STRATEGIC ANALYSIS OF RIO TINTO

Strategic Analysis of Rio Tinto



Executive Summary

In 1873, Rio Tinto was founded to mine ancient copper workings in southern Spain at Rio Tinto. Currently, Rio Tinto is involved in international mining which includes finding, mining, and processing of the mineral resources. Rio Tinto operates an extensive business line. Its operation encompasses six business groups: copper, aluminium, diamonds and minerals, iron ore, energy, and other operations. In the copper and aluminium industry, Rio Tinto is a global leader. The extensive business line of Rio Tinto assists in diversification of its business risk. Rio Tinto has a huge amount of debt, which could restrict its capital expenditure. The company enjoys an increased bargaining power because of its undeniable market presence in the metals business, which enhances its competitive stand. Nevertheless, in the near future, commodity prices and demand for the products of group may not remain substantial which would have a negative effect on revenues, cash flows, earnings, and growth of Rio Tinto.

The analysis has shown that the position of Rio Tinto is quite strong to meet price volatility and an increase in demand. Because of the diversity of its assets, changes in the price of one mineral have a limited impact on the company as a whole. For instance, the decline in prices of iron ore has had a lesser impact on the group in comparison to rivals, and so it has been capable of continuing its plans for expenditure. The company has, however, not demonstrated any serious effort towards the environmental degradation caused by its mining operations. Rio Tinto has the potential of becoming a market leader in the mining and metals industry. In comparison to competitors, it has a less direct exposure to price and cost risks; however, its indirect exposure to risks necessitates more measured strategic management. With the acceleration of its efforts to seek more mines other than the existing ones will help it to be a strong player in the long run.

Executive Summaryii

Background of the Organisation1

Brief Highlights of Company1

Macro Environment Analysis using PESTEL2

Porter's Five Forces Model7

Functions of the Organization9

TOWS Analysis11

Implication for the Company13

Conclusion15

Recommendation16

References17

Strategic Analysis of Rio Tinto

Background of the Organisation

Rio Tinto is a United Kingdom based mining group. Rio Tinto is involved in the business of mining, finding, and processing mineral resources. The major products of Rio Tinto are iron ore, copper, aluminium, diamonds, gold, uranium, coal and industrial minerals (titanium dioxide, borax and salt). The activities of company span the globe but are represented strongly in North America and Australia with considerable businesses in Asia, South America, Africa and Europe. Five principal product groups comprise the operations of company, including Energy and Iron Ore, Copper, Aluminium, Diamonds & Minerals, in addition two support groups: Exploration and Technology & Innovation. The iron ore group of Rio Tinto entirely holds Hamersley Iron mines in Brazil. The aluminium group of Rio Tinto operates through the wholly-owned, integrated aluminium subsidiary, Rio Tinto Alcan. Rio Tinto Alcan is one of the largest producers of aluminium, alumina and ...