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Kevin Kato Fischer Swot Analysis 2

Kevin Kato Fischer Swot Analysis 2

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Published by: Kevin Kato Fischer on May 30, 2013
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08/10/2015

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Presentation Agenda

Purpose: To provide an in depth analysis of Teva’s current situation and strategies concluding with recommendations for future strategy and implementation for continued growth. Structure of Analysis: I. Internal Analysis – Present Situation, Financial Resources, Strengths and Weaknesses II. External Analysis
General and Operating Environment Competitive Forces & Strategy Opportunities and Threats

III. IV. V. VI.

Key Decisions Alternative Strategies Recommendations Implementation & Evaluation

Present Situation
• World leading producer of generic pharmaceuticals • Current products:
– Generics: Zocor, Zoloft – Innovative: Copaxone, Azilect

• Current generic market share:
– 18% of U.S. generic market – Significant presence in U.K. and the Netherlands – Small presence in Germany, France, Japan

• Increasing competition in “authorized” generic market • Financial Position:
– Cash flow from operations for 2006 was over $2 billion – Net sales for 2006 reached $8.4 billion, a 60% increase over 2005 – 2007 Outlook – Net sales to exceed $9 billion

Strengths
IMPORTANCE
• Low cost manufacturing strategy – esp. supply chain • Acquisition capability – size & global footprint • Highly efficient Paragraph IV pipeline • Strategic relationships
– National pharmacy chains – Israeli academic institutions (R&D)

Weaknesses
• Increasing diminishing returns on acquisitions • Heavy dependence on U.S. market • Over reliance on few products – Copaxone: 11% of revenue • Small R&D Budget

• Market leader in U.S. generics • Backward integration – active pharmaceutical ingredients

General Environment
• Increasing acceptance of generic drugs worldwide • Increasing health care costs • Aging population – esp. North America and Japan • Developing markets • Commodity nature of industry

Operating Environment
Current Customers: • Generic Drug Market
– Pharmacies – Doctors (physiciandriven markets) – Governments
Region % of Sales

North America
Europe and CIS Israel Other countries

64%
26% 6% 4%

Target Customers: • Developing markets – Latin America, India, China • Biosimilar/Niche generic and/or innovative drug markets

Competitive Forces
Potential Entrants: Big Pharma (generics) MEDIUM

Suppliers: Chemical companies LOW

Competitors: Big Pharma Sandoz, Barr, Mylan, Ranbaxy, etc.

Buyers: Pharmacies Governments Doctors MEDIUM-HIGH

Substitutes: “Authorized” generics Other generics Brand name drugs HIGH

Competitive Group Analysis
Big Pharma Teva U.S. Focus on Customers Other Generics U.S. Focus on Competitors Low High Big Pharma Teva Other Generic companies Low

Quality Perception

Teva Japan

Other Generics Japan

Price

High

Competitive Strategy
Teva • Traditionally cost leadership • Focused on national pharmacy chains • Growth driven by systematic acquisitions • Supply chain/ manufacturing scale advantages Big Pharma • Differentiation • Focus on markets by drug purpose • Heavy investment in R&D • Higher margins
Other Generic Companies

• 4th generic strategy • Mimicking TEVA

Opportunities
• • • • • • • Many blockbuster patents expiring in near future Potential consolidation in global generic market Niche and biosimilar markets largely untapped Decreasing government regulation in Asian markets Developing markets need for low cost health care Europe opening up to generic drugs Innovative pharmaceutical markets

IMPORTANCE

Threats
• New “low-cost” entrants from India and Eastern Europe • Increasing competition for “authorized” generic drugs • Big Pharma plans to enter generic markets • Increasing complexity in drug formulations • Erosion of generic drug prices in the U.S. IMPORTANCE

Analysis of Environmental Trends
- New entrants from India and Eastern Europe - Big Pharma plans to enter generic markets - Increasing competition for “authorized” generic drugs - Global demand for generics increasing - Innovative pharmaceutical markets - Increasing complexity in drugs - Niche and biosimilar markets largely untapped

Impact

High

- Erosion of generic prices in the U.S.

- Many blockbuster patents expiring in near future

Low

Low Probability of Growth

High

Key Decision
How to expand in the future? • Continue U.S. and similar market consolidation • Expand into global branded generic markets
– Large, established markets (Japan, Germany, France) – Emerging markets (Latin America, Asia)

• Increase specialization
– Niche and biosimilar generic drugs – Innovative drugs

• Or some combination

Continue consolidation in U.S. market
Pros • Streamlines the market • Savings through synergy • Increased scale/production • Less price competition • Easily add products/markets Cons • Increased anti-trust risk • Incompatible networks • Increases G&A expenses • Declining prices for commodity generics

Expand into Emerging Markets
Pros • Large potential market • Rapidly growing prescription market in Latin America • Current core competencies match market needs • Ivax acquisition included access to Latin American markets
Cons

Expand into large, established markets
Pros • Instant access to: • High usage of prescription drugs • Higher price point Cons • Physician based system • Prefer name brand products
– – Harder to enter High sales cost – – Large Populations Wealthy Population

• High competition from local companies (i.e. Ranbaxy in India) • Highly regulated markets

Niche and biosimilar markets
Pros • Higher margins than current commodity generics • Untapped segment of generic market • Rapid growth expected and increasing importance • Very few competitors
Cons

Innovative Drugs
Pros • 100% market share • Portfolio growth and diversity • High profitability over longer period Cons • Heavy capital & R&D investment • High risk of failure • Different business model than generics

• Higher production costs • Higher initial capital requirements • Require physician prescription • Regulations in U.S. undecided • Sandoz first to market in Europe

Recommendations
How to expand in the future? • Maintain market share in U.S. • Expand into global markets that deregulating to become more pharmacist driven • Follow CVS and the like into emerging markets • Increase specialization into niche and biosimilar generic drugs

Implementation Challenges
• Unknown Factors
– New Markets

• Production
– Estimating production for emerging markets

• Price
– Creating a proper pricing models for various markets

Implementation
• The prior recommendations take into account the Strength, Weaknesses, Opportunities and Threats. • TEVA should partner with large national pharmacy chains to enter emerging markets. • Further TEVA should enter developed markets as they deregulate to pharmacist driven markets. • TEVA should also take advantage of its current relationship with academic institutes in order to create niche and biosimilar product, which have a lower R&D cost than innovative products.

Evaluation
• TEVA should evaluate generic sales on a quarterly basis for each country they sell to. • Research should be done to gauge:
– Consumer reaction to the introduction of generics in markets – Consumers’ expectations of appropriate price, placement, and quality

Questions?

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