In 1996, PT Freeport Indonesia, the mining subsidiary of Freeport McMoRan, had just completed an expansion of its copper and gold mine in the western half of New Guinea. The mine, which had dealt with numerous environmental and sociocultural problems over the past couple of years, had recently proposed concrete plans for dealing with problems of acid drainage and spoils deposition. Now, although under widespread criticism and attack, the company is undergoing environmental and social audits and is again contemplating a major expansion.
Swot Analysis of "Freeport Indonesia" written by Richard H.K. Vietor includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Freeport Indonesia facing as an external strategic factors. Some of the topics covered in Freeport Indonesia case study are - Strategic Management Strategies, Government, Sustainability and Global Business.
Some of the macro environment factors that can be used to understand the Freeport Indonesia casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic ,
digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Freeport Indonesia
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Freeport Indonesia case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Freeport Indonesia, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Freeport Indonesia 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 Freeport Indonesia can be done for the following purposes –
1. Strategic planning using facts provided in Freeport Indonesia case study
2. Improving business portfolio management of Freeport Indonesia
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Freeport Indonesia
Strengths Freeport Indonesia | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Freeport Indonesia in Freeport Indonesia Harvard Business Review case study are -
Innovation driven organization
– Freeport Indonesia is one of the most innovative firm in sector. Manager in Freeport Indonesia Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Highly skilled collaborators
– Freeport Indonesia 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 Freeport Indonesia HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Freeport Indonesia 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.
Effective Research and Development (R&D)
– Freeport Indonesia 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 Freeport Indonesia - 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 Freeport Indonesia 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.
Successful track record of launching new products
– Freeport Indonesia has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Freeport Indonesia 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.
Low bargaining power of suppliers
– Suppliers of Freeport Indonesia in the sector have low bargaining power. Freeport Indonesia has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Freeport Indonesia to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Freeport Indonesia has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Freeport Indonesia 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.
Analytics focus
– Freeport Indonesia 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 Richard H.K. Vietor 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.
High brand equity
– Freeport Indonesia has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Freeport Indonesia to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Freeport Indonesia 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 Freeport Indonesia is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Freeport Indonesia Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Freeport Indonesia in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses Freeport Indonesia | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Freeport Indonesia are -
Increasing silos among functional specialists
– The organizational structure of Freeport Indonesia is dominated by functional specialists. It is not different from other players in the Global Business segment. Freeport Indonesia needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Freeport Indonesia to focus more on services rather than just following the product oriented approach.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Freeport Indonesia 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 Freeport Indonesia has relatively successful track record of launching new products.
Need for greater diversity
– Freeport Indonesia 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Freeport Indonesia is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Freeport Indonesia can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Freeport Indonesia 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.
No frontier risks strategy
– After analyzing the HBR case study Freeport Indonesia, it seems that company is thinking about the frontier risks that can impact Global Business 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.
Slow to strategic competitive environment developments
– As Freeport Indonesia HBR case study mentions - Freeport Indonesia 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Freeport Indonesia, it seems that the employees of Freeport Indonesia 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Freeport Indonesia 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 Freeport Indonesia 's lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Freeport Indonesia 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. Freeport Indonesia 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.
Low market penetration in new markets
– Outside its home market of Freeport Indonesia, firm in the HBR case study Freeport Indonesia needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Opportunities Freeport Indonesia | 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 Freeport Indonesia are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Freeport Indonesia 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, Freeport Indonesia, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Manufacturing automation
– Freeport Indonesia can use the latest technology developments to improve its manufacturing and designing process in Global Business 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.
Using analytics as competitive advantage
– Freeport Indonesia 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 Freeport Indonesia - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Freeport Indonesia to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Freeport Indonesia 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.
Loyalty marketing
– Freeport Indonesia 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 Freeport Indonesia can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Better consumer reach
– The expansion of the 5G network will help Freeport Indonesia to increase its market reach. Freeport Indonesia 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Freeport Indonesia can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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. Freeport Indonesia 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 Freeport Indonesia 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.
Learning at scale
– Online learning technologies has now opened space for Freeport Indonesia 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.
Buying journey improvements
– Freeport Indonesia can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Freeport Indonesia 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Freeport Indonesia is facing challenges because of the dominance of functional experts in the organization. Freeport Indonesia 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.
Threats Freeport Indonesia External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Freeport Indonesia are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Freeport Indonesia 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 Freeport Indonesia 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.
Environmental challenges
– Freeport Indonesia 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. Freeport Indonesia can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Freeport Indonesia, Freeport Indonesia may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
Technology acceleration in Forth Industrial Revolution
– Freeport Indonesia has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Freeport Indonesia needs to keep up with the evolution of technology in the Global Business 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.
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 Freeport Indonesia in the Global Business sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Freeport Indonesia 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 Freeport Indonesia .
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 Freeport Indonesia business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Freeport Indonesia 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.
Shortening product life cycle
– it is one of the major threat that Freeport Indonesia is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Freeport Indonesia.
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.
Regulatory challenges
– Freeport Indonesia 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 Global Business industry regulations.
Weighted SWOT Analysis of Freeport Indonesia 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 Freeport Indonesia 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 Freeport Indonesia 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 Freeport Indonesia 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 Freeport Indonesia 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 Freeport Indonesia needs to make to build a sustainable competitive advantage.