Glencore: One of World’s Largest Mining and Commodity Trading Companies

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Strategic alternativesThe company has seen tremendous growth since its inception and that has been down to some strategic decisions which have shaped the company. In 2010, Glencore had a global market share of 60% in internationally tradable zinc, 50% in internationally tradable copper, 9 percent in the internationally tradable grain market and 3 percent in the internationally tradable oil market.

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Glencore’s Value Chain Model – Figure 1[pic 2]

The value chain describes the primary and supporting activities which creates margin for the company. This value chain also provides information about the sources of competitive advantage of the company. The figure above shows how Glencore creates value for its customers.

Analyzing the growth strategy through Enzof’s Product-Market grid, we see that the company has used diversification, market development and market penetration in different phases of the company’s history to achieve growth. For instance, the company initially was in the mining business but later added agricultural segment into its business and finally became a big name in commodity trading business.

Moreover, the VRIN framework indicates the sustainable competitive advantage of Glencore company is its strategic resources like fleet of ships (it has more ships than British Royal Navy) and the mining quarries in Ecuador, Zambia and other countries.

Based on this information and the current situation the company has a few alternatives:

- Merge with Xstrata

One alternative for Glencore is to merge with Xstrata which is another mining company. Glencore currently owns 40% shares of Xstrata and is a marketing partner of the company. Acquiring it fully would help Glencore to increase the scale of its operations which might bring economies of scale and lower cost per unit.

- Invest in new Mining Fields

Another alternative for Glencore could be to look for other areas to broaden its operations. By developing new markets Glencore could achieve growth. This means it should find new mining quarries which are accessible and have large reserves of minerals like coal and oil.