SWOT Analysis / TOWS Matrix for Arena Pharma (United States)
Based on various researches at Oak Spring University , Arena Pharma is operating in a macro-environment that has been destablized by – there is backlash against globalization, wage bills are increasing, increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings,
talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Arena Pharma can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Arena Pharma, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Arena Pharma 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 Arena Pharma can be done for the following purposes –
1. Strategic planning of Arena Pharma
2. Improving business portfolio management of Arena Pharma
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 Arena Pharma
Strengths of Arena Pharma | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Arena Pharma are -
Highly skilled collaborators
– Arena Pharma 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 Arena Pharma have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Biotechnology & Drugs
– Arena Pharma is one of the leading players in the Biotechnology & Drugs industry in United States. Over the years it has not only transformed the business landscape in the Biotechnology & Drugs industry in United States but also across the existing markets. The ability to lead change has enabled Arena Pharma in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Arena Pharma has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Arena Pharma to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Arena Pharma 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.
Sustainable margins compare to other players in Biotechnology & Drugs industry
– Arena Pharma has clearly differentiated products in the market place. This has enabled Arena Pharma to fetch slight price premium compare to the competitors in the Biotechnology & Drugs industry. The sustainable margins have also helped Arena Pharma to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Arena Pharma in the Healthcare sector have low bargaining power. Arena Pharma has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Arena Pharma to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Biotechnology & Drugs industry
- digital transformation varies from industry to industry. For Arena Pharma digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Arena Pharma 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.
Diverse revenue streams
– Arena Pharma is present in almost all the verticals within the Biotechnology & Drugs industry. This has provided Arena Pharma 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.
Cross disciplinary teams
– Horizontal connected teams at the Arena Pharma 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.
Training and development
– Arena Pharma 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.
High switching costs
– The high switching costs that Arena Pharma 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.
Superior customer experience
– The customer experience strategy of Arena Pharma in Biotechnology & Drugs industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Arena Pharma | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Arena Pharma are -
Ability to respond to the competition
– As the decision making is very deliberative at Arena Pharma, in the dynamic environment of Biotechnology & Drugs industry it has struggled to respond to the nimble upstart competition. Arena Pharma has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of United States, Arena Pharma needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow decision making process
– As mentioned earlier in the report, Arena Pharma 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. Arena Pharma 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.
Aligning sales with marketing
– From the outside it seems that Arena Pharma needs to have more collaboration between its sales team and marketing team. Sales professionals in the Biotechnology & Drugs industry have deep experience in developing customer relationships. Marketing department at Arena Pharma can leverage the sales team experience to cultivate customer relationships as Arena Pharma is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of Arena Pharma is dominated by functional specialists. It is not different from other players in the Biotechnology & Drugs industry, but Arena Pharma needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Arena Pharma to focus more on services in the Biotechnology & Drugs industry rather than just following the product oriented approach.
High cash cycle compare to competitors
Arena Pharma 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, Arena Pharma 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 Arena Pharma lucrative customers.
Skills based hiring in Biotechnology & Drugs industry
– The stress on hiring functional specialists at Arena Pharma 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.
Capital Spending Reduction
– Even during the low interest decade, Arena Pharma 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.
Workers concerns about automation
– As automation is fast increasing in the Biotechnology & Drugs industry, Arena Pharma 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 Arena Pharma products
– To increase the profitability and margins on the products, Arena Pharma needs to provide more differentiated products than what it is currently offering in the marketplace.
Arena Pharma Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Arena Pharma are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Arena Pharma can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Arena Pharma 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Arena Pharma can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Better consumer reach
– The expansion of the 5G network will help Arena Pharma to increase its market reach. Arena Pharma 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Biotechnology & Drugs industry, but it has also influenced the consumer preferences. Arena Pharma can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Arena Pharma 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 Arena Pharma to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Arena Pharma has opened avenues for new revenue streams for the organization in Biotechnology & Drugs industry. This can help Arena Pharma to build a more holistic ecosystem for Arena Pharma products in the Biotechnology & Drugs industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Arena Pharma 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.
Leveraging digital technologies
– Arena Pharma 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.
Building a culture of innovation
– managers at Arena Pharma 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.
Learning at scale
– Online learning technologies has now opened space for Arena Pharma 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.
Buying journey improvements
– Arena Pharma 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.
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 Arena Pharma 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.
Threats Arena Pharma External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Arena Pharma are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Arena Pharma 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Biotechnology & Drugs industry are lowering. It can presents Arena Pharma with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Biotechnology & Drugs sector.
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 Arena Pharma business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Arena Pharma
– 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 Arena Pharma.
Consumer confidence and its impact on Arena Pharma 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.
Regulatory challenges
– Arena Pharma 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.
Stagnating economy with rate increase
– Arena Pharma 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.
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. Arena Pharma can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Arena Pharma in the Biotechnology & Drugs sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Arena Pharma has witnessed rapid integration of technology during Covid-19 in the Biotechnology & Drugs industry. As one of the leading players in the industry, Arena Pharma 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.
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. Arena Pharma needs to understand the core reasons impacting the Biotechnology & Drugs industry. This will help it in building a better workplace.
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.
High dependence on third party suppliers
– Arena Pharma 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.
Weighted SWOT Analysis of Arena Pharma Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Arena Pharma 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 Arena Pharma 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 Arena Pharma 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 Arena Pharma 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 Arena Pharma needs to make to build a sustainable competitive advantage.