Freeport-McMoran (FCX) SWOT Analysis / TOWS Matrix / 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 – there is backlash against globalization, challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, etc

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Introduction to SWOT Analysis of Freeport-McMoran

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.

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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

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Strengths of Freeport-McMoran | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Freeport-McMoran are -

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.

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.

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.

Ability to lead change in Metal Mining

– Freeport-McMoran 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 Freeport-McMoran 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 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.

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.

Effective Research and Development (R&D)

– Freeport-McMoran has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Freeport-McMoran staying ahead in the Metal Mining 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 Freeport-McMoran in the Basic Materials sector have low bargaining power. Freeport-McMoran has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Freeport-McMoran to manage not only supply disruptions but also source products at highly competitive prices.

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.

Digital Transformation in Metal Mining industry

- digital transformation varies from industry to industry. For Freeport-McMoran digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Freeport-McMoran 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.

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.

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.

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Weaknesses of Freeport-McMoran | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Freeport-McMoran are -

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.

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.

Skills based hiring in Metal Mining industry

– The stress on hiring functional specialists at Freeport-McMoran 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.

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 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 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.

Aligning sales with marketing

– From the outside it seems that Freeport-McMoran needs to have more collaboration between its sales team and marketing team. Sales professionals in the Metal Mining industry have deep experience in developing customer relationships. Marketing department at Freeport-McMoran can leverage the sales team experience to cultivate customer relationships as Freeport-McMoran is planning to shift buying processes online.

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.

High bargaining power of channel partners in Metal Mining industry

– because of the regulatory requirements in United States, Freeport-McMoran 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.

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.

Capital Spending Reduction

– Even during the low interest decade, Freeport-McMoran 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 Metal Mining industry using digital technology.

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Freeport-McMoran Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Freeport-McMoran are -

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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Freeport-McMoran 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 Freeport-McMoran to hire the very best people irrespective of their geographical location.

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.

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.

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.

Reforming the budgeting process

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

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.

Manufacturing automation

– Freeport-McMoran 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.

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. Freeport-McMoran can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Metal Mining industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Freeport-McMoran 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. Freeport-McMoran 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, 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.

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.

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Threats Freeport-McMoran External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Freeport-McMoran are -

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.

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.

Learning curve for new practices

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

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.

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 Freeport-McMoran.

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.

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.

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.

Trade war between China and United States

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

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 Freeport-McMoran in the Metal Mining sector and impact the bottomline of the organization.

Environmental challenges

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

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. Freeport-McMoran 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.

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.

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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.

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