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Marsh & McLennan SWOT Analysis / Matrix
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SWOT analysis is a vital strategic planning tool that can be used by Marsh & McLennan managers to do a situational analysis of the organization . It is an important technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Marsh & McLennan is facing in its current business environment.
The Marsh & McLennan is one of the leading companies in its industry. Marsh & McLennan maintains its prominent position in market by critically analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the firm such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework enables an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the Marsh & McLennan to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The core purpose of SWOT matrix is to identify the strategies that a firm can use to exploit external opportunities, counter threats, and build on & protect Marsh & McLennan strengths, and eradicate its weaknesses.
Step by Step Guide to Marsh & McLennan SWOT Analysis
Strengths of Marsh & McLennan – Internal Strategic Factors
As one of the leading organizations in its industry, Marsh & McLennan has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Marsh & McLennan are –
- Strong Free Cash Flow – Marsh & McLennan has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Successful track record of developing new products – product innovation.
- Automation of activities brought consistency of quality to Marsh & McLennan products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Superb Performance in New Markets – Marsh & McLennan has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
- Highly skilled workforce through successful training and learning programs. Marsh & McLennan is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
- Strong Brand Portfolio – Over the years Marsh & McLennan has invested in building a strong brand portfolio. The SWOT analysis of Marsh & McLennan just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
- Highly successful at Go To Market strategies for its products.
Weakness of Marsh & McLennan – Internal Strategic Factors
Weakness are the areas where Marsh & McLennan can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- High attrition rate in work force – compare to other organizations in the industry Marsh & McLennan has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
- Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that Marsh & McLennan is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Marsh & McLennan needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
- The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Marsh & McLennan has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
- Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Marsh & McLennan
Opportunities for Marsh & McLennan – External Strategic Factors
- The new technology provides an opportunity to Marsh & McLennan to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
- New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Marsh & McLennan. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- The market development will lead to dilution of competitor’s advantage and enable Marsh & McLennan to increase its competitiveness compare to the other competitors.
- New trends in the consumer behavior can open up new market for the Marsh & McLennan . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Marsh & McLennan.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Marsh & McLennan to increase its profitability.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Marsh & McLennan to capture new customers and increase its market share.
Threats Marsh & McLennan Facing - External Strategic Factors
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Marsh & McLennan in those markets.
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Marsh & McLennan
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
- No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
Limitations of SWOT Analysis for Marsh & McLennan
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Marsh & McLennan
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of Marsh & McLennan
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Marsh & McLennan managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of Marsh & McLennan
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
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Example of Weighted SWOT Analysis
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SWOT Worksheet & Template
If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.
References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)
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