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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