Royal Gold (RGLD) SWOT Analysis / TOWS Matrix / MBA Resources
Gold & Silver
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Royal Gold (United States)
Based on various researches at Oak Spring University , Royal Gold is operating in a macro-environment that has been destablized by – competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing,
geopolitical disruptions, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Royal Gold can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Royal Gold, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Royal Gold 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 Royal Gold can be done for the following purposes –
1. Strategic planning of Royal Gold
2. Improving business portfolio management of Royal Gold
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 Royal Gold
Strengths of Royal Gold | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Royal Gold are -
Successful track record of launching new products
– Royal Gold has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Royal Gold 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.
Highly skilled collaborators
– Royal Gold 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 Royal Gold have helped the firm to develop new products and bring them quickly to the marketplace.
Sustainable margins compare to other players in Gold & Silver industry
– Royal Gold has clearly differentiated products in the market place. This has enabled Royal Gold to fetch slight price premium compare to the competitors in the Gold & Silver industry. The sustainable margins have also helped Royal Gold to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Royal Gold has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Royal Gold 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.
Cross disciplinary teams
– Horizontal connected teams at the Royal Gold 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.
Operational resilience
– The operational resilience strategy of Royal Gold 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.
Diverse revenue streams
– Royal Gold is present in almost all the verticals within the Gold & Silver industry. This has provided Royal Gold 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.
Low bargaining power of suppliers
– Suppliers of Royal Gold in the Basic Materials sector have low bargaining power. Royal Gold has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Royal Gold to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Gold & Silver
– Royal Gold 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 Royal Gold in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Royal Gold
– The covid-19 pandemic has put organizational resilience at the centre of everthing Royal Gold does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Gold & Silver industry
- digital transformation varies from industry to industry. For Royal Gold digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Royal Gold 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.
Analytics focus
– Royal Gold 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 Gold & Silver 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.
Weaknesses of Royal Gold | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Royal Gold are -
Lack of clear differentiation of Royal Gold products
– To increase the profitability and margins on the products, Royal Gold needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, Royal Gold has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Gold & Silver industry over the last five years. Royal Gold 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.
Low market penetration in new markets
– Outside its home market of United States, Royal Gold needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Royal Gold 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.
Compensation and incentives
– The revenue per employee of Royal Gold 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.
Workers concerns about automation
– As automation is fast increasing in the Gold & Silver industry, Royal Gold 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 Royal Gold 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.
High cash cycle compare to competitors
Royal Gold 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.
High operating costs
– Compare to the competitors, Royal Gold 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 Royal Gold lucrative customers.
Aligning sales with marketing
– From the outside it seems that Royal Gold needs to have more collaboration between its sales team and marketing team. Sales professionals in the Gold & Silver industry have deep experience in developing customer relationships. Marketing department at Royal Gold can leverage the sales team experience to cultivate customer relationships as Royal Gold is planning to shift buying processes online.
No frontier risks strategy
– From the 10K / annual statement of Royal Gold, it seems that company is thinking out the frontier risks that can impact Gold & Silver 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.
Royal Gold Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Royal Gold are -
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. Royal Gold can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Royal Gold 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.
Developing new processes and practices
– Royal Gold 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.
Leveraging digital technologies
– Royal Gold 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.
Loyalty marketing
– Royal Gold 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.
Buying journey improvements
– Royal Gold 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.
Better consumer reach
– The expansion of the 5G network will help Royal Gold to increase its market reach. Royal Gold 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.
Use of Bitcoin and other crypto currencies for transactions in Gold & Silver industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Royal Gold in the Gold & Silver industry. Now Royal Gold can target international markets with far fewer capital restrictions requirements than the existing system.
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. Royal Gold can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Royal Gold can use these opportunities to build new business models that can help the communities that Royal Gold operates in. Secondly it can use opportunities from government spending in Gold & Silver sector.
Learning at scale
– Online learning technologies has now opened space for Royal Gold 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, Royal Gold 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 Royal Gold to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Royal Gold 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 Royal Gold to build a competitive advantage using analytics. The analytics driven competitive advantage can help Royal Gold to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Royal Gold External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Royal Gold are -
Stagnating economy with rate increase
– Royal Gold 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.
Consumer confidence and its impact on Royal Gold 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.
Technology acceleration in Forth Industrial Revolution
– Royal Gold has witnessed rapid integration of technology during Covid-19 in the Gold & Silver industry. As one of the leading players in the industry, Royal Gold needs to keep up with the evolution of technology in the Gold & Silver 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.
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 Royal Gold.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Royal Gold 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 Royal Gold 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. Royal Gold 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.
Increasing wage structure of Royal Gold
– 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 Royal Gold.
High dependence on third party suppliers
– Royal Gold 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.
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 Royal Gold in the Gold & Silver sector and impact the bottomline of the organization.
Regulatory challenges
– Royal Gold 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 Gold & Silver industry regulations.
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.
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 Royal Gold with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Gold & Silver sector.
Weighted SWOT Analysis of Royal Gold Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Royal Gold 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 Royal Gold 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 Royal Gold 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 Royal Gold 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 Royal Gold needs to make to build a sustainable competitive advantage.
