Freeport-McMoran (FCX) SWOT Analysis / TOWS Matrix / MBA Resources
Metal Mining
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Freeport-McMoran (United States)
Based on various researches at Oak Spring University , Freeport-McMoran is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, increasing household debt because of falling income levels, increasing transportation and logistics costs, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China,
increasing commodity prices, geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Freeport-McMoran can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Freeport-McMoran, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Freeport-McMoran 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 Freeport-McMoran can be done for the following purposes –
1. Strategic planning of Freeport-McMoran
2. Improving business portfolio management of Freeport-McMoran
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 Freeport-McMoran
Strengths of Freeport-McMoran | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Freeport-McMoran are -
Analytics focus
– Freeport-McMoran 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.
Highly skilled collaborators
– Freeport-McMoran 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 Freeport-McMoran have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Freeport-McMoran 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 Freeport-McMoran is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Freeport-McMoran emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Freeport-McMoran has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Freeport-McMoran 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 switching costs
– The high switching costs that Freeport-McMoran 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.
Operational resilience
– The operational resilience strategy of Freeport-McMoran 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.
Ability to recruit top talent
– Freeport-McMoran 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.
Organizational Resilience of Freeport-McMoran
– The covid-19 pandemic has put organizational resilience at the centre of everthing Freeport-McMoran does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Freeport-McMoran has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Freeport-McMoran to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Freeport-McMoran is present in almost all the verticals within the Metal Mining industry. This has provided Freeport-McMoran 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.
Sustainable margins compare to other players in Metal Mining industry
– Freeport-McMoran has clearly differentiated products in the market place. This has enabled Freeport-McMoran to fetch slight price premium compare to the competitors in the Metal Mining industry. The sustainable margins have also helped Freeport-McMoran to invest into research and development (R&D) and innovation.
Strong track record of project management in the Metal Mining industry
– Freeport-McMoran is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses of Freeport-McMoran | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Freeport-McMoran are -
Employees’ less understanding of Freeport-McMoran strategy
– From the outside it seems that the employees of Freeport-McMoran 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.
Increasing silos among functional specialists
– The organizational structure of Freeport-McMoran is dominated by functional specialists. It is not different from other players in the Metal Mining industry, but Freeport-McMoran needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Freeport-McMoran to focus more on services in the Metal Mining industry rather than just following the product oriented approach.
Products dominated business model
– Even though Freeport-McMoran 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. Freeport-McMoran should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Freeport-McMoran has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Metal Mining industry over the last five years. Freeport-McMoran 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.
Compensation and incentives
– The revenue per employee of Freeport-McMoran 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.
Interest costs
– Compare to the competition, Freeport-McMoran 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
Freeport-McMoran 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.
Slow to strategic competitive environment developments
– As Freeport-McMoran 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.
High dependence on Freeport-McMoran ‘s star products
– The top 2 products and services of Freeport-McMoran 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 Freeport-McMoran has relatively successful track record of launching new products.
No frontier risks strategy
– From the 10K / annual statement of Freeport-McMoran, 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.
Ability to respond to the competition
– As the decision making is very deliberative at Freeport-McMoran, in the dynamic environment of Metal Mining industry it has struggled to respond to the nimble upstart competition. Freeport-McMoran has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Freeport-McMoran Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Freeport-McMoran are -
Buying journey improvements
– Freeport-McMoran can improve the customer journey of consumers in the Metal Mining 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.
Creating value in data economy
– The success of analytics program of Freeport-McMoran has opened avenues for new revenue streams for the organization in Metal Mining industry. This can help Freeport-McMoran to build a more holistic ecosystem for Freeport-McMoran 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
– Freeport-McMoran 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 Freeport-McMoran 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.
Using analytics as competitive advantage
– Freeport-McMoran 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 Freeport-McMoran to build a competitive advantage using analytics. The analytics driven competitive advantage can help Freeport-McMoran 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, Freeport-McMoran 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 Freeport-McMoran to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Freeport-McMoran is facing challenges because of the dominance of functional experts in the organization. Freeport-McMoran 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Freeport-McMoran can use these opportunities to build new business models that can help the communities that Freeport-McMoran operates in. Secondly it can use opportunities from government spending in Metal Mining sector.
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 Freeport-McMoran 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.
Building a culture of innovation
– managers at Freeport-McMoran 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.
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 Freeport-McMoran in the Metal Mining industry. Now Freeport-McMoran can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Freeport-McMoran 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.
Better consumer reach
– The expansion of the 5G network will help Freeport-McMoran to increase its market reach. Freeport-McMoran 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 Freeport-McMoran External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Freeport-McMoran are -
Regulatory challenges
– Freeport-McMoran 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.
Shortening product life cycle
– it is one of the major threat that Freeport-McMoran is facing in Metal Mining sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Freeport-McMoran business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Freeport-McMoran 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 Freeport-McMoran prominent markets.
Increasing wage structure of Freeport-McMoran
– 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 Freeport-McMoran.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Metal Mining industry are lowering. It can presents Freeport-McMoran 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 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.
High dependence on third party suppliers
– Freeport-McMoran 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.
Stagnating economy with rate increase
– Freeport-McMoran 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.
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. Freeport-McMoran 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. Freeport-McMoran needs to understand the core reasons impacting the Metal Mining industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Freeport-McMoran has witnessed rapid integration of technology during Covid-19 in the Metal Mining industry. As one of the leading players in the industry, Freeport-McMoran 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.
Consumer confidence and its impact on Freeport-McMoran 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.
Weighted SWOT Analysis of Freeport-McMoran Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Freeport-McMoran 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 Freeport-McMoran 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 Freeport-McMoran 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 Freeport-McMoran 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 Freeport-McMoran needs to make to build a sustainable competitive advantage.
