Rio Tinto Ltd (RIO) SWOT Analysis / TOWS Matrix / 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 – customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, increasing household debt because of falling income levels, there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, etc

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Introduction to SWOT Analysis of Rio Tinto Ltd

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.

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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

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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 -

Analytics focus

– Rio Tinto Ltd 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 Metal Mining industry. The technology infrastructure of Australia 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.

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.

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.

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.

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.

Sustainable margins compare to other players in Metal Mining industry

– Rio Tinto Ltd has clearly differentiated products in the market place. This has enabled Rio Tinto Ltd to fetch slight price premium compare to the competitors in the Metal Mining industry. The sustainable margins have also helped Rio Tinto Ltd to invest into research and development (R&D) and innovation.

Diverse revenue streams

– Rio Tinto Ltd is present in almost all the verticals within the Metal Mining industry. This has provided Rio Tinto Ltd 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

– 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.

Cross disciplinary teams

– Horizontal connected teams at the Rio Tinto Ltd 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.

Effective Research and Development (R&D)

– Rio Tinto Ltd has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Rio Tinto Ltd staying ahead in the Metal Mining industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

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.

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.

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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 -

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.

Employees’ less understanding of Rio Tinto Ltd strategy

– From the outside it seems that the employees of Rio Tinto Ltd 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.

Slow to strategic competitive environment developments

– As Rio Tinto Ltd 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.

Increasing silos among functional specialists

– The organizational structure of Rio Tinto Ltd is dominated by functional specialists. It is not different from other players in the Metal Mining industry, but Rio Tinto Ltd needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Rio Tinto Ltd to focus more on services in the Metal Mining industry rather than just following the product oriented approach.

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.

Lack of clear differentiation of Rio Tinto Ltd products

– To increase the profitability and margins on the products, Rio Tinto Ltd needs to provide more differentiated products than what it is currently offering in the marketplace.

Workers concerns about automation

– As automation is fast increasing in the Metal Mining industry, Rio Tinto Ltd 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.

Capital Spending Reduction

– Even during the low interest decade, Rio Tinto Ltd 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 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.

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.

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.

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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 -

Developing new processes and practices

– Rio Tinto Ltd can develop new processes and procedures in Metal Mining 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.

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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Rio Tinto Ltd is facing challenges because of the dominance of functional experts in the organization. Rio Tinto Ltd 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.

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.

Loyalty marketing

– Rio Tinto Ltd 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

– Rio Tinto Ltd 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 Rio Tinto Ltd to build a competitive advantage using analytics. The analytics driven competitive advantage can help Rio Tinto Ltd 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 Rio Tinto Ltd 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.

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.

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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Rio Tinto Ltd 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.

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.

Better consumer reach

– The expansion of the 5G network will help Rio Tinto Ltd to increase its market reach. Rio Tinto Ltd 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.

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.

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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 -

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.

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.

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 Rio Tinto Ltd in the Metal Mining sector and impact the bottomline of the organization.

Increasing wage structure of Rio Tinto Ltd

– 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 Rio Tinto Ltd.

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.

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.

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.

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.

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.

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.

Stagnating economy with rate increase

– Rio Tinto Ltd 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 Rio Tinto Ltd with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Metal Mining sector.

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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.

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