Based on various researches at Oak Spring University , Merlin Entertainments PLC is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, increasing commodity prices, central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings, there is backlash against globalization,
technology disruption, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of Merlin Entertainments PLC
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Merlin Entertainments PLC can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Merlin Entertainments PLC, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Merlin Entertainments PLC 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.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Merlin Entertainments PLC can be done for the following purposes –
1. Strategic planning of Merlin Entertainments PLC
2. Improving business portfolio management of Merlin Entertainments PLC
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Recreational Activities sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Merlin Entertainments PLC
Strengths of Merlin Entertainments PLC | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Merlin Entertainments PLC are -
Learning organization
- Merlin Entertainments PLC 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 Merlin Entertainments PLC is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Merlin Entertainments PLC emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Merlin Entertainments PLC has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Recreational Activities industry. Secondly the value chain collaborators of Merlin Entertainments PLC have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of Merlin Entertainments PLC in Recreational Activities industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Merlin Entertainments PLC 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.
Ability to recruit top talent
– Merlin Entertainments PLC is one of the leading players in the Recreational Activities 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.
Sustainable margins compare to other players in Recreational Activities industry
– Merlin Entertainments PLC has clearly differentiated products in the market place. This has enabled Merlin Entertainments PLC to fetch slight price premium compare to the competitors in the Recreational Activities industry. The sustainable margins have also helped Merlin Entertainments PLC to invest into research and development (R&D) and innovation.
Strong track record of project management in the Recreational Activities industry
– Merlin Entertainments PLC is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Merlin Entertainments PLC is one of the most innovative firm in Recreational Activities sector.
High brand equity
– Merlin Entertainments PLC has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Merlin Entertainments PLC to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Recreational Activities
– Merlin Entertainments PLC is one of the leading players in the Recreational Activities industry in United Kingdom. Over the years it has not only transformed the business landscape in the Recreational Activities industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Merlin Entertainments PLC in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Recreational Activities industry
- digital transformation varies from industry to industry. For Merlin Entertainments PLC digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Merlin Entertainments PLC 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.
Cross disciplinary teams
– Horizontal connected teams at the Merlin Entertainments PLC 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.
Weaknesses of Merlin Entertainments PLC | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Merlin Entertainments PLC are -
Compensation and incentives
– The revenue per employee of Merlin Entertainments PLC is just above the Recreational Activities 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.
Need for greater diversity
– Merlin Entertainments PLC 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.
Interest costs
– Compare to the competition, Merlin Entertainments PLC 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 Merlin Entertainments PLC ‘s star products
– The top 2 products and services of Merlin Entertainments PLC still accounts for major business revenue. This dependence on star products in Recreational Activities industry has resulted into insufficient focus on developing new products, even though Merlin Entertainments PLC has relatively successful track record of launching new products.
Slow decision making process
– As mentioned earlier in the report, Merlin Entertainments PLC has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Recreational Activities industry over the last five years. Merlin Entertainments PLC 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.
Lack of clear differentiation of Merlin Entertainments PLC products
– To increase the profitability and margins on the products, Merlin Entertainments PLC needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– From the 10K / annual statement of Merlin Entertainments PLC, it seems that company is thinking out the frontier risks that can impact Recreational Activities 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.
Employees’ less understanding of Merlin Entertainments PLC strategy
– From the outside it seems that the employees of Merlin Entertainments PLC 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.
Products dominated business model
– Even though Merlin Entertainments PLC has some of the most successful models in the Recreational Activities industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Merlin Entertainments PLC should strive to include more intangible value offerings along with its core products and services.
Low market penetration in new markets
– Outside its home market of United Kingdom, Merlin Entertainments PLC needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Skills based hiring in Recreational Activities industry
– The stress on hiring functional specialists at Merlin Entertainments PLC 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.
Merlin Entertainments PLC Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Merlin Entertainments PLC are -
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 Merlin Entertainments PLC 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.
Manufacturing automation
– Merlin Entertainments PLC can use the latest technology developments to improve its manufacturing and designing process in Recreational Activities 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.
Use of Bitcoin and other crypto currencies for transactions in Recreational Activities industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Merlin Entertainments PLC in the Recreational Activities industry. Now Merlin Entertainments PLC can target international markets with far fewer capital restrictions requirements than the existing system.
Learning at scale
– Online learning technologies has now opened space for Merlin Entertainments PLC 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.
Developing new processes and practices
– Merlin Entertainments PLC can develop new processes and procedures in Recreational Activities 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Merlin Entertainments PLC 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Recreational Activities industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Merlin Entertainments PLC 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. Merlin Entertainments PLC 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
– Merlin Entertainments PLC can improve the customer journey of consumers in the Recreational Activities 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Merlin Entertainments PLC can use these opportunities to build new business models that can help the communities that Merlin Entertainments PLC operates in. Secondly it can use opportunities from government spending in Recreational Activities sector.
Building a culture of innovation
– managers at Merlin Entertainments PLC 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 Recreational Activities industry.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Merlin Entertainments PLC is facing challenges because of the dominance of functional experts in the organization. Merlin Entertainments PLC can utilize new technology in the field of Recreational Activities industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Using analytics as competitive advantage
– Merlin Entertainments PLC has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Recreational Activities sector. This continuous investment in analytics has enabled Merlin Entertainments PLC to build a competitive advantage using analytics. The analytics driven competitive advantage can help Merlin Entertainments PLC to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Merlin Entertainments PLC 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 Merlin Entertainments PLC to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Merlin Entertainments PLC External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Merlin Entertainments PLC are -
Consumer confidence and its impact on Merlin Entertainments PLC 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 Recreational Activities industry and other sectors.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Merlin Entertainments PLC 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 Merlin Entertainments PLC prominent markets.
Stagnating economy with rate increase
– Merlin Entertainments PLC 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 Recreational Activities industry.
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.
Increasing wage structure of Merlin Entertainments PLC
– 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 Merlin Entertainments PLC.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Merlin Entertainments PLC may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Recreational Activities sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Merlin Entertainments PLC in Recreational Activities industry. The Recreational Activities 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.
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. Merlin Entertainments PLC 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 Merlin Entertainments PLC in the Recreational Activities sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Merlin Entertainments PLC is facing in Recreational Activities sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Merlin Entertainments PLC 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.
Regulatory challenges
– Merlin Entertainments PLC 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 Recreational Activities industry regulations.
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 Merlin Entertainments PLC.
Weighted SWOT Analysis of Merlin Entertainments PLC Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Merlin Entertainments PLC 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 Merlin Entertainments PLC 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 Merlin Entertainments PLC 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 Merlin Entertainments PLC 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 Merlin Entertainments PLC needs to make to build a sustainable competitive advantage.
