Pharmaceutical Industry Global Corporate Strategy
Over the past two decades, the pharmaceutical sector has experienced significant changes in the competitive landscape. Large international companies are expanding their market coverage in the emerging markets of Eastern Europe, Latin America, Brazil, India, and China. The expansion and subsequent success in the international markets require efficient global corporate strategy. Companies seeking to expand into these markets need to consider the two perspectives of growth, which are global convergence and international diversity. While the global convergence perspective creates global synergies, the international diversity perspective increases local responsiveness. However, as pharmaceutical firms grow into the global markets, they must recognize the importance of upholding ethical business standards and participating in corporate social responsibilities. QUESTION ONE Powerful purchaser pressures, stringent government regulations, intense competition for intellectual property, and very risky and lengthy research and development process characterize the global pharmaceutical industry.
Large pharmaceutical companies such as Pfizer and GlaxoSmithKline have to deal with these factors in the industry in their bid to achieve their key performance indicators including sales revenue (Kouvelis, Xiao, and Yang, 2015). As the global pharmaceutical industry is increasingly becoming more competitive, the international context of firms in the industry is in a dilemma. Pharmaceutical firms are torn between adopting a global convergence perspective and an international diversity perspective. One demerit is that a global convergence perspective in the pharmaceutical industry is faced by government and trade restrictions. For instance, trade restrictions and government regulations may limit the degree to which a pharmaceutical company might attempt to standardize its pharmaceutical products. Another demerit of the global convergence perspective is that it does not consider the specific demands and interests of different markets.
The users of the pharmaceutical products differ significantly from one country to another in their response patterns, preferences, and interests. Therefore, when a pharmaceutical company adopts a global convergence perspective, it may lose responsiveness of the markets. The table below shows a summary of the merits and demerits of the international growth perspectives. Table 1 Merits Demerits 1. Global Convergence Perspective • Centralization of firms for appropriate structuring and management to ensure effective, safe, and quality supply of pharmaceutical products. • Enables pharmaceutical firms to embrace open innovation. • Increased government and trade restrictions. The Impact of Customer Feedback and Market Trends Pharmaceutical companies operate in a very sensitive industry given the nature of the products that they produce. As such, customers are very sensitive to every aspect of the companies including the manufacture, promotion, and distribution of the medial products.
For this reason, customer feedback has great impacts on the sales performance of the companies. “Today, Companies collect a lot of customer feedback in the form of surveys, reviews, and comments” (Oelke, 2009). The appendices show an example of a customer feedback survey. In this context, there are various merits and demerits of using the different approaches as growth strategies. Merits of Strategic Alliances One vital merit of strategic alliances in the pharmaceutical industry is that it facilitates research and development. The alliances allow the pulling together of resources for the common purpose of financing research and development. According to a study by Nicholson, Danzon and McCullough (2002), medicines produced by co-development partnership or a strategic alliance of pharmaceutical companies are more likely to succeed in winning approval from the Food and Drug Administration by those produced by a sole firm.
When pharmaceutical firms agree to pursue research and development, the result is often helpful in the medial environment dues to the level of expertise deployed by the different firms. Merits of Mergers and Acquisitions One merit of mergers and acquisition is the increase in market share. In an acquisition or mergers’ agreement, the involved companies combine their market share; hence, putting a block or market base under the influence of one organization. For instance, in a case where a financially strong pharmaceutical company acquires or merges with a relatively distressed company, the resultant firm can experience a significant increase in market share. The new organization becomes more competitive and cost-efficient as compared to its financially weak parent organizations. Another merit of mergers and acquisitions in the pharmaceutical industry is enhanced competitive edge.
Strategic Alliances • It facilitates research and development. • Generate economies of scale for the firms involved in various perspectives. • Limited control in the pharmaceutical companies that form the alliances. • Unequal benefits that may arise from the agreement of the involved companies. Mergers and Acquisitions • Increase in market share. The idea of corporate governance applies to all industries including in profit and non- profit organizations. As such, corporate governance is relevant in the pharmaceutical industry to provide an examination of the control of an organization as utilized by its directors. In the case of Pfizer, the company’s directors are held responsible for their actions by the company’s shareholders. As indicated in the company statement, Pfizer is a leader in corporate governance, which is fundamental to the company’s business.
Through the shareholder outreach program, the company engages with its investors and stakeholders around the world to gain insight into the bargaining issues at the forefront of the company’s business guidelines and policies. Although business ethics is significant in every industry, it holds a higher purpose in the pharmaceutical industry. In the pharmaceutical sectors, companies operate to help people live better and longer. The desire to fulfill this service to humankind is what pushes millions of scientists, research and development departments, FDA agents, and pharmaceutical marketing specialists in the industry to work every day. As such, individuals in the pharmaceutical sector are bound to uphold high standards of business ethics (Johnson, Scholes and Whittington, 2008). Given that Pfizer operates in the pharmaceutical industry, it faces ethical issues distinct from what companies in other industries face.
The public and media have shown increased interest in the type of healthcare services offered by companies. As such, pharmaceutical companies such as Pfizer cannot avoid the issue of corporate social responsibility. The public widely perceives pharmaceutical companies to be making huge profits unethically from matters of life and death. This perception has led to mistrust and vitriol. To counter the negative public perception, these companies extensively engage in corporate social responsibility. The importance of strategic alliances is that they generate economies of scale and facilitate research and development in firms. The demerits of strategic alliances are limited control and unequal benefits for the involved companies. For the option of M&A, the merits are increased market share and enhanced competitive advantage.
The demerits are a duplication of efforts and disruption of ongoing research and development programs. Corporate governance in organizations provides a framework for shareholders to hold the board of directors responsible for their actions. Therefore, these companies must strictly be ethical and carry out corporate social responsibilities. References Cuervo-Cazurra, A. , & Ramamurti, R. (Eds. Understanding multinationals from emerging markets. Research Policy, 44(2), pp. Johnson, G. Exploring strategy: text and cases. Pearson Education. Johnson, G. Macmillan International Higher Education. Nicholson, S. , Danzon, P. M. and McCullough, J. Changing R&D models in research-based pharmaceutical companies. Journal of translational medicine, 14(1), p. Tricker, R. B. , and Tricker, R. E. and Janetzko, H. , 2009, October. Visual opinion analysis of customer feedback data. In Visual Analytics Science and Technology, 2009.
Appendices 1. Assignment Brief Question Two: Strategic alliances, M&As and Pfizer’s R&D Strategies More than any other industry, the global pharmaceutical sector is highly dependent on its research and development (R&D) segment. Some pharmaceutical companies invest 20 percent and more of their revenues in R&D measures. Because of the steady loss of patent protection, the invention of new drugs is of vital importance for the pharmaceutical industry. Revenue losses due to patent expiry often are very significant, as can be seen with Pfizer’s Lipitor from 2012 on. com/corporate-governance/default. aspx ) Using your understanding of corporate governance, business ethics, social responsibility, and the differences between what managers and leaders actually do in practice, critique the above statement and evaluate the ability of Pfizer’s Chairman and Senior management team to drive change in a fast-changing and complex 21st Century Global Health Care environment.
[30 % marks] This is a personal response requiring students to use their understanding of relevant theories relating to corporate purpose, business ethics, corporate profitability, corporate social responsibility (CSR), corporate culture and leadership, in critiquing and evaluating the ability of Pfizer’s top management team to sustain sales growth (Lecture 7). Credit will be given for critical analysis of data/information, your strength of arguments and ability to apply relevant theory to practice. Question Four: Personal reflections on learning In 350-400 words reflect on the impact of this assessment on your understanding of the global pharmaceutical industry competition, highlighting the key benefits and limitations of the global convergence and international diversity perspectives, the merits and demerits of choosing strategic alliances, M&As, and the role of corporate management and strategic leadership, in sustaining profitability through responsible policies and practices.
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