Lonmin (LONJ) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Lonmin (South Africa)

Based on various researches at Oak Spring University , Lonmin is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, increasing energy prices, digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, etc

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Introduction to SWOT Analysis of Lonmin

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

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

The strengths of Lonmin are -

Diverse revenue streams

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

Innovation driven organization

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

Successful track record of launching new products

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

High brand equity

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

Sustainable margins compare to other players in Metal Mining industry

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

High switching costs

– The high switching costs that Lonmin 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.

Superior customer experience

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

Training and development

– Lonmin 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.

Organizational Resilience of Lonmin

– The covid-19 pandemic has put organizational resilience at the centre of everthing Lonmin does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Strong track record of project management in the Metal Mining industry

– Lonmin is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Ability to lead change in Metal Mining

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

Cross disciplinary teams

– Horizontal connected teams at the Lonmin 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.

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

The weaknesses of Lonmin are -

Capital Spending Reduction

– Even during the low interest decade, Lonmin 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 Metal Mining industry using digital technology.

Products dominated business model

– Even though Lonmin 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. Lonmin should strive to include more intangible value offerings along with its core products and services.

Interest costs

– Compare to the competition, Lonmin 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.

Compensation and incentives

– The revenue per employee of Lonmin is just above the Metal Mining 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.

Slow to strategic competitive environment developments

– As Lonmin 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.

Low market penetration in new markets

– Outside its home market of South Africa, Lonmin needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Aligning sales with marketing

– From the outside it seems that Lonmin 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 Lonmin can leverage the sales team experience to cultivate customer relationships as Lonmin is planning to shift buying processes online.

High bargaining power of channel partners in Metal Mining industry

– because of the regulatory requirements in South Africa, Lonmin 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 Metal Mining industry.

Skills based hiring in Metal Mining industry

– The stress on hiring functional specialists at Lonmin 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.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Lonmin is slow explore the new channels of communication. These new channels of communication can help Lonmin to provide better information regarding Metal Mining products and services. It can also build an online community to further reach out to potential customers.

High dependence on Lonmin ‘s star products

– The top 2 products and services of Lonmin 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 Lonmin has relatively successful track record of launching new products.

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

The opportunities of Lonmin are -

Redefining models of collaboration and team work

– As explained in the weaknesses section, Lonmin is facing challenges because of the dominance of functional experts in the organization. Lonmin can utilize new technology in the field of Metal Mining industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Leveraging digital technologies

– Lonmin 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, Lonmin 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.

Using analytics as competitive advantage

– Lonmin has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Metal Mining sector. This continuous investment in analytics has enabled Lonmin to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lonmin to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Building a culture of innovation

– managers at Lonmin 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.

Reforming the budgeting process

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

Lowering marketing communication costs

– 5G expansion will open new opportunities for Lonmin 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.

Use of Bitcoin and other crypto currencies for transactions in Metal Mining industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lonmin in the Metal Mining industry. Now Lonmin can target international markets with far fewer capital restrictions requirements than the existing system.

Remote work and new talent hiring opportunities

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

Manufacturing automation

– Lonmin can use the latest technology developments to improve its manufacturing and designing process in Metal Mining 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.

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 Lonmin 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 Lonmin has opened avenues for new revenue streams for the organization in Metal Mining industry. This can help Lonmin to build a more holistic ecosystem for Lonmin products in the Metal Mining industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Developing new processes and practices

– Lonmin can develop new processes and procedures in Metal Mining 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.

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

The threats of Lonmin are -

Increasing wage structure of Lonmin

– 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 Lonmin.

Stagnating economy with rate increase

– Lonmin 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.

Technology acceleration in Forth Industrial Revolution

– Lonmin has witnessed rapid integration of technology during Covid-19 in the Metal Mining industry. As one of the leading players in the industry, Lonmin needs to keep up with the evolution of technology in the Metal Mining 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.

Shortening product life cycle

– it is one of the major threat that Lonmin is facing in Metal Mining sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Increasing international competition and downward pressure on margins

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

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

High dependence on third party suppliers

– Lonmin 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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Lonmin 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.

Barriers of entry lowering

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

Consumer confidence and its impact on Lonmin 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.

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.

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.

Easy access to finance

– Easy access to finance in Metal Mining industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lonmin can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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Weighted SWOT Analysis of Lonmin Template, Example

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

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