ArcelorMittal (0RP9) SWOT Analysis / TOWS Matrix / MBA Resources
Iron & Steel
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for ArcelorMittal (United Kingdom)
Based on various researches at Oak Spring University , ArcelorMittal is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, technology disruption, increasing household debt because of falling income levels,
increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that ArcelorMittal can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the ArcelorMittal, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which ArcelorMittal 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 ArcelorMittal can be done for the following purposes –
1. Strategic planning of ArcelorMittal
2. Improving business portfolio management of ArcelorMittal
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Iron & Steel sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of ArcelorMittal
Strengths of ArcelorMittal | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of ArcelorMittal are -
Learning organization
- ArcelorMittal 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 ArcelorMittal is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at ArcelorMittal emphasize – knowledge, initiative, and innovation.
Organizational Resilience of ArcelorMittal
– The covid-19 pandemic has put organizational resilience at the centre of everthing ArcelorMittal does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of ArcelorMittal in the Basic Materials sector have low bargaining power. ArcelorMittal has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps ArcelorMittal to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of ArcelorMittal in Iron & Steel industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– ArcelorMittal has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – ArcelorMittal staying ahead in the Iron & Steel industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– ArcelorMittal has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. ArcelorMittal 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 Iron & Steel industry
- digital transformation varies from industry to industry. For ArcelorMittal digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. ArcelorMittal 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.
Ability to recruit top talent
– ArcelorMittal is one of the leading players in the Iron & Steel industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.
Innovation driven organization
– ArcelorMittal is one of the most innovative firm in Iron & Steel sector.
Ability to lead change in Iron & Steel
– ArcelorMittal is one of the leading players in the Iron & Steel industry in United Kingdom. Over the years it has not only transformed the business landscape in the Iron & Steel industry in United Kingdom but also across the existing markets. The ability to lead change has enabled ArcelorMittal in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– ArcelorMittal has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Iron & Steel industry. Secondly the value chain collaborators of ArcelorMittal have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that ArcelorMittal 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.
Weaknesses of ArcelorMittal | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of ArcelorMittal are -
High dependence on ArcelorMittal ‘s star products
– The top 2 products and services of ArcelorMittal still accounts for major business revenue. This dependence on star products in Iron & Steel industry has resulted into insufficient focus on developing new products, even though ArcelorMittal has relatively successful track record of launching new products.
Products dominated business model
– Even though ArcelorMittal has some of the most successful models in the Iron & Steel industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. ArcelorMittal should strive to include more intangible value offerings along with its core products and services.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, ArcelorMittal is slow explore the new channels of communication. These new channels of communication can help ArcelorMittal to provide better information regarding Iron & Steel products and services. It can also build an online community to further reach out to potential customers.
Need for greater diversity
– ArcelorMittal 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.
Ability to respond to the competition
– As the decision making is very deliberative at ArcelorMittal, in the dynamic environment of Iron & Steel industry it has struggled to respond to the nimble upstart competition. ArcelorMittal has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of ArcelorMittal is dominated by functional specialists. It is not different from other players in the Iron & Steel industry, but ArcelorMittal needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help ArcelorMittal to focus more on services in the Iron & Steel industry rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, ArcelorMittal has high operating costs in the Iron & Steel industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract ArcelorMittal lucrative customers.
Lack of clear differentiation of ArcelorMittal products
– To increase the profitability and margins on the products, ArcelorMittal needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners in Iron & Steel industry
– because of the regulatory requirements in United Kingdom, ArcelorMittal 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 Iron & Steel industry.
Capital Spending Reduction
– Even during the low interest decade, ArcelorMittal 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 Iron & Steel industry using digital technology.
Employees’ less understanding of ArcelorMittal strategy
– From the outside it seems that the employees of ArcelorMittal 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.
ArcelorMittal Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of ArcelorMittal are -
Buying journey improvements
– ArcelorMittal can improve the customer journey of consumers in the Iron & Steel 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, ArcelorMittal 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 ArcelorMittal to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Manufacturing automation
– ArcelorMittal can use the latest technology developments to improve its manufacturing and designing process in Iron & Steel 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for ArcelorMittal in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Iron & Steel industry, and it will provide faster access to the consumers.
Building a culture of innovation
– managers at ArcelorMittal 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 Iron & Steel industry.
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 ArcelorMittal 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for ArcelorMittal 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 ArcelorMittal to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– ArcelorMittal can develop new processes and procedures in Iron & Steel 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects ArcelorMittal can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, ArcelorMittal 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.
Creating value in data economy
– The success of analytics program of ArcelorMittal has opened avenues for new revenue streams for the organization in Iron & Steel industry. This can help ArcelorMittal to build a more holistic ecosystem for ArcelorMittal products in the Iron & Steel industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, ArcelorMittal can use these opportunities to build new business models that can help the communities that ArcelorMittal operates in. Secondly it can use opportunities from government spending in Iron & Steel sector.
Learning at scale
– Online learning technologies has now opened space for ArcelorMittal 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.
Threats ArcelorMittal External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of ArcelorMittal are -
Regulatory challenges
– ArcelorMittal 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 Iron & Steel industry regulations.
Increasing wage structure of ArcelorMittal
– 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 ArcelorMittal.
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 ArcelorMittal business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, ArcelorMittal 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 ArcelorMittal prominent markets.
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. ArcelorMittal 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 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Iron & Steel industry are lowering. It can presents ArcelorMittal with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Iron & Steel sector.
Easy access to finance
– Easy access to finance in Iron & Steel industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. ArcelorMittal can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– ArcelorMittal 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 Iron & Steel industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, ArcelorMittal may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Iron & Steel sector.
Environmental challenges
– ArcelorMittal 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. ArcelorMittal can take advantage of this fund but it will also bring new competitors in the Iron & Steel industry.
Consumer confidence and its impact on ArcelorMittal 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 Iron & Steel 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 ArcelorMittal.
Weighted SWOT Analysis of ArcelorMittal Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at ArcelorMittal 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 ArcelorMittal 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 ArcelorMittal 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 ArcelorMittal 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 ArcelorMittal needs to make to build a sustainable competitive advantage.