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 - – increasing energy prices, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, there is backlash against globalization, cloud computing is disrupting traditional business models,
banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, 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 -
High switching costs
– The high switching costs that Codelco Copper 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
- 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.
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.
High brand equity
– Codelco Copper has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Codelco Copper to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
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.
Highly skilled collaborators
– Codelco Copper has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Codelco Copper Mines HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Technology & Operations industry
– Codelco Copper Mines firm has clearly differentiated products in the market place. This has enabled Codelco Copper to fetch slight price premium compare to the competitors in the Technology & Operations industry. The sustainable margins have also helped Codelco Copper to invest into research and development (R&D) and innovation.
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.
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.
Successful track record of launching new products
– Codelco Copper has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Codelco Copper 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.
Training and development
– Codelco Copper has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Codelco Copper Mines 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.
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 -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Codelco Copper Mines, it seems that the employees of Codelco Copper 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.
Lack of clear differentiation of Codelco Copper products
– To increase the profitability and margins on the products, Codelco Copper needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Codelco Copper Mines, is just above the industry average. Codelco Copper 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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Codelco Copper is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Codelco Copper Mines can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Codelco Copper Mines, in the dynamic environment Codelco Copper has struggled to respond to the nimble upstart competition. Codelco Copper has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High cash cycle compare to competitors
Codelco Copper 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.
Interest costs
– Compare to the competition, Codelco Copper 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.
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 -
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.
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.
Loyalty marketing
– Codelco Copper 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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Codelco Copper can use these opportunities to build new business models that can help the communities that Codelco Copper operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
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.
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.
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.
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.
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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Codelco Copper 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. Codelco Copper 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.
Using analytics as competitive advantage
– Codelco Copper 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 Codelco Copper Mines - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Codelco Copper to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 -
Regulatory challenges
– Codelco Copper 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 Technology & Operations industry regulations.
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.
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.
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.
Consumer confidence and its impact on Codelco Copper 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.
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 Codelco Copper.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Codelco Copper 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 Codelco Copper Mines .
Shortening product life cycle
– it is one of the major threat that Codelco Copper is facing in Technology & Operations 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 Codelco Copper business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
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.
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.