McKesson Europe (CAKFF) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Drugs)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for McKesson Europe (United States)
Based on various researches at Oak Spring University , McKesson Europe is operating in a macro-environment that has been destablized by – technology disruption, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings, there is backlash against globalization, talent flight as more people leaving formal jobs, there is increasing trade war between United States & China,
geopolitical disruptions, increasing transportation and logistics costs, etc
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.
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 States
4. Making a Retail (Drugs) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of McKesson Europe
Strengths of McKesson Europe | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of McKesson Europe are -
High brand equity
– McKesson Europe has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled McKesson Europe to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Retail (Drugs)
– McKesson Europe is one of the leading players in the Retail (Drugs) industry in United States. Over the years it has not only transformed the business landscape in the Retail (Drugs) industry in United States 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.
Strong track record of project management in the Retail (Drugs) industry
– McKesson Europe is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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 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.
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.
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.
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.
Digital Transformation in Retail (Drugs) industry
- digital transformation varies from industry to industry. For McKesson Europe digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. McKesson Europe 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.
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.
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.
Training and development
– McKesson Europe has one of the best training and development program in Services 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.
Highly skilled collaborators
– McKesson Europe has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Drugs) industry. Secondly the value chain collaborators of McKesson Europe have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of McKesson Europe | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of McKesson Europe are -
Slow to strategic competitive environment developments
– As McKesson Europe is one of the leading players in the Retail (Drugs) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Drugs) industry in last five years.
Need for greater diversity
– McKesson Europe 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.
High bargaining power of channel partners in Retail (Drugs) industry
– because of the regulatory requirements in United States, 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.
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.
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.
Increasing silos among functional specialists
– The organizational structure of McKesson Europe is dominated by functional specialists. It is not different from other players in the Retail (Drugs) industry, but McKesson Europe needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help McKesson Europe to focus more on services in the Retail (Drugs) industry rather than just following the product oriented approach.
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.
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.
No frontier risks strategy
– From the 10K / annual statement of McKesson Europe, it seems that company is thinking out the frontier risks that can impact Retail (Drugs) 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.
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.
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.
McKesson Europe Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of McKesson Europe are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, McKesson Europe 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 McKesson Europe to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, McKesson Europe can use these opportunities to build new business models that can help the communities that McKesson Europe operates in. Secondly it can use opportunities from government spending in Retail (Drugs) sector.
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.
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.
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.
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.
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.
Manufacturing automation
– McKesson Europe can use the latest technology developments to improve its manufacturing and designing process in Retail (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.
Creating value in data economy
– The success of analytics program of McKesson Europe has opened avenues for new revenue streams for the organization in Retail (Drugs) industry. This can help McKesson Europe to build a more holistic ecosystem for McKesson Europe products in the Retail (Drugs) industry by providing – data insight services, data privacy related products, data based consulting services, 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.
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.
Leveraging digital technologies
– McKesson Europe 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.
Use of Bitcoin and other crypto currencies for transactions in Retail (Drugs) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for McKesson Europe in the Retail (Drugs) industry. Now McKesson Europe can target international markets with far fewer capital restrictions requirements than the existing system.
Threats McKesson Europe External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of McKesson Europe are -
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 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.
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.
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.
Easy access to finance
– Easy access to finance in Retail (Drugs) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. McKesson Europe can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, McKesson Europe 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 McKesson Europe prominent markets.
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.
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.
Regulatory challenges
– McKesson Europe 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 Retail (Drugs) industry regulations.
High dependence on third party suppliers
– McKesson Europe 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.
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.
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.
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. McKesson Europe needs to understand the core reasons impacting the Retail (Drugs) industry. This will help it in building a better workplace.
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.
