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 – customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, wage bills are increasing, there is backlash against globalization, there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings,
cloud computing is disrupting traditional business models, technology disruption, 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 -
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.
Superior customer experience
– The customer experience strategy of Merck&Co in Biotechnology & Drugs industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
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.
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.
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.
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.
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.
Training and development
– Merck&Co 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.
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.
Innovation driven organization
– Merck&Co is one of the most innovative firm in Biotechnology & Drugs sector.
Weaknesses of Merck&Co | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Merck&Co are -
Low market penetration in new markets
– Outside its home market of France, Merck&Co needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
Products dominated business model
– Even though Merck&Co 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. Merck&Co should strive to include more intangible value offerings along with its core products and services.
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.
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.
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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Merck&Co is slow explore the new channels of communication. These new channels of communication can help Merck&Co to provide better information regarding Biotechnology & Drugs products and services. It can also build an online community to further reach out to potential customers.
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.
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.
Merck&Co Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Merck&Co are -
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.
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.
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.
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.
Building a culture of innovation
– managers at Merck&Co can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Biotechnology & Drugs industry.
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.
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.
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.
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.
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 Merck&Co in the Biotechnology & Drugs industry. Now Merck&Co can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
Threats Merck&Co External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Merck&Co are -
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.
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.
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.
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.
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.
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.
Consumer confidence and its impact on Merck&Co 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.
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 Merck&Co.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Biotechnology & Drugs industry are lowering. It can presents Merck&Co with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Biotechnology & Drugs sector.
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.
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.
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.
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.
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.