AmerisourceBergen (ABC) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for AmerisourceBergen (United States)

Based on various researches at Oak Spring University , AmerisourceBergen is operating in a macro-environment that has been destablized by – wage bills are increasing, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, 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 AmerisourceBergen

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

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

The strengths of AmerisourceBergen are -

Low bargaining power of suppliers

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

Learning organization

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

Highly skilled collaborators

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

Organizational Resilience of AmerisourceBergen

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

Analytics focus

– AmerisourceBergen 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 Biotechnology & Drugs industry. The technology infrastructure of United States 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.

Strong track record of project management in the Biotechnology & Drugs industry

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

Superior customer experience

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

Operational resilience

– The operational resilience strategy of AmerisourceBergen 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.

Cross disciplinary teams

– Horizontal connected teams at the AmerisourceBergen 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.

Successful track record of launching new products

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

Ability to recruit top talent

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

Effective Research and Development (R&D)

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

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

The weaknesses of AmerisourceBergen are -

High bargaining power of channel partners in Biotechnology & Drugs industry

– because of the regulatory requirements in United States, AmerisourceBergen 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.

Workers concerns about automation

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

Lack of clear differentiation of AmerisourceBergen products

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

Products dominated business model

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

High cash cycle compare to competitors

AmerisourceBergen has a high cash cycle compare to other players in the Biotechnology & Drugs industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

High operating costs

– Compare to the competitors, AmerisourceBergen 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 AmerisourceBergen lucrative customers.

Slow decision making process

– As mentioned earlier in the report, AmerisourceBergen 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. AmerisourceBergen 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.

Ability to respond to the competition

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

Employees’ less understanding of AmerisourceBergen strategy

– From the outside it seems that the employees of AmerisourceBergen 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 to strategic competitive environment developments

– As AmerisourceBergen is one of the leading players in the Biotechnology & Drugs industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Biotechnology & Drugs industry in last five years.

Compensation and incentives

– The revenue per employee of AmerisourceBergen is just above the Biotechnology & 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.

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

The opportunities of AmerisourceBergen are -

Learning at scale

– Online learning technologies has now opened space for AmerisourceBergen 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, AmerisourceBergen 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 AmerisourceBergen to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Leveraging digital technologies

– AmerisourceBergen 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.

Reforming the budgeting process

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

Creating value in data economy

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

Remote work and new talent hiring opportunities

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

Better consumer reach

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

Loyalty marketing

– AmerisourceBergen 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.

Buying journey improvements

– AmerisourceBergen 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.

Lowering marketing communication costs

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

Redefining models of collaboration and team work

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

Developing new processes and practices

– AmerisourceBergen can develop new processes and procedures in Biotechnology & 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.

Low interest rates

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

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

The threats of AmerisourceBergen are -

Regulatory challenges

– AmerisourceBergen 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 Biotechnology & Drugs industry regulations.

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

Easy access to finance

– Easy access to finance in Biotechnology & Drugs industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. AmerisourceBergen can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

High dependence on third party suppliers

– AmerisourceBergen 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.

Shortening product life cycle

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

Environmental challenges

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

Consumer confidence and its impact on AmerisourceBergen 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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for AmerisourceBergen in Biotechnology & Drugs industry. The Biotechnology & 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.

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 AmerisourceBergen.

Stagnating economy with rate increase

– AmerisourceBergen 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 Biotechnology & Drugs industry.

Barriers of entry lowering

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

Learning curve for new practices

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

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Weighted SWOT Analysis of AmerisourceBergen Template, Example

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

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