Rio Tinto Ltd (RIO) SWOT Analysis / TOWS Matrix / MBA Resources
Metal Mining
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Rio Tinto Ltd (Australia)
Based on various researches at Oak Spring University , Rio Tinto Ltd is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, increasing household debt because of falling income levels, wage bills are increasing, geopolitical disruptions, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation,
competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Rio Tinto Ltd can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Rio Tinto Ltd, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Rio Tinto Ltd 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 Rio Tinto Ltd can be done for the following purposes –
1. Strategic planning of Rio Tinto Ltd
2. Improving business portfolio management of Rio Tinto Ltd
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 Rio Tinto Ltd
Strengths of Rio Tinto Ltd | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Rio Tinto Ltd are -
Training and development
– Rio Tinto Ltd 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.
Digital Transformation in Metal Mining industry
- digital transformation varies from industry to industry. For Rio Tinto Ltd digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Rio Tinto Ltd 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 switching costs
– The high switching costs that Rio Tinto Ltd 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.
Ability to lead change in Metal Mining
– Rio Tinto Ltd 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 Rio Tinto Ltd in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Rio Tinto Ltd 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.
Innovation driven organization
– Rio Tinto Ltd is one of the most innovative firm in Metal Mining sector.
Strong track record of project management in the Metal Mining industry
– Rio Tinto Ltd is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy of Rio Tinto Ltd 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.
Learning organization
- Rio Tinto Ltd 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 Rio Tinto Ltd is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Rio Tinto Ltd emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Rio Tinto Ltd in the Basic Materials sector have low bargaining power. Rio Tinto Ltd has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Rio Tinto Ltd to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Rio Tinto Ltd has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Rio Tinto Ltd to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Rio Tinto Ltd in Metal Mining industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Rio Tinto Ltd | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Rio Tinto Ltd are -
No frontier risks strategy
– From the 10K / annual statement of Rio Tinto Ltd, 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.
Low market penetration in new markets
– Outside its home market of Australia, Rio Tinto Ltd needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 Rio Tinto Ltd supply chain. Even after few cautionary changes, Rio Tinto Ltd is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Rio Tinto Ltd vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee of Rio Tinto Ltd is just above the Metal Mining 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.
Need for greater diversity
– Rio Tinto Ltd 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.
High bargaining power of channel partners in Metal Mining industry
– because of the regulatory requirements in Australia, Rio Tinto Ltd 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.
Interest costs
– Compare to the competition, Rio Tinto Ltd 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.
Aligning sales with marketing
– From the outside it seems that Rio Tinto Ltd 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 Rio Tinto Ltd can leverage the sales team experience to cultivate customer relationships as Rio Tinto Ltd is planning to shift buying processes online.
Skills based hiring in Metal Mining industry
– The stress on hiring functional specialists at Rio Tinto Ltd 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.
Slow decision making process
– As mentioned earlier in the report, Rio Tinto Ltd 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. Rio Tinto Ltd 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Rio Tinto Ltd is slow explore the new channels of communication. These new channels of communication can help Rio Tinto Ltd to provide better information regarding Metal Mining products and services. It can also build an online community to further reach out to potential customers.
Rio Tinto Ltd Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Rio Tinto Ltd are -
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. Rio Tinto Ltd 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. Rio Tinto Ltd 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.
Creating value in data economy
– The success of analytics program of Rio Tinto Ltd has opened avenues for new revenue streams for the organization in Metal Mining industry. This can help Rio Tinto Ltd to build a more holistic ecosystem for Rio Tinto Ltd products in the Metal Mining industry by providing – data insight services, data privacy related products, data based consulting services, 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 Rio Tinto Ltd 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Rio Tinto Ltd 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 Rio Tinto Ltd to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Rio Tinto Ltd 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Rio Tinto Ltd can use these opportunities to build new business models that can help the communities that Rio Tinto Ltd operates in. Secondly it can use opportunities from government spending in Metal Mining sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Rio Tinto Ltd 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 Rio Tinto Ltd to hire the very best people irrespective of their geographical location.
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. Rio Tinto Ltd 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 Rio Tinto Ltd 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.
Use of Bitcoin and other crypto currencies for transactions in Metal Mining industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Rio Tinto Ltd in the Metal Mining industry. Now Rio Tinto Ltd can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Rio Tinto Ltd 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.
Manufacturing automation
– Rio Tinto Ltd 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Rio Tinto Ltd 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.
Threats Rio Tinto Ltd External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Rio Tinto Ltd are -
Technology acceleration in Forth Industrial Revolution
– Rio Tinto Ltd has witnessed rapid integration of technology during Covid-19 in the Metal Mining industry. As one of the leading players in the industry, Rio Tinto Ltd 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.
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. Rio Tinto Ltd can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Rio Tinto Ltd 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.
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 Rio Tinto Ltd business can come under increasing regulations regarding data privacy, data security, etc.
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. Rio Tinto Ltd needs to understand the core reasons impacting the Metal Mining industry. This will help it in building a better workplace.
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 Rio Tinto Ltd.
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. Rio Tinto Ltd 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Rio Tinto Ltd 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.
Regulatory challenges
– Rio Tinto Ltd 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.
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.
High dependence on third party suppliers
– Rio Tinto Ltd 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.
Shortening product life cycle
– it is one of the major threat that Rio Tinto Ltd is facing in Metal Mining sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Rio Tinto Ltd 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.
Weighted SWOT Analysis of Rio Tinto Ltd Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Rio Tinto Ltd 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 Rio Tinto Ltd 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 Rio Tinto Ltd 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 Rio Tinto Ltd 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 Rio Tinto Ltd needs to make to build a sustainable competitive advantage.
