RESEARCH AND DEVELOPMENT IN A GLOBAL PHARMACEUTICAL INDUSTRY

Document Type:Thesis

Subject Area:Business

Document 1

The continued rise of innovative capabilities by up-coming specialty pharmaceutical firms pose concerns for large pharmaceutical organizations forcing organizations such as Pfizer and GlaxoSmithKline to strike strategic alliances or M&A’s in their bid to regain market share and remain competitive. However, for this organization to realize long-term R&D objectives, this study finds that it will be imperative for business managers to focus on full R&D integration. Through the application of strategic management, companies are able to develop and implement plans that embrace the company objectives and overall goal. Strategic management in corporate governance, business ethics and CSR should be designed with respective stakeholder environmental conditions in mind by altering and maximizing the internal corporate governance set-up to include both financial and non-financial players. This ensures that pharmaceutical firms stand to make gains in mutual decision making, openness, transparency and accountability to the stakeholders. Contents Abstract 2 Contents 3 Introduction 4 Q1: Competitiveness in the Global Pharmaceutical Industry 4 Q2: Strategic Alliances, M&A’s and Pfizer’s R&D Strategies 8 Q3: Pfizer’s Strategic Management and Leadership for Corporate Governance, Business Ethics, and Corporate Social Responsibility 11 Q4: Personal Reflection 14 Conclusion: 15 References 17 Introduction The global pharmaceutical industry is responsible for the development, production, and marketing of medications. This paper examines changes driven in the global pharmaceutical industries through research and development (R&D) divisions by focusing on two global corporations, that is, Pfizer and GlaxoSmithKline. This research report is divided into four parts. These include an analysis of the firms’ competitiveness in the global pharmaceutical industry, the strategic alliances, mergers and acquisitions (M&A’s), and Pfizer’s R&D strategies, Strategic Management and Leadership for Corporate Governance, Business Ethics, and Corporate Social Responsibility and lastly, conclusion entailing an individual reflection on all the above sections, in sustaining profitability through responsible policies and practices.

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Q1: Competitiveness in the Global Pharmaceutical Industry The conduct of business around the globe is no longer restricted to international trade or barriers that limit production and supply into geographical boundaries. Further, the existence of modern medicine and technology not only shapes healthcare provision and regulations but also drives new patient expectations. According to Cortez (2008), it is these existing similarities shared by nations that add to theories of convergence forcing adoption of almost similar strategic solutions. Pharmaceutical companies’ are increasingly achieving global convergence along different dimensions including removal of trade barriers, the introduction of standardized labor laws, economic interdependence, the establishment of single markets like EU, intensified competition for markets, and reduction of exchange rate volatility. Interestingly, the concept of convergence across large pharmaceutical organizations like GlaxoSmithKline and Pfizer also entrench diversity as the firms vary considerably across geographical national boundaries.

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Both Pfizer and GlaxoSmithKline are ranked among the world’s biggest pharmaceutical companies (Forbes, 2017). Global convergence provides pharmaceutical firms with large data samples where they can continue to engage in this slow and uncertain process of surveillance. As such, translational research and analysis becomes of increasing importance to both the pharmaceutical firm and the society. Reporting and data collected related to adverse drug reactions provide the basis for R&D to analyze other drug compounds in the pipeline. However, global convergence and international diversity also have its own demerits. Pharmaceutical firms venturing into new markets are faced with foreign rules, regulations, national and tax laws. In summary, global convergence has the potential to promote widespread international diversity. That is, as globalization occurs, organizations become decentralized and in turn find themselves in new diversified environs forcing them to adapt.

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GlaxoSmithKline and Pfizer managers’ must, therefore, engage in strategic and operational planning in their ‘globes’. This includes activities such as re-organization of work and setting up convergent processes for embracing diversity in thinking & action. Q2: Strategic Alliances, M&A’s and Pfizer’s R&D Strategies Over the years, rising industry challenges have made it difficult for pharmaceutical companies to sustain growth in sales and revenue. Figure 3: Merger and Acquisitions transactions value from 2006 to 2015 (in million $) Source: Vitez & Harrison (2016) Pfizer has taken part in several mergers and acquisitions since its inception in 1849 by Charles Pfizer and Erhart in New York (Pratt, 1985). Latterly, Pfizer bought Medivation a cancer drug maker biotech for $14 billion in 2015. Earlier in 2015, Pfizer acquisition of Allergan, Plc at $165 billion, a figure that would have made the largest transaction within the pharmaceutical was canceled due to US tax inversion rules (Isidore, 2016).

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Questions were also raised on the potential job loss, pains in restructuring, minimal pipeline overlap and negative publicity from its number 1 customer base, US (Levy, 2015). Whether these mergers and acquisitions have provided solid productivity benefits both in the short and long term remains a challenging question. However, even as organizations merge or acquire others, it is imperative for the business management to understand at what point the expansion will benefit or weaken productivity. This process gets even more complex for the larger pharmaceutical firms engaging in alliances or M&A’s. Industry experts argue that large pharmaceutical organizations like Pfizer may have already reached the threshold of increasing returns on an R&D scale. This was evident in the subsequent steep drop of Pfizer profits (7% revenue decrease) as soon as it lost its’ exclusive rights to sell Lipitor (Rappeport, 2012; Chao, et al.

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Large corporations such as Pfizer are also characterized by complexity in coordination and communication owing to bureaucratic nature involved in running daily activities in an alliance setting. Pfizer in its bid to embrace and adapt to changes in the business landscape and governance engages with investors and stakeholders around the globe regularly through its shareholder outreach program. This program allows Pfizer to “gain insight into the burgeoning issues at the forefront of their stakeholders’ business policies and guidelines” (Pfizer Inc, 2018). Pfizer acknowledges that good corporate governance is critical to their business. Oman (2001) defines corporate governance as a term used by both public and private institutions to include the set of regulations, business practices and laws that govern the relationship between corporate managers and stakeholders. Corporate governance entails accountability, credibility, trust and transparency components.

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Thomas et al. assert that modern managers, in their leadership capacities, wield extensive abilities to shift ethical principles of company stakeholders’ – internally and externally – in either towards a positive and negative direction. Pfizer’s statement though envisions consistent engagement with stakeholders does not stress the importance of ensuring these engagements are carried out within acceptable morals, ethics, and standard. This tact whether intentional or unintentional might be perceived by the public as full of malice. For instance, Pfizer a top pharmaceutical company only spent $6. This is however not clearly stated in its corporate governance statement. In the era of increased global competition, the omission of such vital information may be read by stakeholders as non-existent CSR. To drive change in the fast-changing 21st-century healthcare environment, where customers obtain and diffuse information in real time through social network platforms, Pfizer management must thus maintain the ability to explicitly state CSR strategic planning and activities to meet the modern customer complex demands, expectations, and values.

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Failure to address these social demands and values might prove costly to organizations as this cannot be considered good business practice in a modern global healthcare environment. Q4: Personal Reflection This section wraps up by providing personal reflections on global pharmaceutical industry impact, competition, key benefits and limitations of global convergence and international diversity perspectives and other attributes highlighted in previous sections of this study. As evidenced by this paper, corporate governance mechanisms adopted by organizations may only be beneficial to a few players. To remedy this, organizations must alter and maximize internal corporate governance set-up to include both financial and non-financial players. This will ensure that pharmaceutical firms make gains in decision-making, openness, transparency, and accountability to stakeholders. References Butts, J. B. C. Hu, H. Zhang, L. Wu, J. Managing the challenges of pharmaceutical patent expiry: a case study of Lipitor.

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Garay, L. Font, X. Doing good to do well? Corporate responsibility reasons, practices, and impacts in small and medium accomodation enterprises. International Journal of Hospitality Management, Volume 31, pp. Grogan, K. Journal of Financial Economics, Volume 53, pp. Howell, D. Eye for pharma. Online] Available at: https://social. eyeforpharma. ft. com/content/6892b926-aae3-11e0-b4d8-00144feabdc [Accessed 21 May 2018]. Johnson, G. Scholes, K. Whittington, R. McColgan, P. Agency theory and corporate governance: a review of the literature from a UK perspective, Glasgow: Department of Accounting & Finance, University of Strathclyde. Oman, C. P. Corporate governance and national development. com/corporate-governance/default. aspx [Accessed 21 May 2018]. Pfizer Inc, 2018. Pfizer corporate responsibility. Online] Available at: https://www. com/content/9820326a-9398-11e1-8ca8-00144feab49a [Accessed 21 May 2018]. Statista, 2018. Stastista: Pharmaceutical products & markets. Online] Available at: https://www.

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statista. Bartles, L. D. Strategic leadership of ethical behavior in business. The Academy of Management Executive, 18(2), pp. Turner, L. Vitez, L. Harrison, R. BioPharma Dealmakers: Trends in pharmaceutical mergers and acquisitions. Online] Available at: https://biopharmadealmakers. nature.

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