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Its starts in 1894 when cousins Charles Pfizer and Charles Erhart founded a
pharmaceutical company that has remained dedicated to developing and discovering new and
better ways to prevent and treat disease and improve health of wellbeing.
Pfizer, Inc., incorporated on June 02, 1942, is one of the worlds largest multinational
pharmaceutical company engaged in the discovery, development, manufacture, and marketing of
prescription drugs for humans and animals worldwide. It operates its business through three
segments, namely, Pharmaceuticals, Animal Health, and Corporate & Other. Pfizer is recognized
for its prescription and over-the-counter drugs. Some of its well-known products are Lipitor,
Viagra, Lyrica, Zeldox, and Aricept.
Despite the economic recession, Pfizer is still in a strong position to recover from
decreasing revenues. The market outlook seems to be positive based on opportunities available,
such as entry to biologics market, mergers/acquisitions, and strategic agreements, despite many
threats that the company will face over the coming years, such as loss of patent protection, global
pricing pressure, and increasing competition.
Pfizer has a major advantage in the pharmaceutical industry because of its global brand
recall, possibly increased by its continued acquisition of other pharmaceutical companies.
However, tougher competition may limit its market share growth. To counter this, the firm will
have to stop depending too much on their leading brand products, and explore emerging markets.
To recuperate from its decline in overall revenue, Pfizer must take advantage of available
opportunities, harness its strengths, mitigate its weakness, and avoid threats.
In 2009, Pfizer proposed the Acquisition of Wyeth, a company based in Madison, New
Jersey, for a cash and stock price of $68 billion. The acquisition would enable Pfizer to enter the
biologics market and would diversify Pfizers product offerings.
The acquisition would also enable Pfizer to get hold of Wyeths ongoing research and
increase the likelihood of producing successful products. It will also result to enhanced presence
in emerging markets, such as China, India, Brazil, Turkey, and Philippines.
This paper will present Pfizers company profile, external and internal analysis, strategy
formulation, implementation, and evaluation.
Table of Contents
I.
II.
Vision/Mission Statements
III.
External Analysis
IV.
V.
VI.
A.
General Environment
B.
Industry Analysis
C.
Competitive Analysis
D.
Internal Analysis
A.
Management
B.
Marketing
C.
Finance / Accounting
D.
Production / Operations
E.
F.
G.
Strategy Formulation
A.
B.
C.
D.
E.
F.
B.
C.
VII.
VIII.
I. Introduction
Recovering from the aftermath of the great recession, Pfizer must take actions to improve
its market presence and increase its revenues. However, this will not be without any challenges.
Competition is tougher. Regulatory authorities are becoming more stringent. Research is
unsuccessful. Pfizer needs to formulate and implement a suitable strategy to respond to these
challenges.
A. Company Profile
Pfizer Inc., the worlds largest research-based pharmaceutical company, discovers,
develops, manufactures and markets prescription medicines in 11 therapeutic areas including
oncology, cardiovascular, pain, neuroscience, and infectious diseases, including HIV/AIDS.
Pfizer is also the worlds largest animal health company. Pfizer is committed to applying science
and global resources to improve health and well-being at every stage of life.
Pfizer Inc. employs approximately 90,000 colleagues worldwide, all of whom are
devoted to working for a healthier world. Pfizer conducts more biomedical research than any
other organization, and has 12,000 professionals working in six major R&D sites worldwide,
including Sandwich in Kent. Pfizer offers a diversified product portfolio in three business
segments: (1) Pharmaceuticals; (2) Animal Health; and (3) Corporate & Other. The
Pharmaceuticals segment offers products for the treatment of cardiovascular diseases, central
nervous system disorders, arthritis and pain, infectious and respiratory diseases, urogenital
conditions, cancer, eye disease, endocrine disorders, and allergies, among others. The Animal
Health segment offers medicines for livestock and pets. The Corporate & Other segment
comprises of empty gelatin capsules, producing contracts, and bulk pharmaceutical chemicals. It
only constitutes 3% of Pfizers total sales.
4
Pfizer, relative to its competitors, has distinct competitive advantages. Being in the
market for more than one and a half century, Pfizer had already established its name as a reliable
pharmaceutical company dedicated to help mankind in battling diseases that threaten our
existence. Moreover, Pfizer had also proved to be one of the leading, if not best, pharmaceutical
companies to develop new medicines. This had been possible because of Pfizers dedicated and
competent research and development teams and Pfizers access to needed resources. Pfizer also
had the opportunity to participate in collaborative research works enabling them to obtain
research data with promising potential.
In terms of market share, Pfizer serves the largest portion compared to its competitors.
Pfizer operates in 180 countries worldwide and focuses on emerging markets like China, India,
Philippines, Turkey, among others.
The United States has historically been the industrys largest and most profitable market,
but now pharmaceutical companies are looking more and more to developing countries. Sales in
developing countries significantly increased in the past years. The acquisition of Wyeth will
prove advantageous to Pfizers dedication to develop in the emerging markets.
B. Paper Design and Methodology
The aim of this strategic management plan is to gather qualitative and quantitative data
that will lead to the formulation of a successful and feasible strategy for Pfizer, Inc. The
quantitative data were obtained from studying and analyzing the information presented in the
case. Additional information was also collected from Pfizers company website in the form of
financial statements, annual reports, newsletters, financial diagrams, among others. To ascertain
credibility of information, financial information about Pfizers performance was collected from
Bloomberg. Information about Pfizer, Inc.s operations, history, strategies, and other qualitative
data was obtained from news articles, company profile, and other reportorial statements of the
company obtained from credible internet sites.
6
The following tools and processes were used to analyze gathered data:
Framework
Tools
Activities
Output
EFE
Societal Environmental
Analysis
Opportunities and
Threats
STEP
Matrices
Functional Areas of
Management
Financial Projections
Industry Analysis
Company Analysis
Strengths and
Weaknesses
Strategy
Formulation
Strategies
Prioritization of
Strategies
Prioritized Strategies
Strategy
Implementation
Strategy Evaluation
and Control
Programs
Control Standards
Balanced Scorecard
Mission
Pfizers mission is to become the worlds most valued company to patients,
customers, colleagues, investors, business partners, and the communities where we work and
live. We will strive for a continuous improvement in our performance, profitability, financial
stability, technology, and measuring results carefully, ensuring that integrity and respect for
people are never compromised. We also believe that leaders empower those around them by
sharing knowledge and rewards in outstanding individual effort and therefore providing
opportunities for leadership at all levels in our organization.
Product development
This strategy seeks to increase sales by improving or modifying present products or
services. This is usually the strategy implemented with regards to pharmaceutical companies
because of the nature of this industry. Because of rapid technological developments, high
competition in the industry exists. High growth rate of product development is essential to
sustain Pfizer in the race. Since competitors like Novartis and Merck & Co. can create and
offer quality products at comparable prices, Pfizer uses product development to counter those
threats. Product development is also used by Pfizer to replace their currently successful
products that are nearing the expiration of their patent rights.
Market Development
Market development involves introducing present products or services into new
geographic areas. Pfizer is currently capitalizing on this strategy because it has the excess
production capacity, capital needed and human resources to manage expanded operations.
Since the markets are unsaturated in some areas it is easy for Pfizer to implement this kind of
strategy and also at the same time, the fact that the organizations basic industry is rapidly
becoming global in scope makes it even easier. Lastly, since Pfizer is obviously successful at
what it does, this is a big factor in the effectiveness of this strategy.
Currently, Pfizers international operations contributed $27.9 billion in revenues in
2008 as compared to the $20.4 billion generated in the United States. The double digit
decline in the U.S. sales of Pharmaceuticals has been offset by the double-digit growth in
international sales. One of the struggles that Pfizer currently facing on its international
operations is the multiple and diverse regulatory environments it contends with.
10
Global companies like Pfizer are subject to unexpected changes in revenues and
profits resulting from unpredictable currency fluctuations. Because of these problems,
Pfizers consolidated Balance Sheet shows that total assets shrunk from $113.84 billion in
2006 to $111.15 billion in 2008, and total liabilities increased from $43.38 billion in 2006 to
53.59 billion in 2008. Stockholders equity also fell 19.34 percent, from $71.36 billion in
2006 to $57.56 billion in 2008.
Pfizer is looking more and more to developing countries like Venezuela. Sales of
prescription drugs in developing markets increased to $152.7 billion in 2008, up from 76.2
billion in 2003. This number should reach $265 billion in 2013, according to IMS Health. In
addition to Venezuela, Pfizer is expanding rapidly into China, India, Brazil, Russia, and
Turkey. During the first quarter of 2009, Pfizers revenues from emerging markets were $1.4
billion, out of $10.8 billion total Pfizer revenues that quarter. Rather than focusing on
middle- and upper-class people, Pfizer and its rival firms are now also focusing on lowerclass people in emerging countries.
11
12
The key is to make advances and ensure that the market receives it well. Pfizer is
always on the edge; always on the verge of creating new products with the intent to help
the debilitating sickness that mankind succumbs to everyday. Due to the advent of new
technology, it will be easier to create quality products which would aid the continuous
search for immunity to diseases. The aid of technology has brought new hope to people
around the world who are down with sickness and disease.
The industry uses manufacturing technology that is the cutting edge of science.
Nowadays, energy is getting more and more scarce and expensive. In order to sustain the
companys production and operations, they must find a way to get a large supply of
energy. There are numerous additional near-term technological opportunities to adapt the
automobile to changing energy availability. The possibilities suggest that pharmaceutical
industry is unexpectedly robust and provides a powerful defense against energy
starvation even if the real price of energy climbs steadily during the next couple of
decades.
3. Economic Environment
With the Great Recession plaguing the United States, the pharmaceutical industry,
along with a great number of other industries, has suffered losses. Pfizer has sacrificed
and cut back its operations in a few places to ensure that the company has funds to
sustain the company. The troubled economy has slowed down drugs sales. More
unemployed people also means a drop in the number of insured Americans. In turn they
worry about costs and therefore cut their spending on health care. Due to this, more and
more people rely on over-the-counter or generic drugs. The latter are on the rise due to
the fact that a lot of patents for brand names have or are about to expire.
13
Consumers are also more aware of the possible side effects of drugs, especially
concerning medications for depression or other mental disorders. Pfizers investments in
different countries have contributed a lot to prevent the pharmaceutical giants ship from
sinking. Pfizers international operations contributed $27.9 billion in revenues in 2008 as
compared to the $20.4 billion generated in the United States. The double digit decline in
the U.S. sales of Pharmaceuticals has been offset by the double-digit growth in
international sales.
4. Political, Governmental, and Legal Environment
The government fights for the wellbeing of its constituents. It is only fair that
those that put the people at risk are held accountable. Pfizer has been a repeat offender in
illegal marketing of their products. The US government did not tolerate Pfizers slip up
and filed for a lawsuit which cost Pfizer 2.3 billion dollars. This has been the largest
criminal fine in the US history. Along with this, the US government will also supervise
the companys behavior in the next five years. This lawsuit, even if it has been only a
small blow on Pfizers earnings, was disparaging to its public image. Many citizens have
expressed that Pfizer has not been punished enough.
The company has promised to strengthen its internal controls and pioneer new
procedures to ensure that they not only comply with state and federal laws, but also meet
the high standards that patients, physicians, and the public expect.
14
B. Industry Analysis
1. Threat of New Entrants
Moderate to High - Companies such as Pfizer, Merck, Novartis and Bayer have
substantial engineering capabilities that are hard to replicate; their products are protected
by patents and have larger marketing budgets to protect their brand. Only legislations,
such as 1984 Waxman-Hatch Act, has made it easier for generic drug companies to enter
the market.
2. Rivalry Among Competitors
High - There are many players in the pharmaceutical industry that have revenues of over
$3 billion. The pharmaceutical industry is expected double its revenues in emerging
markets in the near future. Companies are finding ways to differentiate their products
from competitors. Limited patient numbers have also tightened the competition.
Companies are in a race to get their patents approved so that their drug reaches the
market first.
3. Threat of Substitutes
Moderate to High - Patents protect a companys products only for a certain number of
years. Once it expires, the products basic formula is open for the public to see. These are
when generic drugs pop out, the cheaper version that may be substituted with the
companys products. Another type of substitute may be herbal remedies which are
gaining popularity these days.
4. Bargaining Power of Suppliers
High With the pharmaceutical industrys nature, supplies are very important. Since
these supplies may be rare materials of chemicals, the companys production hangs in the
15
balance if or when suppliers suppress the supply. The patients who participate in trials
may also be considered as suppliers. These patients have the power to ask for more
compensation, demand supplement resources and not fully cooperate with the
experiment. This will have an effect on the companys ongoing researches.
5. Bargaining Power of Buyers
Moderate to high - Buyers can negotiate a price reduction or threaten to go to rival
companies or generics if their needs are not meet. If this happens, sales will decrease.
Hospitals and health care buy in bulk and ensure that pharmaceutical companies keep
prices in check.
Bargaining Power of
Suppliers
Rivalry among
Competing Firms
Bargaining Power of
Consumers
HIGH
HIGH
MODERATE - HIGH
16
C. Competitive Analysis
1. Profile of Competitors
Merck & Co. (MRK)
Merck & Co. (established in 1891) is an American pharmaceutical company with
headquarters located in Kenilworth, New Jersey. Merck is one of the world's largest
pharmaceutical company by market capitalization and revenue. Its products consist of
vaccines (BCG Vaccine, MMR II, and Rota Teq); prescription drugs (cardiovascular
disease, respiratory disease, oncology, neuroscience, infectious disease, immunology, and
women's health); animal health products (vaccines, anti-infection, anti-parasitic). Merck
uses different strategies to maintain their competitive advantages. These include mergers
and acquisitions, product development, market development, and partnerships.
Bayer AG
Bayer AG is a German multinational chemical and pharmaceutical company
headquartered in Leverkusen, Germany. It is well known for its original brand of aspirin.
Bayer's primary areas of business include Bayer HealthCare (hematology, cardiology,
oncology, anti-infective, contraceptives, and gynecological therapies); Bayer Crop
Science (high value seeds, crop protection solutions like fungicide, herbicide, insecticide,
seed treatment); Bayer Material Science (coatings, adhesive, polycarbonates, and
polyurethanes). The 150 year old company implements strategies like corporate social
responsibility, unrelated diversification, mergers and acquisitions, product development,
and market development.
17
Novartis AG
Novartis International AG is a Swiss multinational pharmaceutical company
based in Basel, Switzerland. It is Pfizers strongest competitor, ranking just below the
number one spot. It has several divisions that include Pharmaceutical (cardio metabolic,
respiratory, neurosciences, immunology, dermatology, oncology, and cell & gene
therapy); Alcon - Eye care (surgical products, ophthalmic pharmaceuticals, vision care);
Sandoz Generics and OTCs (cough, cold, respiratory, pain relief, digestive health,
smoking cessation, and supplements); Vaccines. Novartis, being the second largest
pharmaceutical company in the industry implements the following strategies: product
development, related diversification, and mergers & acquisitions.
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PFIZER
Critical Success
Factors
Advertising
MERCK &
Co.
NOVARTIS
BAYER
0.20
0.15
0.15
0.15
0.10
0.30
0.30
0.40
0.30
0.09
0.36
0.18
0.36
0.27
Store Locations
0.04
0.16
0.08
0.12
0.08
R&D
0.14
0.42
0.56
0.56
0.42
Employee
Dedication
0.09
0.27
0.18
0.36
0.27
Financial Profit
0.10
0.40
0.40
0.20
0.40
Customer
Loyalty
0.06
0.18
0.12
0.18
0.18
Market Share
0.10
0.40
0.30
0.20
0.20
Product Quality
0.09
0.27
0.27
0.27
0.27
Top Management
0.05
0.15
0.15
0.10
0.10
Price
Competitiveness
0.09
0.27
0.36
0.27
0.27
Totals
1.00
Market
Penetration
Customer
Service
3.38
3.05
3.17
2.91
The most important factor to being successful in the industry is the Research and
development as indicated by weight of 0.14. We can notice that Pfizer has the best market
advertising, customer service, store locations, financial profit and market share but they were
defeated in terms of research and development which we note as the most important factor.
Overall Pfizer is still the best among its competitors with a score of 3.38 and Novartis as its
strongest rival with 3.17 weighted score.
19
20
Threats
1.
Weight
Rating
Weighted
Score
0.09
0.27
0.06
0.07
0.07
3
4
3
0.18
0.28
0.21
0.03
0.09
0.02
0.06
0.07
0.28
0.05
0.03
3
2
0.15
0.06
0.04
0.16
Weight
Rating
Weighted
Score
0.08
0.15
2
3
0.06
0.18
0.24
4
3
0.27
0.12
0.06
0.16
0.09
2.88
score of 2.88 for its
External Factor Evaluation (EFE) matrix, which shows an above average response to its existing
opportunities and threats in the industry. The current strategies that the company is using is
satisfactory, but these will need to be improved for Pfizer to keep the top position among its
competitors.
21
22
These popular TV ads reach consumers by reaching through their emotions. A great
example of this is the Be Brave commercial which emphasizes that it takes more than
medication to get well from any sickness. Pfizer wants its customers to see that their goal is not
to sell medicine, but to keep the world healthy.
C. Finance/Accounting
For the years 2006 to 2008, Pfizers assets decreased and its liabilities increased due to
the Great Recession that plagued the United States. Pfizer has discontinued a few of its
operations to pay off its debts and to sustain most of its operations. This is why its net income
has dropped from 19 billion in 2006 to 8 billion in 2008.
We have gathered data from Pfizers financial statements and determined its financial
ratios (See Appendix C). Its current ratios have dropped from 2.2 in 2006 to 1.6 in 2008. This
means that the companys ability to pay its current obligations have lessened. The debt-to-equity
ratios have climbed up from 0.1 in 2006 to 0.3 in 2008. We can deduce from here that the funds
provided by creditors have increased marginally from the funds provided by the shareholders.
This is parallel to the tremendous increase of 6 billion in the companys long term debt. Its return
on investment has decreased from 0.2 to 0.1. This means that after tax profits for every dollar of
asset has decreased. The return on the stockholders equity is in the same situation. The
tremendous decrease in net income influenced this drop.
The economy in the US has forced Pfizer to take different measures to keep the company
going. It has discontinued some operations to raise needed short-term capital and ensure that it
has enough working capital. Seeing that the company has managed to maintain a substantial
amount of net income, we can assume that its budgeting procedures have been effective.
23
With the stockholders and the investors support, Pfizer has gone through the recession,
though not exactly unscathed, well enough. Despite these difficulties, Pfizer still remained on top
compared to the others in the industry.
D. Production/Operations
The Great Recession has also impaired the Pfizers production. The company had to close
several facilities to keep up with the declining economy. This has hindered the company
operations, though not by much since the company only shut down those facilities which are too
costly but do not earn much.
E. Research and Development
Pfizer has several R&D state-of-the-art facilities located optimally around the world.
These facilities employ top-notch scientists and doctors known internationally. These 10
facilities are strategically located in optimal places. One might think that Pfizers R&D is very
extensive, but for a company with this size, it is hardly sufficient. In the pharmaceutical industry,
to maintain the top position, one must make a few breakthroughs in the course of a few years.
But Pfizer has not discovered a single drug since Viagra. The budget in R&D has not been very
hefty, considering the companys size, if compared with the R&D of other companies in the
industry.
F. Management Information System
Priss is Pfizers 600,000 project information and support system jointly developed with
Atlantic Global PLC has allowed the informatics department to stretch itself across the very
diverse range of demands that are placed on it.
24
Being able to see how those demands line up against each other has helped us to talk
about priorities in a way we would not have been able to before. This information system has
helped Pfizer consolidate with its previous acquisitions.
G. Summary and Conclusion
1. Summary of Key Internal Factors
Strengths
1. One of the largest pharmaceutical company in the world and spread over more than
50 countries
2. Excellent research and development (R&D) creating innovative and breakthrough
products
3. Mergers and acquisitions with big pharmaceutical companies increasing brand
reputation
4. Has over 100,000 employees as a part of the organization
5. Strong brand name and recall globally
6. Number one pharmaceutical from sales point of view and its marketing infrastructure
is well established throughout the world
7. Therapeutic coverage is very large and the innovative researchers are broadening it
further
8. Well established reputation for years on number of products
9. Wide range of area being worked, that includes human health, animal health,
customer health, and corporate groups
10. Involved in licensing agreements with different companies for collaborative research
work
25
Weaknesses
1. Tough competition from other major pharmaceutical brands means limited scope for
market share growth
2. Negative brand image due to involvement in largest healthcare fraud of marketing its
drug illegally
3. Very limited penetration of biologics market
4. Marketing with other companies and merging with other pharmaceuticals can halter
its global popularity
5. Overreliance on the mature market (U.S.) and a small number of distributors
6. Irrational drug policies such as bringing over 70 percent of the drugs under price
control
7. Inadequate infrastructure for fermentation-based drug remedies and effluent treatment
plants
8. Lack of or inadequate subsidies and fiscal incentives for the industry
9. Inadequate quality testing facilities for the regulatory authorities, which have more
administrative and less technical capabilities as a result
10. Limited emission rights
26
Strengths
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
One of the largest pharmaceutical company in the world and spread over
more than 50 countries
Excellent research and development (R&D) creating innovative and
breakthrough products
Mergers and acquisitions with big pharmaceutical companies increasing
brand reputation
Has over 100,000 employees as a part of the organization
Strong brand name and recall globally
Number one pharmaceutical from sales point of view and its marketing
infrastructure is well established throughout the world
Therapeutic coverage is very large and the innovative researchers are
broadening it further
Well established reputation for years on number of products
Wide range of area being worked, that includes human health, animal health,
customer health, and corporate groups
Involved in licensing agreements with different companies for collaborative
research work
Weaknesses
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Weight
Rating
Weighted
Score
0.03
0.12
0.05
0.15
0.07
0.28
0.04
0.07
3
3
0.12
0.21
0.05
0.20
0.03
0.09
0.05
0.15
0.04
0.16
0.07
0.21
Weight
Rating
Weighted
Score
0.08
0.16
0.05
0.10
0.09
0.18
0.05
0.15
0.02
0.04
0.03
0.12
0.04
0.12
0.03
0.09
0.08
0.32
0.03
1.00
0.09
3.06
The table illustrated above shows that Pfizer got a total weighted score of 3.06 for its
Internal Factor Evaluation (EFE) matrix, which shows an above average response to its existing
Strengths and weaknesses inside the company. Pfizer tries its best to capitalize on its strengths
and eliminate its weaknesses.
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V. Strategy Formulation
A. Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix
1. SO Strategies
It can use its reputation as one of the largest pharmaceutical company in the world to
gain strategic agreements with other companies such as Wyeth and other
organizations to boost its research (S1, O1)
It can use its fully integrated manufacturing facilities to expand into the biologics
market like vaccines, blood or blood components, allergenics, somatic cells, gene
therapies, tissues, recombinant therapeutic protein, and the living cells used in cell
therapy. (S10, O8)
It can use its marketing infrastructure to have a marketing agreements with the
industries leading companies in terms of marketing such as Sanofi and AstraZeneca
(S6 O10)
2. ST Strategies
It can use its excellent research and development (R&D) program to reduce the
threats or unsuccessful new products introductions (S2 T1)
It can use its strong mergers and acquisitions strategies against the industries leading
pharmaceutical companies such as Wyeth to abate the increasing market competition
(S3 T4)
Its strong brand name and recall globally can reduce the threats given by increasing
entries of private individuals (S5 T9)
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3. WO Strategies
Use E-commerce to reduce reliance to US markets and small number of distributors
(W6 O8)
Marketing agreements with Wyeth or Sanofi to broaden the scope of market share
growth in the Northeastern and Mid-Atlantic regions of the United States (W1 O10)
Use excess funds to penetrate into the biologics market specifically vaccines and the
living cells used in cell therapy which is highly in demand in the African regions
specially in the Central and Northern Africa (W3 O6)
4. WT Strategies
Allocate further research efforts before new inductions in the market specifically into
the biologics market which requires keen and thorough studies (W6 T1)
Fund capital expenditures on infrastructures for fermentation-based drug remedies
and effluent treatment plants (W7 T1)
Provide added marketing efforts to regain an acceptable public image for previously
sued products through using different promotional tools like traditional media such as
TV, radio and newspaper advertising and product placement. (W1 T7)
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Financial Position
Stability Position
Rate of Inflation
-4
Leverage
Technological Changes
-3
Liquidity
Price Elasticity
-4
Working Capital
Competitive Pressure
-4
Cash Flow
-3
4.6
Competitive Position
-3.6
Industry Position
Market Share
-2
Growth Potential
Product Quality
-3
Financial Stability
Customer Loyalty
-2
Technological Know-how
Control Over Suppliers and
Distributors
-4
Resource Utilization
-2
Profit Potential
-2.6
4.0
These values that have been averaged for the Financial, Stability, Competitive, and
Industry Position will be used to compute for the coordinates. These coordinates are computed as
illustrated below:
X AXIS =
CP + IP
Y AXIS =
SP + FP
(-2.6) + 4
(-3.6) + 4.6
1.4
1.0
30
Integration Strategies
Market Penetration
Market Development
Diversification
Strategies
The Space matrix illustrated tells us that Pfizer should pursue an aggressive strategy
because it is financially strong in achieving competitive advantage in a growing and stable
industry. Pfizer should use integrative and intensive strategies. They can also use diversification
strategies to maintain its position should the first two fail. They can use their internal strengths to
take advantage of the opportunities, to overcome their weaknesses and avoid threats.
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US
International
The graph above illustrates the geographical divisions of Pfizer. It can be observed from
the information provided that the international division has greater sales volume and profit
compared to US division. Even with this given information, we cannot simply discount the
merits of the performance of the US division. If we look at it from a different perspective, the
international division covers the rest of the world, while the US division only covers 50 states.
We can safely say that Americans patronize Pfizer compared to any other country in the whole
world.
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Pharmaceuticals
Animal Health
Corporate
In contrast with the previous graph, this illustration above give information on the
companys divisions by their products. It can be observed from this graph that Pharmaceutical
products are the stars of the company while its Animal Health and Corporate are its cash cows.
Pharmaceuticals, being the companys star, has a large market share and shows the greatest
potential for growth among other divisions. The other two segments, while having large market
shares, show low levels of growth. The pie slices within the circles also reveals the percent of
corporate profits contributed by each division. This shows that Pharmaceuticals contributed most
profits, with Animal Health in second, and Corporate bringing up the rear.
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IFE 2.88
EFE 3.06
Pharmaceuticals
From matching Pfizers IFE of 2.88 and EFE of 3.06, the IE Matrix above shows that
Pfizer falls in cell number II. This which shows that the company should grow and build its
operations. Integrative and intensive strategies are the most appropriate strategies for this
sections.
34
Integration Strategies
Intensive Strategies
Related Diversification
Pfizer has high enough cash flows that even though there are direct and rising competitors,
it still grows. Because of its strong competitive position and rapid market growth, Pfizer can
employ integration and intensive strategies in order to boost its sales and market share, as well as
to fulfill its goal of becoming the leading biopharmaceutical company.
35
Increase
R&D funds
to increase
probability
of
developing
new
products
Key Factors
Opportunities
1. Strategic agreements with other
pharmaceutical companies and orgs to
boost its research.
2. Increasing awareness about healthcare
needs
3. Global penetration through mergers
and acquisitions
4. Increasing demand for quality
healthcare solutions
5. Restructuring strategy designed to cut
costs and leaner company
6. Funding available to facilitate
product/company
7. Acquisitions (Wyeth) and inlicensing/co-development
opportunities
8. Expansion into biologics market
9. E-Commerce
10. High profits, revenues and funds are
available to uplift the company's
progress
Threats
1. Risk of unsuccessful new products
2. Regulatory environment is becoming
more & more stringent
3. Economic slowdown in European
markets
4. Increased market competitions
5. Losing of patent individuality by
focusing on one product
6. Loss of patent protection of major
products
Market
Developme
nt
specifically
on
Emerging
Markets
(China,
India)
Acquisition
of Wyeth
Weig
ht
AS
TAS
AS
TAS
AS
TAS
0.09
0.36
0.09
0.27
0.06
0.18
0.18
0.12
0.07
0.21
0.14
0.28
0.07
0.14
0.21
0.21
0.03
0.09
0.09
0.12
0.02
0.08
0.06
0.08
0.07
0.21
0.21
0.28
0.05
0.03
2
2
0.1
0.06
3
2
0.15
0.06
3
2
0.15
0.06
0.04
0.08
0.12
0.12
0.04
0.12
0.08
0.12
0.05
0.1
0.15
0.15
0.03
0.09
0.06
0.09
0.06
0.12
0.18
0.24
0.08
0.16
0.16
0.16
0.07
0.14
0.14
0.28
36
0.04
0.12
0.12
0.16
0.03
0.09
0.12
0.09
0.04
0.08
0.12
0.08
0.03
0.09
0.09
0.09
1
Strengths
1. Largest pharmaceutical company in
the world and spread over more than
50 countries
2. Excellent R&D creating innovative
and breakthrough products
3. Mergers and acquisitions with big
pharmaceutical companies increasing
brand reputation
4. Has over 100,000 employees as a part
of the organization
5. Strong brand name and recall globally
6. Number one pharmaceutical from
sales point of view and its marketing
infrastructure is well established
throughout the world
7. Therapeutic coverage is very large
and the innovative researchers are
broadening it further
8. Well established reputation for years
on number of products
9. Wide range of area being worked, that
includes human health, animal health,
customer health, and corporate groups
10. Involved in licensing agreements with
different companies for collaborative
research work
Weaknesses
1. Tough competition from other major
pharmaceutical brands means limited
scope for market share growth
2. Negative brand image due to
involvement in largest healthcare
fraud of marketing its drug illegally
3. Very limited penetration of biologics
market
2.62
2.53
3.15
0.03
0.09
0.09
0.06
0.05
0.2
0.15
0.15
0.07
0.21
0.21
0.28
0.04
0.12
0.12
0.08
0.07
0.21
0.21
0.21
0.05
0.2
0.2
0.15
0.03
0.09
0.06
0.09
0.05
0.15
0.1
0.1
0.04
0.12
0.12
0.12
0.07
0.14
0.14
0.28
0.08
0.16
0.24
0.32
0.05
0.15
0.15
0.2
0.09
0.27
0.36
0.36
37
0.05
0.05
0.15
0.2
0.02
0.04
0.02
0.06
0.03
0.06
0.06
0.09
0.04
0.08
0.08
0.12
0.03
0.09
0.03
0.06
0.08
0.24
0.16
0.24
0.03
1
0.09
2.76
5.38
0.06
2.71
5.24
0.09
3.26
6.41
From the previous matrices from the matching stage, namely the SWOT matrix, SPACE
matrix, BCG matrix, IE matrix and Grand Strategy Matrix, we came up with three alternative
strategies to help secure Pfizers position in the industry. These matrices all suggest having an
integrative strategies and intensive strategies. For the first one, we have an integrative strategy
which is the horizontal integration. Specifically, this is the acquisition of Wyeth. Secondly, we
have an intensive strategy which is product development. To specify, this strategy pushes for the
increase in the R&D funds to help develop new products. Lastly, we have another intensive
strategy, which is market development on emerging markets.
Based on the Total Attractiveness score of 6.41, acquiring Wyeth is the most preferred
and beneficial strategy that will maximize the use of its strengths, weaknesses, threats and
opportunities for Pfizer. This strategy will help cover the lack of breakthroughs currently, and
mitigates the impact of the recession and the expiration of the patents of its top selling products.
38
39
2. The most relevant emerging pharmaceutical markets where Pfizer should focus
investments are Brazil, Russia, India, China, Mexico, South Korea and Turkey. Together,
these markets are forecasted to grow at a compounded growth rate of 13-16% over the
next 5 years, compared to 4-7% for the overall market.
3. Chief among the market opportunities is China where private incomes are growing and
government announced a significant healthcare expansion plans.
R&D Product Development
1. Develop various medicines which caters to the therapeutic opportunities in the emerging
markets such as large pediatric populations, infectious diseases, respiratory diseases due
to high rate of smoking, and etc.
Marketing and Sales
1. Tailoring marketing to targeted customer segments maximizes returns. In particular it is
important to avoid pricing out mass markets.
2. Targeting promotions according to private, public, or mixed healthcare which will be an
essential part of sales strategies which will vary by country. Rather than hiring thousands
of sales representatives, they will have to employ specialists who can negotiate and talk
to qualified managers.
Regulation
1. Address additional emerging market security risks: security of data and manufacturing
supply chain, protection of company image and reputation, and protection of assets.
2. Tailored approach in formulating and implementing policies regarding regulatory hurdles
as larger companies often have varying regional regulations and segments.
40
2008
48,296,000.00
8,112,000.00
40,184,000.00
2009
82,096,000.00
26,912,000.00
55,184,000.00
2010
74,231,340.00
25,201,232.00
49,030,108.00
2011
72,013,208.00
23,093,034.00
48,920,174.00
7,945,000.00
14,537,000.00
3,308,000.00
2,668,000.00
28,458,000.00
11,726,000.00
-1,516,000.00
10,210,000.00
516,000.00
9,694,000.00
1,645,000.00
-23,000.00
8,026,000.00
10,328,500.00
20,351,800.00
2,900,000.00
3,090,800.00
36,671,100.00
18,512,900.00
10,431,785.00
18,316,620.00
2,023,012.00
2,400,783.00
33,172,200.00
15,857,908.00
12,518,142.00
18,316,620.00
1,098,343.00
1,093,433.00
33,026,538.00
15,893,636.00
1,390,900.00
19,903,800.00
1,314,981.00
18,588,819.00
2,950,105.00
-33,731.00
15,604,983.00
-1,463,534.00
14,394,374.00
1,070,406.00
13,323,968.00
2,114,556.32
-37,731.00
11,171,680.68
-1,453,453.00
14,440,183.00
890,670.00
13,549,513.00
2,150,351.03
-15,000.00
11,384,161.97
78,000.00
8,104,000.00
8,104,000.00
0.00
15,604,983.00
15,604,983.00
1,109,000.00
12,280,680.68
12,280,680.68
500,940.00
11,885,101.97
11,885,101.97
The projected income statement respectively for 2009, 2010, and 2011 with the last years actual 2008
income statement is based on the assumptions and projections:
In 2009, The Acquisition of Wyeth will increase the revenue of Pfizer by its product by 23 billion
dollars and additional 10.8 Billion dollars increase in revenue coming from the entrance to emerging
markets and will continue to increase by 10% each year.
The expiration of Lipitor and Aricept which contribute around 15 billion of its revenues will
decrease by 60% for additional generic products will come to the market on 2010. In addition, the
expiration of its patent Xalatan on 2011 will also decrease its revenues by half billion dollars.
Cost of revenue is increase by the acquisition and making of more products for Wyeth and the
emerging markets and will be base on the number of sales on the upcoming years being a variable
expense.
The Research and development cost will be increase by 30% in 2009 for utilizing of acquisition of
Wyeth, 1% in 2010 for reduction of cost and 20% in 2011 for the expiration of patent of Lipitor and
Aricept.
Selling and administrative expense will increase by 40% on 2009 for the acquisition of Wyeth but
should be decrease by 20% on 2010 and 2011 for the reduction of expenses in consideration of fall
down in revenues.
The interest expense is base on its current and projected Long term debt multiply by 3.5%
The income tax expense is base on its current and projected Income before tax multiply by 17%
The net Operating income will increase largely on 2009 through the acquisition of Wyeth but the
expiration of the patent of Lipitor and Aricept will decrease the revenue in 2010 and 2011 which will
41
be compensated by a reduction of expenses on various items that will make the Net Operating
Income stable for the year 2010 and 2011.
2008
2009
2010
2011
2,122,000.00
22,433,000.00
13,992,000.00
4,529,000.00
43,076,000.00
11,478,000.00
13,287,000.00
21,464,000.00
17,721,000.00
4,122,000.00
111,148,000.00
2,023,023.00
29,342,200.00
23,909,734.00
11,590,456.00
66,865,413.00
21,908,808.00
29,456,372.00
29,009,402.00
28,003,427.00
9,034,394.00
184,277,816.00
2,343,432.00
31,023,232.00
20,984,125.00
12,803,045.00
67,153,834.00
22,984,343.00
35,093,443.00
30,100,232.00
20,940,393.00
10,329,324.00
186,601,569.00
2,042,984.00
30,930,304.00
21,032,043.00
11,908,303.00
65,913,634.00
24,093,283.00
36,098,343.00
30,203,940.00
22,904,930.00
8,930,334.00
188,144,464.00
6,233,000.00
9,320,000.00
11,456,000.00
27,009,000.00
14,531,000.00
8,909,000.00
2,959,000.00
184,000.00
9,157,125.00
12,094,043.00
16,764,000.00
38,015,168.00
37,031,000.00
9,606,900.00
5,647,394.00
207,000.00
7,094,939.00
11,032,343.00
14,093,203.00
32,220,485.00
30,143,560.00
10,232,343.00
8,034,834.00
213,233.00
6,233,000.00
10,904,323.00
13,090,940.00
30,228,263.00
25,089,303.00
10,000,100.00
7,003,022.00
300,000.00
72,620,688.00
73,000.00
443,000.00
49,142,000.00
-57,391,000.00
70,283,000.00
-4,994,000.00
57,556,000.00
111,148,000.00
110,000.00
750,000.00
71,909,323.00
-54,093,003.00
73,004,015.00
2,090,019.00
93,770,354.00
184,277,816.00
130,000.00
760,000.00
73,094,094.00
-46,309,303.00
79,085,023.00
-1,002,700.00
105,757,114.00
186,601,569.00
132,000.00
780,000.00
79,094,332.00
-45,873,922.00
82,425,289.00
-1,033,923.00
115,523,776.00
188,144,464.00
42
The projected balance sheet respectively for 2009, 2010, and 2011 with the last years actual 2008
balance sheet is based on the assumptions and projections:
The funding methods to be use in acquisition of Wyeth will composed of 22.5 billion from cash,
22.5 billion as part of equity and 23 billion as Pfizer stock for the price of 68 billion dollars, thus will
increase its debt and common stock on 2010.
Short Term and Long term investment will be increase by investing to it competitors in pursuing its
strategy to enter the emerging markets such as China, India, Brazil and Turkey.
Net Receivables, Inventory, and Property Plant and Equipment will increase due to the acquisition of
Wyeth as more products and manufacturing sites will now be owned by Pfizer.
The acquisition will arise to goodwill since the Fair market Value of Wyeth Net Asset is greater than
the cash price.
Intangible will be increase by additional patents and products of Wyeth.
The total asset will be increase by 73 Billion dollars coming from the Acquisition of Wyeth,
additional investments in emerging markets, goodwill and acquisition of additional assets and the
company aim to increase it by 2 billion dollar per year.
Current Ratio
Quick Ratio
3.0
2.0
2.2
2.7
2.1
1.6
1.8
2.1
2.0
1.0
2007
2008
0
1.9
2006
2007
1.4
1.5
1.7
2008
2009
2010
2.2
0.0
2006
1.9
1.0
0.0
3.0
2009
0
2010
2011
2011
With this projected balance sheet, Pfizer current ratio will also increase from 1.5 to 1.8 on 2009, 2.1
on 2010 and finally 2.7 on 2011.The current ratio is a liquidity ratio that measures the companys
ability to pay its short term obligations. In addition it will also increase its quick ratio from 1.4 to 2.2
on 2011.Quick ratio is also a liquidity measures but it uses only the most liquid assets of the
company excluding its inventories.
Pfizers liabilities will increase because Pfizer will assume Wyeths current liabilities and other
litigation expense but will pay this liabilities as soon as possible to decrease its liabilities back to
normal to have a good credit rating in Moodys and S&P.
Its Common stock is increase by the issuance in the acquisition of Wyeth and aims to limit the
issuance of stock by certain amount not exceeding 1 Billion dollar.
Its retained earnings is increase by the net income from 2009, 2010 and 2011
Overall, Pfizer aims to increase its assets and decrease its liabilities. It also aims to utilize the
acquisition of Wyeth in becoming the premiere biopharmaceutical company in the world and
increase its investment in emerging markets.
43
Plan of action
Activity
Timetable
Person/Unit
Responsible
2 weeks
Accounting
Department,
Finance
department
Approved
Funding Mix that
will be used in
acquiring Wyeth
1 day
Accounting
Department,
Finance
department,
Board of
Directors
Contract of
Acquiring Wyeth
1 day
Executives of
Wyeth and
Pfizer
Expected Output
Planned Funding
Mix that will be
used in acquiring
Wyeth
A. Presentation of
Planned Funding
method for acquisition
of Wyeth
Presentation and
Approval of the
planned Funding
Method to the
board of directors
Meeting with
Wyeth Executives
for finalizing the
acquisition
B. Suggestions and
Recommendations
from the board of
directors
C. Revision of
planned funding
methods
D. Approval of the
Planned Funding
Method by the board
of directors
A. Finalize the terms
of agreement in the
contract
B. Propose the
approved budget
C. Sign the contract of
acquisition
44
Negotiating and
solving the
misapprehension
with Eisai
regarding the
Wyeth acquisition
A. Propose a new
agreement to Eisai
that will allow the
partnership to
continue even with the
acquisition of Wyeth
B. Pay the necessary
expenses for the new
agreement and terms
C. Sign the new
contract with Eisai to
carry on the
partnership
A. Become a leader in
biologics with the use
of Wyeths Enbrel
manufacturing
excellence and
pipeline
Utilizing the
benefit of
acquiring Wyeth
Pursuing and
entering the
emerging markets
B. Establishing a
lower and more
flexible cost base
using Wyeth to
promote long term
growth and stability
Increased income
generation of
Pfizer that will
contribute in
promoting the
long term growth
and stability of the
company
C. Increase the
breadth and depth of
portfolio for
established products
A. Enter the vaccines
market with the use of
Wyeths Prevnar
which has a strong late
stage pipeline
Increased income
generation of
B. Invest in acquiring Pfizer and
competitors in Brazil, increased market
Russia, India, Mexico, share around the
South Korea, and
world
Turkey
1 day
Executives of
Wyeth and
Pfizer
1 to 3
years
Research and
Development
Department,
Operations
Department,
1 to 5
years
Marketing
department,
Operations
Department,
tactical
Managers
C. Invest in ways to
penetrate the market
45
Focusing on
product
development
through using the
newly acquired
company - Wyeth
Improving
Marketing, Sales
and following
Legal Regulations
B. Invest more in
areas which augments
in line and pipeline
portfolios in
inflammation,
neuroscience,
oncology and
infectious diseases
Increased product
line for major
disease problems
around the world
to retain Pfizers
standing as
number the
primary care
company
1 to 5
years
Research and
Development
Department
5 years
Marketing
Department,
Sales
Department,
Operations
Department
46
A. Extend Global
health care leadership
in different countries
Making Pfizer the by increasing
corporate social
worlds Premiere
Biopharmaceutical responsibility projects
to the community
Company
B. Enhance the ability
to satisfy unmet needs
of patients, physicians
and other customers
Monitoring and
controlling of the
strategies
C. Strengthen
platforms for
improved, consistent
and stable earnings
growth
A. Matching the
expected results from
the achieved results
and taking necessary
actions
Maintained top
position in
primary care and
become the
Worlds Premiere
Biopharmaceutical
company
Evaluation and
Monitoring Paper
3 to 7
years
Annually
Top managers
Operating
Managers
47
49
Looking at the history, Pfizer has been able to historically do better with existing
products than other companies. So if Lipitor is an example, most probably Pfizer could take
Wyeth's products to new heights. If Pfizer can help take these products to market faster by being
a very strong marketing company, everyone could stand to gain, including the shareholders.
BALANCE SCORECARD
50
Appendices
Appendix A: Company Products
Cardiovascular and Metabolic Diseases
Lipitor
Norvasc
Chantix/champix
Caduet
Cardura
Central Nervous System Disorders
Lyrica
Geodon/Zeldox
Zoloft
Aricept
Neurontin
Xanax/ Xanax XR
Relpax
Arthritis and Pain
Celebrex
Opthalmology
Xalatan
51
52
53
54
55
Bibliography
http://www.pfizer.com/
http:// youtube.com/ Pfizer
http://en.wikipedia.org/wiki/Pfizer
http://www.nytimes.com/2009/01/26/business/26drug.html?pagewanted=all&_r=0
http://www.scribd.com/doc/35918806/Pfizer-Wyeth-Case-Study#scribd
http://www.slideshare.net/AileenMarshall/business-report-on-pfizer
http://www.scribd.com/doc/31759261/Pfizer-Business-Report-Aileen-Marshall#scribd
http://ivythesis.typepad.com/term_paper_topics/2009/08/strategic-analysis-for-pfizerincorporated.html
http://www.businesswire.com/news/home/20091015005867/en/Pfizer-Completes- AcquisitionWyeth#.VRA3FuEwBUs
http://seekingalpha.com/article/976561-pfizer-company-is-still-cleaning-up-after-wyeth- megamerger
56