Eli Lilly (LLY) SWOT Analysis / TOWS Matrix / MBA Resources
Biotechnology & Drugs
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Eli Lilly (Germany)
Based on various researches at Oak Spring University , Eli Lilly is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, there is backlash against globalization, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices,
increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Eli Lilly can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Eli Lilly, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Eli Lilly 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 Eli Lilly can be done for the following purposes –
1. Strategic planning of Eli Lilly
2. Improving business portfolio management of Eli Lilly
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 Eli Lilly
Strengths of Eli Lilly | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Eli Lilly are -
Superior customer experience
– The customer experience strategy of Eli Lilly in Biotechnology & Drugs industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy of Eli Lilly 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.
Ability to lead change in Biotechnology & Drugs
– Eli Lilly 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 Eli Lilly in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Cross disciplinary teams
– Horizontal connected teams at the Eli Lilly 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
– Eli Lilly is present in almost all the verticals within the Biotechnology & Drugs industry. This has provided Eli Lilly 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.
Training and development
– Eli Lilly 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 recruit top talent
– Eli Lilly 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.
Low bargaining power of suppliers
– Suppliers of Eli Lilly in the Healthcare sector have low bargaining power. Eli Lilly has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Eli Lilly to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Biotechnology & Drugs industry
- digital transformation varies from industry to industry. For Eli Lilly digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Eli Lilly 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.
Organizational Resilience of Eli Lilly
– The covid-19 pandemic has put organizational resilience at the centre of everthing Eli Lilly does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management in the Biotechnology & Drugs industry
– Eli Lilly is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Eli Lilly 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 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.
Weaknesses of Eli Lilly | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Eli Lilly are -
Increasing silos among functional specialists
– The organizational structure of Eli Lilly is dominated by functional specialists. It is not different from other players in the Biotechnology & Drugs industry, but Eli Lilly needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Eli Lilly to focus more on services in the Biotechnology & Drugs industry rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As Eli Lilly 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.
Employees’ less understanding of Eli Lilly strategy
– From the outside it seems that the employees of Eli Lilly 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 Eli Lilly products
– To increase the profitability and margins on the products, Eli Lilly needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners in Biotechnology & Drugs industry
– because of the regulatory requirements in Germany, Eli Lilly 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.
High dependence on Eli Lilly ‘s star products
– The top 2 products and services of Eli Lilly 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 Eli Lilly has relatively successful track record of launching new products.
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 Eli Lilly supply chain. Even after few cautionary changes, Eli Lilly is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Eli Lilly vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, Eli Lilly 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. Eli Lilly 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.
Compensation and incentives
– The revenue per employee of Eli Lilly 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.
Skills based hiring in Biotechnology & Drugs industry
– The stress on hiring functional specialists at Eli Lilly has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Interest costs
– Compare to the competition, Eli Lilly 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.
Eli Lilly Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Eli Lilly are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Eli Lilly 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 Eli Lilly to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Eli Lilly in the Biotechnology & Drugs industry. Now Eli Lilly can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Eli Lilly 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 Eli Lilly 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 Eli Lilly to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Eli Lilly can use these opportunities to build new business models that can help the communities that Eli Lilly operates in. Secondly it can use opportunities from government spending in Biotechnology & Drugs sector.
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. Eli Lilly can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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. Eli Lilly can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Learning at scale
– Online learning technologies has now opened space for Eli Lilly 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
– Eli Lilly 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Eli Lilly can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Eli Lilly 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.
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. Eli Lilly 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. Eli Lilly 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.
Manufacturing automation
– Eli Lilly 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.
Threats Eli Lilly External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Eli Lilly are -
Stagnating economy with rate increase
– Eli Lilly 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.
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, Eli Lilly 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.
Shortening product life cycle
– it is one of the major threat that Eli Lilly is facing in Biotechnology & Drugs sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Eli Lilly.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Eli Lilly 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.
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. Eli Lilly 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.
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. Eli Lilly can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Biotechnology & Drugs industry are lowering. It can presents Eli Lilly with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Biotechnology & Drugs sector.
Consumer confidence and its impact on Eli Lilly 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.
Technology acceleration in Forth Industrial Revolution
– Eli Lilly has witnessed rapid integration of technology during Covid-19 in the Biotechnology & Drugs industry. As one of the leading players in the industry, Eli Lilly 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Eli Lilly 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 Eli Lilly prominent markets.
Weighted SWOT Analysis of Eli Lilly Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Eli Lilly 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 Eli Lilly 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 Eli Lilly 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 Eli Lilly 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 Eli Lilly needs to make to build a sustainable competitive advantage.