Novan (NOVN) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Novan (United States)

Based on various researches at Oak Spring University , Novan is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings, technology disruption, geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, etc

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Introduction to SWOT Analysis of Novan

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Novan can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Novan, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Novan 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Novan can be done for the following purposes –
1. Strategic planning of Novan
2. Improving business portfolio management of Novan
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 Novan

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Strengths of Novan | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Novan are -

High switching costs

– The high switching costs that Novan 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.

Organizational Resilience of Novan

– The covid-19 pandemic has put organizational resilience at the centre of everthing Novan 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 Novan 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.

High brand equity

– Novan has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Novan to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Superior customer experience

– The customer experience strategy of Novan in Biotechnology & Drugs industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Strong track record of project management in the Biotechnology & Drugs industry

– Novan is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Diverse revenue streams

– Novan is present in almost all the verticals within the Biotechnology & Drugs industry. This has provided Novan 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.

Learning organization

- Novan 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 Novan is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Novan emphasize – knowledge, initiative, and innovation.

Digital Transformation in Biotechnology & Drugs industry

- digital transformation varies from industry to industry. For Novan digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Novan 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.

Ability to lead change in Biotechnology & Drugs

– Novan 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 Novan in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Effective Research and Development (R&D)

– Novan has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Novan 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.

Ability to recruit top talent

– Novan 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.

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Weaknesses of Novan | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Novan are -

Capital Spending Reduction

– Even during the low interest decade, Novan 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, Novan 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.

Products dominated business model

– Even though Novan 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. Novan should strive to include more intangible value offerings along with its core products and services.

Need for greater diversity

– Novan 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.

Lack of clear differentiation of Novan products

– To increase the profitability and margins on the products, Novan needs to provide more differentiated products than what it is currently offering in the marketplace.

High cash cycle compare to competitors

Novan 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 Novan supply chain. Even after few cautionary changes, Novan is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Novan vulnerable to further global disruptions in South East Asia.

Low market penetration in new markets

– Outside its home market of United States, Novan needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Compensation and incentives

– The revenue per employee of Novan 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.

Slow to strategic competitive environment developments

– As Novan 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 bargaining power of channel partners in Biotechnology & Drugs industry

– because of the regulatory requirements in United States, Novan 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.

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Novan Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Novan are -

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Novan 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 Novan to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Manufacturing automation

– Novan 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.

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. Novan can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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 Novan in the Biotechnology & Drugs industry. Now Novan can target international markets with far fewer capital restrictions requirements than the existing system.

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. Novan can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

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 Novan 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

– Novan 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.

Better consumer reach

– The expansion of the 5G network will help Novan to increase its market reach. Novan 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, Novan can use these opportunities to build new business models that can help the communities that Novan operates in. Secondly it can use opportunities from government spending in Biotechnology & Drugs sector.

Leveraging digital technologies

– Novan 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Novan can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Using analytics as competitive advantage

– Novan 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 Novan to build a competitive advantage using analytics. The analytics driven competitive advantage can help Novan to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Developing new processes and practices

– Novan 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.

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Threats Novan External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Novan are -

Regulatory challenges

– Novan 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.

Increasing wage structure of Novan

– 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 Novan.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Novan 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.

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 Novan business can come under increasing regulations regarding data privacy, data security, etc.

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.

Technology acceleration in Forth Industrial Revolution

– Novan has witnessed rapid integration of technology during Covid-19 in the Biotechnology & Drugs industry. As one of the leading players in the industry, Novan 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.

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.

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. Novan 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.

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. Novan can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Stagnating economy with rate increase

– Novan 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 international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Novan 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 Novan 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 Novan.

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 Novan in the Biotechnology & Drugs sector and impact the bottomline of the organization.

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Weighted SWOT Analysis of Novan Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Novan 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 Novan 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 Novan 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 Novan 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 Novan needs to make to build a sustainable competitive advantage.

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