The project included more than 40 initiatives.
In every business, improved results come from a better understanding of the customer. That’s particularly true in the mining industry, where a wide variety of products are sold for many different purposes, in a range of market conditions.
That simple truth can be hard to put into practice, as was the case for MiningCo, a highly diversified mine operator that deals in multiple commodity markets. MiningCo had traditionally taken a very passive approach to its marketing and sales. Among the problems that approach created was a drift toward a high concentration of sales to intermediaries rather than to end customers; in some business units, that concentration reached nearly 90%. Dealing with middlemen limited MiningCo’s insights about actual user needs, and left money on the table from the intermediary’s markup.
BCG worked with MiningCo to revamp its entire approach to marketing and sales. The approach was based on the principle that the best way to create value in each business unit would be defined by MiningCo’s relative competitive position in that commodity, and the market’s relative liquidity. Products in relatively nonliquid markets in which MiningCo had a smaller market share would benefit from a dedicated local sales force, for example, while commodities that had reached full liquidity in the market would best be sold through exchange-based trading.
BCG’s team worked closely with MiningCo’s management to define targets for each unit, yielding a list of more than 40 initiatives designed to increase the number of levers the company had to work with to maximize value.
One initiative developed an asset-backed trading business for one of MiningCo’s most important products. BCG evaluated the various trading levers the new trading business could tap, including long-term sourcing and geographical arbitrage, and then identified which operational capabilities MiningCo would need to build its own trading unit organically. The analysis also investigated what the benefits and drawbacks would be of entering that business through a joint venture.
BCG’s engagement with MiningCo spanned two years, and the dozens of initiatives and their accompanying business case evaluations and plans resulted in a more centralized marketing approach that yielded better results and increased efficiency. The estimated bottom-line impact of the effort was more than $1 billion in annual pretax benefit, with nearly half of that likely to be delivered within three years of implementation.