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Example research essay topic: R Amp D Standard Of Living - 1,607 words

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Corporate strategy. Scope, Scale, 5 forces, SWOT, Direction, long term, Competitive advantages, Stakeholders 1. Direction The first key concept of strategy is the direction the company wants to follow. The direction of SmithKline Beecham clearly adjusts in order to cope with the increasing competition in the pharmaceutical industry. In 1989, SmithKline Beecham was formed out of a merger of SmithKline Beckman and the Beecham Group. Five years later, the Annual Report Chief Executive Leschly wrote: "Through a series of strategic acquisitions and disposals, SB made progress in its transformation from a company made up of four successful, but separate, businesses into a unified organisation focused on human healthcare. " To reach SB's philosophy several actions were taken by management: they were the second firm that integrated vertically (with DPS); DPS was sold in 1999 because of failed efforts to control distribution channels; It divided its operations into four and later in three businesses: SB Pharmaceuticals, SB Healthcare Services and SB Consumer Healthcare.

The direction of the management can best be seen as 'vision' because of their philosophy. They have a vision and want to achieve it, no matter what road they take. The figure below represents this approach. 2. Long term The most eye-catching trait of the current global pharmaceutical industry is that the largest pharmaceutical companies consolidate to become the number one in the industry.

For example the merger between Zeneca and Astra, which became AstraZeneca, which is now the world leading pharmaceutical company. These facts were all to the detriment of SmithKline Beecham, which became smaller in comparison with its giant competitors. SB slipped from the 4 th position in rank to the 9 th player in the market in eight years, since 1989. Therefore it focused on a merger strategy and went into merger talks with AHP and later with Glaxo Wellcome.

A merger with Glaxo would make the new combination a number one, with around 8 % market share. Currently the merger talks with Glaxo Wellcome seem to be failed, but if the goal is to be a giant, this is the road to become one. 3. Environment (STEP, Porter, SWOT) STEP Socio-cultural factors The demand for medicines changed in the last 20 - 30 years. There is a clear shift from antibiotics towards more complex drugs for cancer, heart diseases and more. The effectiveness of these drugs is more difficult to test and requires a longer R& D process. A trend of increasing use of drugs is recognised.

Consumers are showing an increasing tendency towards taking responsibility for their own health. Also a rising standard of living in many developed countries is affecting the pharmaceutical industry. Technological The industry adopts in the last decades more and more science based research technology. As a result of new analysing techniques the approval process can be reduced significantly.

There is also a change in the distribution structure of drugs. More and more drugs will be bought on the internet in the future. The computer techniques and especially the simulation techniques are increasing the speed and efficiency of the R& D process. There are also developing big technological breakthroughs in the fields of molecular biology, genetics and biochemistry and bioinformatics. This new techniques will be the start of a new generation of drugs by use of gene techniques and specific proteins. Economic Factors Governments are an important customer for the pharmaceutical industry.

Due to economic recessions a lot of governments are forced to cut costs heavily, especially in the healthcare. Use of generics is encouraged and price reductions are forced by the government. Political / legal factors The length of the approval process will determine the profitable lifetime of a drug. A long approval process will generate a short profitable lifetime due to expiring patents very shortly after approval. Governments are limiting the maximum profits allowed of pharmaceutical companies.

This may differ from country to country but the maximum profit has to be high enough in order to give an incentive towards pharmaceutical companies to produce the drugs. Because the pharmaceutical industry is thinking global, governments are flexible regarding the continuing trend towards consolidation. Reason is that a merger will generate an efficient use of R& D budget which will contribute to human welfare. Regarding the vertical integration the Federal Trade Commission mandated that: the health maintenance organisations present an open formulary as an option to its managed-care customers; prevent sharing of prescription pricing policies of competitors.

restrict access to patient records for marketing purposes. Five forces of Porter Potential entrants IT is hard to develop a new drug because the R& D for a new drug requires a lot of time and investments. Due to long approval procedures the pay off of the investment is late. Regarding the over the counter markets, the growing market volumes and margins are attracting new entrants. However, barriers to entry are high in this market and margin on over the counter drugs are lower than margins on prescription drugs.

In order to defend themselves against new entrants pharmaceutical companies are looking for a global presence into the over the counter market. Suppliers In order to reduce cost some pharmaceutical companies moved their operations abroad. Pharmaceutical companies do not have much primary supplies on which they depend heavily. Most elementary ingredients are made by the company self from wide available basic raw materials. Industry rivalry In the past decades a couple of merger waves occurred. A lot of pharmaceutical companies merged but not only with national companies, also international companies.

The pharmaceutical industry environment is nowadays a global market with a couple of very strong players in it. The trends in the healthcare industry are linking early diagnosis and prevention. The company with the best linking will have a competitive advantage. The world pharmaceutical market sales continue to increase. Buyers In the past the most important buyers were doctors and were informed personally by a salesman of a pharmaceutical company.

These days we see a clear shift of prescription drugs towards over the counter drugs. People are more and more practicing self medication due to better education and help of interactive available knowledge. Pharmaceutical companies have to direct their marketing efforts directly to the consumers. Other strategic moves in order to gain the favour of the consumers are the strategic alliances, the so called vertical integration, with health maintenance organisations. This integration will also make more information regarding effectiveness of therapies and the types of patients using specific therapies available. In despite of the advantages of this vertical integration the regulatory attention from consumer advocacy groups on this topic makes it hard to exploit the advantages.

Some vertical integration's are already made undone. Substitutes For a lot of diseases there are more drugs in order to treat the illness. Generic substitution affects profitability heavily in the pharmaceutical industry. As soon a patent is expired competition will copy the active ingredients and introduce it into the market against low prices as a result of reduced R& D expenditures. SWOT Opportunity Threat increasing use of drugs; gene technology; a merger will share knowledge and R& D; shift towards OTC drugs; rising standard of living; computer technology for developing and testing; less legal barriers for merger; the average age of the population is increasing. complexity new drugs; cost reduction in healthcare; limited maximum profit; rules regarding vertical integration; vertical integration.

Strength Weakness relative high entry barriers; operations are relatively independent of suppliers; benefits of scale due to mergers. low margins OTC market; due to mergers a lot of different cultures in one company; short profitable lifetime of drugs. 4. Resources SB's resources consist of human resources, financial resources and intellectual capital. The human resources of SB are very stable, for they fired only once a number of people, but it is necessary to invest more in Human Resources.

Through all the alliances, mergers, partnerships, etc. the culture changes constantly. SB earned lots of financial resources with several acquisitions and partnerships. The financial resources were mostly spend on R& D and marketing, to increase SB's market share.

In the branch of pharmaceutical companies high R& D budgets are required. SB' intellectual capital consists of many patents and a very strong brand name, with which SB was able to transfer the market value. SB several times adapted its company resources to the industrial environment. A good example are the acquisitions and partnerships with which SB was able to expand its services towards the customers, so that they offer complete healthcare packages and cutting costs for also the customers.

Customers were also offered the opportunity of self-diagnosis and self-medication. 5. Advantage (sustainable competitive advantages) The three main competitive advantages of SB are: superior information about market conditions; more direct access to customers; opportunities to meet patient needs with new products. But we can also distinguish some other competitive advantages like SB was able to offer customers a complete healthcare package by alliances and acquisitions. With their focus on total healthcare and the partnerships SB was active in all four divisions of the pharmaceutical industry; prevention, diagnosis, treatment and cure. Those alliances were also reason for SB to position itself for the clinical laboratory testing market. Now SB was provided with results and to fulfill the customers clients better and exactly on the right time.

With the possible merger with Glaxo, SB will be capable of enlarging their R& D budget and gain more market power, for the potential pay off from the complementary research skills of the two companies, the existing pipelines of 4 promising drugs in the finals stages of development, the outcome of marketing incentives of the merge and their remained independency. 6. Scope...


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Research essay sample on R Amp D Standard Of Living

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