case study midwest copper mining

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Criterion 1: Construct a clear problem statement

Summarize the key issues and choices for MCM:

  • Summarize the most impactful external opportunities and threats that have recently affected MCM
  • Summarize the historically important strengths of MCM
  • Summarize the dilemma the managers are currently facing

Excellent papers will provide a situation analysis that documents the relevant context and contributing factors to MCM’s main and most important strategic / business problem. (Suggestion: write this section last….)

Criterion 2: Analyze external factors

Provide an analysis of the macro environment and industry forces:

  • Conduct a PESTEL analysis of the macro environment, identifying opportunities and threats.
  • Conduct a Five Forces Industry analysis.
  • Identify the macro environmental and industry factors that have the greatest potential impact on MCM.

Excellent papers will identify all the external factors that have been affecting, or have the potential to affect MCM performance – both in the macro-environment, and due to competitive forces. Those factors that are identified as most impactful are justified based on importance, urgency and/or potential impact to the organization.

Criterion 3: Analyze internal factors

Provide an analysis of the strengths and weaknesses of MCM:

  • List all the strengths and weaknesses of MCM in each functional area mentioned in the case.
  • State and justify MCM’s core and distinctive competencies.
  • Analyze whether the distinctive competencies provide a competitive advantage.
  • Address the sustainability of the distinctive competencies.

Excellent papers will identify all stated strengths and weakness of organizational functions within MCM and use the valuable, rare, inimitable and organizational capabilities model to justify the core and distinctive competencies, as well as the sustainability of those competencies. The competitive advantage analysis will include past, present and future considerations.

Criterion 4: Determine current business level strategy

Provide an analysis and conclusion about the current business level strategy of MCM:

  • State the business level strategy of MCM
  • Discuss the evidence that leads you to your conclusion about their business strategy
  • Discuss how their distinctive competencies support or do not support their business strategy

Excellent papers will justify the choice of business level strategy based on cost and price, differentiation of the product, breadth of the market. The discussion will show the connections between the distinctive competencies and the business level strategy, as well as consider how well MCM will be able to execute that strategy in the future (the sustainability of their business-level strategy).

Criterion 5: Make recommendation for future action

Provide concise yet thorough action-oriented recommendation

  • Briefly summarize the most urgent and important problem, based on your analyses above.
  • Provide a multi-step action plan based on the analysis above,
  • Addresses limitations of the solution, and
  • Outlines ways to monitor success of the action plan

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Midwest Copper Mining During Volatile Times “Copper production continues to see strong growth, confirming the long-anticipated supply-side build-out that has underpinned our projection of a fundamental shift to surplus in the market. February data (the latest available) show global production up 6.0% year over year, the strongest rate of growth since mid2005. However, London Metal Exchange (LME) prices for copper have pulled back below $7,200/metric ton. This retreat has been a bit of a surprise and appears linked to softer US housing data and reports of inventory building in China. July Chilean mine production data also showed robust year-over-year growth” (U.S. Industry Quarterly Review: Manufacturing & Mining, 2014). Copper is essentially a commodity product, affected by global supply and demand. Midwest Copper Mining (MCM) is a relatively small player in the global copper industry. MCM is located in northeastern Minnesota, in the town of Kopparstad (which means “Copper City” in Swedish). Historically, in spite of being considered small by mining company standards, MCM has been able to offer their copper at a reduced price for a variety of reasons. MCM has some of the best mining engineers in the world, educated at the many high quality engineering programs throughout Minnesota and Michigan, many of which focus on metallurgy and mining. These engineers have developed patented processes for extracting and refining copper, using specialized machinery. Also, MCM has developed, through experience, knowledge-intensive processes that are passed down from one employee to the next through tacit knowledge, that is, based on watching someone else and then practicing the process. The combination of their equipment and their experienced employees reduces both the waste and the pollution related to copper mining. Customers who can co-locate next to MCM enjoy even lower prices and overall costs, since co-location reduces inventory stockpiling, as well as delivery costs, but more importantly, allows the firms to use the copper in a more efficient manner, since it eliminates the need for a final hardening process. Many Minnesota manufacturers (such as 3M, Medtronic and St. Jude) require copper for their products, and have been willing to locate small processing facilities next to the MCM plant in Kopperstad. MCM prides itself on meeting customer needs by producing the highest grade of copper at the lowest costs, even though it serves a fairly small market area. The town of Kopperstad was founded as a “company” mining town, typical of many of the towns in northern Minnesota, known for its high grade and plentiful supply of iron ore and other minerals. The area also boasts some of the cleanest water in the world, and is more plentiful than in many other parts of the U.S. The culture of the town is reflected in the MCM culture – it has a strong ethical climate, creating family-friendly policies, and caring about the needs of all stakeholders, reflecting the culture of its surrounding community. The Kopperstad Chamber of Commerce sponsors festivals throughout the year, celebrating the accomplishments of its businesses and population. Awards are given to the most civicminded community groups, and to scout troops and other student groups for their contribution to environmentally-focused projects. Forty percent of the population of Kopperstad works directly for MCM, twenty percent work for the businesses that supply equipment to MCM or for the customers of MCM, twenty percent work for non-mining businesses (grocery stores, hardware stores, etc), and twenty percent work for the local hospital or schools. John Anderson, the CEO of MCM is worried about the future. Currently, demand exceeded capacity, allowing industry incumbants to enjoy fairly robust profits. International demand is increasing; Chinese demand rose nine percent last year. However, at the same time, locally based and multinational copper mining operations are increasing capacity, and starting to reduce prices and fees associated with international trade. In the previous year, for example, Zambia, one of the top copper producers in Africa, waived their value-added tax on copper exports. This allowed Zambian firms to be more pricecompetitive, which spurred local growth in the mining industry (Wall Street Journal, 2014). Profits were © Metropolitan State University, MNSCU starting to erode because MCM could not reach any greater capacity or economies of scale at their only mine, in Kopperstad. The board of directors for the publicly held MCM Corporation was pressuring Anderson to take action. Anderson knew he could raise prices to remain profitable, but that was a short term solution. He predicted that if they did not do something, in two to four years they would no longer be profitable. Anderson called in two of his key employees to brainstorm the issues; Carlos Diaz, his chief engineer, who was trained in the U.S., but had worked for the Chilean firm Codelco, which is the world’s single biggest copper producer. He also invited Mubita Banda to the meeting, who was the COO and in charge of the operation of the Kopperstad facility. His training was in Britain, but he worked most of his professional life at the Swiss-owned Glencore facility in Zambia. As they pondered the possibilities, the three of them talked about the difficulties of expanding their operation. John: Our current copper deposit can only sustain our current capacity. Increasing the capacity here in Kopperstad would require a duplication of equipment and would drastically reduce the life of the mine. Carlos: We could ramp up production here while looking for other copper deposits in northern Minnesota, and then gradually close this facility as other facilities come online. The new copper deposits are likely to be far enough away from Kopperstad that we would have to create another facility, so we would have to know that the deposit was large enough to make it worth it. John: Our currently co-located customers would probably not build another facility next to another mine. If we opened a mine closer to other copper customers, maybe not in Minnesota, perhaps there are other firms we could entice to co-locate. They might be willing to co-locate, based on the higher quality and lower prices we could guarantee, since we remove some of our costs when customers co-locate. Carlos: We would have to be certain that our current quality of our copper could be matched elsewhere. The grade of copper in other deposits we have found so far cannot make use of our specialized machinery without significant modifications. Mubita: Not to mention the time it would take to train in the operational staff. Our production people work with a mentor for six months before they can adequately operate efficiently without quality issues. They have to be operating the actual machinery they will be using in order for this to be effective. Carlos: Speaking of quality, another issue is that in Kopperstad, we create minimal pollution because we have tuned our equipment based on our specific water supply – both the temperature and the quality of the water we can pump out of the ground here. There is no guarantee we could perform with so little pollution elsewhere. John: We would have to allow a significant amount of time for the analysis of the environmental impact statement before we committed to a sizable investment. Mubita: I am also concerned about the morale of the operations staff. As we look into all these options, people will, no doubt, get nervous about what is going to happen to them, their jobs, and their future. Since most of them are dependent on this firm for their livelihood, we have to assure them that growth elsewhere does not imply a reduction here, and we will have to use some of our staff to train in employees at a remote site, which will disrupt families. John: Well, that is a fairly complete list of the issues. Now let’s move on to options and come up with a recommendation. © Metropolitan State University, MNSCU MCM Assignment Instructions The Midwest Copper Mining assignment is an exercise in critical thinking, with a focus on solving a strategic business problem by analyzing relevant external and internal factors, determining the MCM core competencies and business level strategy, and making a recommendation for future action. Read the MCM case and apply strategic thinking (thinking about external opportunities and threats, and internal strengths and weaknesses, and business strategy) to the MCM Case. Then address each of the following items (no minimum nor maximum number of pages). Be as thorough as possible in your logic and in your attention to the instructions. There is no “correct answer”– your suggested solution should be appropriate to the situation, and justified by the facts of the case. The first part of each bullet (in italics) describes the expectation for that part of the assignment. Note that the information about the copper mining industry and other copper mining firms is accurate, but Midwest Copper Mining is a fictional company, and Kopperstad is a fictional town. The following are the five criteria for evaluating MCM case assignment paper, along with guidelines for what constitutes excellence in meeting those criteria. The assumed target audience for papers and recommendations is constituted of MCM executive leadership and its Board. Criterion 1: Construct a clear problem statement Summarize the key issues and choices for MCM: • Summarize the most impactful external opportunities and threats that have recently affected MCM • Summarize the historically important strengths of MCM • Summarize the dilemma the managers are currently facing Excellent papers will provide a situation analysis that documents the relevant context and contributing factors to MCM’s main and most important strategic / business problem. (Suggestion: write this section last….) Criterion 2: Analyze external factors Provide an analysis of the macro environment and industry forces: • Conduct a PESTEL analysis of the macro environment, identifying opportunities and threats. • Conduct a Five Forces Industry analysis. • Identify the macro environmental and industry factors that have the greatest potential impact on MCM. Excellent papers will identify all the external factors that have been affecting, or have the potential to affect MCM performance – both in the macro-environment, and due to competitive forces. Those factors that are identified as most impactful are justified based on importance, urgency and/or potential impact to the organization. © Metropolitan State University, MNSCU 1 Criterion 3: Analyze internal factors Provide an analysis of the strengths and weaknesses of MCM: • List all the strengths and weaknesses of MCM in each functional area mentioned in the case. • State and justify MCM’s core and distinctive competencies. • Analyze whether the distinctive competencies provide a competitive advantage. • Address the sustainability of the distinctive competencies. Excellent papers will identify all stated strengths and weakness of organizational functions within MCM and use the valuable, rare, inimitable and organizational capabilities model to justify the core and distinctive competencies, as well as the sustainability of those competencies. The competitive advantage analysis will include past, present and future considerations. Criterion 4: Determine current business level strategy Provide an analysis and conclusion about the current business level strategy of MCM: • State the business level strategy of MCM • Discuss the evidence that leads you to your conclusion about their business strategy • Discuss how their distinctive competencies support or do not support their business strategy Excellent papers will justify the choice of business level strategy based on cost and price, differentiation of the product, breadth of the market. The discussion will show the connections between the distinctive competencies and the business level strategy, as well as consider how well MCM will be able to execute that strategy in the future (the sustainability of their businesslevel strategy). Criterion 5: Make recommendation for future action Provide concise yet thorough action-oriented recommendation • Briefly summarize the most urgent and important problem, based on your analyses above. • Provide a multi-step action plan based on the analysis above, • Addresses limitations of the solution, and • Outlines ways to monitor success of the action plan Excellent papers will recommend a plan that best addresses MCM’s main business problem, considering the most impactful external and industry factors, and MCM’s distinctive competencies. Clear, convincing rationale will be provided for the recommended solution. At least 5 action steps for implementing the solution will be provided, with sufficient detail and a realistic timetable (actual actions, not just to do more analysis). Potential limitations of the recommended solution will be mentioned, along with suggestions for items to monitor. Excellent papers will also identify a goal for the recommended solution, along with how to evaluate success. © Metropolitan State University, MNSCU 2 Midwest Copper Mining During Volatile Times “Copper production continues to see strong growth, confirming the long-anticipated supply-side build-out that has underpinned our projection of a fundamental shift to surplus in the market. February data (the latest available) show global production up 6.0% year over year, the strongest rate of growth since mid2005. However, London Metal Exchange (LME) prices for copper have pulled back below $7,200/metric ton. This retreat has been a bit of a surprise and appears linked to softer US housing data and reports of inventory building in China. July Chilean mine production data also showed robust year-over-year growth” (U.S. Industry Quarterly Review: Manufacturing & Mining, 2014). Copper is essentially a commodity product, affected by global supply and demand. Midwest Copper Mining (MCM) is a relatively small player in the global copper industry. MCM is located in northeastern Minnesota, in the town of Kopparstad (which means “Copper City” in Swedish). Historically, in spite of being considered small by mining company standards, MCM has been able to offer their copper at a reduced price for a variety of reasons. MCM has some of the best mining engineers in the world, educated at the many high quality engineering programs throughout Minnesota and Michigan, many of which focus on metallurgy and mining. These engineers have developed patented processes for extracting and refining copper, using specialized machinery. Also, MCM has developed, through experience, knowledge-intensive processes that are passed down from one employee to the next through tacit knowledge, that is, based on watching someone else and then practicing the process. The combination of their equipment and their experienced employees reduces both the waste and the pollution related to copper mining. Customers who can co-locate next to MCM enjoy even lower prices and overall costs, since co-location reduces inventory stockpiling, as well as delivery costs, but more importantly, allows the firms to use the copper in a more efficient manner, since it eliminates the need for a final hardening process. Many Minnesota manufacturers (such as 3M, Medtronic and St. Jude) require copper for their products, and have been willing to locate small processing facilities next to the MCM plant in Kopperstad. MCM prides itself on meeting customer needs by producing the highest grade of copper at the lowest costs, even though it serves a fairly small market area. The town of Kopperstad was founded as a “company” mining town, typical of many of the towns in northern Minnesota, known for its high grade and plentiful supply of iron ore and other minerals. The area also boasts some of the cleanest water in the world, and is more plentiful than in many other parts of the U.S. The culture of the town is reflected in the MCM culture – it has a strong ethical climate, creating family-friendly policies, and caring about the needs of all stakeholders, reflecting the culture of its surrounding community. The Kopperstad Chamber of Commerce sponsors festivals throughout the year, celebrating the accomplishments of its businesses and population. Awards are given to the most civicminded community groups, and to scout troops and other student groups for their contribution to environmentally-focused projects. Forty percent of the population of Kopperstad works directly for MCM, twenty percent work for the businesses that supply equipment to MCM or for the customers of MCM, twenty percent work for non-mining businesses (grocery stores, hardware stores, etc), and twenty percent work for the local hospital or schools. John Anderson, the CEO of MCM is worried about the future. Currently, demand exceeded capacity, allowing industry incumbants to enjoy fairly robust profits. International demand is increasing; Chinese demand rose nine percent last year. However, at the same time, locally based and multinational copper mining operations are increasing capacity, and starting to reduce prices and fees associated with international trade. In the previous year, for example, Zambia, one of the top copper producers in Africa, waived their value-added tax on copper exports. This allowed Zambian firms to be more pricecompetitive, which spurred local growth in the mining industry (Wall Street Journal, 2014). Profits were © Metropolitan State University, MNSCU starting to erode because MCM could not reach any greater capacity or economies of scale at their only mine, in Kopperstad. The board of directors for the publicly held MCM Corporation was pressuring Anderson to take action. Anderson knew he could raise prices to remain profitable, but that was a short term solution. He predicted that if they did not do something, in two to four years they would no longer be profitable. Anderson called in two of his key employees to brainstorm the issues; Carlos Diaz, his chief engineer, who was trained in the U.S., but had worked for the Chilean firm Codelco, which is the world’s single biggest copper producer. He also invited Mubita Banda to the meeting, who was the COO and in charge of the operation of the Kopperstad facility. His training was in Britain, but he worked most of his professional life at the Swiss-owned Glencore facility in Zambia. As they pondered the possibilities, the three of them talked about the difficulties of expanding their operation. John: Our current copper deposit can only sustain our current capacity. Increasing the capacity here in Kopperstad would require a duplication of equipment and would drastically reduce the life of the mine. Carlos: We could ramp up production here while looking for other copper deposits in northern Minnesota, and then gradually close this facility as other facilities come online. The new copper deposits are likely to be far enough away from Kopperstad that we would have to create another facility, so we would have to know that the deposit was large enough to make it worth it. John: Our currently co-located customers would probably not build another facility next to another mine. If we opened a mine closer to other copper customers, maybe not in Minnesota, perhaps there are other firms we could entice to co-locate. They might be willing to co-locate, based on the higher quality and lower prices we could guarantee, since we remove some of our costs when customers co-locate. Carlos: We would have to be certain that our current quality of our copper could be matched elsewhere. The grade of copper in other deposits we have found so far cannot make use of our specialized machinery without significant modifications. Mubita: Not to mention the time it would take to train in the operational staff. Our production people work with a mentor for six months before they can adequately operate efficiently without quality issues. They have to be operating the actual machinery they will be using in order for this to be effective. Carlos: Speaking of quality, another issue is that in Kopperstad, we create minimal pollution because we have tuned our equipment based on our specific water supply – both the temperature and the quality of the water we can pump out of the ground here. There is no guarantee we could perform with so little pollution elsewhere. John: We would have to allow a significant amount of time for the analysis of the environmental impact statement before we committed to a sizable investment. Mubita: I am also concerned about the morale of the operations staff. As we look into all these options, people will, no doubt, get nervous about what is going to happen to them, their jobs, and their future. Since most of them are dependent on this firm for their livelihood, we have to assure them that growth elsewhere does not imply a reduction here, and we will have to use some of our staff to train in employees at a remote site, which will disrupt families. John: Well, that is a fairly complete list of the issues. Now let’s move on to options and come up with a recommendation. © Metropolitan State University, MNSCU
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Explanation & Answer

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Running Head: MIDWEST COPPER MINING

Case Study Midwest Copper Mining Analysis
Name
Institutional Affiliation

1

MIDWEST COPPER MINING

2

Case Study Midwest Copper Mining Analysis
Criterion 1: problem statement
External opportunities and threats
Midwest Copper Mining Company is among the major copper producer in the United
States and its opportunities are generated by the flow of international trade. The recognition
in the growth of technology and developments raises the demand for copper not only to the
United States manufactures but also international companies. The opportunity that exists is
the expansion of the international market. The standardization of the quality and regulation
procedures of mining in the United States further increases the opportunity of the company.
For instance, being a moderately small company, it has the grasps of its production process,
therefore, limiting exposure to external litigations and other limiting factors of expansion.
On the other hand, the company is faced by the major threats of protectionists’
policies in the political landscape of the United States. The decrease in the number of
manufacturing companies in the country has triggered protectionists policies that while may
increase the market share of the company, but also threats to limit its expansion strategy into
the international market.
Historically important strengths
Midwest Copper Mining Company is based on the traditions that reflect its business
strategy and production process. The company was developed on the basis of a community
culture that recognizes the surrounding community in the production process. This increases
and raises the reputation of the company a factor that has contributed to its relationships with
the consumer base in the country. Further, based on the knowledge-based production, the
company has increased its production through improvement and alignment of its processes to
the progress of knowledge and technology. This has enabled the company to consistently

MIDWEST COPPER MINING

3

improve the quality of its product and therefore providing strength into the market and
consumer base.
Managers’ dilemma
The company is faced by the threat of lost profits as well as a reduction in the
production capacity. The largest dilemma of the managers is based on how to increase
production while faced by high competition and low prices of the copper. Further, faced with
the threat of a dried up mining site, the managers must recognize how t...


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