Strategy Audit: Novartis International AG.

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One of the major threats that Norvatis face from the task environment is the loss of market individuality. Their product such as Diovan, which is one of the firms’ best-selling products, is threatened in the market. As indicated in Luthans, this effect is currently felt in the EU and is likely to be witnessed in the US in 2012 and also in Japan come the year 2013. Davis indicates that this will cause an unpleasant substance effect on the general output of the company (218). In addition, Gullick and Urwick indicate; Norvatis also faces the problem of reduced net sales for branded products due to the emergence of a new quality generic version of branded medicines which are highly competitive (820). Hence those manufacturers offering unbranded versions have sharply reduced the prices of their brands thus facilitating them to gain more market share as compared to those with branded generic versions thus enhancing rigorous competition for market share (Filley).

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This competition has been further enhanced by the expiry of the patent term and the emergence of a brand generic version medicine of an identical therapeutic group. Opposition from manufacturers especially on products under legal threats of patent infringement before the concluding legal resolution is made also poses a great challenge to the task environment. Koontz and Weihrich say; “the company in most cases relies on the third party for the operation of some the crucial company’s functions which has generally posed great drawback to the company” (Kahtz and Kahnz).

Davies in his book states; “It is noted that most of the buyers are not willing to buy the patent product due to their high prices and in most these buyers tend to use their bargaining power through their unions to champion for a reduction in prices of these pharmaceutical products”. It has been witnessed that most buyers tend to buy unbranded products which are being offered at cheaper prices, thus hindering the profit-making ability of Norvatis (Mintzberg).

Because the company operates in around 140 countries, it is obliged to adhere to the laws in place, of these countries in which it functions. However, it is sometimes faced with the problem of substantial liabilities especially if the company violates any of these laws. This in turn affects the company’s business and reputation since these liabilities are rarely compensated by insurance. For instance, the company has greatly suffered various legal proceedings from increased litigation and government investigation, especially in the US. These legal proceedings include proceedings on product liabilities, tax, and marketing practices e.t.c. the business has also been subjected to regular governmental investigations and information requests by regulatory authorities (Mundell).

Currently, the company faces a global economic and financial crisis which has led to a decline in the prices of the company’s assets, liquidity, and inadequate capital for the expansion of the firm. For example, the ongoing debt problem in some countries in Europe has made healthcare companies found in such countries lower the prices of their products. In Jenster and Hussey, the crisis may also imply that those companies including Novartis may not receive the debts from such countries with the economic crisis. This economic crisis may also lead to devaluation and inflation thus making Norvatis witness a big loss (Novartis-20F-2010).

The company may also be in a position to predict accurate future revenues and earnings that the company will realize when giving the company’s future guidance on the future market conditions (Nystrom and Starbuck).

Corporate Culture

Novartis believes strongly in brand-oriented health business and most cases, they have tried to develop trademarks that are of utmost significance to the consumers. This has helped in protecting the brands from being infringed in areas where they are being sold. The company sometimes uses alternative trademarks especially where legal or linguistic considerations are required, to help differentiate local and international trademarks (Robbins and Coulter, Reillyand Brown ).

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In Barro and Vittorio, it is also noted that Norvatis also covers its products with patents to avoid exposing crucial information which may help the competitors to develop a new brand of their products (102). This information includes the product’s active substance and its formulation, the process for manufacturing the product, and its intermediates used in its manufacture, and the particular uses of a product. The company by all means ensures that it protects the significant development of a product in all major markets. However, Barro and Vittorio note that; the company is also engaged in the selling of products that are patent uncovered at the moment, as a result of patent expiry while others have never been patent-protected (89).

It is also the company’s tradition that before an OTC product is taken for marketing, a detailed prescription of its use must be prepared and filed by the relevant national or international registration authority and this must attain the consent of the relevant health authority. Robbins reinstate that; the company’s healthcare practices in its products i.e. in the company’s branch in the US, an OTC product is only sold after it has undergone the OTC Drud Review which ensures that the drug is safe and effective for human consumption (112).

Finally, the company through its competitive nature also believes in the production of quality products. This competition is intense and stretches to a wide range of commercial activities such as enhanced customer services, pricing of the products among others. Through CIBA, the company has gradually invested in internal research and developmental operations which have helped in bringing up new chemistries, lens design and surfaces, and new processing technologies (Anderson).

Situational Analysis

We find in Preker, One of the strategic plans of the company is that it has 77% shares in Alcon, Inc (Alcon) which is widely known for discovering and developing of innovative eye care products which are helpful in enabling people to see better. According to the announcement made by the company on December 15, 2010, the company had solemnly signed a treaty with Alcon, where Alcon was to be merged into Norvatis under some terms and conditions which are to be outlined by both of them and this union is expected to be through by end of mid 2011.

The company also expect to transform along with the demands of the healthcare market by coming up with a series of new medicines. This is expected to be achieved through the company’s wide, determined portfolio, innovative abilities and the well established familiarity that the company has across the region (Taylor).

In the struggle to attain its mission, the company has various strategic opportunities through which it can choose from in order to advance. Among these are innovation, an aging global population which requires continuous accessibility and demand for healthcare management which requires the attention of pharmaceutical companies; there is also the growth of emerging markets due successful growth of developing countries that is expected to be witnessed in future years to come (Tobin).

Others include lifestyles enhance the spread of chronic diseases and scientific advancements which opens new prospects targeted therapies thus requiring the company’s attention to increased productivity. However, it is worth noting that the company should tirelessly work on the strategy of innovation in order to come up with new healthcare systems which would help solve the aging global population being one of the biggest strategic opportunities that the company is faced with in its operations (Cleland and King).

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Implementation

In order to implement the recommended strategy, the company is trying to restructure itself since the recommended strategy is a long-term process which requires continuous healthcare attention. In Tsaing we find that; this is mainly witnessed in the employment level where the company has sought to create more employment opportunities (102). It is also planning to join with Alcon to help it further enhance its aim of providing healthcare services. This is expected to generate much revenue at the long run (University of Michigan).

Novartis is also expected to acquire Genoptix, Inc in cash tender offer of $25 per share. This would help in providing strategic fit with the company’s Molecular Diagnostic unit and would ensure that the internal capabilities aimed at enhancing healthcare outcomes are achieved through the advancement of individual treatment programs (Swenson).

Works cited

Anderson, Raynad. Management: Skills, Functions and Organisation Performance. New York: Allyn & Bacon, 1988.

Barro Robert, and Vittorio Grilli. European Macroeconomics, New York: Macmillan Publisher, Ch. 8, p. 139, 1994.

Barro,Robert, and Vittorio Grilli. European Macroeconomics, Ch. 8, p. 139, New York: Macmillan Publishers, 1994.

Cleland, Daniel, and King Richard. System Analysis and Project Management. New York: McGraw-Hill, 1968.

Davies, Adrian. Best practice in corporate governance: building reputation and sustainable success. New York: Gower Publishing, Ltd., 2006.

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Davis, Samuel. Problems of Organizations. London: Harvard Business Review, 1978.

Filley, Alan. The complete Manager: What Works When. Champaign, IL: Research Press, 1978.

Gullick, Luther, and Urwick Lawrence. Business environments. New York: Institute of Public Administration, 1937.

Jenster, Per, and Hussey David.Company analysis: determining strategic capability. London: Wiley, 2001.

Kahtz, Daniel, and Kahnz Robert.The Social Psychology of Organisations. New York: John Wiley, 1978.

Koontz, O’Donnell, and Weihrich Heinz. Management. New York: McGraw-Hill, 1980.

Luthans, Fred. Organisational Behavior. Singapore: McGraw-Hill, 1986.

Mintzberg, Henry. Organisation Design: Fashion or Fit. Harvard Business Review: 103-116, 1981.

Mundell, James. Journal of Political Economy: Inflation and Real Interest, 280-83., 1963.

Novartis-20F-2010: Annual Report pursuant to section 13 or 15 (d) of the securities Exchange Act of 1934 for the fiscal year ended 2010:87-237.Print.

Nystrom, Paul, and Starbuck William. Handbook of Organisational Design. Oxford: Oxford University Press, 1981.

Preker, Alexander. Spending wisely: buying health services for the poor. London : World Bank Publications, 2005.

Reilly, Frank, and Brown Keith. Investment analysis and portfolio management. California: South-Western/Thomson Learning, 2003.

Robbins, Stephen, and Coulter, Mary. Management. New Jersey: Prentice Hall. Upper Saddle River, 1984.

Robbins, Stephen. Organisation Behsavior: Concepts, Controversies & Applications. New Delhi: Prentice-Hall of India, 1989.

Swenson, Lars. Journal of Economic Perspectives, Volume 17, Issue 4:145-166, 2003.

Taylor, Timothy. Principles of Economics. New Jersey: Freeload Press, 2008.

Tobin, Econometrica. Money and Economic Growth. New Delhi: Prentice-Hall of India, 1965.

Tsaing, Sho-chieh. Journal of Money, Credit and Banking: A Critical Note on the Optimum Supply of Money, 1969: I266-80, 1969.

University of Michigan. Directory of corporate affiliations. Michigan: National Register Pub. Co., 2001.

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