SWOT Analysis / TOWS Matrix for Fortescue Metals (United States)
Based on various researches at Oak Spring University , Fortescue Metals is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, increasing energy prices, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions,
central banks are concerned over increasing inflation, wage bills are increasing, 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 United States
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 -
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.
Organizational Resilience of Fortescue Metals
– The covid-19 pandemic has put organizational resilience at the centre of everthing Fortescue Metals does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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.
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.
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.
Ability to recruit top talent
– Fortescue Metals 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.
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 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 Fortescue Metals in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
High switching costs
– The high switching costs that Fortescue Metals 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.
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.
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 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.
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.
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.
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.
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 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.
Employees’ less understanding of Fortescue Metals strategy
– From the outside it seems that the employees of Fortescue Metals 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.
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.
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.
Low market penetration in new markets
– Outside its home market of United States, Fortescue Metals needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Products dominated business model
– Even though Fortescue Metals 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. Fortescue Metals should strive to include more intangible value offerings along with its core products and services.
Fortescue Metals Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Fortescue Metals are -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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. Fortescue Metals can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Fortescue Metals External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Fortescue Metals are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Fortescue Metals 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.
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.
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. Fortescue Metals needs to understand the core reasons impacting the Metal Mining industry. This will help it in building a better workplace.
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.
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.
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.
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.
Regulatory challenges
– Fortescue Metals 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.
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.
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.
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.
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.
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.