Fresnillo (FRES) SWOT Analysis / TOWS Matrix / MBA Resources
Gold & Silver
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Fresnillo (United Kingdom)
Based on various researches at Oak Spring University , Fresnillo is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs, increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, technology disruption,
there is increasing trade war between United States & China, increasing transportation and logistics costs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Fresnillo can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Fresnillo, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Fresnillo 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 Fresnillo can be done for the following purposes –
1. Strategic planning of Fresnillo
2. Improving business portfolio management of Fresnillo
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Gold & Silver sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Fresnillo
Strengths of Fresnillo | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Fresnillo are -
Diverse revenue streams
– Fresnillo is present in almost all the verticals within the Gold & Silver industry. This has provided Fresnillo 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.
Digital Transformation in Gold & Silver industry
- digital transformation varies from industry to industry. For Fresnillo digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Fresnillo 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.
Cross disciplinary teams
– Horizontal connected teams at the Fresnillo 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.
Training and development
– Fresnillo 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.
High brand equity
– Fresnillo has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Fresnillo to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Fresnillo 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 Fresnillo is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Fresnillo emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Fresnillo has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Fresnillo 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.
Ability to recruit top talent
– Fresnillo is one of the leading players in the Gold & Silver 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.
High switching costs
– The high switching costs that Fresnillo 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.
Effective Research and Development (R&D)
– Fresnillo has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Fresnillo staying ahead in the Gold & Silver industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Gold & Silver industry
– Fresnillo has clearly differentiated products in the market place. This has enabled Fresnillo to fetch slight price premium compare to the competitors in the Gold & Silver industry. The sustainable margins have also helped Fresnillo to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy of Fresnillo comprises – understanding the underlying the factors in the Gold & Silver 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.
Weaknesses of Fresnillo | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Fresnillo are -
Compensation and incentives
– The revenue per employee of Fresnillo is just above the Gold & Silver 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.
No frontier risks strategy
– From the 10K / annual statement of Fresnillo, it seems that company is thinking out the frontier risks that can impact Gold & Silver 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.
Need for greater diversity
– Fresnillo 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.
Workers concerns about automation
– As automation is fast increasing in the Gold & Silver industry, Fresnillo 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.
Skills based hiring in Gold & Silver industry
– The stress on hiring functional specialists at Fresnillo 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.
High dependence on Fresnillo ‘s star products
– The top 2 products and services of Fresnillo still accounts for major business revenue. This dependence on star products in Gold & Silver industry has resulted into insufficient focus on developing new products, even though Fresnillo has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, Fresnillo has high operating costs in the Gold & Silver industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Fresnillo lucrative customers.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Fresnillo is slow explore the new channels of communication. These new channels of communication can help Fresnillo to provide better information regarding Gold & Silver products and services. It can also build an online community to further reach out to potential customers.
Employees’ less understanding of Fresnillo strategy
– From the outside it seems that the employees of Fresnillo 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.
High cash cycle compare to competitors
Fresnillo has a high cash cycle compare to other players in the Gold & Silver industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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 Fresnillo supply chain. Even after few cautionary changes, Fresnillo is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Fresnillo vulnerable to further global disruptions in South East Asia.
Fresnillo Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Fresnillo are -
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Gold & Silver industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Fresnillo 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. Fresnillo 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.
Building a culture of innovation
– managers at Fresnillo 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 Gold & Silver 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 Fresnillo 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Gold & Silver industry, but it has also influenced the consumer preferences. Fresnillo can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Fresnillo has opened avenues for new revenue streams for the organization in Gold & Silver industry. This can help Fresnillo to build a more holistic ecosystem for Fresnillo products in the Gold & Silver 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, Fresnillo can use these opportunities to build new business models that can help the communities that Fresnillo operates in. Secondly it can use opportunities from government spending in Gold & Silver sector.
Manufacturing automation
– Fresnillo can use the latest technology developments to improve its manufacturing and designing process in Gold & Silver 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.
Use of Bitcoin and other crypto currencies for transactions in Gold & Silver industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Fresnillo in the Gold & Silver industry. Now Fresnillo can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Fresnillo 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Fresnillo 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Fresnillo in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Gold & Silver industry, and it will provide faster access to the consumers.
Developing new processes and practices
– Fresnillo can develop new processes and procedures in Gold & Silver 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.
Using analytics as competitive advantage
– Fresnillo has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Gold & Silver sector. This continuous investment in analytics has enabled Fresnillo to build a competitive advantage using analytics. The analytics driven competitive advantage can help Fresnillo to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Fresnillo External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Fresnillo are -
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. Fresnillo 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.
Stagnating economy with rate increase
– Fresnillo 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 Gold & Silver industry.
Environmental challenges
– Fresnillo 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. Fresnillo can take advantage of this fund but it will also bring new competitors in the Gold & Silver industry.
Increasing wage structure of Fresnillo
– 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 Fresnillo.
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 Fresnillo business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Fresnillo may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Gold & Silver sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Fresnillo 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 Fresnillo prominent markets.
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
– Fresnillo has witnessed rapid integration of technology during Covid-19 in the Gold & Silver industry. As one of the leading players in the industry, Fresnillo needs to keep up with the evolution of technology in the Gold & Silver 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Fresnillo in Gold & Silver industry. The Gold & Silver 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.
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.
High dependence on third party suppliers
– Fresnillo 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.
Consumer confidence and its impact on Fresnillo 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 Gold & Silver industry and other sectors.
Weighted SWOT Analysis of Fresnillo Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Fresnillo 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 Fresnillo 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 Fresnillo 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 Fresnillo 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 Fresnillo needs to make to build a sustainable competitive advantage.