BHP: Negotiating Iron Ore Prices With China SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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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 - – customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, increasing commodity prices, increasing transportation and logistics costs, supply chains are disrupted by pandemic , central banks are concerned over increasing inflation,
increasing energy prices, increasing household debt because of falling income levels, 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 -
Organizational Resilience of Ore Iron
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Ore Iron does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
Cross disciplinary teams
– Horizontal connected teams at the Ore Iron 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.
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.
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.
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.
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.
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.
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.
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.
Superior customer experience
– The customer experience strategy of Ore Iron in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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 -
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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Ore Iron is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study BHP: Negotiating Iron Ore Prices With China can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Aligning sales with marketing
– It come across in the case study BHP: Negotiating Iron Ore Prices With China 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 BHP: Negotiating Iron Ore Prices With China can leverage the sales team experience to cultivate customer relationships as Ore Iron is planning to shift buying processes online.
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.
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.
Need for greater diversity
– Ore Iron 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 decision making process
– As mentioned earlier in the report, Ore Iron 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. Ore Iron 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.
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.
Skills based hiring
– The stress on hiring functional specialists at Ore Iron 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.
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 -
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Ore Iron can use these opportunities to build new business models that can help the communities that Ore Iron operates in. Secondly it can use opportunities from government spending in Global Business sector.
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.
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 Ore Iron 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
– 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.
Using analytics as competitive advantage
– Ore Iron 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 BHP: Negotiating Iron Ore Prices With China - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Ore Iron to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Loyalty marketing
– Ore Iron 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 Ore Iron can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Ore Iron 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, BHP: Negotiating Iron Ore Prices With China, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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 -
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.
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.
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 .
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.
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.
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.
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.
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.
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.
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 Ore Iron in the Global Business sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Ore Iron with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
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.
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.