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 - – geopolitical disruptions, increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization,
increasing energy prices, increasing transportation and logistics costs, 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 -
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.
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.
Low bargaining power of suppliers
– Suppliers of Ore Fortescue in the sector have low bargaining power. Fortescue Metals Group: Becoming "The New Force in Iron Ore" has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Ore Fortescue to manage not only supply disruptions but also source products at highly competitive prices.
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.
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.
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.
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.
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.
Analytics focus
– Ore Fortescue 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 George Foster, David W. Hoyt 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.
Operational resilience
– The operational resilience strategy in the Fortescue Metals Group: Becoming "The New Force in Iron Ore" 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.
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.
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.
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 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.
Aligning sales with marketing
– It come across in the case study Fortescue Metals Group: Becoming "The New Force in Iron Ore" 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 Fortescue Metals Group: Becoming "The New Force in Iron Ore" can leverage the sales team experience to cultivate customer relationships as Ore Fortescue is planning to shift buying processes online.
Workers concerns about automation
– As automation is fast increasing in the segment, Ore Fortescue 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.
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.
Slow to strategic competitive environment developments
– As Fortescue Metals Group: Becoming "The New Force in Iron Ore" HBR case study mentions - Ore Fortescue 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.
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.
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.
Interest costs
– Compare to the competition, Ore Fortescue 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.
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 cash cycle compare to competitors
Ore Fortescue 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.
Need for greater diversity
– Ore Fortescue 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.
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 -
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.
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.
Developing new processes and practices
– Ore Fortescue can develop new processes and procedures in Innovation & Entrepreneurship 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.
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.
Buying journey improvements
– Ore Fortescue can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Fortescue Metals Group: Becoming "The New Force in Iron Ore" 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.
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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Ore Fortescue in the consumer business. Now Ore Fortescue can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Ore Fortescue can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
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.
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 -
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 .
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.
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.
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.
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.
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.
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 Fortescue business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Ore Fortescue has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Ore Fortescue needs to keep up with the evolution of technology in the Innovation & Entrepreneurship 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.
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.
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.
Stagnating economy with rate increase
– Ore Fortescue 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.
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 Fortescue.
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. Ore Fortescue 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.
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.