business assignment

Executive Summary

Pfizer has a long history in the biopharmaceutical industry, and a lengthy list of mergers and acquisitions. It has vast experience in creating lasting partnerships in the research and development, manufacturing, distributing, and marketing of its products. Pfizer seeks to improve the health of people everywhere through education and by making medications more accessible, which translates into better health beyond just the people it would employ here. Although there are risks such as potential job loss and environmental factors, the benefits outweigh these risks, and therefore it is recommended to allow Pfizer to set up operations in this country.

Company Description

Pfizer Inc. began operations in 1849 and has become the largest company specializing in biopharmaceuticals.It has operations in over 150 countries, with its headquarters located in New York, New York, USA. Pfizer employs more than 91,500 people and earned nearly $59 billion in 2012 revenues (Mergent, 2013). Operating in the pharmaceutical industry, it carries out the research, development,production,and marketing of goodssuch as over-the-counter and prescription medicines, vaccines, and consumer healthcare products. Advil, Lyrica, Lipitor, Celebrex, Viagra, and Prevnar are just a few of the blockbuster name brands made at Pfizer (Pfizer Inc., 2013).It recently divided its operations into three units, Primary Care, Specialty Care & Oncology, and Emerging Markets & Established Products, dropping the Animal Health and the Nutrition units through sales to Zoetis and Nestlé respectively (Staton, 2013). The Emerging Markets unitenables Pfizer’s vaccines and other medicines to reach developing countries, while Established Products handle the drugsthat have or will soon lose patent protection, as well as medicines acquired through licensing(Pfizer, 2013). Although revenues have been decreasing asa direct result of patents expiring, net profit is again increasing(Mergent, 2013) and appears to be stable in 2013 (U.S. Securities and Exchange Commission, 2013). Recent Income Statements and Revenues for the top-ten biopharmaceutical products can be viewed in Appendix A. Pfizer recently merged with the only remaining division of Wyeth, in India (Reuters, 2013); the original merger occurred in 2009 and led to the 2010 announcement that eight plants would be shut down in an effort to remain competitive and to prevent price increases (TopNews, 2010).

Company’s International Strategy

Pfizer grew the business internationally through mergers, acquisitions, and partnerships, which led to it being the world’s leading biopharmaceutical company. It has 100% ownership of all its numerous subsidiaries andmaintains operations in countries where it has acquired established companies that can continue to contribute to the growth of the business(Mergent, 2013). Its international strategy is closest to a transnational strategy due to the high costs of research, development, and patent protection, and the pressure of competition once products are off patent. Local responsiveness is high due to countries having different medical needs and regulations, and the price has to be responsive to the wallets of each population. In fact, it has tailored pricing in at least 56 emerging markets in an effort to make its products more accessible to patients (Pfizer Inc., 2013).Pfizer’s recent steps have been to cut back operations, which are deemed redundant and invest in profitable businesses, as demonstrated by the actions taken after merging with their competitor, Wyeth (TopNews, 2010). Other competitors include GlaxoSmithKline, Novartis, Johnson & Johnson, and Merck & Co., Inc. (Mergent, 2013); however, Pfizer and Merck & Co. recently joined forces to develop a new type-two diabetes drug (Nordqvist, 2013), confirming that Pfizer’s primary growth strategy is to develop new drugs through partnerships.Pfizer operates in both developing and developed countries with an aim to promote health through preventative medicine, treatments, and remedies to the illnesses and diseases existing today.Pfizer Investments in Health, an outreach partnership program which aims to, according to its website,‘treat, teach, build, and serve’ in communities where preventable health issues are a major concern (Pfizer Inc., 2013), is an example of what is believed to be its global philanthropic strategy,and shows that it is willing to go anywhere in the world. Pfizer’s main research and development is done in USA, Canada, France, Australia, Japan, China and UK, where it wants to develop new drugs. Clinical trials happen the world over, as seen in Appendix B, and it expects to spend $6.5 billion globally on research and development in 2013 (Pfizer Inc., 2013).It has 80+ production plants, the largest located in Belgium, Singapore, Ireland, Japan, Germany, Puerto Rico, Italy, China, and the U.S (Mergent, 2013). Because Established Products are threatened by generic competition, Pfizer taps into underserved markets to sell these branded products at a reasonable price and by manufacturing generics through its subsidiaries (Pfizer Inc., 2013). Pfizer’s greatest challenge is the ongoing loss of patent protection for its blockbuster drugs, for example Lipitor, which lost patent exclusivity in November 2011 in the USA, and has subsequently lost this right in other major markets(SWOT Analysis, 2013). The effects of Lipitor’s patent loss can be seen via shrinking revenues, from 9.5 billion in 2011 to 3.9 billion in 2012 (see Appendix A; Pfizer Inc., 2013).Generic productions of Lipitor, and other big name brands upon loss of patent protection, pose the biggest threat to revenue growth.Fortunately, Pfizer does have strength in its marketing abilities, which helps with sales of new products and popular brands. It also has good partnerships with smaller companies from emerging markets, which bolster its growth (SWOT Analysis, 2013). It is believed that Pfizer is being fiscally responsible, cutting back redundant operations tomake up for revenue losses, and establishing new operations that can fulfill its goals. The bottom line is still strong; however, it needs to offset revenues lost due to patents ending because it cannot keep cutting expenses and selling off units indefinitely. A long-term strategy needs to find new revenue sources, which emerging markets may provide.

Company’s Marketing Approach

Pfizer’s major focus,for patent protected and over-the-counter products, are markets in developed countries, mainly USA and Europe; however, it sells products worldwide, as seen on the map in Appendix C. Furthermore, emerging markets revenues are growing while developed markets revenues are shrinking; for example, revenue growth in the US have been flat, whereas revenue share for emerging markets went from 17.2% to 20.3% from 2011 to 2012 (Pfizer Inc., 2013). So while the majority of sales still occur in the United States, likely because its main operations are there and the brand names are well advertised and recognized, it is thought the greatest potential for growth stems from developing countries. Marketing is one of its major strengths, which makes it the go-to company for small and medium sized companies for marketing partnerships. This is evidenced in thehigh revenues of the Established Products & Emerging Markets unit, achieved through licensing agreements and joint marketing ventures.Brand name products facing competition from generics can be marketed in developing countries, and new products can be launched worldwide where there is need (SWOT Analysis, 2013). Pfizer has a long history of being sued for its marketing practices, most recently being found guilty in 2010 for racketeering fraud, in 2011 for illegally marketing, in 2012 for unsubstantiated claims, and improper marketing (Mattera, 2013). It is believed that with its diverse portfolio of vaccines and medications, Pfizer can tap into any market for either the purpose of profit or philanthropy. As mentioned above, Pfizer has the opportunity to customize its productsbased on the medical and pricing needs of each country. Advertising in developed countries is primarily done through television, but print and online ads, as well as targeting doctors who prescribe its drugs and the retailers who shelve its products, are revenue drivers as well. To prevent counterfeit drugs from reaching consumers, Pfizer strictly enforces distribution of its products through its authorized distributors. Consumers purchase these products mainly in pharmacies and grocery stores(Pfizer Inc., 2013). Pfizer’s mode of communication is through its websites and through social media.

Company’s Supply Chain Approach

Pfizer operates 80+ manufacturing sites, with 175 distribution centres in its major markets, using about 200 transportation suppliers to distributeits products from manufacturing to resale locations (Pfizer Inc., 2013). It has a huge network of internal and external partners aiding in the production of medicines, all under the Pfizer Global Supply umbrella and all linked via the cloud (Bowman, 2012). Because every country has different regulations for drugs, Pfizer uses market segmentation supply chain management, keeping production in the markets where it sells, and sometimes by outsourcing. It has high standards and thus performs audits of both its own facilities and partner sites, to ensure quality is consistent with the expectations of consumers. Although price is a contributing factor in the selection of a supplier, the main concern is adherence to the Pfizer standards of quality, and Pfizer will work with its suppliers to help achieve this goal. Because of the risky nature of theindustry for counterfeit drugs, it expects suppliers to manage the chain of custody of its products. To this end, it has quality assurance units in each market, staffed with people whoknow the local environment and languages, allowing them to monitor the operating procedures of its suppliers (Pfizer Inc., 2013). Pfizer’s recent foreign direct investment comes in the form of partnerships and mergers, where new drugs and vaccines can be developed, and existing drugs can be tailored to meet local standards. Reducing transportation costs by operating in the markets it serves makes sense since it ships high valued goods, not high weight. Further, Pfizer shares its expertise in training and product development with its partners, allowing it to set up production operations anywhere it can bring its technology, using unskilled to semi-skilled labour for low end positions, with the main challenge in emerging markets being a lack of sufficient systems available for processing products, which are temperature-sensitive (Bowman, 2012).

Company’s Human Resource Management Approach

Pfizer prides itself on being a highly regarded employer which values workplace diversity, and has won Top Employer awards several years in many countries. It offers benefitscustomizable to fit employee needs as well as extensive training and growth opportunities including a Career Development Resource Centre as well as a mentorship program, both available online to its employees.Through its Global Health Fellows program, employees can volunteer to travel for three to six months to help train healthcare providers in developing countries in an effort to improve health and available care (Pfizer Inc., 2013).It is believed that these values are also applied to operations in developing countries, tailored to the needs of each country, taking into considerationits levels of education, culture, history, and employment expectations, when developing its HR policies. By adapting to needs and hiring locally, companies with a good HRM system will havehappier employees and should prove to be more successful than companies’ trying a one size fits all approach to HRM.

Analysis

Benefits : Pfizer has a strong benevolent side with programs such as Pfizer Investments in Health, and Global Health Fellows, showing that it does work towards its vision, as stated on Pfizer’s website, to “be recognized for meeting the diverse medical needs of patients in Emerging Markets around the world in an innovative, socially responsible and commercially viable manner” (2013). It has a global policy to comply with the local laws, and has strong health, safety and environmental policies, which are enforced through regular audits. It is believed that Pfizer would provide health benefits to its employees, as well as training and education as needed, and that jobs would be created with its policy to hire locally.

Risks: Pfizer has recently been closing plants and selling off units in an effort to offset shrinking revenues by reducing expenses. Pfizer tends to expand operations through mergers and acquisitions, which means there is the risk of it closing redundant operations, causing the loss of jobs already here, or the exploitation of employees for their lower wages, in order to cut back its expenses and push profitability. Lastly, prior to 2005, Pfizer had several environmental charges and settlements so there remains a risk that it may exploit potential loopholes in local policies.

Recommendation and Conclusion

Although the risks of allowing Pfizer to operate in this country are valid, it can be concluded that these risks are outweighed by the potential benefits. The risks are less likely to be realized as Pfizer is only partnering and merging with, or acquiring businesses with which it can increase its profitability, so it is not looking to purchase redundant operations just to lay employees off. Pfizer has improved its environmental policies, with no issues arising since 2005, showingit has become more environmentally responsible, and therefore this is unlikely to be an issue. The benefits of entry are more likely to be realized; added jobs, better health, improved education, and increased revenues. Pfizer is a well-established, reputable company with excellent employment practices, and it is recommended that it be permitted to set up operations in this country.

Appendix A

Part 1 – Partial Consolidated Income Statement

Part 2: Revenues - Major Biopharmaceutical Products (Top 10) -in millions

Source: Pfizer.com, Annual Reports

Appendix B

Clinical Trials