SWOT Analysis / TOWS Matrix for Arch Coal (United States)
Based on various researches at Oak Spring University , Arch Coal is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, increasing commodity prices, increasing energy prices, geopolitical disruptions, talent flight as more people leaving formal jobs,
challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Arch Coal can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Arch Coal, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Arch Coal 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 Arch Coal can be done for the following purposes –
1. Strategic planning of Arch Coal
2. Improving business portfolio management of Arch Coal
3. Assessing feasibility of the new initiative in United States
4. Making a Coal sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Arch Coal
Strengths of Arch Coal | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Arch Coal are -
Low bargaining power of suppliers
– Suppliers of Arch Coal in the Energy sector have low bargaining power. Arch Coal has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Arch Coal to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Arch Coal has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Arch Coal 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.
Analytics focus
– Arch Coal 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 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.
Innovation driven organization
– Arch Coal is one of the most innovative firm in Coal sector.
Effective Research and Development (R&D)
– Arch Coal has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Arch Coal 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.
High brand equity
– Arch Coal has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Arch Coal to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Arch Coal 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.
Cross disciplinary teams
– Horizontal connected teams at the Arch Coal 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.
Strong track record of project management in the Coal industry
– Arch Coal is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– Arch Coal is present in almost all the verticals within the Coal industry. This has provided Arch Coal 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.
Operational resilience
– The operational resilience strategy of Arch Coal comprises – understanding the underlying the factors in the Coal 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.
Digital Transformation in Coal industry
- digital transformation varies from industry to industry. For Arch Coal digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Arch Coal 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.
Weaknesses of Arch Coal | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Arch Coal are -
High bargaining power of channel partners in Coal industry
– because of the regulatory requirements in United States, Arch Coal 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.
Workers concerns about automation
– As automation is fast increasing in the Coal industry, Arch Coal 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.
Increasing silos among functional specialists
– The organizational structure of Arch Coal is dominated by functional specialists. It is not different from other players in the Coal industry, but Arch Coal needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Arch Coal to focus more on services in the Coal industry rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Arch Coal 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.
High cash cycle compare to competitors
Arch Coal has a high cash cycle compare to other players in the Coal industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Employees’ less understanding of Arch Coal strategy
– From the outside it seems that the employees of Arch Coal 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.
Capital Spending Reduction
– Even during the low interest decade, Arch Coal 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.
Ability to respond to the competition
– As the decision making is very deliberative at Arch Coal, in the dynamic environment of Coal industry it has struggled to respond to the nimble upstart competition. Arch Coal has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow decision making process
– As mentioned earlier in the report, Arch Coal 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. Arch Coal 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.
Aligning sales with marketing
– From the outside it seems that Arch Coal 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 Arch Coal can leverage the sales team experience to cultivate customer relationships as Arch Coal is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of United States, Arch Coal needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Arch Coal Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Arch Coal are -
Leveraging digital technologies
– Arch Coal 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.
Better consumer reach
– The expansion of the 5G network will help Arch Coal to increase its market reach. Arch Coal 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 Arch Coal 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.
Developing new processes and practices
– Arch Coal 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Arch Coal can use these opportunities to build new business models that can help the communities that Arch Coal operates in. Secondly it can use opportunities from government spending in Coal sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Arch Coal 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 Arch Coal to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at Arch Coal 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Arch Coal can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– Arch Coal 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 Arch Coal to build a competitive advantage using analytics. The analytics driven competitive advantage can help Arch Coal 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, Arch Coal 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 Arch Coal to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Creating value in data economy
– The success of analytics program of Arch Coal has opened avenues for new revenue streams for the organization in Coal industry. This can help Arch Coal to build a more holistic ecosystem for Arch Coal products in the Coal industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Arch Coal 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Arch Coal is facing challenges because of the dominance of functional experts in the organization. Arch Coal 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.
Threats Arch Coal External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Arch Coal are -
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. Arch Coal needs to understand the core reasons impacting the Coal industry. This will help it in building a better workplace.
Increasing wage structure of Arch Coal
– 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 Arch Coal.
Consumer confidence and its impact on Arch Coal 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.
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 Arch Coal.
Environmental challenges
– Arch Coal 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. Arch Coal can take advantage of this fund but it will also bring new competitors in the Coal industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Arch Coal 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
– Arch Coal 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.
Shortening product life cycle
– it is one of the major threat that Arch Coal is facing in Coal sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Arch Coal has witnessed rapid integration of technology during Covid-19 in the Coal industry. As one of the leading players in the industry, Arch Coal 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.
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 Arch Coal business can come under increasing regulations regarding data privacy, data security, etc.
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. Arch Coal can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Arch Coal 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.
Weighted SWOT Analysis of Arch Coal Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Arch Coal 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 Arch Coal 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 Arch Coal 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 Arch Coal 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 Arch Coal needs to make to build a sustainable competitive advantage.