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Pfizer-Strategic Management Case

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Strategic Management Case of Pfizer. From text book by David, Fred R. "Strategic Management Concepts & Cases",13 th Ed. Assignment on Strategic Management Class in Universitas Tarumanegara Post Graduate class.

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Pfizer-Strategic Management Case

  1. 1. Sanjaya Tarumanegara University Post Graduate-2014 Strategic Management Case-Pfizer
  2. 2. Company Overview  Founded 1849 in New York City by Charles Pfizer & Charles Erhart as a manufacturer of fine chemicals.  2014: an American multinational pharmaceutical  Popular products: Lipitor, Lyrica, Diflucan, Zithromax, Viagra, Celebrex Revenue US$ 53.8 bio (↓12.2) Net Income US$ 22.003 bio Total Assets US$ 172.101 bio Total Equity US$ 76.620 bio Employees 77.700 Websites www.pfizer.com *2013
  3. 3. Big Pharma Rank Company Total Revenues (in millions of USD) Net income/ (loss) (in millions) R&D Expenses (in millions) Fortune 500 Ranking[1] 1 Johnson & Johnson[2] 71,312 13,831 2,411 121 2 Pfizer[4] 51,584 22,003 6,678 191 3 Roche[5] 52,080 12,652 9,678 196 4 GlaxoSmithKline[7] 45,402 8,015 3,929 170 5 Novartis[9] 57,920 9,292 9,600 157 6 Sanofi[11] 44,563 9,043 1,685 238 7 AstraZeneca[13] 25,711 8,390 4,269 468 8 Abbott Laboratories[15] 21,848 2,576 1,452 136 9 Merck & Co.[17] 44,000 4,404 7,503 241 10 Bayer HealthCare[19] 54,211 4,702 4,306 154 11 Eli Lilly[21] 23,113 4,684 5,531 129 12 Bristol-Myers Squibb[23] 16,385 2,340 3,715 176 *Based on Fortune 500 Ranking of 2013
  4. 4. Vission & Mission  VISION We apply science and our global resources to bring therapies to people that extend and significantly improve their lives through the discovery, development and manufacture of healthcare products.  MISSSION We will  develop bold and innovative partnerships  reach patients we have never reached before  provide medicines and services in an affordable manner  be recognized for having the best talent in healthcare  becoming a leading biopharmaceutical company in Emerging Markets Proposed Vision To be the biggest pharmaceutical company in the world.
  5. 5. External Factor Evaluation (EFE) Matrix Key External Factors Weight Rating Score Opportunities 1. Technology advancement 0.20 3 0.60 2. Opportunities in Emerging Markets 0.10 3 0.30 3. Longer life expectancy 0.10 4 0.40 4. High entry barriers 0.10 4 0.40 5. Increase of chronic disease 0.10 2 0.20 Threats 1. Increase strengh of US Dollar 0.05 2 0.10 2. Higher effective tax rate 0.10 2 0.20 3. Patent Litigation settlement 0.10 3 0.30 4. Medicaid or other similar gov. programs 0.05 2 0.10 5. Development of blockbuster drugs by competitors 0.10 1 0.10 Total 1.00 2.70
  6. 6. Competitive Profile Matrix (CPM) Critical Success Factor Weight PFIZER BMS NOVARTIS Rating Score Rating Score Rating Score Innovation 0.15 2 0.30 3 0.45 4 0.60 People Management 0.05 1 0.05 3 0.15 4 0.20 Use of Corporate Assets 0.05 2 0.10 4 0.20 3 0.15 Social Responsibility 0.10 3 0.30 4 0.40 3 0.30 Quality of Management 0.15 2 0.30 4 0.60 4 0.60 Financial Soundness 0.15 2 0.30 3 0.45 4 0.60 Long-term Investment 0.10 2 0.20 3 0.30 3 0.30 Quality of Products 0.15 2 0.30 4 0.60 3 0.45 Global Compatitiveness 0.10 3 0.30 1 0.10 4 0.40 Total 1.00 2.15 3.25 3.60
  7. 7. Internal Factor Evaluation (IFE) Matrix Key Internal Factors Weight Rating Score Strength 1. Strong brand image 0.10 3 0.30 2. The most profitable company 0.10 3 0.30 3. Big pile of cash 0.20 4 0.80 4. Strong sales force 0.20 4 0.80 Weakness 1. Patent expiration 0.05 2 0.10 2. Too big to grow organically 0.10 2 0.20 3. No potential new blockbuster drugs 0.10 1 0.10 4. Litigation in several courts around the world 0.05 2 0.10 5. Internal politics 0.10 1 0.10 Total 1.00 2.80
  8. 8. SWOT Matrix Strategies Strengths- Opportunities •Focus on vitamins & supplements (S1, O3) •Finance all R&D proposal (spread the bets) (S3, O1) Weakness- Opportunites •Spinoff generic brands (W1, O2) Strength-Threats •Move HQ to other country with stronger currency and lower tax (S3, T1,4) Weakness- Threats •Acquire promising competitors with potential blockbuster drugs (W3, T5) Strengths Weaknessess 1. Strong brand image 1. Patent expiration 2. The most profitable pharmaceutical company in the world 2. Too big to grow organically 3. Big pile of cash 3. No potential new blockbuster drugs 4. Strong sales force 4. Litigation in several courts around the world 5. Blockbuster drugs 5. Internal politics Opportunities 1. Technology advancement 2. Opportunities in Emerging Markets 3. Longer life expectancy 4. High entry barriers 5. Increase of chronic disease Threats 1. Increase strengh of US Dollar 2. Higher effective tax rate 3. Patent Litigation settlement 4. Medicaid or other similar gov. programs 5. Development of blockbuster drugs by competitors
  9. 9. SPACE Matrix Industry Position Competitive Position Opportunities of Blockbuster drugs 2.0Brand image -2.0 Generic drug threats 2.0Market share -2.0 Medicaid programs 3.0Product quality -1.0 Patent Litigation 3.0Customer Loyalty -2.0 X axis 2.5 -1.8 0.8 Financial Position Stability Position Revenue 7.0Growth Potential -4.0 Profit 6.0Patent Expiration -3.0 Cash Flow 6.0 Competition among branded drugs -2.0 Leverage 5.0Litigation Potential -2.0 Y axis 6.0 -2.8 3.3 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 Financial Position Stability Position Competitive Position Industry Position •A firm whose financial strength is a dominating factor in the industry. • Aggressive stratgies: •Horizontal integration •Market penetration •Product development
  10. 10. 1 2 3 4 1.02.03.04.0 IE Matrix EFE (2.70) IFE (2.80) Hold & Maintain •Market Development •Entry into emerging markets •Product Development •Development of new drugs
  11. 11. The Grand Strategy Matrix Rapid Market Growth Slow Market Growth Weak Competitive Postion Strong Competitive Postion Quadrant I 1. Market Penetration to emarging markets 2. Product Development: R&D 3. Horizontal Integration: Acquire Competitor
  12. 12. QSPM Matrix Key Factors Weight Horizontal Integration Penetration into Emerging Markets Increase R&D AS TAS AS TAS AS TAS Opportunites Sales in emerging markets 0.15 2 0.30 4 0.60 1 0.15 Longer life expectancy 0.15 3 0.45 1 0.15 4 0.60 Increase appetite in vitamin products 0.10 3 0.30 1 0.10 2 0.20 Threats Medicaid or similar government program 0.20 2 0.40 4 0.80 1 0.20 Generic drugs 0.20 1 0.20 4 0.80 1 0.20 Competition from Branded Products 0.20 3 0.60 2 0.40 4 0.80 Total 1.00 2.25 2.85 2.15 Strengths Increase brand awareness 0.20 4 0.80 3 0.60 1 0.20 Bigger sales force 0.15 4 0.60 3 0.45 1 0.15 Stronger financial stability 0.20 4 0.80 2 0.40 3 0.60 Weakness Patent expiration 0.20 3 0.60 1 0.20 4 0.80 Litigation processed 0.10 2 0.20 3 0.30 4 0.40 Internal politics 0.15 1 0.15 2 0.30 4 0.60 Total 1.00 3.15 2.25 2.75
  13. 13. Strategy: Horizontal Integration  Acquire other big pharma companies to be the biggest and baddest pharmaceutical company in the world. Tax inversion Bigger revenue Cost synergy Acquire new expertise “The only way for a shark to survive is to keep going forward. To maintain its leadership, Pfizer will again need to make a major acquisition in the next 4-5 year.” -John LaMattina Forbes.com 5/06/2014
  14. 14. Proposed Pfizer – Astra Zeneca Merger  The offer: US$ 117 billion of US$ 92 per share.  Pfizer will hold 74% of the combined company.  Tax benefit of moving Pfizer’s HQ to UK: US $ 12 bio.  Astra Zeneca’s strong points:  Cancer immunotherapy  Pulmonary disease  Area of complimentary research:  Cardiovascular  Metabolic  Oncology Patents: Pfizer 80%, AZ 20%.  Rejected in May 26, 2014.  Still in consideration. Main reason: Blackrock.
  15. 15. Thank You Mergers in the industry are done out of weakness. We are not weak.” -Bill Steere (Pfizer CEO 1991-2001, a year before acquiring Warner-Lambert)

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