Vale: Global Expansion in the Challenging World of Mining SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Vale: Global Expansion in the Challenging World of Mining
To maximize their effectiveness, color cases should be printed in color.In 2009 the management of Vale, a Brazilian diversified mining company and the largest iron ore producer in the world, was under pressure from at least two fronts. First, the emergence of China as the most important consumer of iron ore in the last few years had changed the pricing system for iron ore from long-term contracts based on negotiated "benchmark prices" to contracts based on spot prices, usually forcing mining companies to pay for shipping. Second, for Brazil's charismatic president, Lula, a former union leader, Vale's layoffs during the global financial crisis and its perceived move away from Brazil (as Vale increased its exports to China and purchased Chinese vessels to ship iron ore to Asia) were reasons to start an open campaign to pressure Vale and Agnelli to invest in integrated steel mills in Brazil. In October of 2009, the CEO of Vale, Roger Agnelli was going to meet with Lula and had to decide what to do to attenuate these political pressures. What could Agnelli do to deal with political pressures at home? Was the purchase of large vessels to ship iron ore to Asia a good decision at a time when the shipping industry had spare capacity?
Authors :: Tarun Khanna, Aldo Musacchio, Ricardo Reisen de Pinho
Swot Analysis of "Vale: Global Expansion in the Challenging World of Mining" written by Tarun Khanna, Aldo Musacchio, Ricardo Reisen de Pinho includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Vale Ore facing as an external strategic factors. Some of the topics covered in Vale: Global Expansion in the Challenging World of Mining case study are - Strategic Management Strategies, Risk management and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Vale: Global Expansion in the Challenging World of Mining casestudy better are - – geopolitical disruptions, technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs,
increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Vale: Global Expansion in the Challenging World of Mining
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Vale: Global Expansion in the Challenging World of Mining case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Vale Ore, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Vale 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 Vale: Global Expansion in the Challenging World of Mining can be done for the following purposes –
1. Strategic planning using facts provided in Vale: Global Expansion in the Challenging World of Mining case study
2. Improving business portfolio management of Vale 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 Vale Ore
Strengths Vale: Global Expansion in the Challenging World of Mining | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Vale Ore in Vale: Global Expansion in the Challenging World of Mining Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Vale Ore in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Vale Ore digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Vale 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
– Vale 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.
Diverse revenue streams
– Vale Ore is present in almost all the verticals within the industry. This has provided firm in Vale: Global Expansion in the Challenging World of Mining 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.
Ability to recruit top talent
– Vale Ore is one of the leading recruiters in the industry. Managers in the Vale: Global Expansion in the Challenging World of Mining are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Strategy & Execution industry
– Vale: Global Expansion in the Challenging World of Mining firm has clearly differentiated products in the market place. This has enabled Vale Ore to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Vale Ore to invest into research and development (R&D) and innovation.
High brand equity
– Vale Ore has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Vale Ore to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Vale 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 Vale Ore is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Vale: Global Expansion in the Challenging World of Mining Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Vale 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 Vale: Global Expansion in the Challenging World of Mining - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Strategy & Execution field
– Vale 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 Vale Ore in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Vale 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 Tarun Khanna, Aldo Musacchio, Ricardo Reisen de Pinho 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.
Low bargaining power of suppliers
– Suppliers of Vale Ore in the sector have low bargaining power. Vale: Global Expansion in the Challenging World of Mining has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Vale Ore to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses Vale: Global Expansion in the Challenging World of Mining | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Vale: Global Expansion in the Challenging World of Mining are -
Interest costs
– Compare to the competition, Vale 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Vale: Global Expansion in the Challenging World of Mining, it seems that the employees of Vale 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Vale: Global Expansion in the Challenging World of Mining, is just above the industry average. Vale 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Vale: Global Expansion in the Challenging World of Mining, in the dynamic environment Vale Ore has struggled to respond to the nimble upstart competition. Vale Ore has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Vale Ore is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Vale Ore needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Vale Ore to focus more on services rather than just following the product oriented approach.
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 Vale Ore supply chain. Even after few cautionary changes mentioned in the HBR case study - Vale: Global Expansion in the Challenging World of Mining, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Vale Ore vulnerable to further global disruptions in South East Asia.
Workers concerns about automation
– As automation is fast increasing in the segment, Vale 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.
High cash cycle compare to competitors
Vale Ore 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.
Low market penetration in new markets
– Outside its home market of Vale Ore, firm in the HBR case study Vale: Global Expansion in the Challenging World of Mining needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As Vale: Global Expansion in the Challenging World of Mining HBR case study mentions - Vale 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.
Need for greater diversity
– Vale Ore 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.
Opportunities Vale: Global Expansion in the Challenging World of Mining | 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 Vale: Global Expansion in the Challenging World of Mining are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Vale Ore can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Vale Ore has opened avenues for new revenue streams for the organization in the industry. This can help Vale Ore to build a more holistic ecosystem as suggested in the Vale: Global Expansion in the Challenging World of Mining case study. Vale Ore can build new products and services such as - data insight services, data privacy related products, data based consulting services, 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 Vale Ore in the consumer business. Now Vale Ore can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Vale 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.
Loyalty marketing
– Vale 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.
Manufacturing automation
– Vale 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Vale 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 Vale Ore to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Vale 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.
Building a culture of innovation
– managers at Vale 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.
Using analytics as competitive advantage
– Vale 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 Vale: Global Expansion in the Challenging World of Mining - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Vale Ore to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Vale Ore can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Vale Ore is facing challenges because of the dominance of functional experts in the organization. Vale: Global Expansion in the Challenging World of Mining 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.
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. Vale Ore can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Vale: Global Expansion in the Challenging World of Mining External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Vale: Global Expansion in the Challenging World of Mining are -
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. Vale Ore needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Vale Ore has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Vale 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.
High dependence on third party suppliers
– Vale 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.
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 Vale Ore business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Vale 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 Vale 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 Vale Ore in the Strategy & Execution sector and impact the bottomline of the organization.
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. Vale 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 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.
Consumer confidence and its impact on Vale 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.
Environmental challenges
– Vale 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. Vale Ore can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Shortening product life cycle
– it is one of the major threat that Vale Ore is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Vale 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Vale 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 Vale: Global Expansion in the Challenging World of Mining .
Weighted SWOT Analysis of Vale: Global Expansion in the Challenging World of Mining 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 Vale: Global Expansion in the Challenging World of Mining 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 Vale: Global Expansion in the Challenging World of Mining 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 Vale: Global Expansion in the Challenging World of Mining 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 Vale: Global Expansion in the Challenging World of Mining 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 Vale Ore needs to make to build a sustainable competitive advantage.
