Rio Tinto PLC (RIO) SWOT Analysis / TOWS Matrix / MBA Resources
Metal Mining
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Rio Tinto PLC (Germany)
Based on various researches at Oak Spring University , Rio Tinto PLC is operating in a macro-environment that has been destablized by – there is backlash against globalization, technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, increasing commodity prices, geopolitical disruptions, increasing energy prices,
increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Rio Tinto PLC can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Rio Tinto PLC, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Rio Tinto PLC 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 PLC can be done for the following purposes –
1. Strategic planning of Rio Tinto PLC
2. Improving business portfolio management of Rio Tinto PLC
3. Assessing feasibility of the new initiative in Germany
4. Making a Metal Mining sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Rio Tinto PLC
Strengths of Rio Tinto PLC | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Rio Tinto PLC are -
Digital Transformation in Metal Mining industry
- digital transformation varies from industry to industry. For Rio Tinto PLC digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Rio Tinto PLC 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.
Diverse revenue streams
– Rio Tinto PLC is present in almost all the verticals within the Metal Mining industry. This has provided Rio Tinto PLC 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.
Sustainable margins compare to other players in Metal Mining industry
– Rio Tinto PLC has clearly differentiated products in the market place. This has enabled Rio Tinto PLC to fetch slight price premium compare to the competitors in the Metal Mining industry. The sustainable margins have also helped Rio Tinto PLC to invest into research and development (R&D) and innovation.
High brand equity
– Rio Tinto PLC has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Rio Tinto PLC to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Rio Tinto PLC 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 Germany 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.
Successful track record of launching new products
– Rio Tinto PLC has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Rio Tinto PLC 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.
Low bargaining power of suppliers
– Suppliers of Rio Tinto PLC in the Basic Materials sector have low bargaining power. Rio Tinto PLC has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Rio Tinto PLC to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Rio Tinto PLC is one of the most innovative firm in Metal Mining sector.
High switching costs
– The high switching costs that Rio Tinto PLC 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.
Organizational Resilience of Rio Tinto PLC
– The covid-19 pandemic has put organizational resilience at the centre of everthing Rio Tinto PLC does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Rio Tinto PLC has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Rio Tinto PLC 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.
Operational resilience
– The operational resilience strategy of Rio Tinto PLC 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.
Weaknesses of Rio Tinto PLC | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Rio Tinto PLC are -
Need for greater diversity
– Rio Tinto PLC 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.
Employees’ less understanding of Rio Tinto PLC strategy
– From the outside it seems that the employees of Rio Tinto PLC 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.
Aligning sales with marketing
– From the outside it seems that Rio Tinto PLC 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 PLC can leverage the sales team experience to cultivate customer relationships as Rio Tinto PLC is planning to shift buying processes online.
High cash cycle compare to competitors
Rio Tinto PLC has a high cash cycle compare to other players in the Metal Mining industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Ability to respond to the competition
– As the decision making is very deliberative at Rio Tinto PLC, in the dynamic environment of Metal Mining industry it has struggled to respond to the nimble upstart competition. Rio Tinto PLC has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Rio Tinto PLC is slow explore the new channels of communication. These new channels of communication can help Rio Tinto PLC to provide better information regarding Metal Mining products and services. It can also build an online community to further reach out to potential customers.
High bargaining power of channel partners in Metal Mining industry
– because of the regulatory requirements in Germany, Rio Tinto PLC 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.
Increasing silos among functional specialists
– The organizational structure of Rio Tinto PLC is dominated by functional specialists. It is not different from other players in the Metal Mining industry, but Rio Tinto PLC needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Rio Tinto PLC to focus more on services in the Metal Mining industry rather than just following the product oriented approach.
Capital Spending Reduction
– Even during the low interest decade, Rio Tinto PLC 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.
Skills based hiring in Metal Mining industry
– The stress on hiring functional specialists at Rio Tinto PLC 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.
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 PLC supply chain. Even after few cautionary changes, Rio Tinto PLC is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Rio Tinto PLC vulnerable to further global disruptions in South East Asia.
Rio Tinto PLC Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Rio Tinto PLC are -
Better consumer reach
– The expansion of the 5G network will help Rio Tinto PLC to increase its market reach. Rio Tinto PLC 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Rio Tinto PLC is facing challenges because of the dominance of functional experts in the organization. Rio Tinto PLC 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.
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 PLC can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Rio Tinto PLC can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Rio Tinto PLC 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.
Creating value in data economy
– The success of analytics program of Rio Tinto PLC has opened avenues for new revenue streams for the organization in Metal Mining industry. This can help Rio Tinto PLC to build a more holistic ecosystem for Rio Tinto PLC products in the Metal Mining industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Using analytics as competitive advantage
– Rio Tinto PLC 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 PLC to build a competitive advantage using analytics. The analytics driven competitive advantage can help Rio Tinto PLC to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Rio Tinto PLC 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Rio Tinto PLC 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 PLC to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Rio Tinto PLC 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.
Buying journey improvements
– Rio Tinto PLC 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Rio Tinto PLC 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 Rio Tinto PLC 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.
Threats Rio Tinto PLC External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Rio Tinto PLC are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Rio Tinto PLC 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Metal Mining industry are lowering. It can presents Rio Tinto PLC with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Metal Mining sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Rio Tinto PLC 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.
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 PLC 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.
Consumer confidence and its impact on Rio Tinto PLC 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.
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 PLC can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Rio Tinto PLC 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 Rio Tinto PLC prominent markets.
Increasing wage structure of Rio Tinto PLC
– 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 PLC.
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 PLC needs to understand the core reasons impacting the Metal Mining industry. This will help it in building a better workplace.
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 PLC 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 Rio Tinto PLC in the Metal Mining sector and impact the bottomline of the organization.
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 PLC business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Rio Tinto PLC Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Rio Tinto PLC 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 PLC 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 PLC 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 PLC 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 PLC needs to make to build a sustainable competitive advantage.