 Aluminum Alcoa is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Alcoa: The Race to Light-Weighting Harvard Business Review case study emphasize – knowledge, initiative, and innovation.

Strong track record of project management

– Aluminum Alcoa is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Sustainable margins compare to other players in Strategy & Execution industry

– Alcoa: The Race to Light-Weighting firm has clearly differentiated products in the market place. This has enabled Aluminum Alcoa to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Aluminum Alcoa to invest into research and development (R&D) and innovation.

Low bargaining power of suppliers

– Suppliers of Aluminum Alcoa in the sector have low bargaining power. Alcoa: The Race to Light-Weighting has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Aluminum Alcoa to manage not only supply disruptions but also source products at highly competitive prices.

Operational resilience

– The operational resilience strategy in the Alcoa: The Race to Light-Weighting 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.

Ability to lead change in Strategy & Execution field

– Aluminum Alcoa 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 Aluminum Alcoa in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Training and development

– Aluminum Alcoa has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Alcoa: The Race to Light-Weighting 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.

Cross disciplinary teams

– Horizontal connected teams at the Aluminum Alcoa 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.

Innovation driven organization

– Aluminum Alcoa is one of the most innovative firm in sector. Manager in Alcoa: The Race to Light-Weighting Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.

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Weaknesses Alcoa: The Race to Light-Weighting | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Alcoa: The Race to Light-Weighting are -

Ability to respond to the competition

– As the decision making is very deliberative, highlighted in the case study Alcoa: The Race to Light-Weighting, in the dynamic environment Aluminum Alcoa has struggled to respond to the nimble upstart competition. Aluminum Alcoa has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Interest costs

– Compare to the competition, Aluminum Alcoa 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.

Employees’ incomplete understanding of strategy

– From the instances in the HBR case study Alcoa: The Race to Light-Weighting, it seems that the employees of Aluminum Alcoa 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 Aluminum Alcoa 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 - Alcoa: The Race to Light-Weighting should strive to include more intangible value offerings along with its core products and services.

Compensation and incentives

– The revenue per employee as mentioned in the HBR case study Alcoa: The Race to Light-Weighting, is just above the industry average. Aluminum Alcoa 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 dependence on star products

– The top 2 products and services of the firm as mentioned in the Alcoa: The Race to Light-Weighting 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 Aluminum Alcoa has relatively successful track record of launching new products.

High operating costs

– Compare to the competitors, firm in the HBR case study Alcoa: The Race to Light-Weighting 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 Aluminum Alcoa 's lucrative customers.

Need for greater diversity

– Aluminum Alcoa has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.

Capital Spending Reduction

– Even during the low interest decade, Aluminum Alcoa 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.

Slow decision making process

– As mentioned earlier in the report, Aluminum Alcoa 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. Aluminum Alcoa 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.

Low market penetration in new markets

– Outside its home market of Aluminum Alcoa, firm in the HBR case study Alcoa: The Race to Light-Weighting needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

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Opportunities Alcoa: The Race to Light-Weighting | 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 Alcoa: The Race to Light-Weighting are -

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. Aluminum Alcoa can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Aluminum Alcoa is facing challenges because of the dominance of functional experts in the organization. Alcoa: The Race to Light-Weighting 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.

Manufacturing automation

– Aluminum Alcoa 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Aluminum Alcoa can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Loyalty marketing

– Aluminum Alcoa 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.

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 Aluminum Alcoa 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.

Buying journey improvements

– Aluminum Alcoa can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Alcoa: The Race to Light-Weighting 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.

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. Aluminum Alcoa 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. Aluminum Alcoa 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.

Learning at scale

– Online learning technologies has now opened space for Aluminum Alcoa 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Aluminum Alcoa 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Aluminum Alcoa can use these opportunities to build new business models that can help the communities that Aluminum Alcoa operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Aluminum Alcoa 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, Alcoa: The Race to Light-Weighting, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

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 Aluminum Alcoa in the consumer business. Now Aluminum Alcoa can target international markets with far fewer capital restrictions requirements than the existing system.

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Threats Alcoa: The Race to Light-Weighting External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats mentioned in the HBR case study Alcoa: The Race to Light-Weighting are -

Technology disruption because of hacks, piracy etc

– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.

Shortening product life cycle

– it is one of the major threat that Aluminum Alcoa is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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 Aluminum Alcoa business can come under increasing regulations regarding data privacy, data security, etc.

Regulatory challenges

– Aluminum Alcoa 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.

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 Aluminum Alcoa.

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. Aluminum Alcoa 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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Alcoa: The Race to Light-Weighting, Aluminum Alcoa 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 .

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. Aluminum Alcoa can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Environmental challenges

– Aluminum Alcoa 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. Aluminum Alcoa can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.

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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Aluminum Alcoa 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.

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 Aluminum Alcoa in the Strategy & Execution sector and impact the bottomline of the organization.

Stagnating economy with rate increase

– Aluminum Alcoa 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.

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Weighted SWOT Analysis of Alcoa: The Race to Light-Weighting 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 Alcoa: The Race to Light-Weighting 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 Alcoa: The Race to Light-Weighting 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 Alcoa: The Race to Light-Weighting 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 Alcoa: The Race to Light-Weighting 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 Aluminum Alcoa needs to make to build a sustainable competitive advantage.

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