In 1997, a Hungarian pharmaceuticals producer/wholesaler is attempting to enter the retail "drugstore" industry, an industry that does not yet exist in Hungary. Hungary has strict laws defining what can be sold in a pharmacy and a "druggery," (which are two separate entities), yet PharmaPlus, (no connection with the North American chain Pharma Plus Drugmart), is attempting to combine the two with its one existing store. Management of PharmaPlus is facing opposition from the regulatory body of pharmacists, which has authority over a pharmacy's operations and the stakeholders in the current industry structure, despite having the support of the Minister of Health and strong evidence that the concept is popular with customers. The case deals with issues of lobbying the stakeholders who have power, finding a sustainable competitive advantage in a market that has never seen this type of business, the idea of a global concept of service, shaping an industry to one's own advantage, an industry of pure competition (many players), potential international expansion, and the impact of Hungary entering the EU.
Authors :: David W. Conklin, Jeffrey Gandz, Trevor Hunter
Swot Analysis of "PharmaPlus in Hungary" written by David W. Conklin, Jeffrey Gandz, Trevor Hunter includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Pharmaplus Hungary facing as an external strategic factors. Some of the topics covered in PharmaPlus in Hungary case study are - Strategic Management Strategies, Government, International business, Managing uncertainty and Strategy & Execution.
Some of the macro environment factors that can be used to understand the PharmaPlus in Hungary casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs, increasing transportation and logistics costs, there is backlash against globalization, increasing government debt because of Covid-19 spendings, wage bills are increasing, there is increasing trade war between United States & China,
increasing commodity prices, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of PharmaPlus in Hungary
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in PharmaPlus in Hungary case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Pharmaplus Hungary, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Pharmaplus Hungary 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 PharmaPlus in Hungary can be done for the following purposes –
1. Strategic planning using facts provided in PharmaPlus in Hungary case study
2. Improving business portfolio management of Pharmaplus Hungary
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Pharmaplus Hungary
Strengths PharmaPlus in Hungary | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Pharmaplus Hungary in PharmaPlus in Hungary Harvard Business Review case study are -
Training and development
– Pharmaplus Hungary has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in PharmaPlus in Hungary 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.
Sustainable margins compare to other players in Strategy & Execution industry
– PharmaPlus in Hungary firm has clearly differentiated products in the market place. This has enabled Pharmaplus Hungary to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Pharmaplus Hungary to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Pharmaplus Hungary 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.
Innovation driven organization
– Pharmaplus Hungary is one of the most innovative firm in sector. Manager in PharmaPlus in Hungary Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Strong track record of project management
– Pharmaplus Hungary is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the PharmaPlus in Hungary 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.
High brand equity
– Pharmaplus Hungary has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Pharmaplus Hungary to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Pharmaplus Hungary 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 PharmaPlus in Hungary HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of Pharmaplus Hungary in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Strategy & Execution field
– Pharmaplus Hungary is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Pharmaplus Hungary in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Pharmaplus Hungary in the sector have low bargaining power. PharmaPlus in Hungary has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Pharmaplus Hungary to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Pharmaplus Hungary
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Pharmaplus Hungary does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses PharmaPlus in Hungary | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of PharmaPlus in Hungary are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study PharmaPlus in Hungary, is just above the industry average. Pharmaplus Hungary 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.
Slow decision making process
– As mentioned earlier in the report, Pharmaplus Hungary 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. Pharmaplus Hungary 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.
Low market penetration in new markets
– Outside its home market of Pharmaplus Hungary, firm in the HBR case study PharmaPlus in Hungary needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High bargaining power of channel partners
– Because of the regulatory requirements, David W. Conklin, Jeffrey Gandz, Trevor Hunter suggests that, Pharmaplus Hungary 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.
Products dominated business model
– Even though Pharmaplus Hungary 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 - PharmaPlus in Hungary should strive to include more intangible value offerings along with its core products and services.
Skills based hiring
– The stress on hiring functional specialists at Pharmaplus Hungary 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the PharmaPlus in Hungary HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Pharmaplus Hungary has relatively successful track record of launching new products.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study PharmaPlus in Hungary, it seems that the employees of Pharmaplus Hungary 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.
High cash cycle compare to competitors
Pharmaplus Hungary has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
No frontier risks strategy
– After analyzing the HBR case study PharmaPlus in Hungary, it seems that company is thinking about the frontier risks that can impact Strategy & Execution 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, Pharmaplus Hungary 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.
Opportunities PharmaPlus in Hungary | 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 PharmaPlus in Hungary are -
Developing new processes and practices
– Pharmaplus Hungary can develop new processes and procedures in Strategy & Execution 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.
Building a culture of innovation
– managers at Pharmaplus Hungary 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 Strategy & Execution segment.
Creating value in data economy
– The success of analytics program of Pharmaplus Hungary has opened avenues for new revenue streams for the organization in the industry. This can help Pharmaplus Hungary to build a more holistic ecosystem as suggested in the PharmaPlus in Hungary case study. Pharmaplus Hungary can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Pharmaplus Hungary 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Pharmaplus Hungary can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Pharmaplus Hungary is facing challenges because of the dominance of functional experts in the organization. PharmaPlus in Hungary 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Pharmaplus Hungary in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Buying journey improvements
– Pharmaplus Hungary can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. PharmaPlus in Hungary 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.
Learning at scale
– Online learning technologies has now opened space for Pharmaplus Hungary 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.
Leveraging digital technologies
– Pharmaplus Hungary 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Pharmaplus Hungary can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Pharmaplus Hungary can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Pharmaplus Hungary to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Pharmaplus Hungary to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Pharmaplus Hungary can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution 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.
Threats PharmaPlus in Hungary External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study PharmaPlus in Hungary are -
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Pharmaplus Hungary can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Pharmaplus Hungary needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Regulatory challenges
– Pharmaplus Hungary 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 Strategy & Execution industry regulations.
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. Pharmaplus Hungary 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.
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.
Technology acceleration in Forth Industrial Revolution
– Pharmaplus Hungary has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Pharmaplus Hungary needs to keep up with the evolution of technology in the Strategy & Execution 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.
Consumer confidence and its impact on Pharmaplus Hungary 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.
Environmental challenges
– Pharmaplus Hungary 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. Pharmaplus Hungary can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Pharmaplus Hungary can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study PharmaPlus in Hungary .
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Pharmaplus Hungary in the Strategy & Execution industry. The Strategy & Execution 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.
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 Pharmaplus Hungary in the Strategy & Execution sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Pharmaplus Hungary with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Pharmaplus Hungary.
Weighted SWOT Analysis of PharmaPlus in Hungary 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 PharmaPlus in Hungary 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 PharmaPlus in Hungary 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 PharmaPlus in Hungary 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 PharmaPlus in Hungary 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 Pharmaplus Hungary needs to make to build a sustainable competitive advantage.
