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Freeport-McMoRan SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by Freeport-McMoRan managers to do a situational analysis of the firm . It is an important technique to evalauate the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Freeport-McMoRan is facing in its current business environment.
The Freeport-McMoRan is one of the leading firms in its industry. Freeport-McMoRan maintains its dominant position in market by critically analyzing and reviewing the SWOT analysis. SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the organization such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework helps an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the Freeport-McMoRan to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The core purpose of SWOT matrix is to identify the strategies that an organization can utilize to exploit external opportunities, counter threats, and build on & protect Freeport-McMoRan strengths, and eradicate its weaknesses.
Step by Step Guide to Freeport-McMoRan SWOT Analysis
Strengths of Freeport-McMoRan – Internal Strategic Factors
As one of the leading firms in its industry, Freeport-McMoRan has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Freeport-McMoRan are –
- Strong Free Cash Flow – Freeport-McMoRan has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Strong Brand Portfolio – Over the years Freeport-McMoRan has invested in building a strong brand portfolio. The SWOT analysis of Freeport-McMoRan just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Strong distribution network – Over the years Freeport-McMoRan has built a reliable distribution network that can reach majority of its potential market.
- Highly skilled workforce through successful training and learning programs. Freeport-McMoRan is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- Automation of activities brought consistency of quality to Freeport-McMoRan products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
- High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
Weakness of Freeport-McMoRan – Internal Strategic Factors
Weakness are the areas where Freeport-McMoRan can improve upon. Strategy is about making choices and weakness are the areas where a firm can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- Limited success outside core business – Even though Freeport-McMoRan is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
- Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that Freeport-McMoRan is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Freeport-McMoRan
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Freeport-McMoRan is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Freeport-McMoRan needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
- The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
Opportunities for Freeport-McMoRan – External Strategic Factors
- New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Freeport-McMoRan. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Freeport-McMoRan’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
- The market development will lead to dilution of competitor’s advantage and enable Freeport-McMoRan to increase its competitiveness compare to the other competitors.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Freeport-McMoRan an opportunity to enter a new emerging market.
- Government green drive also opens an opportunity for procurement of Freeport-McMoRan products by the state as well as federal government contractors.
- New trends in the consumer behavior can open up new market for the Freeport-McMoRan . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Freeport-McMoRan to drive home its advantage in new technology and gain market share in the new product category.
- Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
Threats Freeport-McMoRan Facing - External Strategic Factors
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Freeport-McMoRan in those markets.
- Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Freeport-McMoRan
- No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
- As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
Limitations of SWOT Analysis for Freeport-McMoRan
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Freeport-McMoRan
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of Freeport-McMoRan
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Freeport-McMoRan managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of Freeport-McMoRan
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
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SWOT Worksheet & Template
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References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)
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