Organizational behavior
krilee
week_5.docxPART 1
Apotex And Bristol-Myers Squibb
Peter Dolan survived many crises in his 5-year tenure as CEO of drug giant Bristol-Myers Squibb, including a corporate accounting scandal, allegations of insider trading, Federal Bureau of Investigation (FBI) raids of his office, and a stock price that dropped 60 percent during his tenure. But in the end, what may have done Dolan in was his negotiation performance against the head of Apotex, a Canadian drug company founded by Dr. Barry Sherman.
At its peak, Plavix—a drug to prevent heart attacks—was Bristol-Myers's best-selling drug and accounted for a staggering one-third of its profits. So when Apotex developed a generic Plavix knockoff, Dolan sought to negotiate an agreement that would pay Apotex in exchange for a delayed launch of Apotex's generic competitor. Dolan sent one of his closest lieutenants, Andrew Bodnar, to negotiate with Sherman. Bodnar and Sherman developed a good rapport and at several points in their negotiations asked their attorneys to leave them alone. At one key point in the negotiations, Bodnar flew to Toronto alone, without Bristol-Myers's attorneys, as a "gesture of goodwill. The thinking was that the negotiations would be more effective this way."
As Dolan, Bodnar, and Bristol-Myers became increasingly concerned with reaching an agreement with Sherman and Apotex, they developed a blind spot. Privately, Sherman was betting that the Federal Trade Commission (FTC) wouldn't approve the noncompete agreement the two parties were negotiating, and his goal in the negotiation was to extract an agreement from Bristol-Myers that would position Apotex favorably should the FTC reject the deal. Indeed, he nonchalantly inserted a clause in the deal that would require Bristol-Myers to pay Apotex $60 million if the FTC rejected the deal. "I thought the FTC would turn it down, but I didn't let on that I did," Sherman said. "They seemed blind to it."
In the meantime, Apotex covertly began shipping its generic equivalent, and it quickly became the best-selling generic drug ever. Thus, Sherman also managed to launch the generic equivalent without Bristol-Myers even considering the possibility that he would do so while still engaged in negotiations.
"It looks like a much smaller generic private company completely outmaneuvered two of the giants of the pharmaceutical industry," said Gbola Amusa, European pharmaceutical analyst for Sanford C. Bernstein & Company. "It's not clear how or why that happened. The reaction from investors and analysts has ranged from shock to outright anger." Within a few months, Dolan was out at Bristol-Myers (Carreyrou & Lublin, 2006; Saul, 2006).
Based on the above reading and the knowledge gained from your assigned readings, respond to the following questions:
•What principles of distributive negotiation did Sherman use to gain his advantage?
•Do you think Sherman behaved ethically? Why or why not?
•What does this incident tell you about the role of deception in negotiation?
(NEED 2-4 PARAGRAPHS WITH REFERENCES)
PART 2
(Need at least 2 pages, apa perfect and references)
Siemens' Simple Structure
There is perhaps no tougher task for an executive than to restructure a European organization. Ask former Siemens CEO Klaus Kleinfeld.
Siemens, with 77 billion euros in revenue in 2008, some 427,000 employees, and branches in 190 countries, is one of the largest electronics companies in the world. Although the company has long been respected for its engineering prowess, it's also derided for its sluggishness and mechanistic structure. So when Kleinfeld took over as CEO, he sought to restructure the company along the lines of what Jack Welch did at General Electric. He has tried to make the structure less bureaucratic so decisions are made more quickly. He spun off underperforming businesses. And he simplified the company's structure.
Kleinfeld's efforts drew angry protests from employee groups, with constant picket lines outside his corporate offices. One of the challenges of transforming European organizations is the customary active participation of employees in executive decisions. Half the seats on the Siemens' board of directors are allocated to labor representatives. Not surprisingly, the labor groups did not react positively to Kleinfeld's GE-like restructuring efforts. In his efforts to speed those efforts, labor groups alleged, Kleinfeld secretly bankrolled a business-friendly workers' group to try to undermine Germany's main industrial union.
Due to this and other allegations, Kleinfeld was forced out in June 2007 and replaced by Peter Löscher. Löscher has found the same tensions between inertia and the need for restructuring. Only a month after becoming CEO, Löscher was faced with a decision whether to spin off the firm's underperforming 10 billion-euro auto parts unit, VDO. He had to weigh the forces for stability, which want to protect worker interests, against US-style pressures for financial performance. One of VDO's possible buyers is a US company, TRW, the controlling interest of which is held by Blackstone, a US private equity firm. German labor representatives have derided such private equity firms as "locusts." When Löscher decided to sell VDO to German tire giant Continental Corporation, Continental promptly began to downsize and restructure the unit's operations.
Löscher has continued to restructure Siemens. In mid-2008, he announced elimination of nearly 17,000 jobs worldwide. He also announced plans to consolidate more business units and reorganize the company's operations geographically. "The speed at which business is changing worldwide has increased considerably, and we're orienting Siemens accordingly," Löscher said.
Since the switch from Kleinfeld to Löscher, Siemens has experienced its ups and downs. Since 2008, its stock price has fallen 26 percent on the European stock exchange and is down 31 percent on the New York Stock Exchange. That is better than some competitors, such as France's Alcatel-Lucent (down 83 percent) and General Electric (down 69 percent), and worse than others, such as IBM (up 8 percent) and the Swiss/Swedish conglomerate ABB (down 15 percent).
Though Löscher's restructuring efforts have generated far less controversy than Kleinfeld's, that doesn't mean they went over well with all constituents. Of the 2008 job cuts, Werner Neugebauer, regional director for a union representing many Siemens employees, said, "The planned job cuts are incomprehensible nor acceptable for these reasons, and in this extent, completely exaggerated."
When asked by a reporter whether the cuts would be controversial, Löscher retorted, "I couldn't care less how it's portrayed." He paused a moment, then added, "Maybe that's the wrong term. I do care."
Based on the above reading and the knowledge gained from your assigned readings, respond to the following questions:
•What do Kleinfeld's efforts at Siemens tell you about the difficulties of restructuring organizations?
•Why do you think Löscher's restructuring decisions have generated less controversy than did Kleinfeld's?
•Assume a colleague read this case and concluded "This case proves restructuring efforts do not improve a company's financial performance." How would you respond to this statement?
•Do you think a CEO who decides to restructure or downsize a company takes the well-being of employees into account? Should he or she do so? Why or why not?
•What were the forces for change?
•What were the restraining forces? How would you overcome them?
•Use Kotter's Eight-Step Plan for implementing change and explain how you would implement this change at Siemens. Be sure to include any organizational development tools that you might use (Davidson, 2008; Esterl & Crawford, 2007; Ewing, 2007; Frey, 2008 ).
Support your responses with examples.
Cite any sources in APA format.
