Merck&Co (0QAH) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Merck&Co (United Kingdom)

Based on various researches at Oak Spring University , Merck&Co 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%, increasing commodity prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic , wage bills are increasing, increasing transportation and logistics costs, talent flight as more people leaving formal jobs, technology disruption, challanges to central banks by blockchain based private currencies, etc

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Introduction to SWOT Analysis of Merck&Co

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

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

The strengths of Merck&Co are -

High switching costs

– The high switching costs that Merck&Co 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.

Training and development

– Merck&Co 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.

Innovation driven organization

– Merck&Co is one of the most innovative firm in Biotechnology & Drugs sector.

Operational resilience

– The operational resilience strategy of Merck&Co comprises – understanding the underlying the factors in the Biotechnology & 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.

Superior customer experience

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

Successful track record of launching new products

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

Cross disciplinary teams

– Horizontal connected teams at the Merck&Co 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.

Low bargaining power of suppliers

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

Learning organization

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

Organizational Resilience of Merck&Co

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

Digital Transformation in Biotechnology & Drugs industry

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

– Merck&Co has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Biotechnology & Drugs industry. Secondly the value chain collaborators of Merck&Co have helped the firm to develop new products and bring them quickly to the marketplace.

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

The weaknesses of Merck&Co are -

High bargaining power of channel partners in Biotechnology & Drugs industry

– because of the regulatory requirements in United Kingdom, Merck&Co 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 Biotechnology & Drugs industry.

Products dominated business model

– Even though Merck&Co has some of the most successful models in the Biotechnology & Drugs industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Merck&Co should strive to include more intangible value offerings along with its core products and services.

Employees’ less understanding of Merck&Co strategy

– From the outside it seems that the employees of Merck&Co 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.

High operating costs

– Compare to the competitors, Merck&Co 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 Merck&Co lucrative customers.

High dependence on Merck&Co ‘s star products

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

Workers concerns about automation

– As automation is fast increasing in the Biotechnology & Drugs industry, Merck&Co 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.

Capital Spending Reduction

– Even during the low interest decade, Merck&Co 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 Biotechnology & Drugs industry using digital technology.

Increasing silos among functional specialists

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

Slow to harness new channels of communication

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

Low market penetration in new markets

– Outside its home market of United Kingdom, Merck&Co needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Slow decision making process

– As mentioned earlier in the report, Merck&Co 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. Merck&Co 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.

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

The opportunities of Merck&Co are -

Reforming the budgeting process

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

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&Co can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Leveraging digital technologies

– Merck&Co 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 Merck&Co to increase its market reach. Merck&Co 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.

Manufacturing automation

– Merck&Co can use the latest technology developments to improve its manufacturing and designing process in Biotechnology & 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.

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. Merck&Co 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&Co 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.

Building a culture of innovation

– managers at Merck&Co 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 Biotechnology & Drugs industry.

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&Co can use these opportunities to build new business models that can help the communities that Merck&Co operates in. Secondly it can use opportunities from government spending in Biotechnology & Drugs sector.

Use of Bitcoin and other crypto currencies for transactions in Biotechnology & Drugs industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Merck&Co in the Biotechnology & Drugs industry. Now Merck&Co 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 Merck&Co has opened avenues for new revenue streams for the organization in Biotechnology & Drugs industry. This can help Merck&Co to build a more holistic ecosystem for Merck&Co products in the Biotechnology & Drugs industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Low interest rates

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

Buying journey improvements

– Merck&Co 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.

Using analytics as competitive advantage

– Merck&Co 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 Merck&Co to build a competitive advantage using analytics. The analytics driven competitive advantage can help Merck&Co to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

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

The threats of Merck&Co are -

Shortening product life cycle

– it is one of the major threat that Merck&Co is facing in Biotechnology & Drugs sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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&Co.

Increasing wage structure of Merck&Co

– 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&Co.

Technology acceleration in Forth Industrial Revolution

– Merck&Co has witnessed rapid integration of technology during Covid-19 in the Biotechnology & Drugs industry. As one of the leading players in the industry, Merck&Co 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.

Environmental challenges

– Merck&Co 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&Co can take advantage of this fund but it will also bring new competitors in the Biotechnology & Drugs industry.

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&Co 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.

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

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.

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&Co in the Biotechnology & Drugs sector and impact the bottomline of the organization.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Merck&Co 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.

Consumer confidence and its impact on Merck&Co 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.

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.

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&Co business can come under increasing regulations regarding data privacy, data security, etc.

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Weighted SWOT Analysis of Merck&Co Template, Example

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

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