Internal and External Analysis
is the largest pharmaceutical company in the world in terms ofrevenue. The multinational was founded in 1849 and has drugs thataddress almost all aspects of human and animal health in the modernworld. The company has its headquarters in New York and researchcenters and production units in other parts of the world. Although has immense resource power and as strong brand recognition, itoperates in a highly competitive environment (Cvetkovs, 2011). Thispaper gives an internal and external analysis of .
Part1: Internal strengths and weaknesses
Theability of the management to connect with its employees at theindividual level has been an important internal strength enjoyed bythe organization. Being one of the largest pharmaceutical companiesin the world, the company is highly depended on qualified andcommitted employees especially in the research department. Through aphilosophy of investing in the people, management is able toattract and retain qualified researchers in all its major researchsites in United States, Asia and Europe. The organization hasestablished mechanisms that are necessary in attracting talentedworkers, an environment that retains experienced workers and hugeinvestment in employee development. This strategy is not only foundin the research sites, but also in other critical departments such asmarketing and administration. However, the welfare of the employeesis an important weakness that is experienced by . Cases ofemployee being exposed to dangerous substances in researchcenters have been reported. For example, in the recent past, thecompany was taken to court by a former employee who claimed that shewas infected with a genetically modified virus while working at oneof the research centers (Cvetkovs, 2011). Although the court ruled infavor of , it raised concern over the commitment of themanagement to ensuring that employees in the research sites are safe.In addition to the financial cost of recalling the products from themarket, product errors can attract legal confrontations and loss ofreputation.
deals with products that have an impact on health and quality of lifeof the customer. The ultimate goal of the organization is to supplyproducts that add value to the clients’ health. To achieve thisgoal, high levels of internal control by the management arenecessary. The internal control systems at can be credited forthe significant success the organization has been able to achieveover the years. This includes the ability of the organization toadhere to both national and international standards in thepharmaceutical industry. This is an important internal strengthenjoyed by . However, there are weaknesses in its controlsystems. Perhaps, failure to control the systems which results intoproduct error is one of the most important internal weaknesses in operations. This is due to the impact of the error on thepatient who will consume the drug. There are several incidences ofproduct error that a have been reported, affecting the reputation ofthe company (Datamonitor, 2001).
Planningis a major internal strength as well as weakness in the operations of. has solidified it command in the pharmaceuticalresearch and development industry due to strategic plans it hasadopted over the years. For example, to ensure a steady release ofnew products in the market, has partnered with researchers andscientists from different parts of the world, especially thoseinvolved in health care and drug development. This includesresearchers and scientists working in private and government researchinstitutions such as universities and research centers. Additionallythe company has research centers in different parts of the world,mainly in regions where they are able to access researchers andscientists as well as drug development ideas (Datamonitor, 2001).This plan has been an important internal strength that has propelled into one of the leading pharmaceutical companies in the world.
However,majority of the major products marketed by in the globalpharmaceutical industry are faced by patent expiration. For example,it is estimated that over 20 percent of revenues is attributedto the sale of Lipitor. The drug is considered to the best sellingdrug of all time. However, the patent of on this drug expiredin 2011. Although the prices of the drug have not been significantlybeen affected by the expiry of the patent an increased number ofpharmaceutical companies are likely to venture into the production ofthe drug. This will significantly affect revenues at . There isa need for to come up with proactive plans that will cushionits revenues from the expiry of patent in some of its major brands.Additionally, does not have a dependable business unit thatdeals with the development of generic drug. Although it is lessprofitable compared to patented drugs, generic drugs business enablespharmaceutical companies to diversify their products and reducedependence on few drugs which may be affected by changes in themarket dynamics.
is a relatively large organization. Organizing different aspects ofthe organization to meet the intended goals is an enormous managementfunctions. This is one of the strengths enjoyed by in itsinternal structures. has a well structured and organizedinternal environment. This enables it enjoy economies of scale andstrong brand recognition in the market. This enables it to coordinatethe different functional units in the organization, which includesadministrative units, research sites and marketing teams. Thecompany has over the years established itself as a provider ofinnovative health care solution. The high level of organizationalstrategies enables to venture into attractive therapy areas inresearch and development (Deng, 2011). This explains the strongmarket presence by the organization. However, organizing a largebusiness organization such as may result into weakness. Forexample, the bureaucratic infrastructures in the management of are a major weakness in the organization. This has a negative impacton the decision making process. Considering the fact that hasresearch, manufacturing and distribution units all over the world,decision making process is significantly slow due to bureaucraticmanagement structure (Hill et al, 2014).
Part2: External strengths and weaknesses
Bargainingpower of buyers:Buyers have significant bargaining power in the operations of .The main buyers include wholesalers, hospitals and governmentagencies. The largest wholesaler in the supply chaincontributes up to 17 percent of the organization’s sale. The topthree wholesalers control almost forty percent of the sales revenues.This gives them a huge bargaining power because the company supplychain is dependent on them (Cvetkovs, 2011). Although recent changesin the health care laws that increase the role of the government innegotiation of prices may have an impact on buyers’ power, theunique characteristic of patented drugs in which mainly marketmeans the market will not significantly change.
Bargainingpower of suppliers:Suppliers to have significantly low bargaining power. is one of the largest pharmaceutical products manufacturing companiesin the world. The economies of scale in which the company operatesenables it purchase raw materials in large volumes. This gives the an advantage when dealing with suppliers. As a result, themarket is dependent on the supply and demand forces, especiallyagricultural based raw materials. However, to maintain a steadysupply of raw materials, has partnership and verticalcooperation with major suppliers (Cvetkovs, 2011).
Substituteproduct:The availability of substitute product is a concern, although notmajor, to the operations of . mainly deals with drugsthat are protected by patents. This reduces the likelihood ofsubstitutes in the market. Although companies dealing with genericdrugs are faced with a high threat of substitute product, the case isrelatively different for . This is due to the internationalregulations that have been adopted world wide to protect patents. However, is faced with expiry of patents of some of its majorproducts in the market. Already, the top selling drug in products line has generic substitute in the market due to expiry ofpatents. Although the impact has been slow due to other factors, anexpiry of patent for a major drug in the market has immediate impacton the availability of substitute products (Cvetkovs, 2011).Therefore, it can be argued that availability of substitutes will bean important challenge as more patents expire. On the other hand, thethreat will not be significant to operations because of itseconomies of scale which allows them to compete favorably in theglobal market.
Industryrivalry:The pharmaceutical research and manufacturing industry in which operates is a very competitive industry. However, there arestrict internal regulations as well as national and internationallegal requirements that control the industry. Nonetheless, rivalrywithin the industry is intense. There are many industry factors thathave a direct impact on operations which includestechnological development, competitors’ patents, breakthrough innew products by competitors, new information and feedbacks ofmarketed products from the market and intense competition fromgeneric drugs. Although mainly concentrates on patentprotected drugs, they are faced with intense competition from rivalsin the market since the competitors will always attempt to challengethe patent. For example, if a patent dispute is ruled against thecompany, it has significant impact on its operation because it wouldbe difficult to recover the cost of research and development. Inaddition to intense rivalry in patents, research and development ofnew drugs, there is intense industry rivalry in the marketing of theproducts. For example, there are several drugs that can be used inthe treatment of a particular disease. Even in cases where thecompany has patent of one of the drugs rivals will employ effectivemarketing strategies to market their products.
Threatof new entrants: Thethreat of new entrants in the pharmaceutical industry is very low.The global pharmaceutical industry is dominated by a few large scaleplayers some of whom have strategic alliances and partnerships. Forexample, in 2009, and Wyeth establish a strategic merger aimedat strengthening the position of the companies in the internationalmarket through diversification of markets, technology and portfolio.Although small scale companies are likely to emerge with unique drugsin the market, they pose no significant threat to the largemanufactures (Cvetkovs, 2011). Some of the factors that limit entrantof new players in the industry include the immense resources that arenecessary to start pharmaceutical research and manufacturing company,the level of technological development, strong internationalregulation and the strong command of the large companies in theglobal markets.
Politicaland legal factors:Political and legal factors have an important impact on theoperations of and the pharmaceutical industry in general.These refer to government policies and interventions that have animpact on the industry. The influences of these interventions arehigh in the pharmaceutical industry. operates at theinternational level, with research and production units in differentparts of the world and market its products throughout the world. Therefore, the company operations are subject to legal and politicalfactors in different parts of the world. One of the most importantlegal and political factor affecting operations is theinfluence of the government on the health care sector. In majority ofthe countries around the world, the health care system is mainlycontrolled by the government. As a result, political factors have animportant influence on contractual agreements and health careexpenditure, which have a direct impact on operations. In somecountries, consumers are not required to buy drugs directly from thesupplier, but receive them through health care systems sponsored bythe government. For example, the recent changes in the health caresystem in the United States had an important impact on thepharmaceutical industry because pharmaceutical companies would behighly dependent of large volumes of purchases by the government.Other important factors include the role of government agencies innegotiating prices which will have an impact on reimbursement of thecompany’s products.
Globalfactors: is an international company that operates and markets itsproducts in the global market. Therefore, global factors haveimportant positive and negative impacts on the operations andprofitability of the company. Being a global market leader in thedevelopment, manufacturing and marketing of pharmaceutical products,over 50 percent of revenues originates from sales outside theUnited States (Cvetkovs, 2011). The global factors will thereforethreaten or secure over fifty percent of the company’s business.The most important global factors include economic and politicalstability in different regions of the world. For example, the impactsof the late 2000s financial crisis on the global economy had animpact on the company’s operations. Additionally, although it isnot a major challenge currently, political instability in some of themajor markets will limit the operations of the company, which cansignificantly affect its profitability.
Socialand demographic factors: Socialand demographic factors are critical in the pharmaceutical industry,and thus the operations of . This is because they influence thedemand of pharmaceutical products. Demographic and social factorsincludes cultural factors and taboos relating to health care, rate ofpopulation growth, average age of the population, gender, patternsand rate of employment/unemployment, public opinion towardsparticular product or company and lifestyles. Changes in these socialand demographic factors have important impacts on the demand of products. For example, an increase in the aged population inthe United States and the world has resulted into increased demandfor medical services and products that target an aged population.This includes drugs that are used in the management of terminaldiseases. Also, changes in lifestyle have resulted into increasedincidences of obesity which has far reaching long term healthimplication. This has an influence on the demand for certain drugsand therefore, the operations of major players in the pharmaceuticalindustry (Cvetkovs, 2011).
Technologicalfactors: Thepharmaceutical industry is highly dependent on technologicaladvancement. spend a significant part of its total annualrevenues on research and development. Research and developmentensures that the company has a sustainable business in the futurethrough improvement of the current drugs or development of new drugs.The huge investment in research and development results intodevelopment of new products that are protected in the market bypatents. As mentioned, the sustainability of business ishighly dependent on patent protected products. According to the mission statement and organization goals, the company aims atalways developing innovative products and addressing unmet healthcare needs in the global market (Van Der Wal, 2007). Technologicaldevelopment is done internally through research sites in the UnitedStates and other parts of the world, or through collaborations andpartnerships with other pharmaceutical research companies, governmentagencies, universities, research centers and individual researchers.
has major strengths and weaknesses, both internal and external thathave an influence on it position in the global market. is thelargest pharmaceutical research and manufacturing company in theworld. This enables the company to enjoy economies of scale.Operating in large scale gives a competitive advantage overother smaller players in the world, and thus forms the basis of itsinternal and external strengths. Due to its operational size, is able to finance mega projects in research and development. Thisenables the company enjoy monopolies in some drugs since itconcentrates on patent protected brands. Additionally, the economiesof scale enable the company to be more attractive to majorwholesalers and government agencies as well as suppliers (Wang &Tang, 2013). In addition to the operational strength, hashigh level of coordination which results in efficiency in all itsoperational units. The organization is also able to attract andretain highly qualified and experienced workers and researchersespecially in the research and development sites. As a result, humanresources remain one of the most important assets of theorganization.
Onthe other hand, there are several is faced by both internaland external threats. The strong bargaining power of majorwholesalers is an important external threat to the operations of thecompany. Additionally, the change in the legal environment especiallyin the United States where the government has an increased influencein the drug market is an important concern. However, throughstrategic alliance and partnership with both wholesalers andgovernment agencies, this threat can become an important opportunityto increase the market share. The expiry of some of the major patentsin the product line is also an important challenge that facesthe company. The threat is more significant considering the fact thatthe company focuses on patent protected drugs. Nonetheless, venturinginto the generic drug markets while concentrating on development ofpatented drugs can turn this threat into an opportunity.
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