Alcoa (AA) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Alcoa (United States)

Based on various researches at Oak Spring University , Alcoa is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, there is backlash against globalization, increasing transportation and logistics costs, technology disruption, challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, increasing commodity prices, etc

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Introduction to SWOT Analysis of Alcoa

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

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

The strengths of Alcoa are -

Highly skilled collaborators

– Alcoa has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Metal Mining industry. Secondly the value chain collaborators of Alcoa have helped the firm to develop new products and bring them quickly to the marketplace.

Strong track record of project management in the Metal Mining industry

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

Cross disciplinary teams

– Horizontal connected teams at the Alcoa 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.

Sustainable margins compare to other players in Metal Mining industry

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

Training and development

– Alcoa 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.

Innovation driven organization

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

Operational resilience

– The operational resilience strategy of Alcoa 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.

Successful track record of launching new products

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

Low bargaining power of suppliers

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

Analytics focus

– Alcoa 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 Metal Mining industry. The technology infrastructure of United States 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.

Ability to recruit top talent

– Alcoa is one of the leading players in the Metal Mining industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.

Ability to lead change in Metal Mining

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

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

The weaknesses of Alcoa are -

Compensation and incentives

– The revenue per employee of Alcoa 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.

High cash cycle compare to competitors

Alcoa 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.

Need for greater diversity

– Alcoa 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.

Low market penetration in new markets

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

High operating costs

– Compare to the competitors, Alcoa has high operating costs in the Metal Mining industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Alcoa lucrative customers.

Employees’ less understanding of Alcoa strategy

– From the outside it seems that the employees of Alcoa 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.

High dependence on Alcoa ‘s star products

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

Lack of clear differentiation of Alcoa products

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

Ability to respond to the competition

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

No frontier risks strategy

– From the 10K / annual statement of Alcoa, it seems that company is thinking out the frontier risks that can impact Metal Mining 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.

High bargaining power of channel partners in Metal Mining industry

– because of the regulatory requirements in United States, Alcoa 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.

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

The opportunities of Alcoa are -

Building a culture of innovation

– managers at Alcoa 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. Alcoa can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Developing new processes and practices

– Alcoa 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.

Learning at scale

– Online learning technologies has now opened space for Alcoa 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.

Reforming the budgeting process

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

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 Alcoa 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

– Alcoa 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.

Manufacturing automation

– Alcoa 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.

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. Alcoa 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

– Alcoa 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 Alcoa to build a competitive advantage using analytics. The analytics driven competitive advantage can help Alcoa to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Harnessing reconfiguration of the global supply chains

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

Better consumer reach

– The expansion of the 5G network will help Alcoa to increase its market reach. Alcoa 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Alcoa 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.

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

The threats of Alcoa are -

Trade war between China and United States

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

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.

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 Alcoa business can come under increasing regulations regarding data privacy, data security, etc.

High dependence on third party suppliers

– Alcoa 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 Alcoa.

Learning curve for new practices

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

Regulatory challenges

– Alcoa 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.

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

Environmental challenges

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

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.

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. Alcoa 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.

Barriers of entry lowering

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

Technology acceleration in Forth Industrial Revolution

– Alcoa has witnessed rapid integration of technology during Covid-19 in the Metal Mining industry. As one of the leading players in the industry, Alcoa 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.

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Weighted SWOT Analysis of Alcoa Template, Example

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

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