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 commodity prices, supply chains are disrupted by pandemic , banking and financial system is disrupted by Bitcoin and other crypto currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models,
there is backlash against globalization, technology disruption, 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 -
Innovation driven organization
– ArcelorMittal is one of the most innovative firm in Iron & Steel sector.
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.
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.
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.
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.
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.
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.
Ability to lead change in Iron & Steel
– ArcelorMittal is one of the leading players in the Iron & Steel industry in Germany. Over the years it has not only transformed the business landscape in the Iron & Steel industry in Germany but also across the existing markets. The ability to lead change has enabled ArcelorMittal in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– ArcelorMittal has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Iron & Steel industry. Secondly the value chain collaborators of ArcelorMittal have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– ArcelorMittal is one of the leading players in the Iron & Steel industry in Germany. It is in a position to attract the best talent available in Germany. The firm has a robust talent identification program that helps in identifying the brightest.
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.
Weaknesses of ArcelorMittal | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of ArcelorMittal are -
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.
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.
Slow to strategic competitive environment developments
– As ArcelorMittal is one of the leading players in the Iron & Steel industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Iron & Steel industry in last five years.
Products dominated business model
– Even though ArcelorMittal has some of the most successful models in the Iron & Steel industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. ArcelorMittal should strive to include more intangible value offerings along with its core products and services.
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.
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.
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.
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.
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.
Capital Spending Reduction
– Even during the low interest decade, ArcelorMittal 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 Iron & Steel industry using digital technology.
Employees’ less understanding of ArcelorMittal strategy
– From the outside it seems that the employees of ArcelorMittal 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.
ArcelorMittal Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of ArcelorMittal are -
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for ArcelorMittal in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Iron & Steel industry, and it will provide faster access to the consumers.
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.
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.
Loyalty marketing
– ArcelorMittal 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.
Leveraging digital technologies
– ArcelorMittal 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.
Use of Bitcoin and other crypto currencies for transactions in Iron & Steel industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for ArcelorMittal in the Iron & Steel industry. Now ArcelorMittal can target international markets with far fewer capital restrictions requirements than the existing system.
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.
Learning at scale
– Online learning technologies has now opened space for ArcelorMittal 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for ArcelorMittal 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 ArcelorMittal to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– ArcelorMittal can develop new processes and procedures in Iron & Steel 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, ArcelorMittal can use these opportunities to build new business models that can help the communities that ArcelorMittal operates in. Secondly it can use opportunities from government spending in Iron & Steel sector.
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.
Threats ArcelorMittal External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of ArcelorMittal are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, ArcelorMittal 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 ArcelorMittal prominent markets.
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.
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.
Easy access to finance
– Easy access to finance in Iron & Steel industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. ArcelorMittal can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Stagnating economy with rate increase
– ArcelorMittal 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 Iron & Steel industry.
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.
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.
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.
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.
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.
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.
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.
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.