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 (France)
Based on various researches at Oak Spring University , Merck&Co is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, talent flight as more people leaving formal jobs, increasing transportation and logistics costs,
there is backlash against globalization, supply chains are disrupted by pandemic , 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 France
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 -
Operational resilience
– The operational resilience strategy of Merck&Co 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
– 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.
Ability to lead change in Biotechnology & Drugs
– Merck&Co is one of the leading players in the Biotechnology & Drugs industry in France. Over the years it has not only transformed the business landscape in the Biotechnology & Drugs industry in France 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.
Successful track record of launching new products
– Merck&Co has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Merck&Co 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.
Learning organization
- Merck&Co 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 Merck&Co is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Merck&Co emphasize – knowledge, initiative, and innovation.
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.
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.
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 France 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.
Ability to recruit top talent
– Merck&Co is one of the leading players in the Biotechnology & Drugs industry in France. It is in a position to attract the best talent available in France. The firm has a robust talent identification program that helps in identifying the brightest.
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.
Sustainable margins compare to other players in Biotechnology & Drugs industry
– Merck&Co has clearly differentiated products in the market place. This has enabled Merck&Co to fetch slight price premium compare to the competitors in the Biotechnology & Drugs industry. The sustainable margins have also helped Merck&Co to invest into research and development (R&D) and innovation.
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 -
Interest costs
– Compare to the competition, Merck&Co 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.
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.
Workers concerns about automation
– As automation is fast increasing in the Biotechnology & Drugs industry, Merck&Co 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.
Ability to respond to the competition
– As the decision making is very deliberative at Merck&Co, in the dynamic environment of Biotechnology & Drugs industry it has struggled to respond to the nimble upstart competition. Merck&Co has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
Increasing silos among functional specialists
– The organizational structure of Merck&Co is dominated by functional specialists. It is not different from other players in the Biotechnology & Drugs industry, but Merck&Co needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Merck&Co to focus more on services in the Biotechnology & Drugs industry rather than just following the product oriented approach.
High bargaining power of channel partners in Biotechnology & Drugs industry
– because of the regulatory requirements in France, 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.
Employees’ less understanding of Merck&Co strategy
– From the outside it seems that the employees of Merck&Co 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.
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.
Aligning sales with marketing
– From the outside it seems that Merck&Co needs to have more collaboration between its sales team and marketing team. Sales professionals in the Biotechnology & Drugs industry have deep experience in developing customer relationships. Marketing department at Merck&Co can leverage the sales team experience to cultivate customer relationships as Merck&Co is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee of Merck&Co 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.
Merck&Co Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Merck&Co are -
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.
Buying journey improvements
– Merck&Co 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.
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.
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.
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.
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.
Learning at scale
– Online learning technologies has now opened space for Merck&Co 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.
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 Merck&Co 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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Merck&Co 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Biotechnology & Drugs industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Merck&Co 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. Merck&Co 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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Merck&Co can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Merck&Co External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Merck&Co are -
Environmental challenges
– Merck&Co 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. Merck&Co can take advantage of this fund but it will also bring new competitors in the Biotechnology & Drugs industry.
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.
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.
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.
Shortening product life cycle
– it is one of the major threat that Merck&Co is facing in Biotechnology & Drugs sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, 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.
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 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.
Regulatory challenges
– Merck&Co 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.
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.
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.
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.
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.
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.
