Novartis (NOVZn) SWOT Analysis / TOWS Matrix / MBA Resources
Major Drugs
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Novartis (Germany)
Based on various researches at Oak Spring University , Novartis is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, increasing commodity prices, there is backlash against globalization, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, increasing energy prices, supply chains are disrupted by pandemic ,
central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Novartis can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Novartis, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Novartis 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 Novartis can be done for the following purposes –
1. Strategic planning of Novartis
2. Improving business portfolio management of Novartis
3. Assessing feasibility of the new initiative in Germany
4. Making a Major Drugs sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Novartis
Strengths of Novartis | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Novartis are -
Ability to recruit top talent
– Novartis is one of the leading players in the Major Drugs industry in Germany. It is in a position to attract the best talent available in Germany. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Novartis 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 Novartis have helped the firm to develop new products and bring them quickly to the marketplace.
Digital Transformation in Major Drugs industry
- digital transformation varies from industry to industry. For Novartis digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Novartis 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.
Cross disciplinary teams
– Horizontal connected teams at the Novartis 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.
Diverse revenue streams
– Novartis is present in almost all the verticals within the Major Drugs industry. This has provided Novartis 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.
Strong track record of project management in the Major Drugs industry
– Novartis is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Novartis
– The covid-19 pandemic has put organizational resilience at the centre of everthing Novartis does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Major Drugs
– Novartis is one of the leading players in the Major Drugs industry in Germany. Over the years it has not only transformed the business landscape in the Major Drugs industry in Germany but also across the existing markets. The ability to lead change has enabled Novartis in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Novartis has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Novartis to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that Novartis 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 Novartis in the Healthcare sector have low bargaining power. Novartis has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Novartis to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Novartis 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 Novartis is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Novartis emphasize – knowledge, initiative, and innovation.
Weaknesses of Novartis | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Novartis are -
Lack of clear differentiation of Novartis products
– To increase the profitability and margins on the products, Novartis needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Novartis is one of the leading players in the Major Drugs industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Major Drugs industry in last five years.
Ability to respond to the competition
– As the decision making is very deliberative at Novartis, in the dynamic environment of Major Drugs industry it has struggled to respond to the nimble upstart competition. Novartis has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Novartis 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 Major Drugs industry using digital technology.
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 Novartis supply chain. Even after few cautionary changes, Novartis is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Novartis vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– From the outside it seems that Novartis needs to have more collaboration between its sales team and marketing team. Sales professionals in the Major Drugs industry have deep experience in developing customer relationships. Marketing department at Novartis can leverage the sales team experience to cultivate customer relationships as Novartis is planning to shift buying processes online.
High bargaining power of channel partners in Major Drugs industry
– because of the regulatory requirements in Germany, Novartis 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 Major Drugs industry.
No frontier risks strategy
– From the 10K / annual statement of Novartis, it seems that company is thinking out the frontier risks that can impact Major 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.
Employees’ less understanding of Novartis strategy
– From the outside it seems that the employees of Novartis 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.
Workers concerns about automation
– As automation is fast increasing in the Major Drugs industry, Novartis 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.
High operating costs
– Compare to the competitors, Novartis 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 Novartis lucrative customers.
Novartis Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Novartis are -
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. Novartis can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Novartis 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Novartis 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 Novartis to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Novartis 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.
Building a culture of innovation
– managers at Novartis 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 Major Drugs industry.
Loyalty marketing
– Novartis 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.
Manufacturing automation
– Novartis 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.
Better consumer reach
– The expansion of the 5G network will help Novartis to increase its market reach. Novartis 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 Novartis can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Novartis 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. Novartis 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Novartis 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 Novartis to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Novartis can use these opportunities to build new business models that can help the communities that Novartis 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, Novartis is facing challenges because of the dominance of functional experts in the organization. Novartis 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.
Threats Novartis External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Novartis 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. Novartis needs to understand the core reasons impacting the Major Drugs industry. This will help it in building a better workplace.
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 Novartis business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Novartis 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 Major Drugs industry regulations.
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.
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 Novartis.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Major Drugs industry are lowering. It can presents Novartis with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Major Drugs sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Novartis 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 Novartis prominent markets.
Environmental challenges
– Novartis 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. Novartis can take advantage of this fund but it will also bring new competitors in the Major Drugs industry.
Consumer confidence and its impact on Novartis 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.
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 Novartis in the Major Drugs sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Novartis 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 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.
Easy access to finance
– Easy access to finance in Major Drugs industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Novartis can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of Novartis Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Novartis 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 Novartis 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 Novartis 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 Novartis 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 Novartis needs to make to build a sustainable competitive advantage.