Fortescue Metals Group: Becoming "The New Force in Iron Ore" SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Innovation & Entrepreneurship
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Fortescue Metals Group: Becoming "The New Force in Iron Ore"
In 2003, Andrew Forrest planned to enter the iron ore industry, which was highly capital intensive, consolidating, and dominated by three companies. Less than five years later, his start-up, Fortescue Metals Group, loaded its first ore onto a ship bound for China. In those five years, the Western Australia company raised more than US$2.5 billion, acquired more than 1 billion metric tons of iron ore reserves, built a mine and processing facility, 256 km of railway, and a port for large ore-carrying ships. Fortescue was profitable in its first full year of production, and expanding its capacity. This case describes Fortescue's early years, the challenges the company faced, and the ways it met those challenges. It also describes challenges facing the company in October 2010, as it looks to the future.
Swot Analysis of "Fortescue Metals Group: Becoming "The New Force in Iron Ore"" written by George Foster, David W. Hoyt includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Ore Fortescue facing as an external strategic factors. Some of the topics covered in Fortescue Metals Group: Becoming "The New Force in Iron Ore" case study are - Strategic Management Strategies, International business, Mergers & acquisitions and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Fortescue Metals Group: Becoming "The New Force in Iron Ore" casestudy better are - – talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, increasing transportation and logistics costs, increasing energy prices, there is backlash against globalization, increasing commodity prices, there is increasing trade war between United States & China,
wage bills are increasing, geopolitical disruptions, etc
Introduction to SWOT Analysis of Fortescue Metals Group: Becoming "The New Force in Iron Ore"
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Fortescue Metals Group: Becoming "The New Force in Iron Ore" case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ore Fortescue, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ore Fortescue 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 Fortescue Metals Group: Becoming "The New Force in Iron Ore" can be done for the following purposes –
1. Strategic planning using facts provided in Fortescue Metals Group: Becoming "The New Force in Iron Ore" case study
2. Improving business portfolio management of Ore Fortescue
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Ore Fortescue
Strengths Fortescue Metals Group: Becoming "The New Force in Iron Ore" | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ore Fortescue in Fortescue Metals Group: Becoming "The New Force in Iron Ore" Harvard Business Review case study are -
Cross disciplinary teams
– Horizontal connected teams at the Ore Fortescue 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 Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Ore Fortescue digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Ore Fortescue 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.
Effective Research and Development (R&D)
– Ore Fortescue 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 Fortescue Metals Group: Becoming "The New Force in Iron Ore" - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Ore Fortescue 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 Fortescue Metals Group: Becoming "The New Force in Iron Ore" HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Fortescue Metals Group: Becoming "The New Force in Iron Ore" firm has clearly differentiated products in the market place. This has enabled Ore Fortescue to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Ore Fortescue to invest into research and development (R&D) and innovation.
Innovation driven organization
– Ore Fortescue is one of the most innovative firm in sector. Manager in Fortescue Metals Group: Becoming "The New Force in Iron Ore" Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Diverse revenue streams
– Ore Fortescue is present in almost all the verticals within the industry. This has provided firm in Fortescue Metals Group: Becoming "The New Force in Iron Ore" case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
High brand equity
– Ore Fortescue has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ore Fortescue to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Ore Fortescue 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 Fortescue is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Fortescue Metals Group: Becoming "The New Force in Iron Ore" Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Ore Fortescue in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Ore Fortescue has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Ability to recruit top talent
– Ore Fortescue is one of the leading recruiters in the industry. Managers in the Fortescue Metals Group: Becoming "The New Force in Iron Ore" are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses Fortescue Metals Group: Becoming "The New Force in Iron Ore" | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Fortescue Metals Group: Becoming "The New Force in Iron Ore" are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Fortescue Metals Group: Becoming "The New Force in Iron Ore" 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 Fortescue has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of Ore Fortescue, firm in the HBR case study Fortescue Metals Group: Becoming "The New Force in Iron Ore" needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Fortescue Metals Group: Becoming "The New Force in Iron Ore", it seems that the employees of Ore Fortescue 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 decision making process
– As mentioned earlier in the report, Ore Fortescue 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 Fortescue 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.
Capital Spending Reduction
– Even during the low interest decade, Ore Fortescue 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Ore Fortescue is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Fortescue Metals Group: Becoming "The New Force in Iron Ore" can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of Ore Fortescue is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Ore Fortescue needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Ore Fortescue to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at Ore Fortescue 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Fortescue Metals Group: Becoming "The New Force in Iron Ore", is just above the industry average. Ore Fortescue 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 operating costs
– Compare to the competitors, firm in the HBR case study Fortescue Metals Group: Becoming "The New Force in Iron Ore" 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 Fortescue 's lucrative customers.
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 Ore Fortescue supply chain. Even after few cautionary changes mentioned in the HBR case study - Fortescue Metals Group: Becoming "The New Force in Iron Ore", it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Ore Fortescue vulnerable to further global disruptions in South East Asia.
Opportunities Fortescue Metals Group: Becoming "The New Force in Iron Ore" | 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 Fortescue Metals Group: Becoming "The New Force in Iron Ore" are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Innovation & Entrepreneurship industry, but it has also influenced the consumer preferences. Ore Fortescue 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 Fortescue is facing challenges because of the dominance of functional experts in the organization. Fortescue Metals Group: Becoming "The New Force in Iron Ore" 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.
Using analytics as competitive advantage
– Ore Fortescue 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 Fortescue Metals Group: Becoming "The New Force in Iron Ore" - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Ore Fortescue to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Creating value in data economy
– The success of analytics program of Ore Fortescue has opened avenues for new revenue streams for the organization in the industry. This can help Ore Fortescue to build a more holistic ecosystem as suggested in the Fortescue Metals Group: Becoming "The New Force in Iron Ore" case study. Ore Fortescue can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Ore Fortescue 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 Fortescue to hire the very best people irrespective of their geographical location.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Ore Fortescue 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 Fortescue 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.
Learning at scale
– Online learning technologies has now opened space for Ore Fortescue 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.
Better consumer reach
– The expansion of the 5G network will help Ore Fortescue to increase its market reach. Ore Fortescue 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.
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 Fortescue can use these opportunities to build new business models that can help the communities that Ore Fortescue operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Leveraging digital technologies
– Ore Fortescue can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Building a culture of innovation
– managers at Ore Fortescue 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 Innovation & Entrepreneurship segment.
Loyalty marketing
– Ore Fortescue 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.
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 Fortescue can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Fortescue Metals Group: Becoming "The New Force in Iron Ore" External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Fortescue Metals Group: Becoming "The New Force in Iron Ore" are -
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Ore Fortescue can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Ore Fortescue in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship 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.
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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Ore Fortescue 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 Fortescue Metals Group: Becoming "The New Force in Iron Ore" .
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Fortescue Metals Group: Becoming "The New Force in Iron Ore", Ore Fortescue may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Innovation & Entrepreneurship .
High dependence on third party suppliers
– Ore Fortescue 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 Fortescue is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Ore Fortescue 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Ore Fortescue with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Fortescue in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Regulatory challenges
– Ore Fortescue 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 Innovation & Entrepreneurship industry regulations.
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. Ore Fortescue needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
Increasing wage structure of Ore Fortescue
– 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 Fortescue.
Weighted SWOT Analysis of Fortescue Metals Group: Becoming "The New Force in Iron Ore" 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 Fortescue Metals Group: Becoming "The New Force in Iron Ore" 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 Fortescue Metals Group: Becoming "The New Force in Iron Ore" 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 Fortescue Metals Group: Becoming "The New Force in Iron Ore" 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 Fortescue Metals Group: Becoming "The New Force in Iron Ore" 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 Fortescue needs to make to build a sustainable competitive advantage.
