Glencore (GLNJ) SWOT Analysis / TOWS Matrix / MBA Resources
Coal
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Glencore (South Africa)
Based on various researches at Oak Spring University , Glencore is operating in a macro-environment that has been destablized by – geopolitical disruptions, supply chains are disrupted by pandemic , increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, 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,
central banks are concerned over increasing inflation, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Glencore can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Glencore, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Glencore 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 Glencore can be done for the following purposes –
1. Strategic planning of Glencore
2. Improving business portfolio management of Glencore
3. Assessing feasibility of the new initiative in South Africa
4. Making a Coal sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Glencore
Strengths of Glencore | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Glencore are -
Ability to lead change in Coal
– Glencore is one of the leading players in the Coal industry in South Africa. Over the years it has not only transformed the business landscape in the Coal industry in South Africa but also across the existing markets. The ability to lead change has enabled Glencore in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– Glencore has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Glencore staying ahead in the Coal industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Glencore 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 Coal industry. The technology infrastructure of South Africa 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.
Superior customer experience
– The customer experience strategy of Glencore in Coal industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Glencore is one of the most innovative firm in Coal sector.
Training and development
– Glencore has one of the best training and development program in Energy 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.
Ability to recruit top talent
– Glencore is one of the leading players in the Coal industry in South Africa. It is in a position to attract the best talent available in South Africa. The firm has a robust talent identification program that helps in identifying the brightest.
High brand equity
– Glencore has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Glencore to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Glencore is present in almost all the verticals within the Coal industry. This has provided Glencore 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.
High switching costs
– The high switching costs that Glencore 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 Glencore in the Energy sector have low bargaining power. Glencore has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Glencore to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Glencore has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Glencore 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.
Weaknesses of Glencore | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Glencore are -
High dependence on Glencore ‘s star products
– The top 2 products and services of Glencore still accounts for major business revenue. This dependence on star products in Coal industry has resulted into insufficient focus on developing new products, even though Glencore has relatively successful track record of launching new products.
Aligning sales with marketing
– From the outside it seems that Glencore needs to have more collaboration between its sales team and marketing team. Sales professionals in the Coal industry have deep experience in developing customer relationships. Marketing department at Glencore can leverage the sales team experience to cultivate customer relationships as Glencore is planning to shift buying processes online.
Capital Spending Reduction
– Even during the low interest decade, Glencore 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 Coal industry using digital technology.
High operating costs
– Compare to the competitors, Glencore has high operating costs in the Coal industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Glencore lucrative customers.
Slow to strategic competitive environment developments
– As Glencore is one of the leading players in the Coal industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Coal industry in last five years.
Interest costs
– Compare to the competition, Glencore 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.
Workers concerns about automation
– As automation is fast increasing in the Coal industry, Glencore 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.
Products dominated business model
– Even though Glencore has some of the most successful models in the Coal industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Glencore should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Glencore has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Coal industry over the last five years. Glencore even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Lack of clear differentiation of Glencore products
– To increase the profitability and margins on the products, Glencore needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– From the 10K / annual statement of Glencore, it seems that company is thinking out the frontier risks that can impact Coal 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.
Glencore Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Glencore are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Glencore can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Glencore 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 Glencore to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Glencore 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.
Creating value in data economy
– The success of analytics program of Glencore has opened avenues for new revenue streams for the organization in Coal industry. This can help Glencore to build a more holistic ecosystem for Glencore products in the Coal industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Glencore can develop new processes and procedures in Coal 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.
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 Glencore 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.
Loyalty marketing
– Glencore 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Glencore in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Coal industry, and it will provide faster access to the consumers.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Coal industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Glencore 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. Glencore 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 Glencore 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 Coal industry.
Manufacturing automation
– Glencore can use the latest technology developments to improve its manufacturing and designing process in Coal 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.
Better consumer reach
– The expansion of the 5G network will help Glencore to increase its market reach. Glencore will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Learning at scale
– Online learning technologies has now opened space for Glencore 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 Glencore External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Glencore are -
Technology acceleration in Forth Industrial Revolution
– Glencore has witnessed rapid integration of technology during Covid-19 in the Coal industry. As one of the leading players in the industry, Glencore needs to keep up with the evolution of technology in the Coal 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.
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 Glencore in the Coal sector and impact the bottomline of the organization.
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 Glencore.
Environmental challenges
– Glencore 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. Glencore can take advantage of this fund but it will also bring new competitors in the Coal industry.
Shortening product life cycle
– it is one of the major threat that Glencore is facing in Coal sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– Glencore 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 Coal industry.
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. Glencore 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.
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 Glencore business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Glencore
– 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 Glencore.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Coal industry are lowering. It can presents Glencore with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Coal sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Glencore in Coal industry. The Coal 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.
High dependence on third party suppliers
– Glencore 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.
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.
Weighted SWOT Analysis of Glencore Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Glencore 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 Glencore 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 Glencore 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 Glencore 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 Glencore needs to make to build a sustainable competitive advantage.
