Rio Tinto plc SWOT Analysis / Matrix

Business Essays, Term Papers & Research Papers

SWOT analysis is a vital strategic planning tool that can be used by Rio Tinto plc managers to do a situational analysis of the organization . It is a useful technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Rio Tinto plc is facing in its current business environment.

The Rio Tinto plc is one of the leading companies in its industry. Rio Tinto plc maintains its prominent 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 firm such as – marketing, finance, operations, management information systems and strategic planning.

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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 Rio Tinto plc 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 primary purpose of SWOT matrix is to identify the strategies that an organization can utilize to exploit external opportunities, counter threats, and build on & protect Rio Tinto plc strengths, and eradicate its weaknesses.

Step by Step Guide to Rio Tinto plc SWOT Analysis

Strengths of Rio Tinto plc – Internal Strategic Factors

As one of the leading companies in its industry, Rio Tinto plc has numerous strengths that enable 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 Rio Tinto plc are –

Read - Rio Tinto plc Porter 5 Forces Analysis & Industry Analysis
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Strong distribution network – Over the years Rio Tinto plc has built a reliable distribution network that can reach majority of its potential market.
Good Returns on Capital Expenditure – Rio Tinto plc is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
Highly skilled workforce through successful training and learning programs. Rio Tinto plc 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.
Strong Free Cash Flow – Rio Tinto plc has strong free cash flows that provide resources in the hand of the company to expand into new projects.
Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
Highly successful at Go To Market strategies for its products.
Strong Brand Portfolio – Over the years Rio Tinto plc has invested in building a strong brand portfolio. The SWOT analysis of Rio Tinto plc just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
Superb Performance in New Markets – Rio Tinto plc has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.

Weakness of Rio Tinto plc – Internal Strategic Factors

Weakness are the areas where Rio Tinto plc can improve upon. Strategy is about making choices and weakness are the areas where an organization can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

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Not highly successful at integrating firms with different work culture. As mentioned earlier even though Rio Tinto plc is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
Investment in Research and Development is below the fastest growing players in the industry. Even though Rio Tinto plc is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.
High attrition rate in work force – compare to other organizations in the industry Rio Tinto plc has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.
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.
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 Rio Tinto plc
The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Rio Tinto plc has to build internal feedback mechanism directly from sales team on ground to counter these challenges.

Opportunities for Rio Tinto plc – External Strategic Factors

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New trends in the consumer behavior can open up new market for the Rio Tinto plc . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
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.
Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Rio Tinto plc.
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 Rio Tinto plc to drive home its advantage in new technology and gain market share in the new product category.
Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Rio Tinto plc in other product categories.
Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Rio Tinto plc to capture new customers and increase its market share.
Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Rio Tinto plc an opportunity to enter a new emerging market.
The new technology provides an opportunity to Rio Tinto plc to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.

Threats Rio Tinto plc Facing - External Strategic Factors

Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Rio Tinto plc in those markets.
Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Rio Tinto plc
New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
Imitation of the counterfeit and low quality product is also a threat to Rio Tinto plc’s product especially in the emerging markets and low income markets.
Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
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.
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.
Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.

Limitations of SWOT Analysis for Rio Tinto plc

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 Rio Tinto plc
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.

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Weighted SWOT Analysis of Rio Tinto plc

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 Rio Tinto plc 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 Rio Tinto plc

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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Example of Weighted SWOT Analysis

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SWOT Worksheet & Template

If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.

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)