BHP: Negotiating Iron Ore Prices With China SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Global Business
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of BHP: Negotiating Iron Ore Prices With China
As the largest iron ore consumer and steel producer, China accounted for 35% of world iron ore imports and over 25% of world steel production. Two-thirds of the iron ore market was dominated by only three companies--Australian-owned BHP Billiton Ore (BHPBIO or BHP), Rio Tinto Hamersley Iron Unit (RTHI), and Brazilian-owned Companhia Vale do Rio Doce SA (CVRD). In February 2005, following a deal between CVRD and Nippon Steel, the price of iron ore increased by 71.5%. This deal, together with the advantage of lower-cost freight advantages for Australian iron ore, led BHP to ask for an extra charge from Chinese companies. Chinese steel producers strongly opposed this demand and in April 2005 the proposed price increase was dropped for the sake of future trade relations with China. However, BHP was still keen on implementing it in the future.
Authors :: Carola Ramon-Berjano, Zhigang Tao, Ivan Png
Swot Analysis of "BHP: Negotiating Iron Ore Prices With China" written by Carola Ramon-Berjano, Zhigang Tao, Ivan Png includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ore Iron facing as an external strategic factors. Some of the topics covered in BHP: Negotiating Iron Ore Prices With China case study are - Strategic Management Strategies, Supply chain and Global Business.
Some of the macro environment factors that can be used to understand the BHP: Negotiating Iron Ore Prices With China casestudy better are - – increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, increasing energy prices,
central banks are concerned over increasing inflation, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of BHP: Negotiating Iron Ore Prices With China
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in BHP: Negotiating Iron Ore Prices With China case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ore Iron, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ore Iron 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 BHP: Negotiating Iron Ore Prices With China can be done for the following purposes –
1. Strategic planning using facts provided in BHP: Negotiating Iron Ore Prices With China case study
2. Improving business portfolio management of Ore Iron
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 Ore Iron
Strengths BHP: Negotiating Iron Ore Prices With China | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ore Iron in BHP: Negotiating Iron Ore Prices With China Harvard Business Review case study are -
High brand equity
– Ore Iron has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ore Iron to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Ore Iron digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Ore Iron 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.
Ability to recruit top talent
– Ore Iron is one of the leading recruiters in the industry. Managers in the BHP: Negotiating Iron Ore Prices With China are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Ability to lead change in Global Business field
– Ore Iron is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Ore Iron in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Ore Iron is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Low bargaining power of suppliers
– Suppliers of Ore Iron in the sector have low bargaining power. BHP: Negotiating Iron Ore Prices With China has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Ore Iron to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Ore Iron has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Ore Iron 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.
Highly skilled collaborators
– Ore Iron 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 BHP: Negotiating Iron Ore Prices With China HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy in the BHP: Negotiating Iron Ore Prices With China Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Learning organization
- Ore Iron 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 Ore Iron is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in BHP: Negotiating Iron Ore Prices With China Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Analytics focus
– Ore Iron 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 Carola Ramon-Berjano, Zhigang Tao, Ivan Png 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.
Sustainable margins compare to other players in Global Business industry
– BHP: Negotiating Iron Ore Prices With China firm has clearly differentiated products in the market place. This has enabled Ore Iron to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Ore Iron to invest into research and development (R&D) and innovation.
Weaknesses BHP: Negotiating Iron Ore Prices With China | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of BHP: Negotiating Iron Ore Prices With China are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the BHP: Negotiating Iron Ore Prices With China 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 Ore Iron has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the segment, Ore Iron 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study BHP: Negotiating Iron Ore Prices With China, it seems that the employees of Ore Iron 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.
Products dominated business model
– Even though Ore Iron 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 - BHP: Negotiating Iron Ore Prices With China should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Ore Iron has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High operating costs
– Compare to the competitors, firm in the HBR case study BHP: Negotiating Iron Ore Prices With China 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 Ore Iron 's lucrative customers.
Lack of clear differentiation of Ore Iron products
– To increase the profitability and margins on the products, Ore Iron needs to provide more differentiated products than what it is currently offering in the marketplace.
Increasing silos among functional specialists
– The organizational structure of Ore Iron is dominated by functional specialists. It is not different from other players in the Global Business segment. Ore Iron needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Ore Iron to focus more on services rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of Ore Iron, firm in the HBR case study BHP: Negotiating Iron Ore Prices With China needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High bargaining power of channel partners
– Because of the regulatory requirements, Carola Ramon-Berjano, Zhigang Tao, Ivan Png suggests that, Ore Iron 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.
No frontier risks strategy
– After analyzing the HBR case study BHP: Negotiating Iron Ore Prices With China, 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.
Opportunities BHP: Negotiating Iron Ore Prices With China | 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 BHP: Negotiating Iron Ore Prices With China are -
Creating value in data economy
– The success of analytics program of Ore Iron has opened avenues for new revenue streams for the organization in the industry. This can help Ore Iron to build a more holistic ecosystem as suggested in the BHP: Negotiating Iron Ore Prices With China case study. Ore Iron can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Ore Iron 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. Ore Iron 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.
Better consumer reach
– The expansion of the 5G network will help Ore Iron to increase its market reach. Ore Iron 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Ore Iron in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Global Business segment, and it will provide faster access to the consumers.
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. Ore Iron 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. Ore Iron can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Building a culture of innovation
– managers at Ore Iron 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 Global Business segment.
Buying journey improvements
– Ore Iron can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. BHP: Negotiating Iron Ore Prices With China 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.
Developing new processes and practices
– Ore Iron can develop new processes and procedures in Global Business 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Ore Iron 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Ore Iron 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 Ore Iron to hire the very best people irrespective of their geographical location.
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 Ore Iron in the consumer business. Now Ore Iron can target international markets with far fewer capital restrictions requirements than the existing system.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Ore Iron is facing challenges because of the dominance of functional experts in the organization. BHP: Negotiating Iron Ore Prices With China 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 BHP: Negotiating Iron Ore Prices With China External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study BHP: Negotiating Iron Ore Prices With China are -
Environmental challenges
– Ore Iron 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. Ore Iron can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Ore Iron can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Ore Iron 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.
Increasing wage structure of Ore Iron
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Ore Iron.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study BHP: Negotiating Iron Ore Prices With China, Ore Iron 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 .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Ore Iron 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 BHP: Negotiating Iron Ore Prices With China .
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 Ore Iron.
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 Ore Iron business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Ore Iron 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 Ore Iron is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Ore Iron has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Ore Iron 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.
Stagnating economy with rate increase
– Ore Iron 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.
Consumer confidence and its impact on Ore Iron 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 BHP: Negotiating Iron Ore Prices With China 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 BHP: Negotiating Iron Ore Prices With China 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 BHP: Negotiating Iron Ore Prices With China 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 BHP: Negotiating Iron Ore Prices With China 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 BHP: Negotiating Iron Ore Prices With China 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 Ore Iron needs to make to build a sustainable competitive advantage.
