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Bayer SWOT & PESTLE Analysis

Last Updated : 27 Jun, 2017

OVERVIEW

Name of the Company: Bayer AG

Business Sector: Health

Operating Geography: Global

About the Company: Bayer AG is a German company that works within the fields of chemical, pharmaceutical and life sciences. The headquarters of the company are located in Leverkusen. The tagline of the company is "science for a better life." the first ever product manufactured by it was acetylsalicylic acid which was later registered under the name of Aspirin which has become its most popular product.

Revenue:

SWOT & PESTLE Analysis

The SWOT analysis for Bayer is presented below:
Strengths
Weaknesses
1. Constant R&D for improvement of products
2. A dedicated & trained workforce.
3. Strong financial condition & cash flow.
4. A strong distribution network
1. Lack of diversification
2. Pricing position/ dilemma
3. Dependencies on Doctors / Experts
Opportunities
Threats
1. Growing concerns of health, especially of people of older age
2. Fitness craze among the people
3. Opening of economies for globalisation, example – Iran
4. Diversification, example – Energy Drinks etc.
1. Counterfeits of products
2. Side effects of medicines and growing concerns over it
3. Government laws & controls over prices of the medicines & products
4. Low cost substitutes from competitors
5. Rise of Ayurveda / Homeopathy
6. High requirement of capital
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Strengths

1. Constant R&D for improvement of products: The R&D has already given exceptional products in past like Aspirin, Rennie, Poncho etc. and continues for the same. Seeing the expenses the company incurs on R&D on all the business fronts like North America € 1081 Million, Europe-Middle East- Africa € 3285 Million & Latin America € 71 Million in 2016.

2. A dedicated & trained workforce: A strong workforce of 115,200 people worldwide provides a healthy work environment & continuous training programs for employees. The company spent as personal expenses € 11357 Million (2016) for the welfare of employees which keeps them motivated. The employees are trained on continuous basis & a healthy work environment is maintained which increases their performance.

3. Strong financial condition & cash flow: The figures show sound financial condition & EPS (€ 5.44) more than declared dividend (€ 2.7) and also cash generated from operations is € 9089 Million, therefore dividend is paid out of cash from operating activities which is a healthy sign.

4. A strong distribution network: Global presence of 301 companies operating in 78 countries gives a strong & integrated distribution system.

Weaknesses

1. Lack of diversification: all the products are related to pharmaceuticals industry and therefore they do not have any diversification from the core business operation.

2. Pricing position/ dilemma: The price of the product is highly crucial as it has profit motive but also welfare of the people, therefore pricing dilemma exists.

3. Dependencies on Doctors / Experts: At times the people do not know about the products and substitutes, they depend on the advice given by the doctors / experts and follow it. Therefore these influencers have a large impact on revenue.

Opportunities

1. Growing concerns of health, especially of people of older age: The current trend is of growing focus on health and for the aged especially as they consume maximum medicines.

2. Fitness craze among the people: Among the younger generations a fitness craze has taken over & therefore energy boosters etc. are attractive segment.

3. Opening of economies for globalisation: Country like Iran opens to globalisation; this gives a new market to explore.

4. Diversification: Diversification in terms of non-medicines like energy drinks etc., which are a rising segment.

Threats

1. Counterfeits of products: This is a major concern as it leads to loss of revenue & also customers.

2. Side effects of medicines and growing concerns over it: People are cautious of the side effects and therefore cautiously use medicines & if possible avoid using it.

3. Government laws & controls over prices of the medicines & products: Tariffs , customs , duties & at times prices of the products are declared by the government and strict laws to control monopoly are placed by almost all countries.

4. Low cost substitutes from competitors: A product created by the company has the biggest competition by the rival firms in terms of price, they might create a similar problem addressing drug in a lower cost.

5. Rise of Ayurveda / Homeopathy: The shift of people from allopathy to ayurveda or homeopathy, as they have less or no side effects.

6. High requirement of capital: The amount of capital is required in terms of R&D expenses, expenses on employees & the distribution because the market structure is monopolistic & patents do not have a long life.

To get the complete detailed SWOT report on Bayer please mail us at: support@swotandpestle.com. or contact us here.

Bayer SWOT analysis has been conducted by Hakimuddin Chowdhury and reviewed by senior analysts from Barakaat Consulting.

References

1. Bayer Group Consolidated Income Statements-http://www.annualreport2016.bayer.com/financial-statements/bayer-group-consolidated-income-statements.html

2. Bayer Group Consolidated Statements of Cash Flows- http://www.annualreport2016.bayer.com/financial-statements/bayer-group-consolidated-statements-of-cash-flows.html

3. Bayer Group Consolidated Statements of Financial Position- http://www.annualreport2016.bayer.com/financial-statements/bayer-group-consolidated-statements-of-financial-position.html

4. Bayer Dividends-http://www.investor.bayer.de/en/stock/dividends/

5. Working at Bayer: Excellent Perspectives-https://www.bayer.com/en/working-at-bayer.aspx

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The PESTLE analysis for Standard Bank Group is presented below:
Political
Economical
1. Varying interest of government & political parties
2. Activities depend mission of the ministries
3. Varying taxation policy & subsidy policy from ministry to ministry & product to product
4. Pricing regulations
1. Income distribution
2. Slowdown of economies
3. Large population, increased customer base
Social
Technological
1. Employee training & development
2. Sensitivity towards customers
3. Loud social media
1. Bayer’s strength is its R&D department
2. Innovation – core element in strategy
3. Open innovation network.
Legal
Environmental
1. Compliance with the rules and regulations of the countries.
2. law suits.
3. The legal expenses are unforeseen.
1. Focus on food security.
2. Innovative products and solutions that improve people's quality of life.
3. Ecological and economic approach to raw materials.
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Political

1. Varying interest of government & political parties: Interest of the government varies with situation. The government can give benefits & subsidies in crisis or epidemic otherwise strict rules & policies to monitor the products, quality & sales.

2. Activities depend on the mission of the ministries: If the focus is on reducing infant mortality then all the research, R&D will focus on it.

3. Varying taxation policy & subsidy policy from ministry to ministry & product to product: Taxes levied in the products and business line depends on the mission of the various ministries, example – health ministry, benefits of subsidies on medicine to reduce infant mortality whereas agriculture ministry, subsidy on products which are biodegradable and increase crop growth rate, high tax on hybrid seeds but low tax on fertilizers. Therefore the taxes & benefits depend on the mission of the ministries.

4. Pricing regulations: On some products the company enjoys autonomy to set its price but on few products, the price is set by the government and company has to comply with it, this done to protect the interest of the masses and also to maintain a fair equilibrium & avoid monopoly.

Economic

1. Income distribution: Income Distribution impacts the purchasing power of the people. Therefore pricing and cost becomes a challenge.

2. Slowdown of economies: Slowing down of the economies like of European countries etc. affects the consumers buying power & therefore spending on health care takes a hit.

3. Large population, increased customer base: Countries like India & china where population is 2.5+ Billion combined is a huge market with a population growth rate of 1.7% & 0.5% respectively.

Social

1. Employee training & development: Bayer focuses a lot on employment training & development and therefore spent € 11357 Million (2016) in personnel expenses for the welfare, training, development & keeping the employees motivated. The company also provides a healthy working environment which increases efficiency as it is one of the core values followed by the company (L.I.F.E. is the acronym of the core values)

2. Sensitivity towards customers: The products have side effects and therefore the customer is usually sensitive to such issues. The company has to maintain the quality standards and therefore an emotional connect is always there.

3. Loud social media: In today’s world, people are active on social mediums and therefore a single issue can become loud on these mediums. Once on the internet always stays and it might also attract people and can create an issue. The consumers are very attached emotionally to health & related issues and therefore a minor trigger can cause major damage.

Technological

1. Bayer’s strength is its R&D department: Constant updating of the R&D lab takes place. Bayer Crop Science to invest € 2.5 Billion, Sep 8th 2016 , in 2015 – increase in R&D investment to over € 4 Billion. Also for the year 2017, Bayer plans to invest € 4.8 Billion in R&D.

2. Innovation – core element in strategy: It considers innovation as it cornerstone of its mission “Science For A Better Life” & a core element in their strategy. It is equipped with the latest technology and is constantly upgraded. They work within a network of alliances with start-ups, academic institutes, industry, suppliers and other partners.

3. Open innovation network: Their open innovation network spans all parts of the company along the value chain. Its open innovation portal offers a platform for collaborations in all parts of the company. They also invest in venture capital funds that finance life science start-up companies, among other projects.

Legal

1. Compliance with the rules and regulations of the countries: Bayer as in the business of pharmaceuticals has to comply with the rules and regulations of the countries and also has an internal set of rules to keep up the brand image and therefore employee safety norms and regulations are strictly adhered. The internal safety management is based on four pillars which are Occupational Health & Safety, Process & Plant Safety, Transportation Safety, and Product Stewardship. This gives a complete safety culture & the safety management is a part of the company corporate strategy. Group Target by 2020 Reduction of 35% in occupational safety incident rate.

2. Law suits: Major areas where Bayer faces law suits are product liability, competition and antitrust law, anticorruption, patent disputes, tax assessments and environmental matters. As health care and environment being sentimental issues, therefore the brand name gets damaged and Bayer loose out customers. A few cases that are still running are Yasmin, Mirena, Beyaz & Safyral, Stivarga, Stamp taxes in Greece.

3. The legal expenses are unforeseen: The expenses of legal judgements and settlements as at times not fully covered and these give a blow to financials. The legal expenses are unforeseen and therefore legal judgements and settlements can give rise to uncovered expenses.

Environmental

1. Focus on food security: As the world population estimated to be almost 10 Billion by 2050, the company drives to create products which increase the productivity of the soil and the same time protect the soil. creating and promoting technologies which help achieve the above objective like, vertical farming etc. to attain its objective of food security.

2. Innovative products and solutions that improve people's quality of life: Being a life science company they develop innovative products and solutions that improve people's quality of life through disease prevention and therapy. Currently they are working on the following, prevention of Zika, Malaria, Dengue, etc. This way they contribute in making the environment a better place.

3. Ecological and economic approach to raw materials: The company focuses on an efficient approach to raw materials and energy makes both ecological and economic sense. These measures help reduce environmental impact and at the same time cut the costs associated with materials, energy, emissions and disposal. Group target by 2020 is improvement of 10% in energy efficiency. The few areas broadly taken by Bayer are energy consumption, air emissions, use of water & emissions into water, waste & recycling, protection of biodiversity, management systems for the implementation of HSEQ targets, environmental incidents & transport accidents, environmental protection in agriculture, Bayer bee care program, Bayer forward farming.

To get the complete detailed PESTLE report on Bayer please mail us at: support@swotandpestle.com. or contact us here.

Bayer PESTLE analysis has been conducted by Hakimuddin Chowdhury and reviewed by senior analysts from Barakaat Consulting.

References

1. Bayer Group Consolidated Income Statements-http://www.annualreport2016.bayer.com/financial-statements/bayer-group-consolidated-income-statements.html

2. Bayer Group Consolidated Statements of Cash Flows- http://www.annualreport2016.bayer.com/financial-statements/bayer-group-consolidated-statements-of-cash-flows.html

3. Bayer Group Consolidated Statements of Financial Position- http://www.annualreport2016.bayer.com/financial-statements/bayer-group-consolidated-statements-of-financial-position.html

4. Bayer Dividends-http://www.investor.bayer.de/en/stock/dividends/

5. Working at Bayer: Excellent Perspectives-https://www.bayer.com/en/working-at-bayer.aspx

Download Analysis Report




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