Case Study Description of Barrick Gold: Eliminating the Gold Hedging Strategy
Barrick Gold, the largest gold producer in the world, has taken steps to eliminate its longstanding gold hedging program. In its early years, Barrick's hedging program was a key factor allowing the firm to grow amidst falling gold prices. But Barricks management team faced questions about its hedging program when gold prices started to rise in the 2000s. The case allows students to review Barrick's hedging program and consider the impact of its decision not to hedge going forward.
Swot Analysis of "Barrick Gold: Eliminating the Gold Hedging Strategy" written by Murray Bryant, Ken Mark 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 Barrick Gold: Eliminating the Gold Hedging Strategy case study are - Strategic Management Strategies, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Barrick Gold: Eliminating the Gold Hedging Strategy casestudy better are - – there is backlash against globalization, cloud computing is disrupting traditional business models, increasing commodity prices, there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, increasing energy prices, geopolitical disruptions,
supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of Barrick Gold: Eliminating the Gold Hedging Strategy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Barrick Gold: Eliminating the Gold Hedging Strategy 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 Barrick Gold: Eliminating the Gold Hedging Strategy can be done for the following purposes –
1. Strategic planning using facts provided in Barrick Gold: Eliminating the Gold Hedging Strategy 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 Barrick Gold: Eliminating the Gold Hedging Strategy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Gold Hedging in Barrick Gold: Eliminating the Gold Hedging Strategy Harvard Business Review case study are -
Ability to recruit top talent
– Gold Hedging is one of the leading recruiters in the industry. Managers in the Barrick Gold: Eliminating the Gold Hedging Strategy are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Superior customer experience
– The customer experience strategy of Gold Hedging in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Gold Hedging
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Gold Hedging does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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 Barrick Gold: Eliminating the Gold Hedging Strategy Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
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 Barrick Gold: Eliminating the Gold Hedging Strategy 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.
Cross disciplinary teams
– Horizontal connected teams at the Gold Hedging are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Innovation driven organization
– Gold Hedging is one of the most innovative firm in sector. Manager in Barrick Gold: Eliminating the Gold Hedging Strategy Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Low bargaining power of suppliers
– Suppliers of Gold Hedging in the sector have low bargaining power. Barrick Gold: Eliminating the Gold Hedging Strategy 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.
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 Barrick Gold: Eliminating the Gold Hedging Strategy - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Gold Hedging 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Barrick Gold: Eliminating the Gold Hedging Strategy 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.
Weaknesses Barrick Gold: Eliminating the Gold Hedging Strategy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Barrick Gold: Eliminating the Gold Hedging Strategy are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Barrick Gold: Eliminating the Gold Hedging Strategy, is just above the industry average. Gold Hedging 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.
Aligning sales with marketing
– It come across in the case study Barrick Gold: Eliminating the Gold Hedging Strategy 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 Barrick Gold: Eliminating the Gold Hedging Strategy can leverage the sales team experience to cultivate customer relationships as Gold Hedging is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of Gold Hedging is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Gold Hedging needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Gold Hedging to focus more on services rather than just following the product oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Barrick Gold: Eliminating the Gold Hedging Strategy, in the dynamic environment Gold Hedging has struggled to respond to the nimble upstart competition. Gold Hedging has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Need for greater diversity
– Gold Hedging has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Capital Spending Reduction
– Even during the low interest decade, 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Barrick Gold: Eliminating the Gold Hedging Strategy 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 Gold Hedging has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, firm in the HBR case study Barrick Gold: Eliminating the Gold Hedging Strategy 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 Gold Hedging 's lucrative customers.
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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Barrick Gold: Eliminating the Gold Hedging Strategy, it seems that the employees of Gold Hedging 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.
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.
Opportunities Barrick Gold: Eliminating the Gold Hedging Strategy | 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 Barrick Gold: Eliminating the Gold Hedging Strategy are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Gold Hedging can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Gold Hedging can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, 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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Gold Hedging 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, Barrick Gold: Eliminating the Gold Hedging Strategy, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Gold Hedging 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 Barrick Gold: Eliminating the Gold Hedging Strategy - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Gold Hedging to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
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.
Building a culture of innovation
– managers at Gold Hedging 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 Finance & Accounting segment.
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.
Better consumer reach
– The expansion of the 5G network will help Gold Hedging to increase its market reach. Gold Hedging will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Threats Barrick Gold: Eliminating the Gold Hedging Strategy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Barrick Gold: Eliminating the Gold Hedging Strategy are -
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
– 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Gold Hedging in the Finance & Accounting industry. The Finance & Accounting 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.
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.
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 Barrick Gold: Eliminating the Gold Hedging Strategy .
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.
Consumer confidence and its impact on Gold Hedging 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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Barrick Gold: Eliminating the Gold Hedging Strategy, 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 .
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 Gold Hedging in the Finance & Accounting sector and impact the bottomline of the organization.
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.
Shortening product life cycle
– it is one of the major threat that Gold Hedging is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Barrick Gold: Eliminating the Gold Hedging Strategy 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 Barrick Gold: Eliminating the Gold Hedging Strategy 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 Barrick Gold: Eliminating the Gold Hedging Strategy 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 Barrick Gold: Eliminating the Gold Hedging Strategy 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 Barrick Gold: Eliminating the Gold Hedging Strategy 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.
