Novartis (0QLR) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Novartis (United Kingdom)

Based on various researches at Oak Spring University , Novartis is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, increasing energy prices, supply chains are disrupted by pandemic , there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, there is increasing trade war between United States & China, increasing transportation and logistics costs, wage bills are increasing, increasing commodity prices, etc

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Introduction to SWOT Analysis of Novartis

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

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

The strengths of Novartis are -

High brand equity

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

Effective Research and Development (R&D)

– Novartis has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Novartis 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.

Cross disciplinary teams

– Horizontal connected teams at the Novartis 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 recruit top talent

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

Low bargaining power of suppliers

– Suppliers of Novartis in the Healthcare sector have low bargaining power. Novartis has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Novartis to manage not only supply disruptions but also source products at highly competitive prices.

Strong track record of project management in the Major Drugs industry

– Novartis is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Operational resilience

– The operational resilience strategy of Novartis comprises – understanding the underlying the factors in the Major Drugs 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.

Innovation driven organization

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

Learning organization

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

Successful track record of launching new products

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

Digital Transformation in Major Drugs industry

- digital transformation varies from industry to industry. For Novartis digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Novartis 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.

Highly skilled collaborators

– Novartis 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 Novartis have helped the firm to develop new products and bring them quickly to the marketplace.

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

The weaknesses of Novartis are -

Increasing silos among functional specialists

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

Workers concerns about automation

– As automation is fast increasing in the Major Drugs industry, Novartis 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.

Interest costs

– Compare to the competition, Novartis 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.

Capital Spending Reduction

– Even during the low interest decade, Novartis 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.

Products dominated business model

– Even though Novartis 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. Novartis should strive to include more intangible value offerings along with its core products and services.

Employees’ less understanding of Novartis strategy

– From the outside it seems that the employees of Novartis 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, Novartis 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. Novartis 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.

Compensation and incentives

– The revenue per employee of Novartis is just above the Major Drugs industry average. It 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.

Aligning sales with marketing

– From the outside it seems that Novartis 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 Novartis can leverage the sales team experience to cultivate customer relationships as Novartis is planning to shift buying processes online.

Skills based hiring in Major Drugs industry

– The stress on hiring functional specialists at Novartis 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 Novartis products

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

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

The opportunities of Novartis are -

Buying journey improvements

– Novartis 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Novartis 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 Novartis to hire the very best people irrespective of their geographical location.

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 Novartis 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.

Learning at scale

– Online learning technologies has now opened space for Novartis 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.

Building a culture of innovation

– managers at Novartis 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.

Developing new processes and practices

– Novartis 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.

Increase in government spending

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

Low interest rates

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

Better consumer reach

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

Leveraging digital technologies

– Novartis 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.

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 Novartis in the Major Drugs industry. Now Novartis can target international markets with far fewer capital restrictions requirements than the existing system.

Creating value in data economy

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

Manufacturing automation

– Novartis 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.

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

The threats of Novartis are -

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. Novartis needs to understand the core reasons impacting the Major 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, Novartis 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.

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 to Major Drugs industry are lowering. It can presents Novartis with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Major Drugs sector.

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. Novartis 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 Novartis in the Major Drugs sector and impact the bottomline of the organization.

High dependence on third party suppliers

– Novartis 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.

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. Novartis can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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 Novartis.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Novartis 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.

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.

Regulatory challenges

– Novartis 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.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Novartis 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 Novartis prominent markets.

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Weighted SWOT Analysis of Novartis Template, Example

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

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