ArcelorMittal (ARRD) SWOT Analysis / TOWS Matrix / MBA Resources
Iron & Steel
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for ArcelorMittal (Germany)
Based on various researches at Oak Spring University , ArcelorMittal is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, there is backlash against globalization,
customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic , etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that ArcelorMittal can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the ArcelorMittal, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which ArcelorMittal 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 ArcelorMittal can be done for the following purposes –
1. Strategic planning of ArcelorMittal
2. Improving business portfolio management of ArcelorMittal
3. Assessing feasibility of the new initiative in Germany
4. Making a Iron & Steel sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of ArcelorMittal
Strengths of ArcelorMittal | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of ArcelorMittal are -
Operational resilience
– The operational resilience strategy of ArcelorMittal comprises – understanding the underlying the factors in the Iron & Steel 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.
Effective Research and Development (R&D)
– ArcelorMittal has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – ArcelorMittal staying ahead in the Iron & Steel industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– ArcelorMittal 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 Iron & Steel 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.
Superior customer experience
– The customer experience strategy of ArcelorMittal in Iron & Steel industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– ArcelorMittal is one of the most innovative firm in Iron & Steel sector.
Sustainable margins compare to other players in Iron & Steel industry
– ArcelorMittal has clearly differentiated products in the market place. This has enabled ArcelorMittal to fetch slight price premium compare to the competitors in the Iron & Steel industry. The sustainable margins have also helped ArcelorMittal to invest into research and development (R&D) and innovation.
Digital Transformation in Iron & Steel industry
- digital transformation varies from industry to industry. For ArcelorMittal digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. ArcelorMittal 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.
High brand equity
– ArcelorMittal has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled ArcelorMittal to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– ArcelorMittal is present in almost all the verticals within the Iron & Steel industry. This has provided ArcelorMittal 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.
Strong track record of project management in the Iron & Steel industry
– ArcelorMittal is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of ArcelorMittal
– The covid-19 pandemic has put organizational resilience at the centre of everthing ArcelorMittal does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Successful track record of launching new products
– ArcelorMittal has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. ArcelorMittal 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.
Weaknesses of ArcelorMittal | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of ArcelorMittal are -
Aligning sales with marketing
– From the outside it seems that ArcelorMittal needs to have more collaboration between its sales team and marketing team. Sales professionals in the Iron & Steel industry have deep experience in developing customer relationships. Marketing department at ArcelorMittal can leverage the sales team experience to cultivate customer relationships as ArcelorMittal is planning to shift buying processes online.
Skills based hiring in Iron & Steel industry
– The stress on hiring functional specialists at ArcelorMittal 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.
Lack of clear differentiation of ArcelorMittal products
– To increase the profitability and margins on the products, ArcelorMittal needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on ArcelorMittal ‘s star products
– The top 2 products and services of ArcelorMittal still accounts for major business revenue. This dependence on star products in Iron & Steel industry has resulted into insufficient focus on developing new products, even though ArcelorMittal has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the Iron & Steel industry, ArcelorMittal 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.
Increasing silos among functional specialists
– The organizational structure of ArcelorMittal is dominated by functional specialists. It is not different from other players in the Iron & Steel industry, but ArcelorMittal needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help ArcelorMittal to focus more on services in the Iron & Steel industry rather than just following the product oriented approach.
Compensation and incentives
– The revenue per employee of ArcelorMittal is just above the Iron & Steel 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, ArcelorMittal is slow explore the new channels of communication. These new channels of communication can help ArcelorMittal to provide better information regarding Iron & Steel products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative at ArcelorMittal, in the dynamic environment of Iron & Steel industry it has struggled to respond to the nimble upstart competition. ArcelorMittal has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High cash cycle compare to competitors
ArcelorMittal has a high cash cycle compare to other players in the Iron & Steel 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, ArcelorMittal has high operating costs in the Iron & Steel industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract ArcelorMittal lucrative customers.
ArcelorMittal Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of ArcelorMittal are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects ArcelorMittal can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, ArcelorMittal 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 ArcelorMittal to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Better consumer reach
– The expansion of the 5G network will help ArcelorMittal to increase its market reach. ArcelorMittal 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. ArcelorMittal can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, ArcelorMittal 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.
Manufacturing automation
– ArcelorMittal can use the latest technology developments to improve its manufacturing and designing process in Iron & Steel 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.
Using analytics as competitive advantage
– ArcelorMittal has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Iron & Steel sector. This continuous investment in analytics has enabled ArcelorMittal to build a competitive advantage using analytics. The analytics driven competitive advantage can help ArcelorMittal to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, ArcelorMittal is facing challenges because of the dominance of functional experts in the organization. ArcelorMittal can utilize new technology in the field of Iron & Steel industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Buying journey improvements
– ArcelorMittal can improve the customer journey of consumers in the Iron & Steel 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.
Building a culture of innovation
– managers at ArcelorMittal 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 Iron & Steel industry.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Iron & Steel industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. ArcelorMittal 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. ArcelorMittal 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Iron & Steel industry, but it has also influenced the consumer preferences. ArcelorMittal can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of ArcelorMittal has opened avenues for new revenue streams for the organization in Iron & Steel industry. This can help ArcelorMittal to build a more holistic ecosystem for ArcelorMittal products in the Iron & Steel industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Threats ArcelorMittal External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of ArcelorMittal are -
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. ArcelorMittal needs to understand the core reasons impacting the Iron & Steel industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– ArcelorMittal has witnessed rapid integration of technology during Covid-19 in the Iron & Steel industry. As one of the leading players in the industry, ArcelorMittal needs to keep up with the evolution of technology in the Iron & Steel 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, ArcelorMittal may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Iron & Steel sector.
Increasing wage structure of ArcelorMittal
– 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 ArcelorMittal.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Iron & Steel industry are lowering. It can presents ArcelorMittal with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Iron & Steel sector.
Consumer confidence and its impact on ArcelorMittal 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 Iron & Steel industry and other sectors.
Environmental challenges
– ArcelorMittal 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. ArcelorMittal can take advantage of this fund but it will also bring new competitors in the Iron & Steel industry.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for ArcelorMittal in Iron & Steel industry. The Iron & Steel 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.
Regulatory challenges
– ArcelorMittal 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 Iron & Steel industry regulations.
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. ArcelorMittal 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 ArcelorMittal.
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 ArcelorMittal business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that ArcelorMittal is facing in Iron & Steel sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of ArcelorMittal Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at ArcelorMittal 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 ArcelorMittal 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 ArcelorMittal 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 ArcelorMittal 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 ArcelorMittal needs to make to build a sustainable competitive advantage.