Strategic Management Case-Pfizer

Sanjaya
Tarumanegara University Post Graduate-2014
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 Pharma
Total Revenues (in Net income/ (loss) R&D Expenses (in Fortune 500
Rank Company
millions of USD) (in millions) millions) 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
Proposed Vision
We apply science and our global resources to bring therapies to
To be the biggest pharmaceutical
people that extend and significantly improve their lives through
the discovery, development and manufacture of healthcare
products. company in the world.
MISSSION
We 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
External Factor Evaluation
(EFE) Matrix
Key External Factors Weight Rating Score
Opportunities
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
Threats
1. 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)

PFIZER BMS NOVARTIS

Critical Success Factor Weight
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 Weaknessess
1. Strong brand image 1. Patent expiration
2. 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 Strengths- Weakness-
2. Opportunities in Emerging Markets Opportunities Opportunites
3. Longer life expectancy Focus on vitamins & Spinoff generic
4. High entry barriers supplements (S1, O3) brands (W1, O2)
Finance all R&D
5. Increase of chronic disease
proposal (spread the
Threats bets) (S3, O1)
1. Increase strengh of US Dollar
2. Higher effective tax rate
3. Patent Litigation settlement
4. Medicaid or other similar gov. Strength-Threats Weakness-
programs Threats
Move HQ to other
5. Development of blockbuster drugs by country with Acquire promising
competitors stronger currency competitors with
and lower tax (S3, potential
T1,4) blockbuster drugs
(W3, T5)
 SPACE Matrix
Industry Position Competitive Position Financial Position
Opportunities of
2.0 Brand image -2.0 7 A firm whose financial
Blockbuster drugs
6 strength is a dominating factor
Generic drug threats 2.0 Market share -2.0 in the industry.
5
Aggressive stratgies:
Medicaid programs 3.0 Product quality -1.0 4 Horizontal integration
Patent Litigation 3.0 Customer Loyalty -2.0 3 Market penetration
2 Product development
X axis 2.5 -1.8 0.8
1
Financial Position Stability Position 0
Revenue 7.0 Growth Potential -4.0 -7 -6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6 7
-1

Profit 6.0 Patent Expiration -3.0 -2

Competitive Industry
-3
Cash Flow 6.0
Competition among
-2.0 Position -4
Position
branded drugs
-5
Leverage 5.0 Litigation Potential -2.0
-6
Y axis 6.0 -2.8 3.3 -7

Stability Position
 IE Matrix IFE
(2.80)
4.0 3.0 2.0 1.0
4

3
Hold & Maintain
EFE Market Development
(2.70) Entry into emerging markets
Product Development
Development of new drugs
2

1
 The Grand Strategy Matrix
Rapid Market Growth
Quadrant I
1. Market Penetration to
emarging markets
2. Product Development:
R&D
3. Horizontal Integration:
Weak Acquire Competitor Strong
Competitive Competitive
Postion Postion

Slow Market Growth

QSPM Matrix
Horizontal Penetration into
Increase R&D
Key Factors Weight Integration Emerging Markets
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
The only way for a shark to
survive is to keep going
Bigger revenue forward. To maintain its
leadership, Pfizer will again
need to make a major
Cost synergy acquisition in the next 4-5
year.
-John LaMattina
Forbes.com
Acquire new expertise 5/06/2014
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 Pfizers HQ to UK: US $ 12 bio.
Astra Zenecas strong points:
Cancer immunotherapy
Pulmonary disease
Area of complimentary research:
Cardiovascular
Metabolic
Oncology
Patents: 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)