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 – increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, increasing energy prices, wage bills are increasing, there is backlash against globalization, technology disruption,
increasing inequality as vast percentage of new income is going to the top 1%, 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 -
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.
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.
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.
Successful track record of launching new products
– Exxaro Resources has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Exxaro Resources 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.
Innovation driven organization
– Exxaro Resources is one of the most innovative firm in Coal sector.
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.
Organizational Resilience of Exxaro Resources
– The covid-19 pandemic has put organizational resilience at the centre of everthing Exxaro Resources does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
Superior customer experience
– The customer experience strategy of Exxaro Resources in Coal industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Strong track record of project management in the Coal industry
– Exxaro Resources is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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.
Weaknesses of Exxaro Resources | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Exxaro Resources are -
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.
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.
Slow to strategic competitive environment developments
– As Exxaro Resources 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.
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.
Low market penetration in new markets
– Outside its home market of South Africa, Exxaro Resources needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
No frontier risks strategy
– From the 10K / annual statement of Exxaro Resources, 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.
Need for greater diversity
– Exxaro Resources 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.
High operating costs
– Compare to the competitors, Exxaro Resources 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 Exxaro Resources lucrative 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.
Compensation and incentives
– The revenue per employee of Exxaro Resources is just above the Coal 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.
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.
Exxaro Resources Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Exxaro Resources are -
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.
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.
Better consumer reach
– The expansion of the 5G network will help Exxaro Resources to increase its market reach. Exxaro Resources 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 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.
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.
Buying journey improvements
– Exxaro Resources can improve the customer journey of consumers in the Coal 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Exxaro Resources can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Exxaro Resources 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.
Developing new processes and practices
– Exxaro Resources 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.
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.
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.
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 -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Exxaro Resources 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 Exxaro Resources prominent markets.
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.
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.
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.
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.
Shortening product life cycle
– it is one of the major threat that Exxaro Resources is facing in Coal sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
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.
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.
Regulatory challenges
– Exxaro Resources 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 Coal industry regulations.
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 Exxaro Resources in the Coal sector and impact the bottomline of the organization.
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.
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.