Novartis (NOVZn) SWOT Analysis / TOWS Matrix / 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 – increasing energy prices, geopolitical disruptions, supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, increasing transportation and logistics costs, wage bills are increasing, etc

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Introduction to SWOT Analysis of Novartis

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.

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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

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

The strengths of Novartis are -

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.

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.

Successful track record of launching new products

– Novartis has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Novartis 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.

Training and development

– Novartis 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.

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.

Sustainable margins compare to other players in Major Drugs industry

– Novartis has clearly differentiated products in the market place. This has enabled Novartis to fetch slight price premium compare to the competitors in the Major Drugs industry. The sustainable margins have also helped Novartis to invest into research and development (R&D) and innovation.

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.

Analytics focus

– Novartis 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 Germany 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.

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.

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.

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.

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.

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

The weaknesses of Novartis are -

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.

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.

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.

Interest costs

– Compare to the competition, Novartis 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.

Low market penetration in new markets

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

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Novartis is slow explore the new channels of communication. These new channels of communication can help Novartis to provide better information regarding Major 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 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.

Need for greater diversity

– Novartis 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.

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.

High cash cycle compare to competitors

Novartis 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.

Increasing silos among functional specialists

– The organizational structure of Novartis is dominated by functional specialists. It is not different from other players in the Major Drugs industry, but Novartis needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Novartis to focus more on services in the Major Drugs industry rather than just following the product oriented approach.

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

The opportunities of Novartis are -

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.

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.

Creating value in data economy

– The success of analytics program of Novartis has opened avenues for new revenue streams for the organization in Major Drugs industry. This can help Novartis to build a more holistic ecosystem for Novartis products in the Major Drugs industry by providing – data insight services, data privacy related products, data based consulting services, 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.

Learning at scale

– Online learning technologies has now opened space for Novartis 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.

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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Novartis in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Major Drugs industry, and it will provide faster access to the consumers.

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.

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.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Major Drugs industry, but it has also influenced the consumer preferences. Novartis can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

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.

Using analytics as competitive advantage

– Novartis has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Major Drugs sector. This continuous investment in analytics has enabled Novartis to build a competitive advantage using analytics. The analytics driven competitive advantage can help Novartis to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

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.

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

The threats of Novartis are -

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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Novartis 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.

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, Novartis 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.

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.

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.

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.

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.

Stagnating economy with rate increase

– Novartis 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.

Technology acceleration in Forth Industrial Revolution

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

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. Novartis 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.

Shortening product life cycle

– it is one of the major threat that Novartis is facing in Major Drugs sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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.

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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.

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