Case Study Description of American Barrick Resources Corp.: Managing Gold Price Risk
Managing the risk of changing prices of gold is central to the business strategy of American Barrick Resources Corp., one of North America's largest and most successful gold-mining firms. The case contrasts this firm's hedging policies with those of its rivals that do not hedge and details the wide range of hedging products (gold loans, forwards, options, spot deferred contracts) used to manage price risk. In 1992 the management of American Barrick is pleasantly surprised by unexpected new gold finds, but this new production places demands on the firm's hedging program and tests the firm's commitment to hedging when prices of gold and of many hedging vehicles are unattractive.
Swot Analysis of "American Barrick Resources Corp.: Managing Gold Price Risk" written by Peter Tufano, Jon D. Serbin includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Gold Hedging facing as an external strategic factors. Some of the topics covered in American Barrick Resources Corp.: Managing Gold Price Risk case study are - Strategic Management Strategies, and Finance & Accounting.
Some of the macro environment factors that can be used to understand the American Barrick Resources Corp.: Managing Gold Price Risk casestudy better are - – increasing transportation and logistics costs, increasing commodity prices, technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models,
increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of American Barrick Resources Corp.: Managing Gold Price Risk
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in American Barrick Resources Corp.: Managing Gold Price Risk case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Gold Hedging, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Gold Hedging 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 American Barrick Resources Corp.: Managing Gold Price Risk can be done for the following purposes –
1. Strategic planning using facts provided in American Barrick Resources Corp.: Managing Gold Price Risk case study
2. Improving business portfolio management of Gold Hedging
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Gold Hedging
Strengths American Barrick Resources Corp.: Managing Gold Price Risk | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Gold Hedging in American Barrick Resources Corp.: Managing Gold Price Risk Harvard Business Review case study are -
Training and development
– Gold Hedging has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in American Barrick Resources Corp.: Managing Gold Price Risk 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.
High brand equity
– Gold Hedging has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Gold Hedging to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Gold Hedging 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 Peter Tufano, Jon D. Serbin 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.
Learning organization
- Gold Hedging 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 Gold Hedging is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in American Barrick Resources Corp.: Managing Gold Price Risk Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Finance & Accounting industry
– American Barrick Resources Corp.: Managing Gold Price Risk firm has clearly differentiated products in the market place. This has enabled Gold Hedging to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Gold Hedging to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Gold Hedging in the sector have low bargaining power. American Barrick Resources Corp.: Managing Gold Price Risk has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Gold Hedging to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Gold Hedging has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Gold Hedging 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.
Effective Research and Development (R&D)
– Gold Hedging 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 American Barrick Resources Corp.: Managing Gold Price Risk - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Gold Hedging digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Gold Hedging 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.
Diverse revenue streams
– Gold Hedging is present in almost all the verticals within the industry. This has provided firm in American Barrick Resources Corp.: Managing Gold Price Risk 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
– Gold Hedging is one of the leading recruiters in the industry. Managers in the American Barrick Resources Corp.: Managing Gold Price Risk are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Gold Hedging 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 American Barrick Resources Corp.: Managing Gold Price Risk HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses American Barrick Resources Corp.: Managing Gold Price Risk | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of American Barrick Resources Corp.: Managing Gold Price Risk are -
Skills based hiring
– The stress on hiring functional specialists at Gold Hedging 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.
Products dominated business model
– Even though Gold Hedging 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 - American Barrick Resources Corp.: Managing Gold Price Risk should strive to include more intangible value offerings along with its core products and services.
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 Gold Hedging supply chain. Even after few cautionary changes mentioned in the HBR case study - American Barrick Resources Corp.: Managing Gold Price Risk, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Gold Hedging vulnerable to further global disruptions in South East Asia.
High bargaining power of channel partners
– Because of the regulatory requirements, Peter Tufano, Jon D. Serbin suggests that, Gold Hedging 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.
Capital Spending Reduction
– Even during the low interest decade, Gold Hedging 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 to strategic competitive environment developments
– As American Barrick Resources Corp.: Managing Gold Price Risk HBR case study mentions - Gold Hedging 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.
Low market penetration in new markets
– Outside its home market of Gold Hedging, firm in the HBR case study American Barrick Resources Corp.: Managing Gold Price Risk needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Aligning sales with marketing
– It come across in the case study American Barrick Resources Corp.: Managing Gold Price Risk that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case American Barrick Resources Corp.: Managing Gold Price Risk can leverage the sales team experience to cultivate customer relationships as Gold Hedging is planning to shift buying processes online.
Interest costs
– Compare to the competition, Gold Hedging 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.
Slow decision making process
– As mentioned earlier in the report, Gold Hedging 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. Gold Hedging 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Gold Hedging 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.
Opportunities American Barrick Resources Corp.: Managing Gold Price Risk | 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 American Barrick Resources Corp.: Managing Gold Price Risk are -
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Gold Hedging 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. Gold Hedging 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.
Loyalty marketing
– Gold Hedging 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.
Creating value in data economy
– The success of analytics program of Gold Hedging has opened avenues for new revenue streams for the organization in the industry. This can help Gold Hedging to build a more holistic ecosystem as suggested in the American Barrick Resources Corp.: Managing Gold Price Risk case study. Gold Hedging can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Gold Hedging can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting 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.
Leveraging digital technologies
– Gold Hedging 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.
Buying journey improvements
– Gold Hedging can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. American Barrick Resources Corp.: Managing Gold Price Risk 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.
Learning at scale
– Online learning technologies has now opened space for Gold Hedging 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Gold Hedging in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Gold Hedging 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 Gold Hedging to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Gold Hedging can use these opportunities to build new business models that can help the communities that Gold Hedging operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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 Gold Hedging 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Gold Hedging can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Gold Hedging in the consumer business. Now Gold Hedging can target international markets with far fewer capital restrictions requirements than the existing system.
Threats American Barrick Resources Corp.: Managing Gold Price Risk External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study American Barrick Resources Corp.: Managing Gold Price Risk are -
Stagnating economy with rate increase
– Gold Hedging 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.
High dependence on third party suppliers
– Gold Hedging 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.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Gold Hedging can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Gold Hedging.
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 Gold Hedging business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Gold Hedging has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Gold Hedging needs to keep up with the evolution of technology in the Finance & Accounting 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.
Regulatory challenges
– Gold Hedging 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 Finance & Accounting 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study American Barrick Resources Corp.: Managing Gold Price Risk, Gold Hedging may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Environmental challenges
– Gold Hedging 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. Gold Hedging can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Gold Hedging with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Gold Hedging needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Gold Hedging 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 American Barrick Resources Corp.: Managing Gold Price Risk .
Weighted SWOT Analysis of American Barrick Resources Corp.: Managing Gold Price Risk 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 American Barrick Resources Corp.: Managing Gold Price Risk 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 American Barrick Resources Corp.: Managing Gold Price Risk 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 American Barrick Resources Corp.: Managing Gold Price Risk 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 American Barrick Resources Corp.: Managing Gold Price Risk 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 Gold Hedging needs to make to build a sustainable competitive advantage.