Vale Indonesia (INCO) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Vale Indonesia (Indonesia)

Based on various researches at Oak Spring University , Vale Indonesia is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, etc

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Introduction to SWOT Analysis of Vale Indonesia

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Vale Indonesia can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Vale Indonesia, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Vale Indonesia 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Vale Indonesia can be done for the following purposes –
1. Strategic planning of Vale Indonesia
2. Improving business portfolio management of Vale Indonesia
3. Assessing feasibility of the new initiative in Indonesia
4. Making a Metal Mining sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Vale Indonesia

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Strengths of Vale Indonesia | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Vale Indonesia are -

Diverse revenue streams

– Vale Indonesia is present in almost all the verticals within the Metal Mining industry. This has provided Vale Indonesia 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.

Organizational Resilience of Vale Indonesia

– The covid-19 pandemic has put organizational resilience at the centre of everthing Vale Indonesia does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Successful track record of launching new products

– Vale Indonesia has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Vale Indonesia 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.

Analytics focus

– Vale Indonesia 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 Metal Mining industry. The technology infrastructure of Indonesia is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.

Strong track record of project management in the Metal Mining industry

– Vale Indonesia is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Training and development

– Vale Indonesia has one of the best training and development program in Basic Materials industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.

Digital Transformation in Metal Mining industry

- digital transformation varies from industry to industry. For Vale Indonesia digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Vale Indonesia 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.

Innovation driven organization

– Vale Indonesia is one of the most innovative firm in Metal Mining sector.

High switching costs

– The high switching costs that Vale Indonesia 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.

Low bargaining power of suppliers

– Suppliers of Vale Indonesia in the Basic Materials sector have low bargaining power. Vale Indonesia has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Vale Indonesia to manage not only supply disruptions but also source products at highly competitive prices.

Highly skilled collaborators

– Vale Indonesia has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Metal Mining industry. Secondly the value chain collaborators of Vale Indonesia have helped the firm to develop new products and bring them quickly to the marketplace.

Superior customer experience

– The customer experience strategy of Vale Indonesia in Metal Mining industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

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Weaknesses of Vale Indonesia | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Vale Indonesia are -

Slow to strategic competitive environment developments

– As Vale Indonesia is one of the leading players in the Metal Mining industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Metal Mining industry in last five years.

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 Vale Indonesia supply chain. Even after few cautionary changes, Vale Indonesia is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Vale Indonesia vulnerable to further global disruptions in South East Asia.

Compensation and incentives

– The revenue per employee of Vale Indonesia is just above the Metal Mining industry average. It 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.

Ability to respond to the competition

– As the decision making is very deliberative at Vale Indonesia, in the dynamic environment of Metal Mining industry it has struggled to respond to the nimble upstart competition. Vale Indonesia has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Workers concerns about automation

– As automation is fast increasing in the Metal Mining industry, Vale Indonesia needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.

Need for greater diversity

– Vale Indonesia 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.

No frontier risks strategy

– From the 10K / annual statement of Vale Indonesia, it seems that company is thinking out the frontier risks that can impact Metal Mining industry. 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 bargaining power of channel partners in Metal Mining industry

– because of the regulatory requirements in Indonesia, Vale Indonesia 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 Metal Mining industry.

Low market penetration in new markets

– Outside its home market of Indonesia, Vale Indonesia needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Interest costs

– Compare to the competition, Vale Indonesia 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.

Lack of clear differentiation of Vale Indonesia products

– To increase the profitability and margins on the products, Vale Indonesia needs to provide more differentiated products than what it is currently offering in the marketplace.

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Vale Indonesia Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Vale Indonesia are -

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Vale Indonesia 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 Vale Indonesia to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Metal Mining industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Vale Indonesia 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. Vale Indonesia 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.

Creating value in data economy

– The success of analytics program of Vale Indonesia has opened avenues for new revenue streams for the organization in Metal Mining industry. This can help Vale Indonesia to build a more holistic ecosystem for Vale Indonesia products in the Metal Mining industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Manufacturing automation

– Vale Indonesia can use the latest technology developments to improve its manufacturing and designing process in Metal Mining sector. 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. Vale Indonesia can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Leveraging digital technologies

– Vale Indonesia 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.

Buying journey improvements

– Vale Indonesia can improve the customer journey of consumers in the Metal Mining industry by using analytics and artificial intelligence. It 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.

Use of Bitcoin and other crypto currencies for transactions in Metal Mining industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Vale Indonesia in the Metal Mining industry. Now Vale Indonesia can target international markets with far fewer capital restrictions requirements than the existing system.

Loyalty marketing

– Vale Indonesia has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.

Building a culture of innovation

– managers at Vale Indonesia 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 Metal Mining industry.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Metal Mining industry, but it has also influenced the consumer preferences. Vale Indonesia can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Using analytics as competitive advantage

– Vale Indonesia has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Metal Mining sector. This continuous investment in analytics has enabled Vale Indonesia to build a competitive advantage using analytics. The analytics driven competitive advantage can help Vale Indonesia to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Vale Indonesia is facing challenges because of the dominance of functional experts in the organization. Vale Indonesia can utilize new technology in the field of Metal Mining industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

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Threats Vale Indonesia External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Vale Indonesia are -

Regulatory challenges

– Vale Indonesia 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 Metal Mining industry regulations.

Technology disruption because of hacks, piracy etc

– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Vale Indonesia may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Metal Mining sector.

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. Vale Indonesia 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.

Technology acceleration in Forth Industrial Revolution

– Vale Indonesia has witnessed rapid integration of technology during Covid-19 in the Metal Mining industry. As one of the leading players in the industry, Vale Indonesia needs to keep up with the evolution of technology in the Metal Mining 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.

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 Vale Indonesia business can come under increasing regulations regarding data privacy, data security, etc.

Consumer confidence and its impact on Vale Indonesia 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 Metal Mining industry and other sectors.

Environmental challenges

– Vale Indonesia 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. Vale Indonesia can take advantage of this fund but it will also bring new competitors in the Metal Mining industry.

Stagnating economy with rate increase

– Vale Indonesia 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 Metal Mining industry.

Easy access to finance

– Easy access to finance in Metal Mining industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Vale Indonesia can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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.

Shortening product life cycle

– it is one of the major threat that Vale Indonesia is facing in Metal Mining sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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. Vale Indonesia needs to understand the core reasons impacting the Metal Mining industry. This will help it in building a better workplace.

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Weighted SWOT Analysis of Vale Indonesia Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Vale Indonesia 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 Vale Indonesia 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 Vale Indonesia 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 Vale Indonesia 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 Vale Indonesia needs to make to build a sustainable competitive advantage.

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