Galapagos (GLPG) SWOT Analysis / TOWS Matrix / MBA Resources
Biotechnology & Drugs
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Galapagos (United States)
Based on various researches at Oak Spring University , Galapagos is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, technology disruption,
there is backlash against globalization, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Galapagos can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Galapagos, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Galapagos 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 Galapagos can be done for the following purposes –
1. Strategic planning of Galapagos
2. Improving business portfolio management of Galapagos
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 Galapagos
Strengths of Galapagos | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Galapagos are -
Diverse revenue streams
– Galapagos is present in almost all the verticals within the Biotechnology & Drugs industry. This has provided Galapagos 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.
Ability to lead change in Biotechnology & Drugs
– Galapagos 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 Galapagos in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Successful track record of launching new products
– Galapagos has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Galapagos 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.
High brand equity
– Galapagos has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Galapagos to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Galapagos in the Healthcare sector have low bargaining power. Galapagos has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Galapagos 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 Galapagos digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Galapagos 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.
Operational resilience
– The operational resilience strategy of Galapagos 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 Galapagos 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
– Galapagos 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.
Learning organization
- Galapagos 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 Galapagos is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Galapagos emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Galapagos 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.
Innovation driven organization
– Galapagos is one of the most innovative firm in Biotechnology & Drugs sector.
Weaknesses of Galapagos | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Galapagos are -
High operating costs
– Compare to the competitors, Galapagos 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 Galapagos lucrative customers.
Lack of clear differentiation of Galapagos products
– To increase the profitability and margins on the products, Galapagos needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee of Galapagos 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.
Low market penetration in new markets
– Outside its home market of United States, Galapagos needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Galapagos is slow explore the new channels of communication. These new channels of communication can help Galapagos to provide better information regarding Biotechnology & Drugs products and services. It can also build an online community to further reach out to potential customers.
High cash cycle compare to competitors
Galapagos 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 dependence on Galapagos ‘s star products
– The top 2 products and services of Galapagos still accounts for major business revenue. This dependence on star products in Biotechnology & Drugs industry has resulted into insufficient focus on developing new products, even though Galapagos has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As Galapagos 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.
Capital Spending Reduction
– Even during the low interest decade, Galapagos 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.
Employees’ less understanding of Galapagos strategy
– From the outside it seems that the employees of Galapagos 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.
Need for greater diversity
– Galapagos 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.
Galapagos Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Galapagos are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Galapagos 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 Galapagos to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at Galapagos 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.
Better consumer reach
– The expansion of the 5G network will help Galapagos to increase its market reach. Galapagos 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Galapagos can use these opportunities to build new business models that can help the communities that Galapagos operates in. Secondly it can use opportunities from government spending in Biotechnology & Drugs sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Galapagos can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Galapagos 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Galapagos 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.
Learning at scale
– Online learning technologies has now opened space for Galapagos 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.
Leveraging digital technologies
– Galapagos 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.
Using analytics as competitive advantage
– Galapagos has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Biotechnology & Drugs sector. This continuous investment in analytics has enabled Galapagos to build a competitive advantage using analytics. The analytics driven competitive advantage can help Galapagos to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Loyalty marketing
– Galapagos 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.
Manufacturing automation
– Galapagos 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Galapagos 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 Galapagos 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 Galapagos External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Galapagos are -
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 Galapagos.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Galapagos 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Galapagos 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 Galapagos prominent markets.
Increasing wage structure of Galapagos
– 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 Galapagos.
Shortening product life cycle
– it is one of the major threat that Galapagos is facing in Biotechnology & Drugs sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Galapagos needs to understand the core reasons impacting the Biotechnology & Drugs industry. This will help it in building a better workplace.
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. Galapagos 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.
Consumer confidence and its impact on Galapagos 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.
Technology acceleration in Forth Industrial Revolution
– Galapagos has witnessed rapid integration of technology during Covid-19 in the Biotechnology & Drugs industry. As one of the leading players in the industry, Galapagos 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.
Environmental challenges
– Galapagos 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. Galapagos can take advantage of this fund but it will also bring new competitors in the Biotechnology & Drugs 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.
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. Galapagos can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Galapagos 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.
Weighted SWOT Analysis of Galapagos Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Galapagos 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 Galapagos 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 Galapagos 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 Galapagos 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 Galapagos needs to make to build a sustainable competitive advantage.