Merck&Co (MRK) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Merck&Co (Germany)

Based on various researches at Oak Spring University , Merck&Co is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, increasing commodity prices, challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, etc

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Introduction to SWOT Analysis of Merck&Co

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.

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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 Germany
4. Making a Biotechnology & Drugs sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Merck&Co

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Strengths of Merck&Co | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Merck&Co are -

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.

Ability to lead change in Biotechnology & Drugs

– Merck&Co is one of the leading players in the Biotechnology & Drugs industry in Germany. Over the years it has not only transformed the business landscape in the Biotechnology & Drugs industry in Germany 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.

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.

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.

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.

Digital Transformation in Biotechnology & Drugs industry

- digital transformation varies from industry to industry. For Merck&Co digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Merck&Co 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.

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.

Innovation driven organization

– Merck&Co is one of the most innovative firm in Biotechnology & Drugs sector.

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 recruit top talent

– Merck&Co is one of the leading players in the Biotechnology & 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

– 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.

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.

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Weaknesses of Merck&Co | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Merck&Co are -

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.

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 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.

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.

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.

Slow to strategic competitive environment developments

– As Merck&Co is one of the leading players in the Biotechnology & Drugs industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Biotechnology & Drugs industry in last five years.

Low market penetration in new markets

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

High bargaining power of channel partners in Biotechnology & Drugs industry

– because of the regulatory requirements in Germany, 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.

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 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.

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.

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Merck&Co Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Merck&Co are -

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.

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.

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.

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.

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.

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. Merck&Co can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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.

Loyalty marketing

– Merck&Co 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.

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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Merck&Co is facing challenges because of the dominance of functional experts in the organization. Merck&Co can utilize new technology in the field of Biotechnology & Drugs industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Using analytics as competitive advantage

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

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.

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.

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Threats Merck&Co External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Merck&Co 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 Merck&Co.

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.

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.

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.

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 Merck&Co in the Biotechnology & Drugs sector and impact the bottomline of the organization.

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.

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. Merck&Co 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.

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.

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.

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.

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.

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.

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.

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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.

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