HI5019 Strategic Analysis: Business Report on Rio Tinto

This report presents a comprehensive strategic analysis of Rio Tinto, a prominent mining and metal products company. It begins with an introduction to Rio Tinto's global operations and significance in the industry. The report then delves into the external analysis, examining the general environment, including environmental considerations, economic contributions, political influences, social factors, and technological advancements. It further explores the industry environment using Porter's Five Forces, assessing supplier power, buyer power, the threat of new entrants, substitute products, and competitive rivalry. The analysis continues with an examination of the competitive environment, identifying key competitors and their strategies, and concludes by highlighting the opportunities and threats faced by Rio Tinto, providing a holistic understanding of its strategic position and challenges within the global market.

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Running head: BUSINESS RESEARCH
Business Research
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BUSINESS RESEARCH
Introduction
Companies play a very significant role in sustaining the daily operations of human
beings. Companies provide products and services which are required in domestic, national, and
global markets (Amils, Fernández-Remolar and IPBSL Team, 2014). In Australia, a company
known as Rio Tinto is very significant in the production and supply of mining and metal
products. Rio Tinto was established in the year 1962 and deals generally with the finding,
mining, as well as processing of mineral resources (O'Faircheallaigh, 2013). These mineral
resources include diamond, copper, iron ore, aluminum, and other energy and mineral products.
The company operates not only in Australia but also in other 34 countries across 6 continents.
These countries include the UK, Brazil, Guinea, Canada, the US, Chile, Mongolia, Iceland, and
New Zealand. In these countries, the company has mines, mills, as well as refineries, and power
stations (Bellis, 2016). The products from this company are exported to other countries through
the use of railways, ships, as well as ports. In this report, the external and the internal analysis of
Rio Tinto will be presented in a logical approach.
Part 1: External Analysis
General Environment Analysis
Kunz and Moran (2014) argue that Rio Tinto respects the natural resources of the host
countries and considers the impacts of its environmental activities. The company has pioneered
ways which are innovative in order to ensure energy use reduction, lower emissions of carbon
dioxide, as well as responsible management of water, and reduction of waste. Rio Tinto works
with host communities and regulators in order to manage and monitor environmental activities
and hence comply with regulations which are set both locally and internationally. Castillo et al

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(2013) posit that the company thinks globally but acts locally in regard to environmental
activities. The company also sets improvement targets which reflect its overall ambition by
putting into account the present circumstances which are in every location. The company also
aims at sharing knowledge and learning from others in order to improve environmental
management approaches through participation in reviews of industries. These industry reviews
are concerned with such issues as water stewardship and tailings management. Biodiversity loss
and land disturbance are highly avoided and managed by this company. Where appropriate, the
company ensures that its environmental approaches are consistent with the mitigation hierarchy
of avoidance, as well as restoration and minimization (O'Faircheallaigh, 2013). Additionally, Rio
Tinto has taken measures to address the issue of climate change and this has been done through a
partnership with other companies and organizations which deal with auto-motives in order to
produce a fuel which is lighter, more efficient, and which increases safety performance.
On the economic sector, the company has helped Australia significantly through the
provision of employment, payment of taxes, and provision of the market to several other
businesses. Oggerin et al (2014) report that Rio Tinto provided employment opportunities to
more than 21,000 people in Australia regions alone in the year 2017. With this data, considering
the locations which are in other countries, Rio Tinto has really provided a lot of income to many
families. Rio Tinto emerges as one of the top companies in Australia which are leading in the
provision of employment. Additionally, in the year 2017, Rio Tinto paid A$4.9 billion as part of
taxes, as well as, royalties to the Australian government (Wirth et al, 2016). These taxes and
royalties have a significant role in the uplifting the economy of the country. Moreover, the
company provides a market to other industries since it requires several machines, equipment, and
tools which are used in finding, mining, and processing the mineral resources. Reports show that

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the company purchased good and services from more than 9,000 businesses in Australia in the
year 2017 (O'Faircheallaigh, 2013). Rio Tinto also has cadetship and scholarship programs
which are helpful in preparing future leaders in Australia. Through these leaders, the country is
able to gain economic power since there is the provision of quality labor in various industries. It
is significant that the company has substantially helped Indigenous Australians to acquire their
rights for land. These land rights have enabled local Indigenous Australians to have a say in how
they want finances and other benefits from mining to be used. This opportunity has led to
substantial developments in the country such as the development of the education sector, as well
as the protection of future generations.
The political environment of Rio Tinto influences its ability to diversify further in various
locations. The political stability of the governments in which they operate affect the way the
companies run. Olías and Nieto (2015) argue that the company faces challenges in some
countries which have war either nationally or internally. Additionally, the level of corruption has
seen some branches of this company fall in its profitability. Corruption means that some legal
procedures would not be followed by its competitors due to their power to compromise the law.
Countries in which the issue of corruption is high is argued to have led Rio Tinto to a decline in
the profit margin (Turner, 2014). Taxation has been a challenge to Rio Tinto in some countries
such as Canada where the rates are too high. High taxation implies that the company is left with
a very low-profit margin. Moreover, Canada’s government has set out laws where employees
have certain compulsory benefits from their employers. For example, employers in Canada have
been set to provide extra time benefits, medical covers, insurance against workplace accidents as
well as a mandatory three days of rest every week.

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On the social environment, Rio Tinto is highly favored by the excellent educational
empowerment of employees in Australia. The citizens of the country have been well-educated
due to the high-quality education systems which have been set. The education system has also
been affected positively by Rio Tinto through the provision of employment to the citizens of the
country. in return, the citizens have been able to further their education and have also been able
to educate their children through the good pay they receive from Rio Tinto (Shaukat, Qiu and
Trojanowski, 2016). The employees who are recruited by Rio Tinto in Australia are mostly well-
educated and have the right and required educational qualifications. Additionally, some countries
do not have the entrepreneurship power and, therefore, Rio Tinto finds it convenient to carry its
business operations with minimum competition. It is of significance that such countries do not
have much power in business and this gives Rio Tinto the power of monopoly. However, some
societies have a high entrepreneurship practice and the highest population depends largely on
entrepreneurial practices, hence pose a challenge to Rio Tinto (Shaukat, Qiu and Trojanowski,
2016). Moreover, countries such as Ireland have societies which have complicated gender roles.
Women are seen as inferior while men are seen to be above the women. Very few men allow
their wives to have employment. Therefore, companies face a shortage of getting women who
can work in different departments.
Several companies which are competitors to Rio Tinto have high technological
advancements. In such countries such as the US, Rio Tinto faces stiff competition because of its
lower technology-use. Heavy machines which are used by the competing companies lead to more
sophisticated products and services to its customers. In addition, some countries whose
technological advancements are high, affect Rio Tinto in a positive way because it uses these
technologies to make its products and services excellent.

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Industry Environment
Porter Five Forces can be used to analyze the industry environment of Rio Tinto. This
includes Rio Tinto’s supplier bargaining power, threats from substitute products, threat of new
entrants, buyer bargaining power, as well as rivalry from the players who exist in the market. Rio
Tinto has been able to innovate new products and services which gives new and old customers a
reason to buy from this company (Wirth et al, 2016). The company also spends much of its
money in carrying out research. Standards are continuously updated in Rio Tinto and this has
made the company close the chances for other companies to experience high profits (Shaukat,
Qiu and Trojanowski, 2016). Additionally, Rio Tinto has tackled the issue of supplier bargaining
power by generating a supply chain which is sufficient with multiple suppliers. The company has
also linked with many suppliers whose business greatly depends on the products which Rio Tinto
produces. The company has also strategized on how to deal with the issue of buyer bargaining
power. For example, Rio Tinto has built a large customer base and has also innovated most of its
products rapidly. New products are also developed in order to ensure that old customers do not
develop bargaining power on old products. Substitute products have also been a threat to Rio
Tinto. However, the company has strategized ways which have made it to encounter such risks.
For example, the company carries out research where the needs of customers are sought and
identified. The needs are, therefore, focused on rather than the products that the customers want
to purchase (Turner, 2014). The switching cost of customers has also been increased. In order to
reduce the risk of competitor rivalry, Rio Tinto has collaborated with the competitors in various
locations in order to enhance the market size and hence reduce competition for a small market. It
has also built a scale which has made it possible to compete better.
Competitive Environment

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Rio Tinto faces competition from several companies across different locations such as
Xstrata Plc, Newmont Mining Corporation, as well as BHP Billiton and De Beers SA. However,
with the adoption of several competitive advantages, Rio Tinto can successfully beat these
companies. Rio Tinto should adopt more strategies which would make a competitive power
higher. For example, Charles Jr, Schmidheiny and Watts (2017) suggest that Rio Tinto should
extend its products to other international territories in the attempt to raise its demand for
aluminum and replace iron. The company should also collaborate with other international
businesses and aim at attaining a better market power rather than racing on local business
competition. Additionally, Rio Tinto should invest more in the aluminum such as through the
mining costs and ensure that it is of high quality. The aluminum should also be ensured that it is
available in different quantities not only in Australia but also in the global market. Additionally,
the company should keep high integrity in obeying legal procedures and requirements in the
global market. This would prevent any restriction by the legal system. Maintaining good
relations with the legal system ensures that the company is not fought against by other business
organizations. Moreover, a brand positioning statement which is unique should be developed in
order to communicate services which it offers and also differentiate itself from other companies
which are its competitors (Harvey and Press, 2014). More research should also be carried out in
order to get an understanding of the strengths, weaknesses, and opportunities other competing
companies have. This understanding gives Rio Tinto the opportunity to design an effective
competitive strategy which can be used against these competing companies (Turner, 2014).
Opportunities and Threats
The development of new environmental policies which have been set gives Rio Tinto a
level playing field for every company within the market environment. This gives Rio Tinto a

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great opportunity in establishing its technological advantage and also gain more market share
(Perfetto and Vargas-Sánchez, 2018). There are new taxation policies which have been
developed and hence Rio Tinto is given an opportunity to gain more profitability in its
operations. The shipping costs have been lowered and this reduces the expenses which the
company used to incur. This should be used as a strength by Rio Tinto by either attaining more
profits or lowering the prices for its customers and hence allow them to gain market share. The
company has also invested in an online platform and has realized more profits. Rio Tinto should
use this opportunity to get a better understanding of its customers better and hence serve their
needs through the use of big data analytics.
Rio Tinto faces some threats in its operations. For example, in some countries, the
company faces the risk of inadequate and partially skilled workforce. This can be a threat which
can lead to a reduced profit. Additionally, Rio Tinto can face lawsuits from various competitors
concerning different issues (Wirth et al, 2016). The company should, therefore, ensure that it
upholds all ethical standards and follows the right legal procedures. Moreover, the company
faces the risk of high competition from various companies. This has occurred within the past two
years where many industries and companies have entered the market, posing higher competition
to Rio Tinto. This has the threat of reducing its profitability, as well as a reduction in its sales.
PART 2: Internal Analysis and Proposal
Northey, Haque and Mudd (2013) argue that Rio Tinto owns ERA shares which amount
to 68.4 percent. The other remaining percentage of shares is held publicly and the Australian
Securities Exchange trades on it. ERA sells its products to areas such as Europe and Asia and
ensures that Uranium from Australia is used for peaceful purposes only. Rio Tinto has several
branches across different continents which are operational. In these branches, there are

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underground mines which Rio Tinto owns as well as mills and refineries. These resources are
core to this company since they are the sources for all of its products which it deals with.
Additionally, the company has more shares in international organizations which protect its
operations. There are also shares with other competing companies which ensure that the
company is safeguarded in the market environment.
Capabilities Identification
Rio Tinto finds, mines, and refines mineral resources. It supplies these resources to other
countries through means such as railways, waterways, and roads. The major products which are
dealt with include copper, diamond, iron ore, aluminum, gold, uranium, industrial minerals such
as salt and borates. The company has more than 34 branches in Asia, North America, Europe,
South America as well as Africa and Australia (Rainey et al, 2015).
Core Competency Analysis
The finding, mining, and processing of minerals give the company a great value since the
products are sold and hence gain profits. Additionally, by selling these products to other
countries, the company experiences the risk of stiff competition from other competing companies
(De Graaf and Wessels, 2013). Moreover, having several branches internationally gives the
company the power to become more competitive. This can make the company outstanding and
hence surviving in the market environment. The high range of products which it produces gives
the company the power to gain more profits. However, these products are prone to imitation by
other companies.
Suitable Information System

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Rio Tinto should develop a cloud platform which helps it in the management of prices. It
will make it possible to for the company to regulate prices depending on global prices of its
products. The prices of the products are, therefore, made flexible and also in rhyme to business
demand. The cloud will also make it possible for Rio Tinto to transform functions of site support
and also transform the service desk which is global.
Recommendations
Rio Tinto should have a system which monitors the global prices depending on several
factors which affect prices such as inflation, new legal systems, and political stability. This
system should be implemented and collaborated to another organization which has more
knowledge and experience with the proposed cloud system. The websites which the company has
would be monitored and operated through the close use of the cloud system. The support in sites
would use this cloud system in most of its operations hence ensuring that information system is
well maintained.
Conclusion
Rio Tinto is a company that deals with products of mining such as diamond, copper, gold,
aluminum, and iron ore. It has several branches which are spread across six continents and 35
countries. The company has underground mines from where it extracts its minerals and has also
mills and refineries. The environment of the company is favorable, in general, and gives it more
opportunities to explore its products. The competition posed by other companies tends to reduce
the profitability of the different branches in various countries. The opportunities which the
company has makes it have several strengths which can boost its operations and overall
profitability. Additionally, the company also experiences threats such as competition and

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inflation, as well as lack of quality workforce in various countries. Rio Tinto should implement
an information system which depends on clouds in order to have better monitoring of price
trends as well as the site support. The company should focus on its strengths and improve on its
weaknesses in order to prosper across the global market.

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References
Amils, R., Fernández-Remolar, D., & IPBSL Team. (2014). Río Tinto: a geochemical and
mineralogical terrestrial analogue of Mars. Life, 4(3), 511-534.
Bellis, J. F. (2016). The iron ore production joint venture between Rio Tinto and BHP Billiton:
The European angle of a multinational antitrust review. In Emerging Issues in
Sustainable Development (pp. 221-243). Springer, Tokyo.
Castillo, S., Jesús, D., de la Campa, A. M. S., González-Castanedo, Y., Fernández-Caliani, J. C.,
Gonzalez, I., & Romero, A. (2013). Contribution of mine wastes to atmospheric metal
deposition in the surrounding area of an abandoned heavily polluted mining district (Rio
Tinto mines, Spain). Science of the Total Environment, 449, 363-372.
Charles Jr, O. H., Schmidheiny, S., & Watts, P. (2017). Walking the talk: The business case for
sustainable development. Routledge.
De Graaf, P. J. H., & Wessels, S. D. N. (2013). Slope monitoring and data visualization state-of-
the-art-advancing to Rio Tinto Iron Ore's Mine of the Future™. In International
Symposium on Slope Stability in Open Pit Mining and Civil Engineering (pp. 803-814).
Perth: Australian Centre for Geomechanics.
Harvey, C., & Press, J. (2014). International Competition and Industrial Change: Essays in the
History of Mining and Metallurgy 1800-1950. Routledge.
Kunz, N. C., & Moran, C. J. (2014). Sharing the benefits from water as a new approach to
regional water targets for mining companies. Journal of cleaner production, 84, 469-474.