SWOT Analysis / TOWS Matrix for Exxaro Resources (South Africa)
Based on various researches at Oak Spring University , Exxaro Resources is operating in a macro-environment that has been destablized by – technology disruption, supply chains are disrupted by pandemic , geopolitical disruptions, increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels,
increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Exxaro Resources can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Exxaro Resources, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Exxaro Resources 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 Exxaro Resources can be done for the following purposes –
1. Strategic planning of Exxaro Resources
2. Improving business portfolio management of Exxaro Resources
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 Exxaro Resources
Strengths of Exxaro Resources | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Exxaro Resources are -
Effective Research and Development (R&D)
– Exxaro Resources has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Exxaro Resources 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.
Cross disciplinary teams
– Horizontal connected teams at the Exxaro Resources 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.
High switching costs
– The high switching costs that Exxaro Resources 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.
Ability to recruit top talent
– Exxaro Resources 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.
Learning organization
- Exxaro Resources 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 Exxaro Resources is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Exxaro Resources emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Coal industry
– Exxaro Resources has clearly differentiated products in the market place. This has enabled Exxaro Resources to fetch slight price premium compare to the competitors in the Coal industry. The sustainable margins have also helped Exxaro Resources to invest into research and development (R&D) and innovation.
High brand equity
– Exxaro Resources has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Exxaro Resources to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Coal industry
- digital transformation varies from industry to industry. For Exxaro Resources digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Exxaro Resources 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.
Analytics focus
– Exxaro Resources 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.
Highly skilled collaborators
– Exxaro Resources has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Coal industry. Secondly the value chain collaborators of Exxaro Resources have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Exxaro Resources 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.
Innovation driven organization
– Exxaro Resources is one of the most innovative firm in Coal sector.
Weaknesses of Exxaro Resources | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Exxaro Resources are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Exxaro Resources is slow explore the new channels of communication. These new channels of communication can help Exxaro Resources to provide better information regarding Coal products and services. It can also build an online community to further reach out to potential customers.
Skills based hiring in Coal industry
– The stress on hiring functional specialists at Exxaro Resources 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.
Capital Spending Reduction
– Even during the low interest decade, Exxaro Resources 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 bargaining power of channel partners in Coal industry
– because of the regulatory requirements in South Africa, Exxaro Resources 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 Coal industry.
Lack of clear differentiation of Exxaro Resources products
– To increase the profitability and margins on the products, Exxaro Resources needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, Exxaro Resources 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. Exxaro Resources 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.
High dependence on Exxaro Resources ‘s star products
– The top 2 products and services of Exxaro Resources 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 Exxaro Resources has relatively successful track record of launching new products.
Employees’ less understanding of Exxaro Resources strategy
– From the outside it seems that the employees of Exxaro Resources 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.
Aligning sales with marketing
– From the outside it seems that Exxaro Resources 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 Exxaro Resources can leverage the sales team experience to cultivate customer relationships as Exxaro Resources is planning to shift buying processes online.
Products dominated business model
– Even though Exxaro Resources 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. Exxaro Resources should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Exxaro Resources 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.
Exxaro Resources Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Exxaro Resources are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Exxaro Resources 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 Exxaro Resources to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Exxaro Resources 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.
Use of Bitcoin and other crypto currencies for transactions in Coal industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Exxaro Resources in the Coal industry. Now Exxaro Resources can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– Exxaro Resources has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Coal sector. This continuous investment in analytics has enabled Exxaro Resources to build a competitive advantage using analytics. The analytics driven competitive advantage can help Exxaro Resources 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, Exxaro Resources is facing challenges because of the dominance of functional experts in the organization. Exxaro Resources can utilize new technology in the field of Coal industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Leveraging digital technologies
– Exxaro Resources 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, Exxaro Resources 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Coal industry, but it has also influenced the consumer preferences. Exxaro Resources can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Exxaro Resources 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.
Creating value in data economy
– The success of analytics program of Exxaro Resources has opened avenues for new revenue streams for the organization in Coal industry. This can help Exxaro Resources to build a more holistic ecosystem for Exxaro Resources products in the Coal industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Exxaro Resources 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.
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. Exxaro Resources 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. Exxaro Resources 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.
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. Exxaro Resources can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Exxaro Resources External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Exxaro Resources are -
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 Exxaro Resources.
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
– Exxaro Resources 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.
Technology acceleration in Forth Industrial Revolution
– Exxaro Resources has witnessed rapid integration of technology during Covid-19 in the Coal industry. As one of the leading players in the industry, Exxaro Resources 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.
Stagnating economy with rate increase
– Exxaro Resources 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. Exxaro Resources 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.
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. Exxaro Resources needs to understand the core reasons impacting the Coal industry. This will help it in building a better workplace.
Consumer confidence and its impact on Exxaro Resources 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 Coal industry and other sectors.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Exxaro Resources may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Coal sector.
Environmental challenges
– Exxaro Resources 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. Exxaro Resources can take advantage of this fund but it will also bring new competitors in the Coal industry.
Easy access to finance
– Easy access to finance in Coal industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Exxaro Resources can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Coal industry are lowering. It can presents Exxaro Resources with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Coal sector.
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 Exxaro Resources business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Exxaro Resources Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Exxaro Resources 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 Exxaro Resources 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 Exxaro Resources 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 Exxaro Resources 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 Exxaro Resources needs to make to build a sustainable competitive advantage.
