Rio Case Analysis (Essay Sample)

Rio Case Analysis
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Company Overview
Rio Tinto is a worldwide mining company. Its headquarters are located in London in the United Kingdom and the company has a management office in Australia. It also has other branches in North America, Africa, South America as well as Asia. The group has been in mining business since 1873. Rio Tinto is a mining group that is one of the largest in the world with products including Iron ore, Alumina, Bauxite, Aluminum, Molybdenum, Copper, Gold, Coal, Diamonds, Uranium, Borates, Titanium Dioxide, Talc and Salt. It operates in all the 6 continents of the world but mainly b based in Australia. The company’s revenue stood at US$ 51.171 billion in December 2013 (Rio Tinto, 2013, p. 2).
Problem Statement
An internal and external Analysis of Rio Tinto reveals a management issue relating to upholding sustainable mining practices that happened in 2010. The failure by the management to respond to a report by the Copenhagen climate change committee of 2009 smashed the reputation of the company as a global mining leader in terms of sustainable mining practices (Dutta, 2012). The public started to view the company as a company that was not very committed to environmental preservation and sustainability. This created major problems to the management of the mining group in term of maintaining a good reputation, access of new assets, and maintaining the employee and investor confidence as well as maintaining a sustainable profit.
The top management met to discuss on this issues and came up with a three year review process of its multi-stakeholders that was named as Global Mining Initiative. This paper tries to examine how the problems that were facing Rio Tinto would be analyzed using the VRIO framework to find how Rio Tinto could have regained its competitive advantage using this model (Hill, 2012).
VRIO Framework
VRIO framework is an analytical technique used in examining internal environment of a firm. VRIO framework can be used to find the competitive advantage of a company by identifying the company’s key components and ways that those components has a competitive advantage over the company’s competitors. This paper uses VRIO framework to look at the Resources that Rio Tinto company could exploit after the Global Mining Initiative that were Valuable to the recovery of the company’s customer loyalty and profit sustainability.
The VRIO for Rio Tinto in this paper is used to analyze how the resources of the company can answer the four questions described by Barney and Hesterly (2006), in the VRIO framework to determine the competitive potential of those resources:
1 The first question involves Value. This is where Rio Tinto’s internal environment, would examine whether its resources were able to exploit the environmental opportunities and neutralize the environmental threats that was facing it.
2 Another question to examine was the question of Rarity. The mineral resources that the company controls are a rare commodity. Starting a mining company requires a heavy capital investment and investment in machinery and assets that are very expensive which makes it a rare venture. This was would be an advantage that would give Rio Tinto a competitive advantage during the period the company was going through the management problems.
3 Question of Imitability. The availability of diversified availability of resources for Rio Tinto is another advantage that would minimize cost in terms of obtaining its products. The mining business is also very hard to imitate.
4 The Question of Organization: After the management problem that arose at Rio Tinto in 2010. The top management met to discuss on this issues that were affecting the company. The management was able to organize and come up with policies such as Risk Analysis and Management Process that would support the exploitation its resources so as to restore performance of the company as there before. This is the strategy that the company utilized to solve its problems (Barney and Hesterly, 2008, p. 112).
The types of resources that lead to a competitive advantage that should be evaluated by the VRIO Framework are (1) the tangible resources such as Financial, Physical, Technology and organization (2) the intangible resources such as human, innovation and reputation and (3) the organizational capabilities such as competences and skills the company uses to transfer inputs and outputs.
Application of the VRIO framework
Rio Tinto’s Resources

Valuable?

Rare?

Difficult to Imitate?

Exploited by Org?

Rio Tinto’s Leadership

*

*

*

*

Strategic Alliances

*

*

*

*

Global expansion

*



*

Experience

*

*

*

*

Marketing Driven Low-Cost Model

*



*

Machine Investments and Systems

*



*

Lack of Knowledge




*

Infrastructure:

*



*

Summary of VRIO Framework, Competitive and Economic Implications

Valuable?

Rare?

Costly to Imitate?

Organized Properly?

Competitive Implications

Economic Implications

No



No

Disadvantage

Below Normal

Yes

No


380365-127000

Parity

Normal

Yes

Yes

No


Temporary Advantage

Above Normal
(at least for some time)

Yes

Yes

Ye...