Ferrexpo (FXPO) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Ferrexpo (United Kingdom)

Based on various researches at Oak Spring University , Ferrexpo is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, etc

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Introduction to SWOT Analysis of Ferrexpo

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Ferrexpo can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ferrexpo, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ferrexpo 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 Ferrexpo can be done for the following purposes –
1. Strategic planning of Ferrexpo
2. Improving business portfolio management of Ferrexpo
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Metal Mining sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Ferrexpo

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

The strengths of Ferrexpo are -

Innovation driven organization

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

Training and development

– Ferrexpo 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.

Effective Research and Development (R&D)

– Ferrexpo has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Ferrexpo staying ahead in the Metal Mining industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Low bargaining power of suppliers

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

High brand equity

– Ferrexpo has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ferrexpo to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Digital Transformation in Metal Mining industry

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

Superior customer experience

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

Sustainable margins compare to other players in Metal Mining industry

– Ferrexpo has clearly differentiated products in the market place. This has enabled Ferrexpo to fetch slight price premium compare to the competitors in the Metal Mining industry. The sustainable margins have also helped Ferrexpo to invest into research and development (R&D) and innovation.

Ability to lead change in Metal Mining

– Ferrexpo is one of the leading players in the Metal Mining industry in United Kingdom. Over the years it has not only transformed the business landscape in the Metal Mining industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Ferrexpo in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Successful track record of launching new products

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

Diverse revenue streams

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

Operational resilience

– The operational resilience strategy of Ferrexpo comprises – understanding the underlying the factors in the Metal Mining 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.

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

The weaknesses of Ferrexpo are -

High cash cycle compare to competitors

Ferrexpo has a high cash cycle compare to other players in the Metal Mining 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 Ferrexpo ‘s star products

– The top 2 products and services of Ferrexpo still accounts for major business revenue. This dependence on star products in Metal Mining industry has resulted into insufficient focus on developing new products, even though Ferrexpo has relatively successful track record of launching new products.

Slow to strategic competitive environment developments

– As Ferrexpo 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.

Aligning sales with marketing

– From the outside it seems that Ferrexpo needs to have more collaboration between its sales team and marketing team. Sales professionals in the Metal Mining industry have deep experience in developing customer relationships. Marketing department at Ferrexpo can leverage the sales team experience to cultivate customer relationships as Ferrexpo is planning to shift buying processes online.

Skills based hiring in Metal Mining industry

– The stress on hiring functional specialists at Ferrexpo 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.

Ability to respond to the competition

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

Products dominated business model

– Even though Ferrexpo has some of the most successful models in the Metal Mining industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Ferrexpo should strive to include more intangible value offerings along with its core products and services.

Lack of clear differentiation of Ferrexpo products

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

Low market penetration in new markets

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

Need for greater diversity

– Ferrexpo 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.

Interest costs

– Compare to the competition, Ferrexpo 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.

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

The opportunities of Ferrexpo are -

Leveraging digital technologies

– Ferrexpo 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.

Building a culture of innovation

– managers at Ferrexpo 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.

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. Ferrexpo can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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 Ferrexpo 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Ferrexpo can use these opportunities to build new business models that can help the communities that Ferrexpo operates in. Secondly it can use opportunities from government spending in Metal Mining sector.

Buying journey improvements

– Ferrexpo 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.

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. Ferrexpo can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Loyalty marketing

– Ferrexpo 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Ferrexpo 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 Ferrexpo in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Metal Mining industry, and it will provide faster access to the consumers.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Ferrexpo can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Harnessing reconfiguration of the global supply chains

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

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Ferrexpo 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 Ferrexpo to hire the very best people irrespective of their geographical location.

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

The threats of Ferrexpo are -

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

Regulatory challenges

– Ferrexpo 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.

Consumer confidence and its impact on Ferrexpo 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.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Ferrexpo 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 Ferrexpo prominent markets.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Metal Mining industry are lowering. It can presents Ferrexpo with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Metal Mining sector.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Ferrexpo 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.

Increasing wage structure of Ferrexpo

– 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 Ferrexpo.

Stagnating economy with rate increase

– Ferrexpo 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.

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.

Environmental challenges

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

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 Ferrexpo in the Metal Mining sector and impact the bottomline of the organization.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Ferrexpo in Metal Mining industry. The Metal Mining 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.

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Weighted SWOT Analysis of Ferrexpo Template, Example

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

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