3. Page | 3
1. Executive Summary
Mature Australian Mining Industry is witnessing higher demand for product segments
such as copper and non-metallic ores. At the same time, stable demand and higher prices
in well-established segments such as Gold, lower prices with stable demand in Coal and
Oil, lower demand and decreasing price for Iron Ore1 will be observed. Overall Mining
industry is expected to remain profitable with slow growth rate2.
Rio Tinto is the second largest Mining company in Australia & globally. This report
critically examines external factors such as economic trends, technological
transformation, ecological factors, competitive analysis along with the Rio Tinto’s
resources and capabilities. This report utilise strategic frameworks and marketing theories
to come up with initiatives that would provide Sustainable Competitive Advantage to Rio
Tinto in the Industry.
2. Situational Analysis
2.1 Context
a. Strong GDP Outlook of Importing Countries: China, Japan and other Asia-
Pacific Countries are the major trading partners of Australian Mining Industry. The
expected economic growth and increase in domestic production in these markets
provide growth opportunities for exports of mining products for Australia as more
than two third of total mining production is exported 2.
b. Surge in demand of Electric Vehicles: Sale of Electric Vehicles globally
increased to about 1000% in the last five years and expected to lead the growth of
1 PWC. (2018). Aussie Mine 2018.
2 IBIS. (2020). IBIS Mining March 2020.
4. Page | 4
Electric Vehicles globally3. Mining Industry supplies Lithium, Nickel, Cobalt and
other key raw materials for electric vehicles and other battery manufacturers. The
demand for clean fuel globally will help the growth in this mining segment.
c. Market Volatility: Volatile Commodity prices and dollar conversion rate fluctuation
could be detrimental for profitability. Demand of Iron ore is expected to decline in
the next few years4. Global coal demand is expected to be stable in coming few
years but many countries are committed for transition to clean fuel, the coal
demand is also expected to decline5 after 2024.
d. Unpredictable & Extreme Weather Conditions: Unpredictable events such as
Bushfires and Flash Floods created disruption in mining production recently.
Unpredictability of extreme weather conditions because of global warming 6
remains a key challenge for the mining industry.
2.2 Customers
2.2.1 Segmentation
Customers of Mining industry could be segmented into four major categories. Automobile,
Energy, Manufacturing and Chemicals (Appendix 4.10). Energy Segment contributes
about 46% of revenue share in the industry (Appendix 4.7) but declining global prices
(Appendix 4.3, 4.4) is decreasing its attractiveness. Automobile and Manufacturing
segment, which contributes to about 47% in revenue (Appendix 4.7) is expected to grow
significantly because of increased demand of their output.
3 Global EV Outlook 2019 – Analysis - IEA. IEA. (2020). Retrieved 29 May 2020, from
https://www.iea.org/reports/global-ev-outlook-2019.
4 Chia, K. (2020). Bloomberg - Are you a robot?. Bloomberg.com. Retrieved 29 May 2020, from
https://www.bloomberg.com/news/articles/2019-09-12/iron-ore-s-glory-days-seen-numbered-as-china-s-
demand-rolls-over.
5 Twidale, S. (2020). Global coal demand to remain stable up to 2024: IEA. reuters.com. Retrieved 29
May 2020, from https://www.reuters.com/article/us-iea-coal/global-coal-demand-to-remain-stable-up-to-
2024-iea-idUSKBN1YL005.
6 C2es.org. Center for Climate and Energy Solutions. (2020). Retrieved 29 May 2020, from
https://www.c2es.org/content/extreme-weather-and-climate-change/.
5. Page | 5
Segment Alias Automobile Energy Manufacturing Chemicals
Summary Increasing demand
in electric vehicles
will increase
demand for raw
material.
Increasing demand
in developing
economies will
balance decreasing
demand in
developed
economies.
Overall increase in
demand but Ores
required in Electric,
Electronics &
Batteries will grow
faster.
Demand will
remain steady.
Figure 1: Customer Segments (Detailed Segment Analysis - Appendix 4.10)
A long-term business relationship is always valued by customers of the mining industry.
Customers expect higher levels of order fulfillment in a given time frame. At the same
time convincing customers for any new deal is not fairly simple and time consuming,
especially Government agencies. Changing trend of social awareness and ethical
sourcing is dominating the customers worldwide since the last decade. Customers are
more comfortable working with suppliers invested in carbon-neutral sourcing and
production.
International Trade plays a very important role for Australian Mining Industry, with about
two third of production exported to global markets. About 53% of production is exported
to China and about 26% is exported to Japan (Appendix 4.7). As demand from both the
economies are expected to grow the overall demand remains positive for the industry.
2.3 Company
2.3.1 Key Figures
Rio Tinto is one of the leading companies in the Mining Industry with strong financial
statements and long-term investments. Efficient operations, investment in research,
technology, and intellectual properties provide higher profitability to Rio Tinto in the Mining
6. Page | 6
Industry. Return on Capital Employed for Rio Tinto was 24% in 20197, which is about
twice the industry average8.
Rio Tinto has a strong operations and supply chain network through Autonomous trains,
trucks, drones, owned ships and contracted fleets. Focus on sustainability and employee
growth initiatives strengthen Rio Tinto’s positioning in the industry (Appendix 4.12). Rio
Tinto has invested US $45 million in 2019 in Research and Development to create
sustainable competitive advantage in the industry 9.
2.3.2 SWOT
Strategic Options using
SWOT
Strengths
- Profitable Operations
- R&D Investments
- Integrated Supply
Chain enabled with
Robotics & AI
Weakness
- Heavy financial
commitments in
existing projects
Opportunities
- Increase in demand of
copper & diverse ores /
minerals
- Increase demand of
ores for battery
(Lithium, nickle, etc)
- Acquisitions of
companies with
synergies to
maximise
opportunities
- R&D investments in
diversified ores,
mineral research to
strengthen &
safeguard position of
assets
Threats
- Volatile Commodity &
Dollar prices
- Decreasing demand of
Iron ore, coal & oil
- Unpredictable weather
conditions
- R&D investments in
reducing operational
cost to manage
fluctuations
- Contingency plan to
manage extreme
weather
- Diversification &
Innovation for long
term profitability
Figure 2: Rio Tinto SWOT Analysis
7 riotinto.com. (2020). Rio Tinto Annual Report 2019. Retrieved from http://riotinto.com
8 BHP Group. Simply Wall St. (2020). Retrieved 29 May 2020, from
https://simplywall.st/stocks/au/materials/asx-bhp/bhp-group-shares.
9 riotinto.com. (2020). Rio Tinto Annual Report 2019. Retrieved from http://riotinto.com
7. Page | 7
2.3.3 Targeting & Positioning
Rio Tinto is targeting Automobile, Manufacturing and Chemical customer segments with
Iron ore, Aluminium, Copper, Diamonds, Borates, Titanium and Seaborne Salt (Appendix
4.11.1). Existing high Investment, R&D projects (such as IP of Pilbara blend), technology
implementation (such as AI and Robotics) in operations and supply chain provides
competitive advantage in Automotive and Manufacturing Segments.
Rio Tinto’s current positioning in the industry is “Pioneering Sustainable Human Progress
(Appendix 4.11.2).”10 This positioning is well supported by investments in sustainability
projects by the company. Further investments in clean fuel product segments, Robotics,
Automation, Artificial Intelligence projects will be helpful in strengthening brand
positioning in the market.
2.4 Competitors
Australian Mining Industry has three major players accounting for about 32% of market
share. BHP Group leads the market with about 15% revenue share, Rio Tinto is second
largest player with about 12% of revenue share and Glencore has 5% revenue share 11.
Rio Tinto leads the industry in targeting customers effectively with many competitive
advantages in participating segments (Appendix 4.11.1).
BHP and Glencore have higher capital investment in assets which makes Rio Tinto an
asset light company with more return on assets. Equity of both the competitors is far more
exposed to debts because of higher leverage Ratio as compared to Rio Tinto. (Figure 3)
10 riotinto.com. (2020). Rio Tinto Annual Report 2019. Retrieved from http://riotinto.com
11 IBIS. (2020). IBIS Mining March 2020.
8. Page | 8
Figure 3: Financial Comparison 2019
Both BHP and Glencore participate in all major segments in the industry with lower
employee to profit ratio. Rio Tinto leads the industry in research and development spends
that will provide the company with sustainable competitive advantage in the longer run
(Figure 4).
Figure 4: Resources & Capabilities Comparison 2019
9. Page | 9
3. Strategic Marketing Alternatives
Following alternative marketing strategies are available to Rio Tinto in the mature mining
market. These strategies are devised using strategic frameworks (ANSOFF & SWOT –
Appendix 4.15, 4.17) and compared on strengths and weaknesses presented (Figure 5).
a. Investment in Operational Efficiency: Investments in technology and process
improvements will enable low cost production and increase profitability. This will
also increase efficiency to meet higher demand and manage market volatilities.
b. Investment in Field Research & Carbon Emission: To meet increasing demand
from Manufacturing and Automobile segments, investment in field research would
be inevitable. Investments in new projects to reduce Carbon Emission from
processing would strengthen the sustainability positioning of Rio Tinto in the
market.
c. Strategic Acquisitions in Mining Industry: Strategic Acquisitions in mining
industries in other geographies, such as India, Africa, South America would help
to grow the business faster in under developed markets or developing economies.
d. New Venture in Agriculture Adjuvants: Agriculture adjuvants will provide
product breadth in the portfolio and reduce dependencies on Mining business. This
alternative would also open possibilities in new markets (& geographies) as it
compliments borate business. Canada and USA are in top 5 importers of
pesticides and adjuvants12, North America will be fastest growing & Asia pacific
will grow medium in adjuvants13. This presents unique opportunity for Australian
exporters in agriculture adjuvant industry.
.
12 OEC - Pesticides (HS92: 3808) Product Trade, Exporters and Importers. Oec.world. (2020). Retrieved
29 May 2020, from https://oec.world/en/profile/hs92/3808/.
13 Global Adjuvants Market | Growth, Trends, and Forecast (2019-2024). Mordorintelligence.com. (2020).
Retrieved 29 May 2020, from https://www.mordorintelligence.com/industry-reports/global-agriculture-
adjuvants-market-industry.
10. Page | 10
e. Supply Chain Consulting Services: Utilising the knowledge gained to implement
Automation, AI and Robotics in Logistics and supply chain by providing Supply
Chain consulting to other industries would provide a diversification strategy. This
reduces the dependencies from existing products and markets.
f. Joint Venture in Clean Energy Solutions: To capture the growth in demand of
clean energy, strategic alternative of working in a partnership with businesses
having unique proposition in clean energy is presented. This alternative would help
Rio Tinto strengthen sustainability approach and diversification.
Strategic Alternative Advantages Disadvantages
Operational Efficiency
Investments
- Higher Profitability and
Output
- Managing unpredictable
demands and weather
conditions
- High capital lock-in
- Increased dependency on
existing markets & products
Field Research & Carbon
Emission Investments
- New ores / minerals mining
for growing segments
- Signifying Sustainability
approach
- High capital lock-in
- Delayed returns
Strategic Acquisitions in
Mining
- Faster new market growth
- Lower knowledge
acquisition investments
- High financial risk
- Culture assimilation risk
Agriculture Adjuvants -
New Venture
- Reduced dependency on
metal ore market
- Reduced dependency on
China, Japan (Asian
markets)
- Higher knowledge
acquisition investments
- Delayed returns
Supply Chain Consulting
Services
- Reduced dependency on
mining industry
- Delayed returns
Clean Energy solutions-
Joint Venture
- Reduced dependency on
mining industry
- Signifying Sustainability
approach
- High capital lock-in
- Delayed returns
Figure 5: Strategic Marketing Alternatives Comparison
11. Page | 11
4. Appendices
4.1 PESTEL - Australian Mining Industry
Opportunities Threats
Political 1. Governments across globe are
in pressure to adopt Carbon
Neutral policies14
1. Positive GDP growth of trading
partner countries like China, Japan
in long term 15
Economical 1. Volatile Commodity prices
2. Improving value of AUD 16 could
reduce exports
1. Gold demand steady17
2. Copper, Lithium, Diversified ores
demand increasing18
3. Increasing Demand of Electric
Vehicles19
Social 1. Increasing Adoption of Clean
Fuel / Solar causing Coal demand
to decline gradually20
1. Automation, AI & other technology
improvements to reduce operational
cost 21
Technological 1. Cyber-attacks could create
disruptions
1. Fear of unpredicted & extreme
weather conditions will increase
demand in manufacturing industries
22
Environmental 1. Unpredicted & extreme weather
conditions causing disruption in
production23
Legal
14 Darby, M. (2020, May 21). Which countries have a net zero carbon goal? Retrieved from
https://www.climatechangenews.com/2019/06/14/countries-net-zero-climate-goal/
15 IBIS. (2020). IBIS Mining March 2020.
16 The Latest 2020 Australian Dollar Forecasts from the Big 4 Banks. (2020, May 14). Retrieved from
https://www.thecurrencyshop.com.au/forecast/australian-dollar-aud-forecasts-2020
17 PWC. (2018). Aussie Mine 2018.
18 PWC. (2018). Aussie Mine 2018.
19 https://www.iea.org/reports/global-ev-outlook-2019
20 Twidale, S. (2019, December 17). Global coal demand to remain stable up to 2024: IEA. Retrieved from
https://www.reuters.com/article/us-iea-coal/global-coal-demand-to-remain-stable-up-to-2024-iea-
idUSKBN1YL005
21 IBIS. (2020). IBIS Mining March 2020.
22 Hyde, R. R. (2020, January 29). How Profits Will Be Made As The Globe Heats Up (MON, RDS-A).
Retrieved from https://www.investopedia.com/articles/investing/092215/industries-will-benefit-global-
warming.asp
23 BHP Annual report 2019 https://www.bhp.com
13. Page | 13
4.4 Crude Oil Price Trends 28
4.5 Rio Tinto Revenue Distribution (by product category)
28 Crude oil1983-2020 Data: 2021-2022 Forecast: Price: Quote: Chart: Historical. (n.d.). Retrieved June 1,
2020, from https://tradingeconomics.com/commodity/crude-oil
14. Page | 14
6.6 Rio Tinto Promotions
4.7 Mining Industry Revenue Share by segments 29
29 IBIS. (2020). IBIS Mining March 2020.
15. Page | 15
4.8 International Trade Mining Industry 30
4.9 Competitive Landscape
30 IBIS. (2020). IBIS Mining March 2020.
16. Page | 16
4.10 Segmentation – Mining Industry
Automobile &
Related
Manufacturers
Electricity &
Petroleum
Product
Producers
Consumer &
Industrial
Product
Manufacturers
Pharmaceutical
& Chemical
Producers
Alias (aka) Automobile Energy Manufacturing Chemicals
Business
Type
(Who)
Large Businesses,
mostly
Multinationals
(private limited
companies), would
prefer long term
contracts
Large
Businesses,
mostly country
specific (could
also be
Government
agencies in
many countries),
would prefer long
term contracts
Medium to Large
Businesses,
(private limited
companies), would
prefer long term
contracts (smaller
manufacturers buy
from big
manufacturers)
Large Businesses,
mostly
Multinationals
(private limited
companies), would
prefer long term
contracts
Needs
(Why)
They produce parts
used in
Automobiles
(engines, body,
transmission etc)
They generate
electricity &
produce final
petroleum
products
(Domestic or
export markets)
Wide range of
manufacturers
globally (producing
Laptops, electric
wires, toys,
batteries,
airplanes, trains,
heavy machineries
etc for consumers
& industrial use)
They produce
medicines, solvents,
agricultural
adjuvants, cleaning,
baking, other
chemicals for both
consumer and
industrial use
Demand Type
(What)
Iron Ore, Copper,
Aluminium
Coal, Oil & Gas Metallic Ores, Non-
Metallic Ores,
Minerals
Minerals, salts,
petroleum bi-
products
Future
(what’s ahead)
Increasing demand
in electric vehicles
will increase
demand for raw
material.
Decreasing
demand of output
for them will
reduce demand of
Coal & Oil in
developed
economies.
However,
demand in
developing
economies
(India, China,
Africa etc) will
still remain
steady.
Increasing demand
of output for them
will increase
demand of Ores &
minerals. Ores
required in
Electric,
Electronics &
Batteries will
grow faster.
Demand will remain
steady.
17. Page | 17
4.11.1 Competitive Targeting Analysis
Automobile &
Related
Manufacturers
Electricity &
Petroleum
Product
Producers
Consumer &
Industrial
Product
Manufacturers
Pharmaceutical
& Chemical
Producers
Alias (aka) Automobile Energy Manufacturing Chemicals
Rio Tinto
Products
Iron Ore, Copper,
Aluminium
Not present Iron Ore, Copper,
Aluminium,
Diamond,
Titanium, Lithium
Borates, Seaborne
Salt
Rio Tinto
Competitive
Advantage
Existing high
Investment, R&D
(IP of Pilbara
blend), technology
(AI Robotics),
Logistics & Supply
chain.
Low cost
Production.
Existing high
Investment, R&D
(IP of Pilbara
blend), technology
(AI Robotics),
Logistics & Supply
chain.
High perceived
value by customers
(their white and
coloured diamonds
are some of the
world’s most
sought-after
gems).
Low Cost
Production.
Largest market
share in products
owned (largest
exporter of
Seaborne salt).
BHP
Strengths
Operational &
supply chain
efficiency, high
investments
High Market
share,
Automation, low
cost production
R&D investments,
Free cash flow to
support growth.
High market share
in few product
segments.
R&D investments,
Free cash flow to
support growth
Glencore
Strengths
R&D Investments
(no significant
advantage)
Market share,
high efficiency
model
R&D Investments
(no significant
advantage)
Early stage- no
Competitive
advantage
18. Page | 18
4.11.2 Competitive Positioning Analysis
Brand
Emotional
Modifier
Descriptive
Modifier
Brand Function
Rio Tinto Pioneering Society (Human)
Sustainable
Progress
BHP Bring Together Resources Better World
Glencore Possibilities Local Communities Developing Talent
4.12 Key Figures, Resources & Capabilities – Rio Tinto
Source: Riotinto.com
19. Page | 19
4.13 BCG Portfolio Analysis – Rio Tinto
4.14 GE-Mckinsey Matrix – Rio Tinto
21. Page | 21
4.16 VRIO Analysis - Rio Tinto
Resources or
Capabilities
Valuable Rare Inimitable
Exploited by
organisation
Competitive
Implication
Financial Positioning -
Profitability & Extra
Cash Flow
Yes No No Yes
Temporary
Competitive
Advantage
Fixed Assets - Fields,
Equipment, Trains etc
Yes No No yes
Temporary
Competitive
Advantage
R & D Function - Field
Research, Automation,
Technology
Yes Yes Yes Yes
Sustainable
Competitive
Advantage
Cost Effective
Production - Low cost
operations
Yes No No Yes
Temporary
Competitive
Advantage
Human Resources -
Skill set development
Yes No Yes Yes
Temporary
Competitive
Advantage
Contracts &
Partnerships
Yes Yes Yes Yes
Sustainable
Competitive
Advantage
Locations
Yes Yes Yes Yes Sustainable
Competitive
Advantage
22. Page | 22
4.17 ANSOFF - SWOT Integration
ANSOFF Strategy Strategic
Options
Reasoning (utilising
SWOT SOs
Market Penetration R & D investment in
new mining field
research
To strengthen the position
and safeguard heavy
investments in assets.
Market Penetration Process
Improvement to
further minimise
operational costs
Utilising extra cash flow to
manage. fluctuations in
demand, price, dollar. Be
profitable in a slow growing
industry.
Market Development Acquisitions of
companies with
synergies from other
geographies
To maximise opportunities
using extra cash flow and a
strong balance sheet.
Product Development Products in
agriculture / farming
adjuvants
To maximise profit in long
term the company should
utilise existing expertise in
borates and salt. This will
counter the negative impact
of threats faced by the mining
Industry.
Product Development Solar / Wind energy
solutions for
commercial use
To maximise profit in the long
term the company should
utilise existing expertise from
existing wind mill in South
23. Page | 23
Africa. This will counter the
negative impact of threats
faced by the mining Industry.
Diversification AI, Robotics &
Automation solutions
to manufacturing,
Shipping or other
businesses
Existing expertise in
automation/ robotics could be
utilised and used as a new
product in new markets.
Diversification & Innovation
for long term profitability is
critical.