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 – wage bills are increasing, technology disruption, digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, geopolitical disruptions, there is increasing trade war between United States & China,
increasing transportation and logistics costs, increasing household debt because of falling income levels, 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 -
Low bargaining power of suppliers
– Suppliers of Fortescue Metals in the Basic Materials sector have low bargaining power. Fortescue Metals has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Fortescue Metals to manage not only supply disruptions but also source products at highly competitive prices.
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.
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.
Ability to lead change in Metal Mining
– Fortescue Metals is one of the leading players in the Metal Mining industry in Australia. Over the years it has not only transformed the business landscape in the Metal Mining industry in Australia but also across the existing markets. The ability to lead change has enabled Fortescue Metals in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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.
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.
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.
Highly skilled collaborators
– Fortescue Metals 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 Fortescue Metals have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy of Fortescue Metals 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.
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.
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.
Weaknesses of Fortescue Metals | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Fortescue Metals are -
High dependence on Fortescue Metals ‘s star products
– The top 2 products and services of Fortescue Metals 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 Fortescue Metals has relatively successful track record of launching new products.
Increasing silos among functional specialists
– The organizational structure of Fortescue Metals is dominated by functional specialists. It is not different from other players in the Metal Mining industry, but Fortescue Metals needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Fortescue Metals to focus more on services in the Metal Mining industry rather than just following the product oriented approach.
High operating costs
– Compare to the competitors, Fortescue Metals has high operating costs in the Metal Mining industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Fortescue Metals lucrative customers.
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.
Low market penetration in new markets
– Outside its home market of Australia, Fortescue Metals needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 to strategic competitive environment developments
– As Fortescue Metals 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.
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.
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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Fortescue Metals is slow explore the new channels of communication. These new channels of communication can help Fortescue Metals to provide better information regarding Metal Mining products and services. It can also build an online community to further reach out to potential customers.
Fortescue Metals Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Fortescue Metals are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Fortescue Metals 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 Fortescue Metals to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Low interest rates
– Even though inflation is raising its head in most developed economies, Fortescue Metals 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 Fortescue Metals to increase its market reach. Fortescue Metals 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.
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.
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.
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.
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.
Buying journey improvements
– Fortescue Metals 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.
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.
Building a culture of innovation
– managers at Fortescue Metals 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.
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.
Using analytics as competitive advantage
– Fortescue Metals 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 Fortescue Metals to build a competitive advantage using analytics. The analytics driven competitive advantage can help Fortescue Metals to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Threats Fortescue Metals External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Fortescue Metals are -
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.
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.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Metal Mining industry are lowering. It can presents Fortescue Metals with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Metal Mining sector.
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.
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.
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. Fortescue Metals can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
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.
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.
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.