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Analysis of Pfizer Company Name Course code Institution Date of submission

2 Analysis of Pfizer Company Introduction The pharmaceutical industry has gone through a lot of evolution; however, it is usually faced with an unusual strategic environment which has raised great concern to industrialists in this sector. Payers and regulators have drawn attention to environmental pressures and consequently discussing the key forces which are currently driving the industry. The issues found included, addressing unmet medical needs, the importance of innovation and time to the market and lastly globalization. However with these factors still in mind, the industry continued to experience an increasing hostile environment and a decline in R&D productivity which led to waves of job losses (US Census Beruae, 2008). This sparked a fresh wave of consolidation in the industry. An instance of such a company which was affected in the pharmaceutical industry is the Pfizer Company. This paper seeks to critically analyze the company in terms of its business strategy and performance as well as suggest recommendations which will help the company prosper in the challenging economic market (The Washington Post, 2005) About Pfizer Company Pfizer Company is the worlds largest pharmaceutical company, with its annual revenue approximated at 13 billion USD. Its main product which has led to its remarkable revenues and contributes to almost a third of the companys turnover is the block-buster cholesterol lowering drug Lipitor. However in the year 2011, the drug faced a patent expiry which led to dramatic losses in sales value. Additionally, a key drug which was supposed to replace the Lipitor had failed terribly during its late stage clinical testing. This made investors in the company to start

3 loosing hope in the company. However, despite the fact that there was nothing wrong with the R&D activities and the balance sheets, something was a miss in the company. In order to find out what needed to be done, this paper seeks to strategically analyze the companys position and make any necessary recommendations. Overview of the pharmaceutical industry The pharmaceutical company can be characterized by factors such as highly risky, lengthy R&D(development) processes and researches, stiff competition in terms of intellectual property, governmental regulations which are stringent and purchaser pressures which are powerful. Establishment of new drugs is usually costly and timely and most of the drugs fail in terms of verification and returns. In a number of countries, the industry is usually subjected to monopsony meaning the government is the powerful and effective purchaser. The three main competitors in the market are; Pfizer, AstraZeneca and Glaxosmithkline(Manhattan Institute For policy research,2008). SWOT Analysis of Pfizer Company SWOT analysis is an analytic method which is employed in the categorization and identification of important internal and external factors which are mostly faced by an organization. The acronym for SWOT means strength, weaknesses (these are internal factors) and Opportunities and threats (these are external factors) which might be facing a company. SWOT analysis is important since it offers information which aids a company to match its capabilities and resources in the competitive environment which it exist. Therefore it massively contributes to the process of strategic planning in an organization and can be used in the business development process and management as a dynamic part (Albert, 2005).

4 Strengths Well established Brand Company Ranked in Position one in the global pharmaceutical indusrty It has a lot of revenues Use of vaccine as a key revenue generator Sales and marketing are well established Lipitor as the worlds best drug Strong balance sheet Broad pipeline of new drugs

Weaknesses Lack of a well established strategic plan Innovation process is not reinvented Timely and costly drug innovation process A lot of failed drugs which lead to loss of investors

Opportunities Acquisition of Monsanto(Warner-Lmabert) and Pharmacia Large emerging markets in the pharmaceutical industry Innovations in the pharmaceutical industry

Threats

5 Well established competitors such as AstraZeneca and Glaxosmithkline Governmental controls and regulators Reduction of productivity by mergers Governmental and media Efforts to reduce spiral healthcare costs Low priced generics in the industry Overall damaged reputation of the pharmaceutical company by some companies Reduced R&D production in the pharmaceutical industry.

Strategic analysis for Pfizer Pharmaceuticals This section seeks to analyze the strategic position, strategic options, and the winning strategy for Pfizer Company. In addition to that necessary recommendations in regards to the strategic analysis of the company will be analyzed. There are three principles that according to Porter are essential in establishing and maintaining a strategic position in the market (Porter, 1980). According to Porter, in understanding the strategic position of an organization, the target market must be clearly identified (Porter, 1980). In the case of Pfizer the target market has already been identified. For Pfizer pharmaceuticals, the ageing population forms their biggest part of consumers. This is because majority of the people who are over sixty five years old are more likely to suffer from healthcare compared to the young people. In fact, they are four times likely to depend on drugs compared to the smaller generation. This is due to the increase in chronic disease that is affecting the aged population especially obesity. The cost leadership strategy is also another principle that has been identified that enables an organization to be strategic position (Murray, 1988). The cost leadership strategy mainly relies

6 on the organization being cost sensitive to its consumers. This can be achieved by having the lowest price in the market compared to the selling price of other organizations. There are various ways that have been identified that can assist an organization in meeting cost leadership strategy. The first tactic that is to be used is to attain a high asset turnover (Hambrick, 1983). In the case of Pfizer pharmaceuticals, this can be achieved by producing large volumes of medicine. By producing large output of drugs, this means that Pfizer will be able to use fixed costs since it is spread over a large concentration of output. Moreover, by Pfizer creating a large output, they will create an entry barrier for other pharmaceuticals who want to produce the same drug since they might be unable to achieve the standard of output that has already been set in the market. Moreover, if their competitors are unable to produce such mass of outputs, this means that they will be unable to match the low cost of production as well as the low price that they are already experiencing in the market. Moreover, in obtaining cost leadership strategy, an organization should also learn how to control and manage its supply and chain in order to achieve low cost production (Wright, 1987). One of the ways that an organization can achieve this is by purchasing the materials that they need in bulk in order to enjoy discounts. For an organization like Plitzer, they can create competitive bidding contracts in which the lowest bidder will be picked for their products. By minimizing the cost of production, the organization can offer cheap products to their consumers (Wright et al., 1990). Lastly, another way that Pfizer can achieve in creating low cost products is by producing generic drugs in order to cut on the production costs. This is because majority of the patients prefer generic drugs because they are cheap and readily available in the market. This is

7 especially true for patients who were mostly suffering from asthma and depression. A patient only turned to patent drugs when their generic drugs failed in which it was a rare case. Moreover, while the number of generic drugs is growing, the number of patented drugs is decreasing due to the small number of people who purchase them. Moreover, in creating a strategic positioning in the market, the pharmaceutical industry mainly focuses on the differentiation strategy. In the case of Pfizer, this is a good way of strategic positioning itself due to the fact that the market is saturated (Miller, 1992). For instance in the case of diabetes, it is well known that diabetes is on the rise for majority of the citizens in the UK. Therefore, majority of the industries are coming up with unique strategies. For instance, some companies have introduced the disease management initiatives where majority of the patients are sensitized on the goals of a healthcare and how they can provide themselves with cheaper alternatives at home by treating themselves. Lastly, in establishing a strategic position in the pharmaceutical market, Plitzer can use the focus strategy. The focus strategy lets organization to choose what market they want to venture in to (William, 1979). For instance, an organization can decide to venture in to an already saturated market or a new market. In the case of the pharmaceutical market, it has been found out that the cost of R& D activities is too high in which this does not guarantee success of the drug that is been tested. Therefore, it is advisable for Pfizer pharmaceuticals to venture in to the already saturate market. By producing generic drugs, this means that the organization will be able to grow and establish itself in the market. The key strategic capabilities of majority of these pharmaceutical companies are sales and marketing and R & D. Majority Of the companies in the pharmaceutical industry have the need

8 to restructure their manufacturing and production sites. For generic manufacturing industries the two sectors that are needed for efficiency in the company is the manufacturing and distribution centre. Generic manufacturing industries have grown rapidly in the market. For majority of the organizations, branded products have been displaced out of the market with the rise of generic products. This is because generic products are cost friendly. In the pharmaceutical world, over the counter medicines have proved to be of great importance. This is because they have accounted for more than half percent of the drugs being sold. Vaccines have also proved to be revenue generated. With entry barriers being high, there is need for specialized workers who are capable of handling large and complex trials at a higher success rates. This is because the success rate of vaccines is very and more so because the vaccine is hard to be created for generics. It is well known that the GDP is boosted by the pharmaceutical industry. This is majorly contributed by the selling of generic products. Moreover. There were other certain factors that have fuelled the increase in growth of the pharmaceutical industry. The 1997 direct to consumer advertisement transformed the pharmaceutical industry although the cost of providing such benefits to employees increased immensely. However, due to the recent recession in the industry, the ageing population would no afford brand drugs and therefore turned to generic drugs. Therefore, majority of the organizations who produce generic drugs would be safe regardless of whether the economic recession hits hard or not. This is because the drugs are cost friendly. Moreover, for organizations who want to internationalize, joining forces with local companies offers a great insight in how to venture in to the market. An instance case is GlaxoSmithKline.

9 Moreover, by also producing cheaper products compared to your competitors, the organization will be in a position to flourish in the new set environment due to its cheap products. In addition to that, pharmaceutical organizations with high levels of R & D are likely to become key leaders in the market. Therefore, it is important for organizations which want to place themselves strategically in the market to have strong R & D developments. For instance, the blockbuster drugs were genuine drugs that as a result of deep R & D penetrated deeply and largely in the market. One company that benefited greatly from the blockbuster drugs is the Glaxo pharmaceuticals went from being a small player in the market to a huge competitor. A blockbuster drug was a drug that offered a solution to a common disease that proved to be a headache. By the drug being efficacy and tolerable, the annual sales was likely to rise due to the way it was marketed globally. It should be also noted that blockbuster drugs were few and far. This is because the development time of such drugs is lengthening with time and the productivity of the R & D has proved to be costly. Majority of the drugs have failed on their last trials thus causing the organization billions of shillings. To tackle this issue, majority of the organizations have resorted to become both creative and efficient. For the pharmaceutical companies, they have mainly focused on a specific area exiting the whole area in order to concentrate on a specific drug. This is the only way that has been seen to contribute to success. Moreover, other pharmaceutical companies have reorganized their R & D to create smaller units which were much more affordable and to better manage them. Moreover, other companies resulted to cost-sharing which proved to be less expensive for majority of the organizations. Consequently, for pharmaceutical organizations which want to create a competitive advantage, sales and marketing has become an important strategy. A pharmaceutical industry which was in a position to create strong global market maximized its

10 profit and was in a better position to attract the best deals in the market. A traditional set up is where an organization would go to a doctor and market themselves by offering free samples. However, with the advancement of technology, new advertising methods were necessary.

SAF Test Situation analysis framework (SAF) is a method used for analytic and planning purposes. This analysis method is mostly used in terms of helping in the achievement and development of objectives made by an organization.SAF is derived from the Logical Framework approach (LAF) and the object oriented project planning (OOPP). The main components of SAF include; Stakeholders; sometimes referred to as beneficiaries. These are the ones who are interested in solving the organizational problem and will benefit from the project through its activities. The one mainly interested is the CEO,of Pfizer Jeff Kindler. Development problem; these includes the issues and problems being solved by a number of projects. Project goal; this is the main aim of the project, and it is a description of what the project tends to achieve by meeting the development problem. The aim of this project is to keep Pfizer company afloat. Main problems; these are the main precise problems being addressed in the project. Project objectives; it addresses what the aims of the project need to accomplish in terms of the major problems addressed. The objective of the company was to make amendments in Pfizer so that it could prosper

11 The problem tree; this is a tool which helps in analyzing the causes and effects of a situation. All the other components of SAF are derived form it.

Effects
Dramatic loss of sales value Failure of key drug to replace liptor Patent expiry of Liptor Declined R&D productivity

Problem

Keep Pfizer Company afloat

Lack of strategic plan

Causes

Lack of innovation Lack of globalization

Focal problems; sometimes known as root problems and are the major factors behind the main problem. These included; lack of innovation, a well established strategic plan and need for globalization. Communication objectives; they are an indication of what will be achieved by the communication intervention aims more so in relation to the focal problem and project goal. For Pfizer Company, These included formulation of a well established strategic plan, there was need for the company to come up with innovation as a key objective of the firm and lastly the company needed to work on globalization as a key factor of keeping the company afloat.

12 Communication mode design; these are a sequence of steps in where activities and media, design specifications, communication approaches and interaction groups. A number of the communication approaches are obtained from this communication mode design. Outputs; these are derived from the different modes in communication mode design and are a measurable results of the available activities in the project. The outputs to be included so as to facilitate the success of these projects were; A considerable sum of money and employment of employees who would facilitate the objectives. Activities; these are the actions carried out so as to generate the outputs in the project. These included; Formulation of a well established strategic plan, where by a number of strategic tools will be applied, hiring of new employees, development of affiliate companies for the purpose of globalization, change of strategy in terms of marketing and production. Inputs; these are the resources carried out in terms of resources and money so as to achieve the desired objectives. Cost for employment of a Well established strategic plan manager The diagram below shows the linkages used in SAF process. Development Problem Problem Tree Goal Main Problem Immediate Objectives

Focal Problems Outputs

Communication Objectives Activities Inputs

Communication Mode Design Conclusion

In conclusion, it is quite evident that despite the fact that Pfizier Company is a well established and reputable brand in the pharmaceutical industry, the company needs to reconsider its strategic

13 planning options. This is because even though the company has a broad pipeline of new drugs, a very strong balance sheet and significant amounts of cash, something had to be done so as to keep the company a float. The only way for the company to succeed in the challenging and competitive pharmaceutical industry is through an effective strategic options, plans and

recommendations as described above through the use of analytic methods such as SWOT and porters five forces analysis.

14 References Albert H,2005.SWOT Analysis for management consulting SRI Alumni Newsletter.SRI International. Experts review Molecular diagnostist.2008.Are we approaching the post block buster era?pharmacodiagnosits and rational drug development 95 to 68 Hambrick, D, 1983 An empirical typology of mature industrial product environments. Academy of Management Journal, 26: 213-230. Manhattan Institute For policy research.2008.The truth about drug innovation. Thirty-five case histories about drug history on private sectors contribution to pharmaceutical sciences.accessed on 24th January 2013 from www.manhattan-

institute.org/html/mpr/06.htm. Miller, D., 1992. The generic strategy trap" in The Journal of Business Strategy 13(1):37-41 Murray, A.I. 1988. A contingency view of Porter's "generic strategies. Academy of Management Review, 13: 390-400. Nature Review Drugs discovery.2009.lessons from 60 years of pharmaceutical innovation.pages 69 to 958. Natures review drugs discovery.From the analyst Couch.Pharmacetical industry financial performance.pages 8 to 927. Porter, M.E., 1980 Competitive Strategy: Techniques for analyzing industries and competitors

15 New York: The Free Press. Rogers, Everett M. .1962. Diffusion of Innovation. New York, USA: The Free Press. Script news.2009.25th November 2009. The economist.2008.Andrew Wittys prescription for GlacosmithKline The Washington Post.2005.February 11th 2005 Us Census Berue.2008.Income,poverty and healthcare insurance coverage in the United States William E. F, Jr., 1979. The NPV Model of StrategyThe Shareholder Value Model, in Financial Strategy: Studies in the Creation, Transfer, and Destruction of Shareholder Value Homewood, IL: Richard D. Irwin Wright, P, 1987. A refinement of Porter's strategies. Strategic Management Journal, 8: 93-101. Wright, P, Kroll M, Kedia B & Pringle, C. 1990. Strategic Profiles, Market Share, and Business Performance. Industrial Management, May 1, pp23-28.