Merck (MRCG) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Merck (Italy)

Based on various researches at Oak Spring University , Merck is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, 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 Italy
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 -

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.

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.

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 Italy 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 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.

Effective Research and Development (R&D)

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

Successful track record of launching new products

– Merck has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Merck 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.

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.

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.

Ability to recruit top talent

– Merck is one of the leading players in the Major Drugs industry in Italy. It is in a position to attract the best talent available in Italy. The firm has a robust talent identification program that helps in identifying the brightest.

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.

Ability to lead change in Major Drugs

– Merck is one of the leading players in the Major Drugs industry in Italy. Over the years it has not only transformed the business landscape in the Major Drugs industry in Italy 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 -

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Merck is slow explore the new channels of communication. These new channels of communication can help Merck to provide better information regarding Major Drugs products and services. It can also build an online community to further reach out to potential customers.

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.

High bargaining power of channel partners in Major Drugs industry

– because of the regulatory requirements in Italy, 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.

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.

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.

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.

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.

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 Merck supply chain. Even after few cautionary changes, Merck is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Merck vulnerable to further global disruptions in South East Asia.

Slow decision making process

– As mentioned earlier in the report, Merck has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Major Drugs industry over the last five years. Merck 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.

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.

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.

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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 -

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.

Using analytics as competitive advantage

– Merck has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Major Drugs sector. This continuous investment in analytics has enabled Merck to build a competitive advantage using analytics. The analytics driven competitive advantage can help Merck to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

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.

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.

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.

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.

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.

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.

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 Merck 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.

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.

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.

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.

Building a culture of innovation

– managers at Merck can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Major Drugs industry.

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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 -

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.

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.

Learning curve for new practices

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

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.

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.

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.

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.

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.

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.

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 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.

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.

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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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