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 - – increasing commodity prices, increasing energy prices, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google,
increasing transportation and logistics costs, there is increasing trade war between United States & China, 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 -
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.
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.
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.
Organizational Resilience of Ore Fortescue
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Ore Fortescue does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Innovation & Entrepreneurship field
– Ore Fortescue is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Ore Fortescue in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
Successful track record of launching new products
– Ore Fortescue has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Ore Fortescue 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.
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.
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.
Training and development
– Ore Fortescue has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Fortescue Metals Group: Becoming "The New Force in Iron Ore" 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 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.
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.
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.
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.
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.
No frontier risks strategy
– After analyzing the HBR case study Fortescue Metals Group: Becoming "The New Force in Iron Ore", it seems that company is thinking about the frontier risks that can impact Innovation & Entrepreneurship strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High 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.
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.
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.
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.
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 -
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.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Ore Fortescue 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.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Ore Fortescue 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.
Manufacturing automation
– Ore Fortescue can use the latest technology developments to improve its manufacturing and designing process in Innovation & Entrepreneurship 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.
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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Ore Fortescue in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, and it will provide faster access to the consumers.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Ore Fortescue 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, Fortescue Metals Group: Becoming "The New Force in Iron Ore", to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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 -
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.
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.
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.
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.
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.
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" .
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.
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.
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.
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.
Environmental challenges
– Ore Fortescue 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. Ore Fortescue can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
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.