Swot Analysis of "Vertex Pharmaceuticals: R&D Portfolio Management (C)" written by Francesca Gino, Gary P. Pisano includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Vertex Pharmaceuticals facing as an external strategic factors. Some of the topics covered in Vertex Pharmaceuticals: R&D Portfolio Management (C) case study are - Strategic Management Strategies, Financial management, Financial markets, Knowledge management, Mergers & acquisitions, Organizational structure, Project management, Research & development, Strategic planning and Technology & Operations.
Some of the macro environment factors that can be used to understand the Vertex Pharmaceuticals: R&D Portfolio Management (C) casestudy better are - – increasing energy prices, supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs, there is backlash against globalization, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs,
increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of Vertex Pharmaceuticals: R&D Portfolio Management (C)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Vertex Pharmaceuticals: R&D Portfolio Management (C) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Vertex Pharmaceuticals, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Vertex Pharmaceuticals 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 Vertex Pharmaceuticals: R&D Portfolio Management (C) can be done for the following purposes –
1. Strategic planning using facts provided in Vertex Pharmaceuticals: R&D Portfolio Management (C) case study
2. Improving business portfolio management of Vertex Pharmaceuticals
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Vertex Pharmaceuticals
Strengths Vertex Pharmaceuticals: R&D Portfolio Management (C) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Vertex Pharmaceuticals in Vertex Pharmaceuticals: R&D Portfolio Management (C) Harvard Business Review case study are -
Training and development
– Vertex Pharmaceuticals has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Vertex Pharmaceuticals: R&D Portfolio Management (C) 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.
High brand equity
– Vertex Pharmaceuticals has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Vertex Pharmaceuticals to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management
– Vertex Pharmaceuticals is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Low bargaining power of suppliers
– Suppliers of Vertex Pharmaceuticals in the sector have low bargaining power. Vertex Pharmaceuticals: R&D Portfolio Management (C) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Vertex Pharmaceuticals to manage not only supply disruptions but also source products at highly competitive prices.
Ability to lead change in Technology & Operations field
– Vertex Pharmaceuticals 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 Vertex Pharmaceuticals in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Vertex Pharmaceuticals digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Vertex Pharmaceuticals 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 Vertex Pharmaceuticals
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Vertex Pharmaceuticals does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Vertex Pharmaceuticals in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy in the Vertex Pharmaceuticals: R&D Portfolio Management (C) 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 switching costs
– The high switching costs that Vertex Pharmaceuticals 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.
Highly skilled collaborators
– Vertex Pharmaceuticals 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 Vertex Pharmaceuticals: R&D Portfolio Management (C) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Vertex Pharmaceuticals is present in almost all the verticals within the industry. This has provided firm in Vertex Pharmaceuticals: R&D Portfolio Management (C) 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 Vertex Pharmaceuticals: R&D Portfolio Management (C) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Vertex Pharmaceuticals: R&D Portfolio Management (C) are -
Interest costs
– Compare to the competition, Vertex Pharmaceuticals 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Vertex Pharmaceuticals: R&D Portfolio Management (C), it seems that the employees of Vertex Pharmaceuticals 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.
Slow decision making process
– As mentioned earlier in the report, Vertex Pharmaceuticals 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. Vertex Pharmaceuticals 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Vertex Pharmaceuticals: R&D Portfolio Management (C), in the dynamic environment Vertex Pharmaceuticals has struggled to respond to the nimble upstart competition. Vertex Pharmaceuticals has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As Vertex Pharmaceuticals: R&D Portfolio Management (C) HBR case study mentions - Vertex Pharmaceuticals 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Vertex Pharmaceuticals: R&D Portfolio Management (C) 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 Vertex Pharmaceuticals 's lucrative customers.
High cash cycle compare to competitors
Vertex Pharmaceuticals 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.
Capital Spending Reduction
– Even during the low interest decade, Vertex Pharmaceuticals 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 Vertex Pharmaceuticals: R&D Portfolio Management (C), is just above the industry average. Vertex Pharmaceuticals 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.
Skills based hiring
– The stress on hiring functional specialists at Vertex Pharmaceuticals 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.
Need for greater diversity
– Vertex Pharmaceuticals has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Opportunities Vertex Pharmaceuticals: R&D Portfolio Management (C) | 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 Vertex Pharmaceuticals: R&D Portfolio Management (C) are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Vertex Pharmaceuticals 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.
Manufacturing automation
– Vertex Pharmaceuticals can use the latest technology developments to improve its manufacturing and designing process in Technology & Operations 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.
Loyalty marketing
– Vertex Pharmaceuticals 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.
Better consumer reach
– The expansion of the 5G network will help Vertex Pharmaceuticals to increase its market reach. Vertex Pharmaceuticals 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Vertex Pharmaceuticals 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. Vertex Pharmaceuticals 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.
Developing new processes and practices
– Vertex Pharmaceuticals can develop new processes and procedures in Technology & Operations 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Vertex Pharmaceuticals can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Vertex Pharmaceuticals can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Vertex Pharmaceuticals 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 Vertex Pharmaceuticals 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, Vertex Pharmaceuticals 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, Vertex Pharmaceuticals: R&D Portfolio Management (C), to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– Vertex Pharmaceuticals 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.
Learning at scale
– Online learning technologies has now opened space for Vertex Pharmaceuticals 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.
Using analytics as competitive advantage
– Vertex Pharmaceuticals 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 Vertex Pharmaceuticals: R&D Portfolio Management (C) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Vertex Pharmaceuticals to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Vertex Pharmaceuticals: R&D Portfolio Management (C) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Vertex Pharmaceuticals: R&D Portfolio Management (C) are -
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. Vertex Pharmaceuticals 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.
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 Vertex Pharmaceuticals in the Technology & Operations sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Vertex Pharmaceuticals 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 Vertex Pharmaceuticals: R&D Portfolio Management (C) .
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Vertex Pharmaceuticals can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Vertex Pharmaceuticals 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 Technology & Operations industry regulations.
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 Vertex Pharmaceuticals.
High dependence on third party suppliers
– Vertex Pharmaceuticals 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.
Shortening product life cycle
– it is one of the major threat that Vertex Pharmaceuticals is facing in Technology & Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Vertex Pharmaceuticals
– 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 Vertex Pharmaceuticals.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Vertex Pharmaceuticals with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Stagnating economy with rate increase
– Vertex Pharmaceuticals 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.
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 Vertex Pharmaceuticals business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Vertex Pharmaceuticals: R&D Portfolio Management (C) 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 Vertex Pharmaceuticals: R&D Portfolio Management (C) 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 Vertex Pharmaceuticals: R&D Portfolio Management (C) 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 Vertex Pharmaceuticals: R&D Portfolio Management (C) 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 Vertex Pharmaceuticals: R&D Portfolio Management (C) 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 Vertex Pharmaceuticals needs to make to build a sustainable competitive advantage.
