Merck (MERK) SWOT Analysis / TOWS Matrix / 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 – increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy, challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, increasing energy prices, etc

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Introduction to SWOT Analysis of Merck

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.

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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

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Strengths of Merck | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Merck are -

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.

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.

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.

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.

Learning organization

- Merck is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Merck is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Merck emphasize – knowledge, initiative, and innovation.

Superior customer experience

– The customer experience strategy of Merck in Major Drugs industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

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.

Innovation driven organization

– Merck is one of the most innovative firm in Major Drugs sector.

Training and development

– Merck has one of the best training and development program in Healthcare industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.

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.

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.

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Weaknesses of Merck | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Merck are -

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.

Interest costs

– Compare to the competition, Merck has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.

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.

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.

High bargaining power of channel partners in Major Drugs industry

– because of the regulatory requirements in India, Merck is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Major Drugs industry.

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.

Increasing silos among functional specialists

– The organizational structure of Merck is dominated by functional specialists. It is not different from other players in the Major Drugs industry, but Merck needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Merck to focus more on services in the Major Drugs industry rather than just following the product oriented approach.

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.

High dependence on Merck ‘s star products

– The top 2 products and services of Merck still accounts for major business revenue. This dependence on star products in Major Drugs industry has resulted into insufficient focus on developing new products, even though Merck has relatively successful track record of launching new products.

Ability to respond to the competition

– As the decision making is very deliberative at Merck, in the dynamic environment of Major Drugs industry it has struggled to respond to the nimble upstart competition. Merck has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Capital Spending Reduction

– Even during the low interest decade, Merck 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 Major Drugs industry using digital technology.

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Merck Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Merck are -

Low interest rates

– Even though inflation is raising its head in most developed economies, Merck 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.

Loyalty marketing

– Merck 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.

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.

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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Merck can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

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.

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.

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.

Developing new processes and practices

– Merck can develop new processes and procedures in Major Drugs 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.

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.

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.

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.

Learning at scale

– Online learning technologies has now opened space for Merck to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.

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Threats Merck External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Merck 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. 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.

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.

Consumer confidence and its impact on Merck 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 Major Drugs industry and other sectors.

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.

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.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Major Drugs industry are lowering. It can presents Merck with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Major Drugs sector.

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.

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 Merck.

Easy access to finance

– Easy access to finance in Major Drugs industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Merck 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

– 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.

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.

High dependence on third party suppliers

– Merck 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.

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.

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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.

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