Codelco was a Chilean copper-mining company, widely considered to be one of the most professionally managed firms in South America in spite of the fact that it was 100% government-owned. A $10.5 billion company in 2005, Codelco faced the challenge of incorporating information technology into its production processes, which had historically been very manual in nature. CEO Juan Villarzu's initial turnaround attempts introduced a customer-centric corporate culture to his ranks, but he was still challenged by how to create an outsourcing strategy given his location and the traditionally low IT-to-total-spending ratio in the mining industry. Villarzu envisioned moving to a robust IT architecture, enhancing the solutions that were available, identifying further needs in the company and deciding how to fix them, and working together with Codelco's business processes to assess, plan, and build new IT projects.
Authors :: David M. Upton, Bradley R. Staats, Virginia A. Fuller
Swot Analysis of "Codelco Copper Mines" written by David M. Upton, Bradley R. Staats, Virginia A. Fuller includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Codelco Copper facing as an external strategic factors. Some of the topics covered in Codelco Copper Mines case study are - Strategic Management Strategies, IT, Manufacturing and Technology & Operations.
Some of the macro environment factors that can be used to understand the Codelco Copper Mines casestudy better are - – technology disruption, geopolitical disruptions, wage bills are increasing, increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google, increasing commodity prices,
increasing energy prices, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Codelco Copper Mines
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Codelco Copper Mines case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Codelco Copper, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Codelco Copper 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 Codelco Copper Mines can be done for the following purposes –
1. Strategic planning using facts provided in Codelco Copper Mines case study
2. Improving business portfolio management of Codelco Copper
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Codelco Copper
Strengths Codelco Copper Mines | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Codelco Copper in Codelco Copper Mines Harvard Business Review case study are -
Ability to lead change in Technology & Operations field
– Codelco Copper 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 Codelco Copper in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Superior customer experience
– The customer experience strategy of Codelco Copper in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Codelco Copper is one of the most innovative firm in sector. Manager in Codelco Copper Mines Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to recruit top talent
– Codelco Copper is one of the leading recruiters in the industry. Managers in the Codelco Copper Mines are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Analytics focus
– Codelco Copper 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 David M. Upton, Bradley R. Staats, Virginia A. Fuller 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.
Strong track record of project management
– Codelco Copper is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Codelco Copper
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Codelco Copper does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Codelco Copper 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 Codelco Copper is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Codelco Copper Mines Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Codelco Copper in the sector have low bargaining power. Codelco Copper Mines has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Codelco Copper to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Codelco Copper digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Codelco Copper 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.
Operational resilience
– The operational resilience strategy in the Codelco Copper Mines 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.
Diverse revenue streams
– Codelco Copper is present in almost all the verticals within the industry. This has provided firm in Codelco Copper Mines 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.
Weaknesses Codelco Copper Mines | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Codelco Copper Mines are -
Capital Spending Reduction
– Even during the low interest decade, Codelco Copper 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.
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 Codelco Copper supply chain. Even after few cautionary changes mentioned in the HBR case study - Codelco Copper Mines, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Codelco Copper vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, Codelco Copper 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. Codelco Copper 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.
Need for greater diversity
– Codelco Copper 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Codelco Copper 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 operating costs
– Compare to the competitors, firm in the HBR case study Codelco Copper Mines 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 Codelco Copper 's lucrative customers.
High bargaining power of channel partners
– Because of the regulatory requirements, David M. Upton, Bradley R. Staats, Virginia A. Fuller suggests that, Codelco Copper 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.
Low market penetration in new markets
– Outside its home market of Codelco Copper, firm in the HBR case study Codelco Copper Mines needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Skills based hiring
– The stress on hiring functional specialists at Codelco Copper 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Codelco Copper Mines 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 Codelco Copper has relatively successful track record of launching new products.
Increasing silos among functional specialists
– The organizational structure of Codelco Copper is dominated by functional specialists. It is not different from other players in the Technology & Operations segment. Codelco Copper needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Codelco Copper to focus more on services rather than just following the product oriented approach.
Opportunities Codelco Copper Mines | 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 Codelco Copper Mines are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Codelco Copper can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Codelco Copper 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, Codelco Copper Mines, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Codelco Copper 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 Codelco Copper to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Codelco Copper can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Codelco Copper Mines 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Codelco Copper 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.
Manufacturing automation
– Codelco Copper can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations 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.
Building a culture of innovation
– managers at Codelco Copper 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 Technology & Operations segment.
Learning at scale
– Online learning technologies has now opened space for Codelco Copper 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.
Developing new processes and practices
– Codelco Copper can develop new processes and procedures in Technology & Operations 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Codelco Copper is facing challenges because of the dominance of functional experts in the organization. Codelco Copper Mines 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.
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. Codelco Copper can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Codelco Copper 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.
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 Codelco Copper in the consumer business. Now Codelco Copper can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Codelco Copper Mines External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Codelco Copper Mines are -
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Codelco Copper can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Codelco Copper 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.
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 Codelco Copper business can come under increasing regulations regarding data privacy, data security, 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. Codelco Copper 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Codelco Copper in the Technology & Operations industry. The Technology & Operations 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Codelco Copper with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Codelco Copper Mines, Codelco Copper may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Technology & Operations .
Increasing wage structure of Codelco Copper
– 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 Codelco Copper.
Environmental challenges
– Codelco Copper 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. Codelco Copper can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
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. Codelco Copper needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
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 Codelco Copper in the Technology & Operations sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Codelco Copper has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Codelco Copper needs to keep up with the evolution of technology in the Technology & Operations 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
– Codelco Copper 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.
Weighted SWOT Analysis of Codelco Copper Mines 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 Codelco Copper Mines 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 Codelco Copper Mines 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 Codelco Copper Mines 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 Codelco Copper Mines 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 Codelco Copper needs to make to build a sustainable competitive advantage.