SWOT Analysis / TOWS Matrix for Luyan Pharma (China)
Based on various researches at Oak Spring University , Luyan Pharma is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, there is backlash against globalization, geopolitical disruptions, increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%,
competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Luyan Pharma can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Luyan Pharma, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Luyan Pharma 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 Luyan Pharma can be done for the following purposes –
1. Strategic planning of Luyan Pharma
2. Improving business portfolio management of Luyan Pharma
3. Assessing feasibility of the new initiative in China
4. Making a Major Drugs sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Luyan Pharma
Strengths of Luyan Pharma | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Luyan Pharma are -
Cross disciplinary teams
– Horizontal connected teams at the Luyan Pharma 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 Luyan Pharma
– The covid-19 pandemic has put organizational resilience at the centre of everthing Luyan Pharma does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Luyan Pharma has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Major Drugs industry. Secondly the value chain collaborators of Luyan Pharma have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of Luyan Pharma in Major Drugs industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in Major Drugs industry
- digital transformation varies from industry to industry. For Luyan Pharma digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Luyan Pharma 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 recruit top talent
– Luyan Pharma is one of the leading players in the Major Drugs industry in China. It is in a position to attract the best talent available in China. The firm has a robust talent identification program that helps in identifying the brightest.
Analytics focus
– Luyan Pharma 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 Major Drugs industry. The technology infrastructure of China 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.
High switching costs
– The high switching costs that Luyan Pharma 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.
Training and development
– Luyan Pharma 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
- Luyan Pharma 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 Luyan Pharma is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Luyan Pharma emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Luyan Pharma has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Luyan Pharma 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.
Strong track record of project management in the Major Drugs industry
– Luyan Pharma 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 Luyan Pharma | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Luyan Pharma are -
Ability to respond to the competition
– As the decision making is very deliberative at Luyan Pharma, in the dynamic environment of Major Drugs industry it has struggled to respond to the nimble upstart competition. Luyan Pharma has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High cash cycle compare to competitors
Luyan Pharma has a high cash cycle compare to other players in the Major 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.
Low market penetration in new markets
– Outside its home market of China, Luyan Pharma needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, Luyan Pharma has high operating costs in the Major Drugs industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Luyan Pharma lucrative customers.
Products dominated business model
– Even though Luyan Pharma has some of the most successful models in the Major Drugs industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Luyan Pharma should strive to include more intangible value offerings along with its core products and services.
Increasing silos among functional specialists
– The organizational structure of Luyan Pharma is dominated by functional specialists. It is not different from other players in the Major Drugs industry, but Luyan Pharma needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Luyan Pharma to focus more on services in the Major Drugs industry rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, Luyan Pharma has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Major Drugs industry over the last five years. Luyan Pharma 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.
Interest costs
– Compare to the competition, Luyan Pharma 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.
Need for greater diversity
– Luyan Pharma 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.
Compensation and incentives
– The revenue per employee of Luyan Pharma is just above the Major 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.
Employees’ less understanding of Luyan Pharma strategy
– From the outside it seems that the employees of Luyan Pharma 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.
Luyan Pharma Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Luyan Pharma are -
Buying journey improvements
– Luyan Pharma can improve the customer journey of consumers in the Major 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Luyan Pharma 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 Luyan Pharma to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Luyan Pharma can use the latest technology developments to improve its manufacturing and designing process in Major 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Luyan Pharma can use these opportunities to build new business models that can help the communities that Luyan Pharma operates in. Secondly it can use opportunities from government spending in Major Drugs sector.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Luyan Pharma is facing challenges because of the dominance of functional experts in the organization. Luyan Pharma can utilize new technology in the field of Major Drugs industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Major Drugs industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Luyan Pharma 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. Luyan Pharma 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.
Learning at scale
– Online learning technologies has now opened space for Luyan Pharma 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.
Use of Bitcoin and other crypto currencies for transactions in Major Drugs industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Luyan Pharma in the Major Drugs industry. Now Luyan Pharma can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Luyan Pharma 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.
Leveraging digital technologies
– Luyan Pharma 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.
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 Luyan Pharma 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Luyan Pharma 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 Luyan Pharma to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Better consumer reach
– The expansion of the 5G network will help Luyan Pharma to increase its market reach. Luyan Pharma 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 Luyan Pharma External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Luyan Pharma are -
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. Luyan Pharma 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 Luyan Pharma in the Major Drugs sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Luyan Pharma 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.
Technology acceleration in Forth Industrial Revolution
– Luyan Pharma has witnessed rapid integration of technology during Covid-19 in the Major Drugs industry. As one of the leading players in the industry, Luyan Pharma needs to keep up with the evolution of technology in the Major 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Luyan Pharma may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Major Drugs sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Luyan Pharma in Major Drugs industry. The Major 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.
Stagnating economy with rate increase
– Luyan Pharma 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 Major Drugs industry.
Shortening product life cycle
– it is one of the major threat that Luyan Pharma is facing in Major Drugs sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Luyan Pharma 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 Major Drugs industry and other sectors.
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 Luyan Pharma.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Luyan Pharma 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 Luyan Pharma prominent markets.
Environmental challenges
– Luyan Pharma 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. Luyan Pharma can take advantage of this fund but it will also bring new competitors in the Major Drugs industry.
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. Luyan Pharma needs to understand the core reasons impacting the Major Drugs industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Luyan Pharma Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Luyan Pharma 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 Luyan Pharma 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 Luyan Pharma 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 Luyan Pharma 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 Luyan Pharma needs to make to build a sustainable competitive advantage.
