McKesson Europe (0OPB) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for McKesson Europe (United Kingdom)

Based on various researches at Oak Spring University , McKesson Europe is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, increasing transportation and logistics costs, increasing commodity prices, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, talent flight as more people leaving formal jobs, etc

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Introduction to SWOT Analysis of McKesson Europe

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

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

The strengths of McKesson Europe are -

Effective Research and Development (R&D)

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

Ability to lead change in Retail (Drugs)

– McKesson Europe is one of the leading players in the Retail (Drugs) industry in United Kingdom. Over the years it has not only transformed the business landscape in the Retail (Drugs) industry in United Kingdom but also across the existing markets. The ability to lead change has enabled McKesson Europe in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Learning organization

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

Successful track record of launching new products

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

Diverse revenue streams

– McKesson Europe is present in almost all the verticals within the Retail (Drugs) industry. This has provided McKesson Europe 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.

Organizational Resilience of McKesson Europe

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

Innovation driven organization

– McKesson Europe is one of the most innovative firm in Retail (Drugs) sector.

High switching costs

– The high switching costs that McKesson Europe 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.

Operational resilience

– The operational resilience strategy of McKesson Europe comprises – understanding the underlying the factors in the Retail (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.

Analytics focus

– McKesson Europe 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 Retail (Drugs) industry. The technology infrastructure of United Kingdom 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 Retail (Drugs) industry

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

Cross disciplinary teams

– Horizontal connected teams at the McKesson Europe 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.

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

The weaknesses of McKesson Europe are -

Workers concerns about automation

– As automation is fast increasing in the Retail (Drugs) industry, McKesson Europe 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 Retail (Drugs) industry

– because of the regulatory requirements in United Kingdom, McKesson Europe 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 Retail (Drugs) industry.

Slow decision making process

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

Products dominated business model

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

Lack of clear differentiation of McKesson Europe products

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

Interest costs

– Compare to the competition, McKesson Europe 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.

Ability to respond to the competition

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

Slow to harness new channels of communication

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

Compensation and incentives

– The revenue per employee of McKesson Europe is just above the Retail (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.

High dependence on McKesson Europe ‘s star products

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

Skills based hiring in Retail (Drugs) industry

– The stress on hiring functional specialists at McKesson Europe 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.

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

The opportunities of McKesson Europe are -

Remote work and new talent hiring opportunities

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

Low interest rates

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

Reforming the budgeting process

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

Learning at scale

– Online learning technologies has now opened space for McKesson Europe 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.

Better consumer reach

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

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 McKesson Europe 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.

Loyalty marketing

– McKesson Europe 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Retail (Drugs) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. McKesson Europe 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. McKesson Europe 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.

Developing new processes and practices

– McKesson Europe can develop new processes and procedures in Retail (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.

Building a culture of innovation

– managers at McKesson Europe 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 Retail (Drugs) industry.

Buying journey improvements

– McKesson Europe can improve the customer journey of consumers in the Retail (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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for McKesson Europe in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Drugs) industry, and it will provide faster access to the consumers.

Redefining models of collaboration and team work

– As explained in the weaknesses section, McKesson Europe is facing challenges because of the dominance of functional experts in the organization. McKesson Europe can utilize new technology in the field of Retail (Drugs) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

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

The threats of McKesson Europe are -

Barriers of entry lowering

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

Learning curve for new practices

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

Environmental challenges

– McKesson Europe 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. McKesson Europe can take advantage of this fund but it will also bring new competitors in the Retail (Drugs) industry.

Shortening product life cycle

– it is one of the major threat that McKesson Europe is facing in Retail (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 McKesson 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 McKesson Europe in the Retail (Drugs) sector and impact the bottomline of the organization.

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 McKesson Europe business can come under increasing regulations regarding data privacy, data security, etc.

Stagnating economy with rate increase

– McKesson Europe 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 Retail (Drugs) industry.

Increasing wage structure of McKesson Europe

– 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 McKesson Europe.

Technology acceleration in Forth Industrial Revolution

– McKesson Europe has witnessed rapid integration of technology during Covid-19 in the Retail (Drugs) industry. As one of the leading players in the industry, McKesson Europe needs to keep up with the evolution of technology in the Retail (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 McKesson Europe 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 Retail (Drugs) industry and other sectors.

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Weighted SWOT Analysis of McKesson Europe Template, Example

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

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