VALE (VALED3) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for VALE (France)

Based on various researches at Oak Spring University , VALE is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, increasing household debt because of falling income levels, supply chains are disrupted by pandemic , technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, increasing commodity prices, etc

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Introduction to SWOT Analysis of VALE

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

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

The strengths of VALE are -

Strong track record of project management in the Metal Mining industry

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

High switching costs

– The high switching costs that VALE 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.

Cross disciplinary teams

– Horizontal connected teams at the VALE 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.

Analytics focus

– VALE 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 France 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.

Operational resilience

– The operational resilience strategy of VALE 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.

Digital Transformation in Metal Mining industry

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

Organizational Resilience of VALE

– The covid-19 pandemic has put organizational resilience at the centre of everthing VALE does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Superior customer experience

– The customer experience strategy of VALE in Metal Mining industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Low bargaining power of suppliers

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

Learning organization

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

Training and development

– VALE 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.

Highly skilled collaborators

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

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

The weaknesses of VALE are -

High dependence on VALE ‘s star products

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

Compensation and incentives

– The revenue per employee of VALE 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.

No frontier risks strategy

– From the 10K / annual statement of VALE, 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.

High bargaining power of channel partners in Metal Mining industry

– because of the regulatory requirements in France, VALE 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.

Lack of clear differentiation of VALE products

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

Aligning sales with marketing

– From the outside it seems that VALE 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 VALE can leverage the sales team experience to cultivate customer relationships as VALE is planning to shift buying processes online.

Capital Spending Reduction

– Even during the low interest decade, VALE 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.

Workers concerns about automation

– As automation is fast increasing in the Metal Mining industry, VALE 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, VALE 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.

Low market penetration in new markets

– Outside its home market of France, VALE 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 VALE supply chain. Even after few cautionary changes, VALE is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left VALE vulnerable to further global disruptions in South East Asia.

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

The opportunities of VALE are -

Lowering marketing communication costs

– 5G expansion will open new opportunities for VALE 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.

Learning at scale

– Online learning technologies has now opened space for VALE 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.

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 VALE 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for VALE 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 VALE to hire the very best people irrespective of their geographical location.

Loyalty marketing

– VALE 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 Metal Mining industry, but it has also influenced the consumer preferences. VALE can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

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 VALE in the Metal Mining industry. Now VALE can target international markets with far fewer capital restrictions requirements than the existing system.

Manufacturing automation

– VALE 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.

Developing new processes and practices

– VALE 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.

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. VALE 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. VALE 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 VALE has opened avenues for new revenue streams for the organization in Metal Mining industry. This can help VALE to build a more holistic ecosystem for VALE products in the Metal Mining industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Low interest rates

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

Building a culture of innovation

– managers at VALE 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.

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

The threats of VALE are -

Shortening product life cycle

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

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.

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 VALE.

Consumer confidence and its impact on VALE 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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for VALE 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.

Increasing wage structure of VALE

– 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 VALE.

Environmental challenges

– VALE 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. VALE can take advantage of this fund but it will also bring new competitors in the Metal Mining industry.

Technology acceleration in Forth Industrial Revolution

– VALE has witnessed rapid integration of technology during Covid-19 in the Metal Mining industry. As one of the leading players in the industry, VALE 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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, VALE 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.

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. VALE needs to understand the core reasons impacting the Metal Mining industry. This will help it in building a better workplace.

High dependence on third party suppliers

– VALE 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.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, VALE 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 VALE prominent markets.

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Weighted SWOT Analysis of VALE Template, Example

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

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