Bayer (BAYGn) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Bayer (Germany)

Based on various researches at Oak Spring University , Bayer is operating in a macro-environment that has been destablized by – 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, technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, increasing transportation and logistics costs, increasing commodity prices, increasing household debt because of falling income levels, etc

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Introduction to SWOT Analysis of Bayer

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Bayer can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Bayer, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Bayer 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 Bayer can be done for the following purposes –
1. Strategic planning of Bayer
2. Improving business portfolio management of Bayer
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 Bayer

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

The strengths of Bayer are -

Low bargaining power of suppliers

– Suppliers of Bayer in the Healthcare sector have low bargaining power. Bayer has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Bayer to manage not only supply disruptions but also source products at highly competitive prices.

Organizational Resilience of Bayer

– The covid-19 pandemic has put organizational resilience at the centre of everthing Bayer 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 Major Drugs industry

– Bayer is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Innovation driven organization

– Bayer is one of the most innovative firm in Major Drugs sector.

High brand equity

– Bayer has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Bayer to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Operational resilience

– The operational resilience strategy of Bayer comprises – understanding the underlying the factors in the Major 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.

Superior customer experience

– The customer experience strategy of Bayer in Major Drugs industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Ability to recruit top talent

– Bayer 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.

High switching costs

– The high switching costs that Bayer 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.

Sustainable margins compare to other players in Major Drugs industry

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

Highly skilled collaborators

– Bayer 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 Bayer have helped the firm to develop new products and bring them quickly to the marketplace.

Successful track record of launching new products

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

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

The weaknesses of Bayer are -

Compensation and incentives

– The revenue per employee of Bayer is just above the Major 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.

Ability to respond to the competition

– As the decision making is very deliberative at Bayer, in the dynamic environment of Major Drugs industry it has struggled to respond to the nimble upstart competition. Bayer has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

High cash cycle compare to competitors

Bayer 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.

High dependence on Bayer ‘s star products

– The top 2 products and services of Bayer still accounts for major business revenue. This dependence on star products in Major Drugs industry has resulted into insufficient focus on developing new products, even though Bayer has relatively successful track record of launching new products.

Interest costs

– Compare to the competition, Bayer 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.

Employees’ less understanding of Bayer strategy

– From the outside it seems that the employees of Bayer 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.

Slow to strategic competitive environment developments

– As Bayer 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.

Slow decision making process

– As mentioned earlier in the report, Bayer has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Major Drugs industry over the last five years. Bayer 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 harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Bayer is slow explore the new channels of communication. These new channels of communication can help Bayer to provide better information regarding Major Drugs products and services. It can also build an online community to further reach out to potential customers.

High operating costs

– Compare to the competitors, Bayer 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 Bayer lucrative customers.

Aligning sales with marketing

– From the outside it seems that Bayer 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 Bayer can leverage the sales team experience to cultivate customer relationships as Bayer is planning to shift buying processes online.

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

The opportunities of Bayer are -

Manufacturing automation

– Bayer 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.

Creating value in data economy

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

Learning at scale

– Online learning technologies has now opened space for Bayer 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Bayer 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.

Use of Bitcoin and other crypto currencies for transactions in Major Drugs industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Bayer in the Major Drugs industry. Now Bayer can target international markets with far fewer capital restrictions requirements than the existing system.

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. Bayer 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. Bayer 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Bayer can use these opportunities to build new business models that can help the communities that Bayer operates in. Secondly it can use opportunities from government spending in Major Drugs sector.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Bayer 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 Bayer to hire the very best people irrespective of their geographical location.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Bayer is facing challenges because of the dominance of functional experts in the organization. Bayer 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.

Buying journey improvements

– Bayer can improve the customer journey of consumers in the Major 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.

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. Bayer can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Better consumer reach

– The expansion of the 5G network will help Bayer to increase its market reach. Bayer 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.

Building a culture of innovation

– managers at Bayer 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.

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

The threats of Bayer are -

Consumer confidence and its impact on Bayer 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.

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 Bayer.

Environmental challenges

– Bayer 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. Bayer can take advantage of this fund but it will also bring new competitors in the Major Drugs industry.

Technology acceleration in Forth Industrial Revolution

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

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 Bayer in the Major Drugs sector and impact the bottomline of the organization.

Shortening product life cycle

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

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. Bayer 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 Bayer business can come under increasing regulations regarding data privacy, data security, 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. Bayer can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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, Bayer 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 Bayer with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Major Drugs sector.

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Weighted SWOT Analysis of Bayer Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Bayer 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 Bayer 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 Bayer 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 Bayer 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 Bayer needs to make to build a sustainable competitive advantage.

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