Glencore (GLCNF) SWOT Analysis / TOWS Matrix / MBA Resources
Coal
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Glencore (United States)
Based on various researches at Oak Spring University , Glencore is operating in a macro-environment that has been destablized by – technology disruption, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, increasing commodity prices, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google,
geopolitical disruptions, there is backlash against globalization, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Glencore can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Glencore, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Glencore 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 Glencore can be done for the following purposes –
1. Strategic planning of Glencore
2. Improving business portfolio management of Glencore
3. Assessing feasibility of the new initiative in United States
4. Making a Coal sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Glencore
Strengths of Glencore | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Glencore are -
Cross disciplinary teams
– Horizontal connected teams at the Glencore 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 lead change in Coal
– Glencore is one of the leading players in the Coal industry in United States. Over the years it has not only transformed the business landscape in the Coal industry in United States but also across the existing markets. The ability to lead change has enabled Glencore in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Glencore has one of the best training and development program in Energy 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.
Highly skilled collaborators
– Glencore has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Coal industry. Secondly the value chain collaborators of Glencore have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Glencore 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 Coal industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Learning organization
- Glencore 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 Glencore is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Glencore emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Glencore has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Glencore 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.
Sustainable margins compare to other players in Coal industry
– Glencore has clearly differentiated products in the market place. This has enabled Glencore to fetch slight price premium compare to the competitors in the Coal industry. The sustainable margins have also helped Glencore to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Glencore in the Energy sector have low bargaining power. Glencore has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Glencore to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Glencore 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.
Diverse revenue streams
– Glencore is present in almost all the verticals within the Coal industry. This has provided Glencore 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.
Digital Transformation in Coal industry
- digital transformation varies from industry to industry. For Glencore digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Glencore 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.
Weaknesses of Glencore | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Glencore are -
High dependence on Glencore ‘s star products
– The top 2 products and services of Glencore still accounts for major business revenue. This dependence on star products in Coal industry has resulted into insufficient focus on developing new products, even though Glencore has relatively successful track record of launching new products.
Ability to respond to the competition
– As the decision making is very deliberative at Glencore, in the dynamic environment of Coal industry it has struggled to respond to the nimble upstart competition. Glencore has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Glencore 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 Coal industry using digital technology.
Compensation and incentives
– The revenue per employee of Glencore is just above the Coal 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.
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 Glencore supply chain. Even after few cautionary changes, Glencore is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Glencore vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– From the 10K / annual statement of Glencore, it seems that company is thinking out the frontier risks that can impact Coal 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.
Slow decision making process
– As mentioned earlier in the report, Glencore has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Coal industry over the last five years. Glencore 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.
High operating costs
– Compare to the competitors, Glencore has high operating costs in the Coal industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Glencore lucrative customers.
Interest costs
– Compare to the competition, Glencore 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.
Workers concerns about automation
– As automation is fast increasing in the Coal industry, Glencore 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 to strategic competitive environment developments
– As Glencore is one of the leading players in the Coal industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Coal industry in last five years.
Glencore Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Glencore are -
Developing new processes and practices
– Glencore can develop new processes and procedures in Coal industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
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 Glencore 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.
Better consumer reach
– The expansion of the 5G network will help Glencore to increase its market reach. Glencore 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Glencore can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Glencore has opened avenues for new revenue streams for the organization in Coal industry. This can help Glencore to build a more holistic ecosystem for Glencore products in the Coal industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Using analytics as competitive advantage
– Glencore has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Coal sector. This continuous investment in analytics has enabled Glencore to build a competitive advantage using analytics. The analytics driven competitive advantage can help Glencore to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Use of Bitcoin and other crypto currencies for transactions in Coal industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Glencore in the Coal industry. Now Glencore can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Glencore 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.
Loyalty marketing
– Glencore 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.
Building a culture of innovation
– managers at Glencore 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 Coal industry.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Glencore is facing challenges because of the dominance of functional experts in the organization. Glencore can utilize new technology in the field of Coal industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Leveraging digital technologies
– Glencore 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Glencore in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Coal industry, and it will provide faster access to the consumers.
Threats Glencore External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Glencore are -
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 Glencore business can come under increasing regulations regarding data privacy, data security, etc.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Glencore may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Coal sector.
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. Glencore 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 Coal industry are lowering. It can presents Glencore with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Coal 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.
Increasing wage structure of Glencore
– 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 Glencore.
Stagnating economy with rate increase
– Glencore 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 Coal industry.
Technology acceleration in Forth Industrial Revolution
– Glencore has witnessed rapid integration of technology during Covid-19 in the Coal industry. As one of the leading players in the industry, Glencore needs to keep up with the evolution of technology in the Coal 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.
Regulatory challenges
– Glencore 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 Coal industry regulations.
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 Glencore in the Coal sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Glencore 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 Glencore prominent markets.
High dependence on third party suppliers
– Glencore 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.
Weighted SWOT Analysis of Glencore Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Glencore 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 Glencore 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 Glencore 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 Glencore 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 Glencore needs to make to build a sustainable competitive advantage.