Merck & Co., Inc., a major pharmaceutical company, is in the process of reviewing and evaluating its personnel policies and practices. Employee interviews revealed that rewards for excellent performance were not adequate: outstanding performers received salary increases that were, in many cases, only marginally better than those given to average performers. In many cases, outstanding performance was not even clearly identified. The objective is to have students wrestle with a common malady of performance appraisal systems: the tendency of managers to assign uniform ratings to employees regardless of performance. Alternative appraisal systems should be suggested and discussed.
Swot Analysis of "Merck & Co., Inc. (A)" written by Kevin J. Murphy includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Appraisal Performers facing as an external strategic factors. Some of the topics covered in Merck & Co., Inc. (A) case study are - Strategic Management Strategies, Compensation, Developing employees, Performance measurement, Personnel policies and Organizational Development.
Some of the macro environment factors that can be used to understand the Merck & Co., Inc. (A) casestudy better are - – geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing,
there is backlash against globalization, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Merck & Co., Inc. (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Merck & Co., Inc. (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Appraisal Performers, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Appraisal Performers operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Merck & Co., Inc. (A) can be done for the following purposes –
1. Strategic planning using facts provided in Merck & Co., Inc. (A) case study
2. Improving business portfolio management of Appraisal Performers
3. Assessing feasibility of the new initiative in Organizational Development field.
4. Making a Organizational Development topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Appraisal Performers
Strengths Merck & Co., Inc. (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Appraisal Performers in Merck & Co., Inc. (A) Harvard Business Review case study are -
High switching costs
– The high switching costs that Appraisal Performers has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Analytics focus
– Appraisal Performers is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Kevin J. Murphy can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Operational resilience
– The operational resilience strategy in the Merck & Co., Inc. (A) Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Training and development
– Appraisal Performers has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Merck & Co., Inc. (A) Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Superior customer experience
– The customer experience strategy of Appraisal Performers in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Appraisal Performers is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Appraisal Performers is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Merck & Co., Inc. (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Appraisal Performers has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Appraisal Performers has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Sustainable margins compare to other players in Organizational Development industry
– Merck & Co., Inc. (A) firm has clearly differentiated products in the market place. This has enabled Appraisal Performers to fetch slight price premium compare to the competitors in the Organizational Development industry. The sustainable margins have also helped Appraisal Performers to invest into research and development (R&D) and innovation.
Strong track record of project management
– Appraisal Performers is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in Organizational Development segment
- digital transformation varies from industry to industry. For Appraisal Performers digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Appraisal Performers has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Highly skilled collaborators
– Appraisal Performers has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Merck & Co., Inc. (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Appraisal Performers has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Merck & Co., Inc. (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Weaknesses Merck & Co., Inc. (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Merck & Co., Inc. (A) are -
Workers concerns about automation
– As automation is fast increasing in the segment, Appraisal Performers needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Skills based hiring
– The stress on hiring functional specialists at Appraisal Performers has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Products dominated business model
– Even though Appraisal Performers has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Merck & Co., Inc. (A) should strive to include more intangible value offerings along with its core products and services.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Merck & Co., Inc. (A), in the dynamic environment Appraisal Performers has struggled to respond to the nimble upstart competition. Appraisal Performers has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of Appraisal Performers, firm in the HBR case study Merck & Co., Inc. (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Appraisal Performers products
– To increase the profitability and margins on the products, Appraisal Performers needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Merck & Co., Inc. (A), it seems that the employees of Appraisal Performers don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
No frontier risks strategy
– After analyzing the HBR case study Merck & Co., Inc. (A), it seems that company is thinking about the frontier risks that can impact Organizational Development strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Capital Spending Reduction
– Even during the low interest decade, Appraisal Performers has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Merck & Co., Inc. (A), is just above the industry average. Appraisal Performers needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Interest costs
– Compare to the competition, Appraisal Performers has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Opportunities Merck & Co., Inc. (A) | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Merck & Co., Inc. (A) are -
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Organizational Development industry, but it has also influenced the consumer preferences. Appraisal Performers can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Appraisal Performers to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Learning at scale
– Online learning technologies has now opened space for Appraisal Performers to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Low interest rates
– Even though inflation is raising its head in most developed economies, Appraisal Performers can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Better consumer reach
– The expansion of the 5G network will help Appraisal Performers to increase its market reach. Appraisal Performers will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Appraisal Performers can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Appraisal Performers can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Merck & Co., Inc. (A), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Loyalty marketing
– Appraisal Performers has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Creating value in data economy
– The success of analytics program of Appraisal Performers has opened avenues for new revenue streams for the organization in the industry. This can help Appraisal Performers to build a more holistic ecosystem as suggested in the Merck & Co., Inc. (A) case study. Appraisal Performers can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Appraisal Performers is facing challenges because of the dominance of functional experts in the organization. Merck & Co., Inc. (A) case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Developing new processes and practices
– Appraisal Performers can develop new processes and procedures in Organizational Development industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Using analytics as competitive advantage
– Appraisal Performers has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Merck & Co., Inc. (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Appraisal Performers to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Appraisal Performers can use these opportunities to build new business models that can help the communities that Appraisal Performers operates in. Secondly it can use opportunities from government spending in Organizational Development sector.
Threats Merck & Co., Inc. (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Merck & Co., Inc. (A) are -
Easy access to finance
– Easy access to finance in Organizational Development field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Appraisal Performers can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Appraisal Performers will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Appraisal Performers.
Stagnating economy with rate increase
– Appraisal Performers can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Increasing wage structure of Appraisal Performers
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Appraisal Performers.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Appraisal Performers needs to understand the core reasons impacting the Organizational Development industry. This will help it in building a better workplace.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Appraisal Performers business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Appraisal Performers demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Technology acceleration in Forth Industrial Revolution
– Appraisal Performers has witnessed rapid integration of technology during Covid-19 in the Organizational Development industry. As one of the leading players in the industry, Appraisal Performers needs to keep up with the evolution of technology in the Organizational Development sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Merck & Co., Inc. (A), Appraisal Performers may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Organizational Development .
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Appraisal Performers in the Organizational Development sector and impact the bottomline of the organization.
Environmental challenges
– Appraisal Performers needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Appraisal Performers can take advantage of this fund but it will also bring new competitors in the Organizational Development industry.
Weighted SWOT Analysis of Merck & Co., Inc. (A) Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Merck & Co., Inc. (A) needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Merck & Co., Inc. (A) is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Merck & Co., Inc. (A) is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Merck & Co., Inc. (A) is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Appraisal Performers needs to make to build a sustainable competitive advantage.