Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Global Business
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit
In 2013, Rio Tinto was expected to begin commercial shipments from Oyu Tolgoi, a copper and gold mine in the Gobi Desert of Mongolia. Oyu Tolgoi was one of the last great unmined deposits in the world, and, once operations were in full swing, was expected to constitute around a tenth of Rio Tinto's profits and over a quarter of Mongolia's GDP. But the terms of the deal were being threatened by elections in Mongolian and a change in voter sentiment towards the project. With around $6 billion invested, Rio Tinto had to figure out how to make its investment work out. Meanwhile the Mongolian government, facing scorching economic growth rates, had to lead the country through its most significant transformation since the time of Ghengis Khan nine centuries earlier.
Authors :: Eric Werker, Battushig Batbold, Kelsey Kennedy, Zanna McComish
Swot Analysis of "Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit" written by Eric Werker, Battushig Batbold, Kelsey Kennedy, Zanna McComish includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Oyu Tolgoi facing as an external strategic factors. Some of the topics covered in Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit case study are - Strategic Management Strategies, Financial management, Government and Global Business.
Some of the macro environment factors that can be used to understand the Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit 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, cloud computing is disrupting traditional business models, technology disruption, increasing energy prices, increasing transportation and logistics costs, central banks are concerned over increasing inflation,
challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Oyu Tolgoi, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Oyu Tolgoi 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 Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit can be done for the following purposes –
1. Strategic planning using facts provided in Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit case study
2. Improving business portfolio management of Oyu Tolgoi
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 Oyu Tolgoi
Strengths Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Oyu Tolgoi in Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit 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.
Effective Research and Development (R&D)
– Oyu Tolgoi 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 Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Digital Transformation in Global Business segment
- digital transformation varies from industry to industry. For Oyu Tolgoi digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Oyu Tolgoi 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.
Cross disciplinary teams
– Horizontal connected teams at the Oyu Tolgoi 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.
Superior customer experience
– The customer experience strategy of Oyu Tolgoi in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High brand equity
– Oyu Tolgoi has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Oyu Tolgoi to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Global Business industry
– Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit firm has clearly differentiated products in the market place. This has enabled Oyu Tolgoi to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Oyu Tolgoi to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Oyu Tolgoi has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Oyu Tolgoi 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 Oyu Tolgoi in the sector have low bargaining power. Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Oyu Tolgoi to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Oyu Tolgoi
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Oyu Tolgoi does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Oyu Tolgoi 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 Oyu Tolgoi is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Training and development
– Oyu Tolgoi has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit 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.
Weaknesses Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit are -
Workers concerns about automation
– As automation is fast increasing in the segment, Oyu Tolgoi 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
– Oyu Tolgoi 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, Oyu Tolgoi is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit, is just above the industry average. Oyu Tolgoi 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.
High cash cycle compare to competitors
Oyu Tolgoi 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.
Capital Spending Reduction
– Even during the low interest decade, Oyu Tolgoi 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.
Low market penetration in new markets
– Outside its home market of Oyu Tolgoi, firm in the HBR case study Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit, in the dynamic environment Oyu Tolgoi has struggled to respond to the nimble upstart competition. Oyu Tolgoi has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
No frontier risks strategy
– After analyzing the HBR case study Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit, 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.
Interest costs
– Compare to the competition, Oyu Tolgoi has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit, it seems that the employees of Oyu Tolgoi 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.
Opportunities Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit | 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 Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit are -
Using analytics as competitive advantage
– Oyu Tolgoi 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 Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Oyu Tolgoi to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Oyu Tolgoi can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Oyu Tolgoi has opened avenues for new revenue streams for the organization in the industry. This can help Oyu Tolgoi to build a more holistic ecosystem as suggested in the Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit case study. Oyu Tolgoi can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Buying journey improvements
– Oyu Tolgoi can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit 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.
Learning at scale
– Online learning technologies has now opened space for Oyu Tolgoi 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Oyu Tolgoi 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, Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Oyu Tolgoi 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.
Loyalty marketing
– Oyu Tolgoi 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.
Building a culture of innovation
– managers at Oyu Tolgoi 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.
Manufacturing automation
– Oyu Tolgoi 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Oyu Tolgoi 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Oyu Tolgoi 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 Oyu Tolgoi to increase its market reach. Oyu Tolgoi will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Threats Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit are -
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Oyu Tolgoi in the Global Business industry. The Global Business 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.
Shortening product life cycle
– it is one of the major threat that Oyu Tolgoi is facing in Global Business sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Oyu Tolgoi 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. Oyu Tolgoi can take advantage of this fund but it will also bring new competitors in the Global Business industry.
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 Oyu Tolgoi in the Global Business sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Oyu Tolgoi 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Oyu Tolgoi with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High dependence on third party suppliers
– Oyu Tolgoi 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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Oyu Tolgoi will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Consumer confidence and its impact on Oyu Tolgoi 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.
Increasing wage structure of Oyu Tolgoi
– 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 Oyu Tolgoi.
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.
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 Oyu Tolgoi.
Weighted SWOT Analysis of Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit 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 Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit 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 Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit 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 Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit 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 Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit 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 Oyu Tolgoi needs to make to build a sustainable competitive advantage.
