SanjayaTarumanegara University Post Graduate-2014

Strategic Management Case-Pfizer

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

Big PharmaRank 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

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.

MISSSIONWe 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.

External Factor Evaluation (EFE) Matrix

Key External Factors Weight Rating ScoreOpportunities

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

Threats1. 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

Competitive Profile Matrix (CPM)

Critical Success Factor WeightPFIZER 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

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

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 expiration2. 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 settlement4. Medicaid or other similar gov. programs5. Development of blockbuster drugs by competitors

SPACE MatrixIndustry Position Competitive Position

Opportunities of Blockbuster drugs

2.0 Brand image -2.0

Generic drug threats 2.0 Market share -2.0

Medicaid programs 3.0 Product quality -1.0

Patent Litigation 3.0 Customer Loyalty -2.0

X axis 2.5 -1.8 0.8

Financial Position Stability Position

Revenue 7.0 Growth Potential -4.0

Profit 6.0 Patent Expiration -3.0

Cash Flow 6.0Competition among branded drugs

-2.0

Leverage 5.0 Litigation 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

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

The Grand Strategy MatrixRapid Market Growth

Slow Market Growth

Weak Competitive

Postion

Strong Competitive

Postion

Quadrant I1. Market Penetration to

emarging markets2. Product Development:

R&D3. Horizontal Integration:

Acquire Competitor

QSPM MatrixKey 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

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.com5/06/2014

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 OncologyPatents: Pfizer 80%, AZ 20%.

Rejected in May 26, 2014.

Still in consideration. Main reason: Blackrock.

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)