Porter’s Five Forces Analysis of Rio Tinto
Rio Tinto Plc.
|Industry||Construction, Oil & Gas Operations, Mining and Chemicals|
|Headquarters||London, United Kingdom|
|Revenues||US$ 63.495 billion in 2021
US $55.554billion in2022
|Profit||US$ 21.09 billion in 2021
US $12.42 billion in 2022
|Competitors||Anglo American, Barrick Gold Corporation, Kronos Worldwide, Allegheny Technologies and Alcoa|
Rio Tinto is a multinational company engaged in mining and exploration business with a history of 150 years operating in four major segments Iron Ore, Aluminum, Copperand Minerals .It was founded in Spain in 1873.As per Statista the company had brand value of US $ 3.34 billion in 2021.The company ranked 82ndby Forbes Global 2000 list Year 2022 and ranked 201st by Fortune 500 in 2022.
The company is operating across six continents, having approximately 2000 consumers globally with a workforce of approximately 52,000 people.
Today we are going over Porter’s Five Forces of Rio Tinto
Porter’s Five Forces Analysis
Rio Tinto Rivalry within the Industry
- Rio Tinto Geographical Business Presentation:Aluminum and iron ore are the main segments of the company, others include; Energy and Minerals, Copper and Diamonds, and Other Operations.
The company gave a record revenues of US$ 55.54 and net profit US $12.42 billion respectively in 2022.The total assets of the company amounted to US $96.744 billion, in 2022 while the total assets were amounted to US$ 102.89 billion in FY 2021.
In 2021 approximately 57.2% and 12.6% of sales were generated in China and the United states, respectively by the company.
The company’s segment of iron ore and aluminum had an employment of 15,000 people, while segment of copper and minerals had a workforce of approximately 8,000 and 9,000 people respectively, in 2022.
The company conducts its operations in 35 countries including, mainly China, United States, Australia, Canada, Iceland, Madagascar, Mongolia, New Zealand and South Africa.
- Rio Tinto Revenue Segmentation FY 2021 – FY 2022 :
The company’s segment of iron ore made revenue of US $39.6 billion and US $30.9 billion in 2021 and 2022 respectively, segment of Aluminum made revenue of US $12.7 billion and US $14.1 billion in 2021 and 2022 respectively, segment of Copper made revenue of US $7.8 billion and US $6.7 billion in 2021 and 2022 respectively and segment of Minerals made revenue of US $6.5 billion and US $6.8 billion in 2021 and 2022 respectively.
In 2022, about 54.6Mt and 521kt of aluminum and copper respectively, were produced by the company. Other than this,319.7 metric tons and 324.1 metric tons of iron ore were produced by the company in 2021 and 2022, respectively.
- Alcoa Corporation made an annual sale and a net profit of US $12.152 billionUS $429 million, respectively in 2021. The market value of the company was US $12.42million in 2021 with total assets of US $15.025 billion.
The company produced 47.6 million metric tons of Bauxite, 13.3 million metric tons of Alumina and 2.2 million metric tons in 2021. The company’s Aluminum segment has operations located in Brazil, whichgenerated US $ 8.4 billion and US $ 3.1 billion from Aluminum and Alumina segment respectively, in United States.
In 2021, the company had a workforce of approximately 12,200 people.
- Anglo Americanmade an annual revenue and a net profit of US $41.554 billion and US $8.562 billion, giving stiff competition to the company in 2021. The market value of the company is US $59.44 billion in 2021 with total assets of US $65.985 billion.
The company made US $ 728 million in revenue in Brazil. There was production of 22.9 metric ton of iron ore, 14.9 metric ton of Metallurgical Coal, 3.7 metric ton of Manganese, 32.3Mct of diamonds, 647 kt of copper, and 41.7kt of nickel in 2021.
The company had a workforce of 106,000 people in 2021.
- Investment in Research & Product Development (Environmental Factors Focused)
The Company is facing special challenges from climate change and focusing climate change. The Rio Tinto is speedily working in a direction to decarbonizing it’s products and services with a aim to invest US$ 400 million annually to achieve this and other targets.
Rio Tinto Threat of New Entrants
- Global Smart Mining Industry:The global smart mining industry valuedUS $ 9.3 billion, in 2021 with an expected projected value of approximately US $28.1 billion, by 2027.
- Capital Investment Requirements:If a new entrant will have to make investments of large sum in assets, this risk of capital investment will deter him from entering the market. The Rio Tinto spent US$ 679 million only as capital expenditure in FY 2022 and US$ 644 million in FY 2021 with a change of 5% respectively. Only the Property, Plant and Equipment US$ 64.73 billion in FY 2022 which is a huge amount.
- Government Regulations: There are a lot of local laws and governmental regulations currently required to be fulfilled in order to enter the market, acting as strong barrier to entry as mining is a highly regulated industry.
- Economies of Scale:The existing giants like Rio Minto, Barrick Gold Corporation etc. have economies of scale i.e. there average cost is lower due to production of items in large quantities leading to lower cost. New entrants will therefore be unable to compete due to high cost.
Rio Tinto Bargaining Power of Suppliers
- Low Influence of Suppliers:There are an increasing number of suppliers in the market. Moreover, raw material supplied is standardized and have low switching cost. Leading for bargaining power of suppliers to be low.
- Suppliers Collaboration With more than 37,000 suppliers, operating in more than 120 locations worldwide, the company maintains its collaborations with suppliers by proactively and continuously partnering with advocacy organizations to connect with small or diverse suppliers.
Rio Tinto Bargaining Power of Buyers
- Bargaining Power of Buyers:Due to increasing number of buyers, their power to bargain is low in the market. Since the company carries its operations in 35 countries, it has whole lot of customers.
- Large Customer Base Consistency in the retention of market share is possible through continuous innovation and satisfying customers by meeting their needs. Therefore; the company should continue to innovate and make products as per the demands of its customers.
Rio Tinto is second largest company according to market capitalization US$ 119.24 billion after BHP (Australian) with a market capitalization of US$ 158.95 billion as of March 23,2022.
Large Customer of Rio Tinto ensures the Rio Tinto’s market leadership and influencing position.
Rio Tinto Threat of Substitute Products or Services
- Government Policies and Regulations:As mining industry is highly regulated as per local governmental laws and rules and regulations any political or policy related changes will affect the business operations of Rio Tinto.
- Climate Change Alarms and Geopolitical Decisions:As Rio Tinto’s many mining and other operations are trigger towards the disturbance of planetary balances so Rio Tinto is targeting the alternate solutions through innovation includingdecarbonizing steel and aluminum production.
Russia – Ukraine invasion disturbs the business of Rio Tinto specially Russian Aluminum suppliers cut the supplies which increase the prices of Aluminum in the global market which further influenced by China but supply chain disruptions after COVID-19 and low world economic growth further destabilized the market in FY 2022.
- Fortune 500,Rio Tinto Group
- Rio Tinto, Annual Report Year 2022
- Revenue generated by Anglo American plc in Brazil from 2013 to 2021(Jan 25, 2023) | Available at Statista
- Revenue of Anglo American Platinum from 2011 to 2021(Mar 16, 2022) | Available at Statista
- Total assets of Anglo American from 2010 to 2021(Mar 16, 2022) | Available at Statista
- Profit of Anglo American from 2005 to 2021(Mar 16, 2022) | Available at Statista
- Revenue of Anglo American from 2005 to 2021 (in million U.S. dollars) (Mar 16, 2022) | Available at Statista
- Anglo American – statistics & facts(Mar 16, 2022) | Available at Statista
- Forbes Global list 2000| Available at Forbes
- Basic information on Rio Tinto by Forbes| Available at Forbes
- Rio Tinto’s production of aluminum and copper from 2010 to 2021(Apr 27, 2022) | Available at Statista
- Distribution of Rio Tinto’s revenue from 2011 to 2021, by country(Mar 14, 2022) | Available at Statista
- Revenue of Rio Tinto in 2021, by segment(Mar 14, 2022) | Available at Statista
- Number of employees at Rio Tinto from 2010 to 2021(Mar 8, 2022) | Available at Statista
- Rio Tinto’s net income from 2001 to 2021 Mar 8, 2022) | Available at Statista
- Brand value of Rio Tinto worldwide from 2015 to 2022(Jul 3, 2022) | Available at Statista
- Rio Tinto – statistics & facts(Mar 14, 2022) | Available at Statista
- Revenue of Rio Tinto from 2010 to 2021(Mar 14, 2022) | Available at Statista
- Countries with the largest smelter production of aluminum in 2022(Feb 16, 2023) | Available at Statista
- Alcoa’s global sales revenue in FY 2021, by segment(Jan 5, 2023) | Available at Statista
- Alcoa Corporation’s global sales revenue from FY 2015 to FY 2021(Jan 5, 2023) | Available at Statista
- Rio Tinto Suppliers| Available at Rio Tinto
- Statista,(March 9,2023),Leading mining companies worldwide based on market capitalization in March 2023 (in billion U.S dollars) .Available at Statista