Astra/Merck (A/M), originally a joint venture of AB Astra and Merck & Co., is preparing to be an independent company in 1993. Since the company does not engage in basic research and development of drugs, it is essentially a distribution organization. Fundamental to A/M's strategy is a new approach to the marketing of prescription drugs. The case outlines this approach, developments in the pharmaceuticals industry, and issues raised by A/M's attempts to implement a new marketing process in an industry where promotion-oriented "detailing" has dominated distribution practices.
Swot Analysis of "Astra/Merck Group" written by Frank V. Cespedes, Marie Bell includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Astra Merck facing as an external strategic factors. Some of the topics covered in Astra/Merck Group case study are - Strategic Management Strategies, Marketing, Sales and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Astra/Merck Group casestudy better are - – increasing household debt because of falling income levels, wage bills are increasing, technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation,
increasing energy prices, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Astra/Merck Group
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Astra/Merck Group case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Astra Merck, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Astra Merck 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 Astra/Merck Group can be done for the following purposes –
1. Strategic planning using facts provided in Astra/Merck Group case study
2. Improving business portfolio management of Astra Merck
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Astra Merck
Strengths Astra/Merck Group | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Astra Merck in Astra/Merck Group Harvard Business Review case study are -
Strong track record of project management
– Astra Merck is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Astra Merck in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Astra Merck 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 Astra/Merck Group - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Astra Merck has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Astra Merck 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.
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Astra Merck digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Astra Merck 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.
Organizational Resilience of Astra Merck
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Astra Merck does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Sales & Marketing industry
– Astra/Merck Group firm has clearly differentiated products in the market place. This has enabled Astra Merck to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Astra Merck to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Astra Merck are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Low bargaining power of suppliers
– Suppliers of Astra Merck in the sector have low bargaining power. Astra/Merck Group has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Astra Merck to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Astra Merck has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Astra/Merck Group 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.
Learning organization
- Astra Merck 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 Astra Merck is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Astra/Merck Group Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Astra Merck is present in almost all the verticals within the industry. This has provided firm in Astra/Merck Group case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Weaknesses Astra/Merck Group | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Astra/Merck Group are -
Products dominated business model
– Even though Astra Merck 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 - Astra/Merck Group should strive to include more intangible value offerings along with its core products and services.
Low market penetration in new markets
– Outside its home market of Astra Merck, firm in the HBR case study Astra/Merck Group needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As Astra/Merck Group HBR case study mentions - Astra Merck takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Aligning sales with marketing
– It come across in the case study Astra/Merck Group that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Astra/Merck Group can leverage the sales team experience to cultivate customer relationships as Astra Merck is planning to shift buying processes online.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Astra Merck supply chain. Even after few cautionary changes mentioned in the HBR case study - Astra/Merck Group, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Astra Merck vulnerable to further global disruptions in South East Asia.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Astra Merck is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Astra/Merck Group can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Slow decision making process
– As mentioned earlier in the report, Astra Merck has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Astra Merck even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Interest costs
– Compare to the competition, Astra Merck 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.
Increasing silos among functional specialists
– The organizational structure of Astra Merck is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Astra Merck needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Astra Merck to focus more on services rather than just following the product oriented approach.
High bargaining power of channel partners
– Because of the regulatory requirements, Frank V. Cespedes, Marie Bell suggests that, Astra Merck is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Astra/Merck Group, is just above the industry average. Astra Merck 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.
Opportunities Astra/Merck Group | 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 Astra/Merck Group are -
Creating value in data economy
– The success of analytics program of Astra Merck has opened avenues for new revenue streams for the organization in the industry. This can help Astra Merck to build a more holistic ecosystem as suggested in the Astra/Merck Group case study. Astra Merck can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Astra Merck can use the latest technology developments to improve its manufacturing and designing process in Sales & Marketing segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Astra Merck 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, Astra/Merck Group, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Astra Merck can develop new processes and procedures in Sales & Marketing 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.
Buying journey improvements
– Astra Merck can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Astra/Merck Group suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Astra Merck can use these opportunities to build new business models that can help the communities that Astra Merck operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Learning at scale
– Online learning technologies has now opened space for Astra Merck 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Astra Merck is facing challenges because of the dominance of functional experts in the organization. Astra/Merck Group 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.
Leveraging digital technologies
– Astra Merck can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Astra Merck can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– Astra Merck 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 Astra/Merck Group - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Astra Merck to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Astra Merck can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Sales & Marketing segment.
Better consumer reach
– The expansion of the 5G network will help Astra Merck to increase its market reach. Astra Merck 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.
Threats Astra/Merck Group External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Astra/Merck Group are -
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. Astra Merck needs to understand the core reasons impacting the Sales & Marketing 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 Astra Merck business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Astra/Merck Group, Astra Merck may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Sales & Marketing .
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 Astra Merck.
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.
Regulatory challenges
– Astra Merck needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Sales & Marketing industry regulations.
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 Astra Merck in the Sales & Marketing sector and impact the bottomline of the organization.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Environmental challenges
– Astra Merck 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. Astra Merck can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
Increasing wage structure of Astra Merck
– 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 Astra Merck.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Astra Merck with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Shortening product life cycle
– it is one of the major threat that Astra Merck is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Astra Merck in the Sales & Marketing industry. The Sales & Marketing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Weighted SWOT Analysis of Astra/Merck Group 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 Astra/Merck Group 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 Astra/Merck Group 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 Astra/Merck Group 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 Astra/Merck Group 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 Astra Merck needs to make to build a sustainable competitive advantage.