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 - – there is backlash against globalization, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing commodity prices, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion,
increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels, 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 -
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.
Innovation driven organization
– Oyu Tolgoi is one of the most innovative firm in sector. Manager in Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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.
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.
Ability to lead change in Global Business field
– Oyu Tolgoi 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 Oyu Tolgoi in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Oyu Tolgoi 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 Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
Analytics focus
– Oyu Tolgoi 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 Eric Werker, Battushig Batbold, Kelsey Kennedy, Zanna McComish 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.
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.
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.
Strong track record of project management
– Oyu Tolgoi is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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 -
Lack of clear differentiation of Oyu Tolgoi products
– To increase the profitability and margins on the products, Oyu Tolgoi needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
Slow decision making process
– As mentioned earlier in the report, Oyu Tolgoi 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. Oyu Tolgoi 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.
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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Oyu Tolgoi supply chain. Even after few cautionary changes mentioned in the HBR case study - Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Oyu Tolgoi vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– It come across in the case study Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit 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 Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit can leverage the sales team experience to cultivate customer relationships as Oyu Tolgoi is planning to shift buying processes online.
Skills based hiring
– The stress on hiring functional specialists at Oyu Tolgoi 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Eric Werker, Battushig Batbold, Kelsey Kennedy, Zanna McComish suggests that, Oyu Tolgoi 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.
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.
Slow to strategic competitive environment developments
– As Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit HBR case study mentions - Oyu Tolgoi 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.
Increasing silos among functional specialists
– The organizational structure of Oyu Tolgoi is dominated by functional specialists. It is not different from other players in the Global Business segment. Oyu Tolgoi needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Oyu Tolgoi to focus more on services rather than just following the product oriented approach.
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 -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Oyu Tolgoi 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 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.
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.
Developing new processes and practices
– Oyu Tolgoi 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, 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.
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.
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.
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. Oyu Tolgoi can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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 Oyu Tolgoi in the consumer business. Now Oyu Tolgoi can target international markets with far fewer capital restrictions requirements than the existing system.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Oyu Tolgoi can use these opportunities to build new business models that can help the communities that Oyu Tolgoi operates in. Secondly it can use opportunities from government spending in Global Business sector.
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.
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.
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 -
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 Oyu Tolgoi business can come under increasing regulations regarding data privacy, data security, etc.
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. Oyu Tolgoi can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Technology acceleration in Forth Industrial Revolution
– Oyu Tolgoi has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Oyu Tolgoi 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.
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.
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.
Regulatory challenges
– Oyu Tolgoi 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.
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.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Oyu Tolgoi needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Oyu Tolgoi 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 Rio Tinto and Mining in Mongolia: The Oyu Tolgoi Deposit .
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.
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.
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.