Merck (MERK) SWOT Analysis / TOWS Matrix / MBA Resources
Major Drugs
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Merck (India)
Based on various researches at Oak Spring University , Merck is operating in a macro-environment that has been destablized by – there is backlash against globalization, challanges to central banks by blockchain based private currencies, increasing energy prices, talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, increasing household debt because of falling income levels,
customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Merck can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Merck, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which 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 Merck can be done for the following purposes –
1. Strategic planning of Merck
2. Improving business portfolio management of Merck
3. Assessing feasibility of the new initiative in India
4. Making a Major Drugs sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Merck
Strengths of Merck | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Merck are -
Diverse revenue streams
– Merck is present in almost all the verticals within the Major Drugs industry. This has provided Merck 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 Major Drugs industry
– Merck has clearly differentiated products in the market place. This has enabled Merck to fetch slight price premium compare to the competitors in the Major Drugs industry. The sustainable margins have also helped Merck to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Merck is one of the leading players in the Major Drugs industry in India. It is in a position to attract the best talent available in India. The firm has a robust talent identification program that helps in identifying the brightest.
Ability to lead change in Major Drugs
– Merck is one of the leading players in the Major Drugs industry in India. Over the years it has not only transformed the business landscape in the Major Drugs industry in India but also across the existing markets. The ability to lead change has enabled Merck in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Merck
– The covid-19 pandemic has put organizational resilience at the centre of everthing Merck does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management in the Major Drugs industry
– 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.
Digital Transformation in Major Drugs industry
- digital transformation varies from industry to industry. For Merck digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. 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.
High switching costs
– The high switching costs that Merck 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
– Merck has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Major Drugs industry. Secondly the value chain collaborators of Merck have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the 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.
High brand equity
– Merck has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Merck to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Merck 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 Major Drugs industry. The technology infrastructure of India is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses of Merck | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Merck are -
Need for greater diversity
– Merck 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.
Workers concerns about automation
– As automation is fast increasing in the Major Drugs industry, Merck 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.
Aligning sales with marketing
– From the outside it seems that Merck needs to have more collaboration between its sales team and marketing team. Sales professionals in the Major Drugs industry have deep experience in developing customer relationships. Marketing department at Merck can leverage the sales team experience to cultivate customer relationships as Merck is planning to shift buying processes online.
Skills based hiring in Major Drugs industry
– The stress on hiring functional specialists at Merck 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.
Lack of clear differentiation of Merck products
– To increase the profitability and margins on the products, Merck needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
Merck has a high cash cycle compare to other players in the Major Drugs industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Low market penetration in new markets
– Outside its home market of India, Merck needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As Merck is one of the leading players in the Major Drugs industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Major Drugs industry in last five years.
No frontier risks strategy
– From the 10K / annual statement of Merck, it seems that company is thinking out the frontier risks that can impact Major Drugs industry. 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.
High operating costs
– Compare to the competitors, Merck has high operating costs in the Major Drugs industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Merck lucrative customers.
Products dominated business model
– Even though Merck has some of the most successful models in the Major Drugs industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Merck should strive to include more intangible value offerings along with its core products and services.
Merck Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Merck are -
Use of Bitcoin and other crypto currencies for transactions in Major Drugs industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Merck in the Major Drugs industry. Now Merck can target international markets with far fewer capital restrictions requirements than the existing system.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Merck can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Merck to increase its market reach. 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Merck is facing challenges because of the dominance of functional experts in the organization. Merck can utilize new technology in the field of Major Drugs industry 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 Merck in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Major Drugs industry, and it will provide faster access to the consumers.
Manufacturing automation
– Merck can use the latest technology developments to improve its manufacturing and designing process in Major Drugs sector. 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, 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 Merck 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
– 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Major Drugs industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Merck 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. Merck 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.
Creating value in data economy
– The success of analytics program of Merck has opened avenues for new revenue streams for the organization in Major Drugs industry. This can help Merck to build a more holistic ecosystem for Merck products in the Major Drugs industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Buying journey improvements
– Merck can improve the customer journey of consumers in the Major Drugs industry by using analytics and artificial intelligence. It 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Major Drugs industry, but it has also influenced the consumer preferences. Merck can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Merck can use these opportunities to build new business models that can help the communities that Merck operates in. Secondly it can use opportunities from government spending in Major Drugs sector.
Threats Merck External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Merck are -
Stagnating economy with rate increase
– Merck 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 Major Drugs industry.
Regulatory challenges
– 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 Major Drugs industry regulations.
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. Merck needs to understand the core reasons impacting the Major Drugs industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Merck has witnessed rapid integration of technology during Covid-19 in the Major Drugs industry. As one of the leading players in the industry, Merck needs to keep up with the evolution of technology in the Major Drugs 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.
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 Merck in the Major Drugs sector and impact the bottomline 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. Merck 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Merck in Major Drugs industry. The Major Drugs 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Merck 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 Merck prominent markets.
Increasing wage structure of 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 Merck.
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 Merck business can come under increasing regulations regarding data privacy, data security, etc.
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.
Shortening product life cycle
– it is one of the major threat that Merck is facing in Major Drugs sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– 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. Merck can take advantage of this fund but it will also bring new competitors in the Major Drugs industry.
Weighted SWOT Analysis of Merck Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Merck 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 Merck 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 Merck is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Merck 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 Merck needs to make to build a sustainable competitive advantage.