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 , there is backlash against globalization, technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, challanges to central banks by blockchain based private currencies, geopolitical disruptions, increasing energy prices,
increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, 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 -
Innovation driven organization
– Galapagos is one of the most innovative firm in Biotechnology & Drugs sector.
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.
Sustainable margins compare to other players in Biotechnology & Drugs industry
– Galapagos has clearly differentiated products in the market place. This has enabled Galapagos to fetch slight price premium compare to the competitors in the Biotechnology & Drugs industry. The sustainable margins have also helped Galapagos to invest into research and development (R&D) and innovation.
Analytics focus
– Galapagos 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.
Organizational Resilience of Galapagos
– The covid-19 pandemic has put organizational resilience at the centre of everthing Galapagos does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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.
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.
Effective Research and Development (R&D)
– Galapagos has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Galapagos 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.
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.
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.
Strong track record of project management in the Biotechnology & Drugs industry
– Galapagos is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Weaknesses of Galapagos | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Galapagos are -
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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Galapagos supply chain. Even after few cautionary changes, Galapagos is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Galapagos vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Galapagos is dominated by functional specialists. It is not different from other players in the Biotechnology & Drugs industry, but Galapagos needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Galapagos to focus more on services in the Biotechnology & Drugs industry rather than just following the product oriented approach.
No frontier risks strategy
– From the 10K / annual statement of Galapagos, it seems that company is thinking out the frontier risks that can impact Biotechnology & 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.
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.
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.
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.
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.
Ability to respond to the competition
– As the decision making is very deliberative at Galapagos, in the dynamic environment of Biotechnology & Drugs industry it has struggled to respond to the nimble upstart competition. Galapagos has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though Galapagos 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. Galapagos should strive to include more intangible value offerings along with its core products and services.
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.
Galapagos Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Galapagos are -
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.
Creating value in data economy
– The success of analytics program of Galapagos has opened avenues for new revenue streams for the organization in Biotechnology & Drugs industry. This can help Galapagos to build a more holistic ecosystem for Galapagos products in the Biotechnology & Drugs industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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.
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.
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.
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 Galapagos 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.
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.
Buying journey improvements
– Galapagos 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.
Use of Bitcoin and other crypto currencies for transactions in Biotechnology & Drugs industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Galapagos in the Biotechnology & Drugs industry. Now Galapagos 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 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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Galapagos is facing challenges because of the dominance of functional experts in the organization. Galapagos 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
– Galapagos 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.
Threats Galapagos External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Galapagos are -
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.
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 Galapagos in the Biotechnology & Drugs sector and impact the bottomline of the organization.
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.
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.
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.
Stagnating economy with rate increase
– Galapagos 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.
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.
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.
High dependence on third party suppliers
– Galapagos 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Galapagos 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.
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.
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.
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.
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.
