Sierra Metals Inc. (SMT) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Sierra Metals Inc. (Canada)

Based on various researches at Oak Spring University , Sierra Metals Inc. is operating in a macro-environment that has been destablized by – geopolitical disruptions, cloud computing is disrupting traditional business models, technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, there is backlash against globalization, increasing government debt because of Covid-19 spendings, etc

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Introduction to SWOT Analysis of Sierra Metals Inc.

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Sierra Metals Inc. can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sierra Metals Inc., and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sierra Metals Inc. 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 Sierra Metals Inc. can be done for the following purposes –
1. Strategic planning of Sierra Metals Inc.
2. Improving business portfolio management of Sierra Metals Inc.
3. Assessing feasibility of the new initiative in Canada
4. Making a Gold & Silver sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sierra Metals Inc.

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Strengths of Sierra Metals Inc. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Sierra Metals Inc. are -

Low bargaining power of suppliers

– Suppliers of Sierra Metals Inc. in the Basic Materials sector have low bargaining power. Sierra Metals Inc. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sierra Metals Inc. to manage not only supply disruptions but also source products at highly competitive prices.

Learning organization

- Sierra Metals Inc. 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 Sierra Metals Inc. is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Sierra Metals Inc. emphasize – knowledge, initiative, and innovation.

Operational resilience

– The operational resilience strategy of Sierra Metals Inc. comprises – understanding the underlying the factors in the Gold & Silver 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.

Ability to recruit top talent

– Sierra Metals Inc. is one of the leading players in the Gold & Silver industry in Canada. It is in a position to attract the best talent available in Canada. The firm has a robust talent identification program that helps in identifying the brightest.

Innovation driven organization

– Sierra Metals Inc. is one of the most innovative firm in Gold & Silver sector.

High brand equity

– Sierra Metals Inc. has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sierra Metals Inc. to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Strong track record of project management in the Gold & Silver industry

– Sierra Metals Inc. is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Highly skilled collaborators

– Sierra Metals Inc. has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Gold & Silver industry. Secondly the value chain collaborators of Sierra Metals Inc. have helped the firm to develop new products and bring them quickly to the marketplace.

High switching costs

– The high switching costs that Sierra Metals Inc. 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.

Effective Research and Development (R&D)

– Sierra Metals Inc. has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Sierra Metals Inc. staying ahead in the Gold & Silver industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Training and development

– Sierra Metals Inc. 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.

Ability to lead change in Gold & Silver

– Sierra Metals Inc. is one of the leading players in the Gold & Silver industry in Canada. Over the years it has not only transformed the business landscape in the Gold & Silver industry in Canada but also across the existing markets. The ability to lead change has enabled Sierra Metals Inc. in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

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Weaknesses of Sierra Metals Inc. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Sierra Metals Inc. are -

High bargaining power of channel partners in Gold & Silver industry

– because of the regulatory requirements in Canada, Sierra Metals Inc. 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 Gold & Silver industry.

Capital Spending Reduction

– Even during the low interest decade, Sierra Metals Inc. 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 Gold & Silver industry using digital technology.

Workers concerns about automation

– As automation is fast increasing in the Gold & Silver industry, Sierra Metals Inc. 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.

Interest costs

– Compare to the competition, Sierra Metals Inc. 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.

High dependence on Sierra Metals Inc. ‘s star products

– The top 2 products and services of Sierra Metals Inc. still accounts for major business revenue. This dependence on star products in Gold & Silver industry has resulted into insufficient focus on developing new products, even though Sierra Metals Inc. has relatively successful track record of launching new products.

Skills based hiring in Gold & Silver industry

– The stress on hiring functional specialists at Sierra Metals Inc. 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.

Products dominated business model

– Even though Sierra Metals Inc. has some of the most successful models in the Gold & Silver industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Sierra Metals Inc. should strive to include more intangible value offerings along with its core products and services.

Need for greater diversity

– Sierra Metals Inc. 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.

Ability to respond to the competition

– As the decision making is very deliberative at Sierra Metals Inc., in the dynamic environment of Gold & Silver industry it has struggled to respond to the nimble upstart competition. Sierra Metals Inc. has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

High operating costs

– Compare to the competitors, Sierra Metals Inc. has high operating costs in the Gold & Silver industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Sierra Metals Inc. 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 Sierra Metals Inc. supply chain. Even after few cautionary changes, Sierra Metals Inc. is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sierra Metals Inc. vulnerable to further global disruptions in South East Asia.

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Sierra Metals Inc. Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Sierra Metals Inc. are -

Developing new processes and practices

– Sierra Metals Inc. can develop new processes and procedures in Gold & Silver 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 Sierra Metals Inc. 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Sierra Metals Inc. in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Gold & Silver industry, and it will provide faster access to the consumers.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Gold & Silver industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Sierra Metals Inc. 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. Sierra Metals Inc. 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.

Loyalty marketing

– Sierra Metals Inc. 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.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Gold & Silver industry, but it has also influenced the consumer preferences. Sierra Metals Inc. can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

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. Sierra Metals Inc. can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Sierra Metals Inc. 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 Sierra Metals Inc. to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Sierra Metals Inc. 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

– Sierra Metals Inc. 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.

Using analytics as competitive advantage

– Sierra Metals Inc. has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Gold & Silver sector. This continuous investment in analytics has enabled Sierra Metals Inc. to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sierra Metals Inc. to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Learning at scale

– Online learning technologies has now opened space for Sierra Metals Inc. 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Sierra Metals Inc. is facing challenges because of the dominance of functional experts in the organization. Sierra Metals Inc. can utilize new technology in the field of Gold & Silver industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

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Threats Sierra Metals Inc. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Sierra Metals Inc. are -

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 Sierra Metals Inc..

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 Gold & Silver industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Sierra Metals Inc. 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, Sierra Metals Inc. 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 Sierra Metals Inc. prominent markets.

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. Sierra Metals Inc. 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.

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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Gold & Silver industry are lowering. It can presents Sierra Metals Inc. with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Gold & Silver sector.

Increasing wage structure of Sierra Metals Inc.

– 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 Sierra Metals Inc..

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 Sierra Metals Inc. in the Gold & Silver sector and impact the bottomline of the organization.

Environmental challenges

– Sierra Metals Inc. 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. Sierra Metals Inc. can take advantage of this fund but it will also bring new competitors in the Gold & Silver industry.

High dependence on third party suppliers

– Sierra Metals Inc. 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.

Stagnating economy with rate increase

– Sierra Metals Inc. 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 Gold & Silver industry.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Sierra Metals Inc. in Gold & Silver industry. The Gold & Silver 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.

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Weighted SWOT Analysis of Sierra Metals Inc. Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sierra Metals Inc. 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 Sierra Metals Inc. 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 Sierra Metals Inc. 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 Sierra Metals Inc. 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 Sierra Metals Inc. needs to make to build a sustainable competitive advantage.

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