Novagold (NG) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Novagold (United States)

Based on various researches at Oak Spring University , Novagold is operating in a macro-environment that has been destablized by – wage bills are increasing, increasing transportation and logistics costs, there is backlash against globalization, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, increasing household debt because of falling income levels, increasing commodity prices, increasing government debt because of Covid-19 spendings, etc

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Introduction to SWOT Analysis of Novagold

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

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Strengths of Novagold | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Novagold are -

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

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

Low bargaining power of suppliers

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

Digital Transformation in Gold & Silver industry

- digital transformation varies from industry to industry. For Novagold digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Novagold 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.

Highly skilled collaborators

– Novagold 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 Novagold have helped the firm to develop new products and bring them quickly to the marketplace.

High switching costs

– The high switching costs that Novagold 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)

– Novagold has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Novagold 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.

Sustainable margins compare to other players in Gold & Silver industry

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

Diverse revenue streams

– Novagold is present in almost all the verticals within the Gold & Silver industry. This has provided Novagold 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.

Operational resilience

– The operational resilience strategy of Novagold 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 lead change in Gold & Silver

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

High brand equity

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

Training and development

– Novagold 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.

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Weaknesses of Novagold | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Novagold are -

Compensation and incentives

– The revenue per employee of Novagold is just above the Gold & Silver 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 operating costs

– Compare to the competitors, Novagold 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 Novagold lucrative customers.

Low market penetration in new markets

– Outside its home market of United States, Novagold needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

High cash cycle compare to competitors

Novagold has a high cash cycle compare to other players in the Gold & Silver industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Need for greater diversity

– Novagold 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 Gold & Silver industry

– because of the regulatory requirements in United States, Novagold 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.

Workers concerns about automation

– As automation is fast increasing in the Gold & Silver industry, Novagold 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 Novagold is one of the leading players in the Gold & Silver industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Gold & Silver industry in last five years.

Ability to respond to the competition

– As the decision making is very deliberative at Novagold, in the dynamic environment of Gold & Silver industry it has struggled to respond to the nimble upstart competition. Novagold 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, Novagold 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.

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 Novagold supply chain. Even after few cautionary changes, Novagold is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Novagold vulnerable to further global disruptions in South East Asia.

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Novagold Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Novagold are -

Building a culture of innovation

– managers at Novagold 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 Gold & Silver industry.

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 Novagold 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 Novagold 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.

Learning at scale

– Online learning technologies has now opened space for Novagold 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.

Buying journey improvements

– Novagold can improve the customer journey of consumers in the Gold & Silver 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.

Leveraging digital technologies

– Novagold 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.

Creating value in data economy

– The success of analytics program of Novagold has opened avenues for new revenue streams for the organization in Gold & Silver industry. This can help Novagold to build a more holistic ecosystem for Novagold products in the Gold & Silver industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Better consumer reach

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

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. Novagold can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Novagold can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Manufacturing automation

– Novagold can use the latest technology developments to improve its manufacturing and designing process in Gold & Silver 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.

Developing new processes and practices

– Novagold 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Novagold 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.

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Threats Novagold External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Novagold are -

Barriers of entry lowering

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

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 Novagold in the Gold & Silver sector and impact the bottomline of the organization.

Environmental challenges

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

Shortening product life cycle

– it is one of the major threat that Novagold is facing in Gold & Silver sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Novagold may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Gold & Silver sector.

Increasing wage structure of Novagold

– 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 Novagold.

Consumer confidence and its impact on Novagold 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 Gold & Silver industry and other sectors.

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. Novagold 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 Novagold 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.

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. Novagold 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.

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 Novagold.

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 Novagold 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. Novagold needs to understand the core reasons impacting the Gold & Silver industry. This will help it in building a better workplace.

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Weighted SWOT Analysis of Novagold Template, Example

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

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