Fortescue Metals Group Ltd SWOT Analysis / Matrix

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SWOT analysis is a strategic planning tool that can be used by Fortescue Metals Group Ltd 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) Fortescue Metals Group Ltd is facing in its current business environment.

The Fortescue Metals Group Ltd is one of the leading firms in its industry. Fortescue Metals Group Ltd maintains its prominent position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the company such as – marketing, finance, operations, management information systems and strategic planning.

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The SWOT Analysis framework facilitates 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 called SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the Fortescue Metals Group Ltd to develop four types of strategies:

SO (strengths-opportunities) Strategies
WO (weaknesses-opportunities) Strategies
ST (strengths-threats) Strategies
WT (weaknesses-threats) Strategies

Fortescue Metals Group Ltd swot analysis / matrix

SWOT Matrix Strategies Objective

The central purpose of SWOT matrix is to identify the strategies that a firm can utilize to exploit external opportunities, counter threats, and build on & protect Fortescue Metals Group Ltd strengths, and eradicate its weaknesses.

Step by Step Guide to Fortescue Metals Group Ltd SWOT Analysis

Strengths of Fortescue Metals Group Ltd – Internal Strategic Factors

As one of the leading companies in its industry, Fortescue Metals Group Ltd 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 Fortescue Metals Group Ltd are –

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Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
Strong distribution network – Over the years Fortescue Metals Group Ltd has built a reliable distribution network that can reach majority of its potential market.
Superb Performance in New Markets – Fortescue Metals Group Ltd 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.
Strong Brand Portfolio – Over the years Fortescue Metals Group Ltd has invested in building a strong brand portfolio. The SWOT analysis of Fortescue Metals Group Ltd just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
Good Returns on Capital Expenditure – Fortescue Metals Group Ltd 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. Fortescue Metals Group Ltd 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.
Successful track record of developing new products – product innovation.

Weakness of Fortescue Metals Group Ltd – Internal Strategic Factors

Weakness are the areas where Fortescue Metals Group Ltd 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.

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Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Fortescue Metals Group Ltd 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.
High attrition rate in work force – compare to other organizations in the industry Fortescue Metals Group Ltd has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
Not highly successful at integrating firms with different work culture. As mentioned earlier even though Fortescue Metals Group Ltd is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
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.
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 Fortescue Metals Group Ltd
Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
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. Fortescue Metals Group Ltd has to build internal feedback mechanism directly from sales team on ground to counter these challenges.

Opportunities for Fortescue Metals Group Ltd – External Strategic Factors

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Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Fortescue Metals Group Ltd.
Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Fortescue Metals Group Ltd an opportunity to enter a new emerging market.
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 Fortescue Metals Group Ltd in other product categories.
The market development will lead to dilution of competitor’s advantage and enable Fortescue Metals Group Ltd to increase its competitiveness compare to the other competitors.
Government green drive also opens an opportunity for procurement of Fortescue Metals Group Ltd products by the state as well as federal government contractors.
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 Fortescue Metals Group Ltd. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
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 Fortescue Metals Group Ltd to drive home its advantage in new technology and gain market share in the new product category.
The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Fortescue Metals Group Ltd to increase its profitability.

Threats Fortescue Metals Group Ltd Facing - External Strategic Factors

Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Fortescue Metals Group Ltd in those markets.
New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
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.
Rising raw material can pose a threat to the Fortescue Metals Group Ltd profitability.
Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
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 Fortescue Metals Group Ltd

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 Fortescue Metals Group Ltd
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 Fortescue Metals Group Ltd

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 Fortescue Metals Group Ltd 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 Fortescue Metals Group Ltd

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)