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 - – cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, supply chains are disrupted by pandemic ,
increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, 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 -
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.
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.
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.
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.
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.
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 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.
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.
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.
Diverse revenue streams
– Gold Hedging is present in almost all the verticals within the industry. This has provided firm in Barrick Gold: Eliminating the Gold Hedging Strategy 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 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.
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 -
Slow to strategic competitive environment developments
– As Barrick Gold: Eliminating the Gold Hedging Strategy 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.
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.
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.
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.
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.
Low market penetration in new markets
– Outside its home market of Gold Hedging, firm in the HBR case study Barrick Gold: Eliminating the Gold Hedging Strategy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
High bargaining power of channel partners
– Because of the regulatory requirements, Murray Bryant, Ken Mark 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Gold Hedging is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Barrick Gold: Eliminating the Gold Hedging Strategy can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
No frontier risks strategy
– After analyzing the HBR case study Barrick Gold: Eliminating the Gold Hedging Strategy, it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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.
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 -
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.
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.
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. Gold Hedging can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
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.
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.
Developing new processes and practices
– Gold Hedging can develop new processes and procedures in Finance & Accounting 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.
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.
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.
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.
Buying journey improvements
– Gold Hedging can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Barrick Gold: Eliminating the Gold Hedging Strategy 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.
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.
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 -
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.
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 .
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.
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.
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 .
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.
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.
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.
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.
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.
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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Consumer confidence and its impact on 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.
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.