Novagold (NG) SWOT Analysis / TOWS Matrix / MBA Resources
Gold & Silver
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Novagold (Canada)
Based on various researches at Oak Spring University , Novagold is operating in a macro-environment that has been destablized by – increasing commodity prices, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%,
talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Novagold can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Novagold, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Novagold 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 Novagold can be done for the following purposes –
1. Strategic planning of Novagold
2. Improving business portfolio management of Novagold
3. Assessing feasibility of the new initiative in Canada
4. Making a Gold & Silver sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Novagold
Strengths of Novagold | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Novagold are -
Analytics focus
– Novagold 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 Gold & Silver industry. The technology infrastructure of Canada 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 lead change in Gold & Silver
– Novagold is one of the leading players in the Gold & Silver industry in Canada. Over the years it has not only transformed the business landscape in the Gold & Silver industry in Canada but also across the existing markets. The ability to lead change has enabled Novagold in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Novagold 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.
Effective Research and Development (R&D)
– Novagold has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Novagold staying ahead in the Gold & Silver industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Novagold 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.
High brand equity
– Novagold has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Novagold to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Novagold is one of the most innovative firm in Gold & Silver sector.
Operational resilience
– The operational resilience strategy of Novagold comprises – understanding the underlying the factors in the Gold & Silver 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.
Superior customer experience
– The customer experience strategy of Novagold in Gold & Silver industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Low bargaining power of suppliers
– Suppliers of Novagold in the Basic Materials sector have low bargaining power. Novagold has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Novagold to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Novagold
– The covid-19 pandemic has put organizational resilience at the centre of everthing Novagold does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Successful track record of launching new products
– Novagold has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Novagold 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.
Weaknesses of Novagold | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Novagold are -
High cash cycle compare to competitors
Novagold has a high cash cycle compare to other players in the Gold & Silver industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to strategic competitive environment developments
– As Novagold is one of the leading players in the Gold & Silver industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Gold & Silver industry in last five years.
Workers concerns about automation
– As automation is fast increasing in the Gold & Silver industry, Novagold 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.
Slow decision making process
– As mentioned earlier in the report, Novagold has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Gold & Silver industry over the last five years. Novagold 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.
Increasing silos among functional specialists
– The organizational structure of Novagold is dominated by functional specialists. It is not different from other players in the Gold & Silver industry, but Novagold needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Novagold to focus more on services in the Gold & Silver industry rather than just following the product oriented approach.
No frontier risks strategy
– From the 10K / annual statement of Novagold, it seems that company is thinking out the frontier risks that can impact Gold & Silver 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
– Novagold 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.
Interest costs
– Compare to the competition, Novagold 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.
Employees’ less understanding of Novagold strategy
– From the outside it seems that the employees of Novagold 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.
Lack of clear differentiation of Novagold products
– To increase the profitability and margins on the products, Novagold needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, Novagold has high operating costs in the Gold & Silver industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Novagold lucrative customers.
Novagold Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Novagold are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Novagold 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 Novagold to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at Novagold 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 Gold & Silver industry.
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 Novagold 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.
Use of Bitcoin and other crypto currencies for transactions in Gold & Silver industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Novagold in the Gold & Silver industry. Now Novagold can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Novagold can improve the customer journey of consumers in the Gold & Silver 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Novagold is facing challenges because of the dominance of functional experts in the organization. Novagold can utilize new technology in the field of Gold & Silver industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Novagold in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Gold & Silver industry, and it will provide faster access to the consumers.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Gold & Silver industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Novagold 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. Novagold 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Novagold can use these opportunities to build new business models that can help the communities that Novagold operates in. Secondly it can use opportunities from government spending in Gold & Silver sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Novagold can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Developing new processes and practices
– Novagold can develop new processes and procedures in Gold & Silver 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.
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. Novagold can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Novagold 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.
Threats Novagold External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Novagold are -
Regulatory challenges
– Novagold 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 Gold & Silver industry regulations.
Consumer confidence and its impact on Novagold 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 Gold & Silver industry and other sectors.
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. Novagold needs to understand the core reasons impacting the Gold & Silver industry. This will help it in building a better workplace.
Increasing wage structure of Novagold
– 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 Novagold.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Gold & Silver industry are lowering. It can presents Novagold with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Gold & Silver sector.
Technology acceleration in Forth Industrial Revolution
– Novagold has witnessed rapid integration of technology during Covid-19 in the Gold & Silver industry. As one of the leading players in the industry, Novagold needs to keep up with the evolution of technology in the Gold & Silver 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Novagold may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Gold & Silver sector.
Easy access to finance
– Easy access to finance in Gold & Silver industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Novagold can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– Novagold 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 Gold & Silver industry.
Environmental challenges
– Novagold 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. Novagold can take advantage of this fund but it will also bring new competitors in the Gold & Silver industry.
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 Novagold in the Gold & Silver sector and impact the bottomline 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 Novagold.
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. Novagold 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 Novagold Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Novagold 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 Novagold 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 Novagold 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 Novagold 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 Novagold needs to make to build a sustainable competitive advantage.