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 – there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, technology disruption, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, increasing energy prices,
geopolitical disruptions, central banks are concerned over increasing inflation, 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 -
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.
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.
Superior customer experience
– The customer experience strategy of Arch Coal in Coal industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Arch Coal 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 Arch Coal have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Arch Coal
– The covid-19 pandemic has put organizational resilience at the centre of everthing Arch Coal 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 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.
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.
Learning organization
- Arch Coal 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 Arch Coal is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Arch Coal emphasize – knowledge, initiative, and innovation.
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.
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.
High switching costs
– The high switching costs that Arch Coal 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.
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.
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 dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Arch Coal supply chain. Even after few cautionary changes, Arch Coal is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Arch Coal vulnerable to further global disruptions in South East Asia.
Lack of clear differentiation of Arch Coal products
– To increase the profitability and margins on the products, Arch Coal needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee of Arch Coal 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.
Slow to strategic competitive environment developments
– As Arch Coal 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 dependence on Arch Coal ‘s star products
– The top 2 products and services of Arch Coal 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 Arch Coal has relatively successful track record of launching new products.
No frontier risks strategy
– From the 10K / annual statement of Arch Coal, 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.
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.
Skills based hiring in Coal industry
– The stress on hiring functional specialists at Arch Coal 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.
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.
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.
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.
Arch Coal Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Arch Coal are -
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. Arch Coal can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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. Arch Coal 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. Arch Coal 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.
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.
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 Arch Coal in the Coal industry. Now Arch Coal can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Arch Coal 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.
Manufacturing automation
– Arch Coal can use the latest technology developments to improve its manufacturing and designing process in Coal 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.
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.
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.
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. Arch Coal can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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 Arch Coal 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.
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.
Threats Arch Coal External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Arch Coal are -
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.
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.
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.
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.
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.
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 Arch Coal in the Coal sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Coal industry are lowering. It can presents Arch Coal with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Coal sector.
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.
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.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Arch Coal 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.
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.
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.
