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 government debt because of Covid-19 spendings, there is backlash against globalization, talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , central banks are concerned over increasing inflation, increasing energy prices, technology disruption,
wage bills are increasing, geopolitical disruptions, 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.
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.
Effective Research and Development (R&D)
– Pharmaplus Hungary 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 PharmaPlus in Hungary - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Pharmaplus Hungary 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 Pharmaplus Hungary is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in PharmaPlus in Hungary Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Pharmaplus Hungary is one of the leading recruiters in the industry. Managers in the PharmaPlus in Hungary are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
Analytics focus
– Pharmaplus Hungary 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 David W. Conklin, Jeffrey Gandz, Trevor Hunter 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.
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.
Diverse revenue streams
– Pharmaplus Hungary is present in almost all the verticals within the industry. This has provided firm in PharmaPlus in Hungary 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.
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.
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 -
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.
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.
Increasing silos among functional specialists
– The organizational structure of Pharmaplus Hungary is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Pharmaplus Hungary needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Pharmaplus Hungary to focus more on services rather than just following the product oriented approach.
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.
Interest costs
– Compare to the competition, Pharmaplus Hungary 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.
Lack of clear differentiation of Pharmaplus Hungary products
– To increase the profitability and margins on the products, Pharmaplus Hungary needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, firm in the HBR case study PharmaPlus in Hungary has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Pharmaplus Hungary 's lucrative customers.
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.
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Pharmaplus Hungary 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.
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.
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 -
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Pharmaplus Hungary 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, PharmaPlus in Hungary, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Pharmaplus Hungary to increase its market reach. Pharmaplus Hungary 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 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.
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 Pharmaplus Hungary 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.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Pharmaplus Hungary in the consumer business. Now Pharmaplus Hungary can target international markets with far fewer capital restrictions requirements than the existing system.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Pharmaplus Hungary can use these opportunities to build new business models that can help the communities that Pharmaplus Hungary operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Using analytics as competitive advantage
– Pharmaplus Hungary 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 PharmaPlus in Hungary - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Pharmaplus Hungary to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Pharmaplus Hungary can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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 -
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 Pharmaplus Hungary business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
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.
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.
Shortening product life cycle
– it is one of the major threat that Pharmaplus Hungary is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Pharmaplus Hungary high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
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.
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.
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.
Stagnating economy with rate increase
– Pharmaplus Hungary 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.
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.
Increasing wage structure of Pharmaplus Hungary
– 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 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.