Strategic Analysis of Rio Plc

Strategic Analysis of Rio Tinto Plc

Rio Tinto PLC holds a dominant position in the global metals and mining industry. Even though the company has a range of strategic strengths, trends in this industry mean that it needs to take further action in order to remain competitive. Three key actions are recommended.

 Table of Contents

Introduction

Key Industry trends

Ability of Rio Tinto to respond to trends

Conclusion

Appendix

Introduction

Rio Tinto is the world’s third largest mining company and the eighth highest FTSE 100 company in terms of market capitalisation (PwC, 2012) (Anon., 2012). With operations spread across six continents, and activities ranging from exploration to extraction to processing, Rio Tinto has grown substantially from the Spanish mine that it started from in 1873. Annual revenue in 2011 was £60.9 billion, profit margins stood at 24%, and the company currently employs 67,930 people worldwide (Orbis, 2011). Market capitalisation stands at £43.3 billion (Anon., 2012)

Rio Tinto focuses its efforts on finding and mining five groups of minerals. These are aluminium, copper, diamonds and industrial minerals, energy minerals (coal and uranium), and iron ore. The central strategy of the business is to find large, cost-effective mines that will remain viable in the long-term (Rio Tinto PLC, 2011), and the company claims that a long-term approach underpins all of its work.

 Key Industry Trends

In the long-term, demand for metals and minerals remains strong despite the economic recession. Demand for metals has bounced back faster than expected (Helbling, 2012), and continued development in countries like China is likely to push up demand for other minerals as well (PwC, 2012). For example, the use of coal is expected to increase by 65% over the next 15 years in response to growing energy demands (IEA, 2011).

In the short-term, prices for these commodities remain volatile. The global economy is still fragile, and a four percent change in...