Kimia Farma Persero (KAEF) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Kimia Farma Persero (Indonesia)

Based on various researches at Oak Spring University , Kimia Farma Persero is operating in a macro-environment that has been destablized by – wage bills are increasing, digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, increasing transportation and logistics costs, geopolitical disruptions, central banks are concerned over increasing inflation, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, etc

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Introduction to SWOT Analysis of Kimia Farma Persero

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Kimia Farma Persero can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Kimia Farma Persero, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Kimia Farma Persero 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 Kimia Farma Persero can be done for the following purposes –
1. Strategic planning of Kimia Farma Persero
2. Improving business portfolio management of Kimia Farma Persero
3. Assessing feasibility of the new initiative in Indonesia
4. Making a Biotechnology & Drugs sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Kimia Farma Persero

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Strengths of Kimia Farma Persero | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Kimia Farma Persero are -

Cross disciplinary teams

– Horizontal connected teams at the Kimia Farma Persero 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.

Learning organization

- Kimia Farma Persero 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 Kimia Farma Persero is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Kimia Farma Persero emphasize – knowledge, initiative, and innovation.

Analytics focus

– Kimia Farma Persero 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 Biotechnology & Drugs industry. The technology infrastructure of Indonesia 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.

Sustainable margins compare to other players in Biotechnology & Drugs industry

– Kimia Farma Persero has clearly differentiated products in the market place. This has enabled Kimia Farma Persero to fetch slight price premium compare to the competitors in the Biotechnology & Drugs industry. The sustainable margins have also helped Kimia Farma Persero to invest into research and development (R&D) and innovation.

High switching costs

– The high switching costs that Kimia Farma Persero 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.

Innovation driven organization

– Kimia Farma Persero is one of the most innovative firm in Biotechnology & Drugs sector.

Ability to lead change in Biotechnology & Drugs

– Kimia Farma Persero is one of the leading players in the Biotechnology & Drugs industry in Indonesia. Over the years it has not only transformed the business landscape in the Biotechnology & Drugs industry in Indonesia but also across the existing markets. The ability to lead change has enabled Kimia Farma Persero in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Superior customer experience

– The customer experience strategy of Kimia Farma Persero in Biotechnology & Drugs industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

High brand equity

– Kimia Farma Persero has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Kimia Farma Persero to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Effective Research and Development (R&D)

– Kimia Farma Persero has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Kimia Farma Persero staying ahead in the Biotechnology & Drugs industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Organizational Resilience of Kimia Farma Persero

– The covid-19 pandemic has put organizational resilience at the centre of everthing Kimia Farma Persero does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Successful track record of launching new products

– Kimia Farma Persero has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Kimia Farma Persero has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.

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Weaknesses of Kimia Farma Persero | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Kimia Farma Persero are -

High cash cycle compare to competitors

Kimia Farma Persero has a high cash cycle compare to other players in the Biotechnology & 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.

No frontier risks strategy

– From the 10K / annual statement of Kimia Farma Persero, it seems that company is thinking out the frontier risks that can impact Biotechnology & 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.

Slow to strategic competitive environment developments

– As Kimia Farma Persero is one of the leading players in the Biotechnology & Drugs industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Biotechnology & Drugs industry in last five years.

Need for greater diversity

– Kimia Farma Persero 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 decision making process

– As mentioned earlier in the report, Kimia Farma Persero has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Biotechnology & Drugs industry over the last five years. Kimia Farma Persero 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 Kimia Farma Persero is dominated by functional specialists. It is not different from other players in the Biotechnology & Drugs industry, but Kimia Farma Persero needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Kimia Farma Persero to focus more on services in the Biotechnology & Drugs industry rather than just following the product oriented approach.

Interest costs

– Compare to the competition, Kimia Farma Persero 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.

High dependence on existing supply chain

– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Kimia Farma Persero supply chain. Even after few cautionary changes, Kimia Farma Persero is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Kimia Farma Persero vulnerable to further global disruptions in South East Asia.

High operating costs

– Compare to the competitors, Kimia Farma Persero has high operating costs in the Biotechnology & Drugs industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Kimia Farma Persero lucrative customers.

Lack of clear differentiation of Kimia Farma Persero products

– To increase the profitability and margins on the products, Kimia Farma Persero needs to provide more differentiated products than what it is currently offering in the marketplace.

Employees’ less understanding of Kimia Farma Persero strategy

– From the outside it seems that the employees of Kimia Farma Persero 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.

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Kimia Farma Persero Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Kimia Farma Persero are -

Developing new processes and practices

– Kimia Farma Persero can develop new processes and procedures in Biotechnology & 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Kimia Farma Persero in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Biotechnology & Drugs industry, and it will provide faster access to the consumers.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Biotechnology & Drugs industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Kimia Farma Persero 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. Kimia Farma Persero 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.

Buying journey improvements

– Kimia Farma Persero can improve the customer journey of consumers in the Biotechnology & 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Kimia Farma Persero 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.

Leveraging digital technologies

– Kimia Farma Persero 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.

Better consumer reach

– The expansion of the 5G network will help Kimia Farma Persero to increase its market reach. Kimia Farma Persero 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.

Creating value in data economy

– The success of analytics program of Kimia Farma Persero has opened avenues for new revenue streams for the organization in Biotechnology & Drugs industry. This can help Kimia Farma Persero to build a more holistic ecosystem for Kimia Farma Persero products in the Biotechnology & Drugs industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Using analytics as competitive advantage

– Kimia Farma Persero has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Biotechnology & Drugs sector. This continuous investment in analytics has enabled Kimia Farma Persero to build a competitive advantage using analytics. The analytics driven competitive advantage can help Kimia Farma Persero 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, Kimia Farma Persero is facing challenges because of the dominance of functional experts in the organization. Kimia Farma Persero can utilize new technology in the field of Biotechnology & Drugs industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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. Kimia Farma Persero can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Kimia Farma Persero can use these opportunities to build new business models that can help the communities that Kimia Farma Persero operates in. Secondly it can use opportunities from government spending in Biotechnology & Drugs sector.

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 Kimia Farma Persero 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.

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Threats Kimia Farma Persero External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Kimia Farma Persero are -

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.

Stagnating economy with rate increase

– Kimia Farma Persero 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 Biotechnology & Drugs industry.

Regulatory challenges

– Kimia Farma Persero 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 Biotechnology & Drugs industry regulations.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Kimia Farma Persero in Biotechnology & Drugs industry. The Biotechnology & 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.

High dependence on third party suppliers

– Kimia Farma Persero 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.

Consumer confidence and its impact on Kimia Farma Persero 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 Biotechnology & Drugs industry and other sectors.

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. Kimia Farma Persero needs to understand the core reasons impacting the Biotechnology & Drugs industry. This will help it in building a better workplace.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Kimia Farma Persero may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Biotechnology & Drugs sector.

Technology acceleration in Forth Industrial Revolution

– Kimia Farma Persero has witnessed rapid integration of technology during Covid-19 in the Biotechnology & Drugs industry. As one of the leading players in the industry, Kimia Farma Persero needs to keep up with the evolution of technology in the Biotechnology & 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.

Easy access to finance

– Easy access to finance in Biotechnology & Drugs industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Kimia Farma Persero can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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. Kimia Farma Persero 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.

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 Kimia Farma Persero.

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.

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Weighted SWOT Analysis of Kimia Farma Persero Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Kimia Farma Persero 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 Kimia Farma Persero 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 Kimia Farma Persero 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 Kimia Farma Persero 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 Kimia Farma Persero needs to make to build a sustainable competitive advantage.

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