SWOT Analysis / TOWS Matrix for Fortescue Metals (Australia)
Based on various researches at Oak Spring University , Fortescue Metals is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings,
cloud computing is disrupting traditional business models, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Fortescue Metals can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Fortescue Metals, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Fortescue Metals 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 Fortescue Metals can be done for the following purposes –
1. Strategic planning of Fortescue Metals
2. Improving business portfolio management of Fortescue Metals
3. Assessing feasibility of the new initiative in Australia
4. Making a Metal Mining sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Fortescue Metals
Strengths of Fortescue Metals | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Fortescue Metals are -
Innovation driven organization
– Fortescue Metals is one of the most innovative firm in Metal Mining sector.
Sustainable margins compare to other players in Metal Mining industry
– Fortescue Metals has clearly differentiated products in the market place. This has enabled Fortescue Metals to fetch slight price premium compare to the competitors in the Metal Mining industry. The sustainable margins have also helped Fortescue Metals to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Fortescue Metals 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.
Ability to recruit top talent
– Fortescue Metals is one of the leading players in the Metal Mining industry in Australia. It is in a position to attract the best talent available in Australia. The firm has a robust talent identification program that helps in identifying the brightest.
Strong track record of project management in the Metal Mining industry
– Fortescue Metals is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in Metal Mining industry
- digital transformation varies from industry to industry. For Fortescue Metals digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Fortescue Metals 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.
High brand equity
– Fortescue Metals has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Fortescue Metals to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Fortescue Metals 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 Australia 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.
Learning organization
- Fortescue Metals 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 Fortescue Metals is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Fortescue Metals emphasize – knowledge, initiative, and innovation.
Training and development
– Fortescue Metals 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.
Diverse revenue streams
– Fortescue Metals is present in almost all the verticals within the Metal Mining industry. This has provided Fortescue Metals 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.
Successful track record of launching new products
– Fortescue Metals has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Fortescue Metals 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 Fortescue Metals | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Fortescue Metals are -
Interest costs
– Compare to the competition, Fortescue Metals 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.
Slow decision making process
– As mentioned earlier in the report, Fortescue Metals 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. Fortescue Metals 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 Fortescue Metals 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 Fortescue Metals can leverage the sales team experience to cultivate customer relationships as Fortescue Metals is planning to shift buying processes online.
Workers concerns about automation
– As automation is fast increasing in the Metal Mining industry, Fortescue Metals 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.
Capital Spending Reduction
– Even during the low interest decade, Fortescue Metals 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.
Need for greater diversity
– Fortescue Metals 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.
No frontier risks strategy
– From the 10K / annual statement of Fortescue Metals, 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 Fortescue Metals 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.
Ability to respond to the competition
– As the decision making is very deliberative at Fortescue Metals, in the dynamic environment of Metal Mining industry it has struggled to respond to the nimble upstart competition. Fortescue Metals has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High bargaining power of channel partners in Metal Mining industry
– because of the regulatory requirements in Australia, Fortescue Metals 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.
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 Fortescue Metals supply chain. Even after few cautionary changes, Fortescue Metals is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Fortescue Metals vulnerable to further global disruptions in South East Asia.
Fortescue Metals Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Fortescue Metals are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Fortescue Metals in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Metal Mining industry, and it will provide faster access to the consumers.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Metal Mining industry, but it has also influenced the consumer preferences. Fortescue Metals can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Fortescue Metals is facing challenges because of the dominance of functional experts in the organization. Fortescue Metals 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.
Loyalty marketing
– Fortescue Metals has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Fortescue Metals can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Leveraging digital technologies
– Fortescue Metals 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 Metal Mining industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Fortescue Metals 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. Fortescue Metals 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, Fortescue Metals can use these opportunities to build new business models that can help the communities that Fortescue Metals operates in. Secondly it can use opportunities from government spending in Metal Mining sector.
Manufacturing automation
– Fortescue Metals 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.
Learning at scale
– Online learning technologies has now opened space for Fortescue Metals 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.
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 Fortescue Metals 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Fortescue Metals 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 Fortescue Metals to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Fortescue Metals has opened avenues for new revenue streams for the organization in Metal Mining industry. This can help Fortescue Metals to build a more holistic ecosystem for Fortescue Metals products in the Metal Mining industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Threats Fortescue Metals External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Fortescue Metals are -
Technology acceleration in Forth Industrial Revolution
– Fortescue Metals has witnessed rapid integration of technology during Covid-19 in the Metal Mining industry. As one of the leading players in the industry, Fortescue Metals 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.
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 Fortescue Metals business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Fortescue Metals is facing in Metal Mining sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Fortescue Metals 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.
Increasing wage structure of Fortescue Metals
– 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 Fortescue Metals.
Environmental challenges
– Fortescue Metals 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. Fortescue Metals can take advantage of this fund but it will also bring new competitors in the Metal Mining industry.
Consumer confidence and its impact on Fortescue Metals 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Fortescue Metals 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 Fortescue Metals prominent markets.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Fortescue Metals 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.
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 Fortescue Metals in the Metal Mining sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Fortescue Metals 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.
High dependence on third party suppliers
– Fortescue Metals 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.
Weighted SWOT Analysis of Fortescue Metals Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Fortescue Metals 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 Fortescue Metals 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 Fortescue Metals 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 Fortescue Metals 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 Fortescue Metals needs to make to build a sustainable competitive advantage.
