Alcoa Corporation SWOT & PESTLE Analysis
COMPANY PROFILE -Alcoa Corporation
Business Sector :Metals and Mining
Operating Geography :United States, Global
About Alcoa Corporation :
Alcoa is an American MNC and headquartered in Pittsburgh, USA. It was founded in 1888 in Pittsburgh. It has a market cap of $6.2 billion. It is the leading producer in bauxite, alumina. It also produces certain compounds for customer specific needs. It has plants for aluminum smelting and refining as well as flexible energy portfolio. Several global refineries are supplied by its raw materials. It is world’s largest bauxite miner. Alcoa’s Western Australia refineries supply 8% of global alumina needs and is the third largest single alumina source. It has operations in more than 80 countries across North America, South America, Asia, Australia and Europe as of 2018. It had 14,000 employees as on Dec 31 2016. It is #173 in Forbes’ top American Public Company. Alcoa Corp is listed on New shareholders York Stock Exchange. Its vision is to become the best company in the world—in the eyes of its customers, shareholders, communities and people.Alcoa Corporation Revenue :
$9.3 billion (FY Dec 2016)Competitive Analysis of Alcoa Corporation
| 1. Diversified operations across global markets 2. Strong footing in Bauxite market 3. Low cost alumina Production 4. Efficient supply chain management | 1. Ongoing legal battle in Boonville to adversely affect operations 2. Over-dependence on US economy |
| 1. Mergers and Acquisitions 2. Growing Aluminium demand in developed as well as developing economies 3. Favourable Supply side forces | 1. Impact of energy costs and supply side constraints 2. Cyber-attack may disrupt operations 3. Cyclical Fluctuations in Aluminium industry 4. Stiff competition in Mining Sector |
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Detailed SWOT Analysis of Alcoa Corporation
Strength
1. Diversified operations across global markets: Alcoa is a global company with more than 130 years of history. It has 43 operating locations across 10 countries and its huge size and diversified operations enable access to major markets across Atlantic and Pacific basis as well as China. Further according to the company it has been involved in research and development of 90% of all aerospace alloys currently used in the aerospace industry. Thus the company also has a strong foothold in the growing aerospace segment.
2. Strong footing in Bauxite market: Alcoa is world's largest bauxite mining Company and the world's leading producer of alumina. Bauxite is converted into alumina which is used to produce aluminium metal. Alcoa’s competitors are relatively new in this market which give it cost advantage and greater access to market. Its early entry made its operations efficient due to long term mining rights in strategic locations like Huntly (the second largest bauxite mine in the world) with large high quality metallurgical grade bauxite. The proximity of Australian bauxite mine to China has increased its market penetration there as well as Middle East. Close proximity with China has improved logistics and reduces cost, Bauxite demand will grow with time which will increase its earnings.
3. Low cost Alumina production: Alumina production units are located close to bauxite mines and alumina refineries which enable for economies of scale. Stable and efficient internal mines leverage supply chain through their vertical integration. The average cost position in 2016 was in the first quartile of global alumina production. This increases their competitiveness in the highly competitive alumina market which is used for metallurgical and non-metallurgical purposes. Technological advancements and skilled workforce have also lowered its cost. It helps in achieving competitive pricing mechanism which increases its sales and hence overall revenue.
4. Efficient supply chain management: Alcoa has a Global Supplier Sustainability Program to leverage supply chain across it global suppliers. They monitor emerging and lagging categories every year to improvise and sustain operations. Quick access to markets in North America, Europe, Middle East and Australia have enabled smooth logistics and thus optimized costs. Value chains also strengthen which make it leader in large scale productions. Efficient supply chain aids in minimizing costs and improves competitiveness. It also increases the profit margins and creates possibility of further expansion.
Weakness
1. Ongoing legal battle in Boonville to affect expansion: To expand operations to Liberty Mine near Boonville, Alcoa needs permissions from the local authorities. However, the local residents demanded protection in expansion areas. This has taken the dispute to court as few locals formed Save Our Homes LLC to save their area from dust and mining waste. They demand Alcoa to honour their demands which will lead to additional costs and affect profit margins. As per Alcoa, Indiana state law has been violated thus, they filed a lawsuit against Boonvile. Ongoing battles due to the complex nature of this industry follow as Alcoa attempts to expand its mining and smelting operations. It will also adversely affect its community relationships.
2. Over-dependence on US economy: Alcoa is highly dependent on North American economy for Rolled Products segment. 90% of food and beverage and bottle markets are concentrated in America. These products compete with domestic and foreign manufacturers but supply contracts of Alcoa are limited which leads to loss of existing customer base outside America. Competition in America leads to aggressive pricing policy which may negatively affect operations and profitability. The profits fell by 272kMT of RCS. Moreover, 2.3 mtpa alumina refining capacity is in Texas which implies closure or weak business environment in US will affect it. US’s share in Alcoa’s revenue was 47%in 2016.
Opportunity
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Threat
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References
1. https://indianapublicmedia.org/news/alcoa-suit-house-bill-statewide-regulatory-impact-140440/
2.http://www.alcoa.com/sustainability/en/pdf/2016-Sustainability-Report.pdf
3. https://www.foundry-planet.com/de/news/firmen-news/firmen-news/1640/?cHash=50fe58f13cc1201d4f6f8dba375f32dd
4. https://in.reuters.com/article/us-china-congress-aluminium/chinas-aluminum-demand-growth-to-stay-ahead-of-gdp-chinalco-chairman-idINKBN1CT0CT
5. https://www.engineering.com/AdvancedManufacturing/ArticleID/16394/Automotive-Aluminum-Demand-Growing-What-It-Means-for-Tier-Ones.aspx
6. file:///C:/Users/Dell/Pictures/Camera%20Roll/alcoa%20pdf.pdf
7.http://www.alcoa.com/global/en/who-we-are/default.asp
8. https://www.reuters.com/article/us-china-metals-aluminium/china-aluminum-capacity-cuts-boost-market-leaders-prices-idUSKBN1AJ0QO
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Alcoa Corporation SWOT and PESTLE analysis has been conducted by Kanupriya Sheopuri and reviewed by senior analysts from Barakaat Consulting.
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