Merck&Co (MRK) SWOT Analysis / TOWS Matrix / MBA Resources
Biotechnology & Drugs
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Merck&Co (United States)
Based on various researches at Oak Spring University , Merck&Co is operating in a macro-environment that has been destablized by – competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy,
wage bills are increasing, talent flight as more people leaving formal jobs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Merck&Co can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Merck&Co, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Merck&Co 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 Merck&Co can be done for the following purposes –
1. Strategic planning of Merck&Co
2. Improving business portfolio management of Merck&Co
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 Merck&Co
Strengths of Merck&Co | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Merck&Co are -
Strong track record of project management in the Biotechnology & Drugs industry
– Merck&Co is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Merck&Co 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.
Organizational Resilience of Merck&Co
– The covid-19 pandemic has put organizational resilience at the centre of everthing Merck&Co does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Merck&Co 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 Merck&Co have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Biotechnology & Drugs
– Merck&Co 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 Merck&Co in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Merck&Co 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.
High switching costs
– The high switching costs that Merck&Co 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.
Low bargaining power of suppliers
– Suppliers of Merck&Co in the Healthcare sector have low bargaining power. Merck&Co has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Merck&Co to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Merck&Co has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Merck&Co to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Analytics focus
– Merck&Co 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.
Effective Research and Development (R&D)
– Merck&Co has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Merck&Co 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.
Diverse revenue streams
– Merck&Co is present in almost all the verticals within the Biotechnology & Drugs industry. This has provided Merck&Co 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.
Weaknesses of Merck&Co | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Merck&Co are -
High cash cycle compare to competitors
Merck&Co 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 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 Merck&Co supply chain. Even after few cautionary changes, Merck&Co is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Merck&Co vulnerable to further global disruptions in South East Asia.
Low market penetration in new markets
– Outside its home market of United States, Merck&Co needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Merck&Co products
– To increase the profitability and margins on the products, Merck&Co needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners in Biotechnology & Drugs industry
– because of the regulatory requirements in United States, Merck&Co 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.
Slow to strategic competitive environment developments
– As Merck&Co 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.
High dependence on Merck&Co ‘s star products
– The top 2 products and services of Merck&Co 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 Merck&Co has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, Merck&Co 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 Merck&Co lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, Merck&Co 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.
Slow decision making process
– As mentioned earlier in the report, Merck&Co 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. Merck&Co 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.
No frontier risks strategy
– From the 10K / annual statement of Merck&Co, 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.
Merck&Co Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Merck&Co are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Merck&Co can use these opportunities to build new business models that can help the communities that Merck&Co operates in. Secondly it can use opportunities from government spending in Biotechnology & Drugs sector.
Manufacturing automation
– Merck&Co 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.
Creating value in data economy
– The success of analytics program of Merck&Co has opened avenues for new revenue streams for the organization in Biotechnology & Drugs industry. This can help Merck&Co to build a more holistic ecosystem for Merck&Co 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 Merck&Co 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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Merck&Co can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Merck&Co 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 Merck&Co to build a competitive advantage using analytics. The analytics driven competitive advantage can help Merck&Co to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Merck&Co 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 Merck&Co to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Loyalty marketing
– Merck&Co 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.
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. Merck&Co can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Developing new processes and practices
– Merck&Co 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.
Leveraging digital technologies
– Merck&Co 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Merck&Co 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 Merck&Co to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help Merck&Co to increase its market reach. Merck&Co 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.
Threats Merck&Co External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Merck&Co are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Merck&Co 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.
High dependence on third party suppliers
– Merck&Co 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.
Stagnating economy with rate increase
– Merck&Co 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.
Increasing wage structure of Merck&Co
– 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 Merck&Co.
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. Merck&Co 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.
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 Merck&Co in the Biotechnology & Drugs sector and impact the bottomline of the organization.
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 Merck&Co business can come under increasing regulations regarding data privacy, data security, etc.
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. Merck&Co can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Merck&Co 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.
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. Merck&Co needs to understand the core reasons impacting the Biotechnology & Drugs industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Merck&Co has witnessed rapid integration of technology during Covid-19 in the Biotechnology & Drugs industry. As one of the leading players in the industry, Merck&Co 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Merck&Co 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 Merck&Co prominent markets.
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.
Weighted SWOT Analysis of Merck&Co Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Merck&Co 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 Merck&Co 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 Merck&Co 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 Merck&Co 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 Merck&Co needs to make to build a sustainable competitive advantage.