The Effects of the Disinvestment of a Transnational Corporation in the UK: Pfizer Case - Essay Example

? The Effects of the Disinvestment of a Transnational Corporation in the United Kingdom: A Study of Pfizer UK Your Number: Word Count: 1,750 Introduction After the Second World War, Transnational Corporations (TNCs) replaced the colonial companies that traded on behalf of nations in foreign territories (Letto-Gilles, 2005). Thus, these business entities replaced the imperialist mining and plantation owners in foreign territories. Jones & Dunning (1997) define transnational corporations as “enterprises which own or control value-added services in two or more countries” (p1). Typically, a transnational company might have different interests in different countries to produce and sell similar products in different countries. TNCs build and develop infrastructure in these foreign countries and employ locals who combine factors of production to produce goods and services. The final output is often either exported or consumed locally. The operations of TNCs have both positive and negative impacts on the home country. The impacts affect areas like the economy, entrepreneurship in the nation, technology transfer and the livelihood of its employees. This paper examines the case of an American TNC operating in the UK, Pfizer. It assumes that Pfizer UK is being folded up and the investments by the American owners are being withdrawn. It therefore evaluates the impact of such a disinvestment and disintegration activity by the parent company of Pfizer. Analyses of Pfizer UK Pfizer UK is a pharmaceutical research and manufacturing company in operating in various outlets in the UK (Pfizer UK Website Home Page, 2011). Pfizer UK is has its offices located in two different parts of the UK and several plants that manufacture its products and some research centers that develop products (Pfizer UK Website Corporate Overview, 2011). Pfizer UK is a major supplier to the UK National Health Service and its plants export to over 180 countries around the world through its branches. The Research & Development centres of Pfizer UK are located in Cambridge and Sandwich. These centres utilize the concentration of British experts and scholars in studying disease and developing appropriate medicines that are eventually commercialized. Pfizer UK seeks to promote amongst other things: advanced wellness and health prevention systems, use the best scientific methods, set high quality ethical standard sin medicine, expand to provide its services globally, promote research, lead social integration of medicine and increase the wealth of its shareholders (Pfizer UK Website Commitments, 2011) Pfizer UK uses technology systems that link it to global partners through its American headquarters (Pfizer UK Website Research, 2011). It seeks to apply science in research through the most sophisticated portals made available by its American partners. Pfizer UK also employs the brightest persons in the UK in the field of pharmacy, medicine, the biological sciences, engineering and other natural sciences (Pfizer Careers Website, 2011). Although most of the researchers and workers are British nationals, there are occasional introductions of foreign nationals, especially in cases where exceptional skills are needed to accomplish a given research. In the UK, Pfizer is in the same industry as Johnson & Johnson, Abbott Laboratories, GlaxoSmithKline & AstraZeneca. These competitors are of the same stature as Pfizer in terms of assets and revenue. There is also a myriad of smaller pharmaceutical companies in the UK that compete with Pfizer, albeit of a much smaller significance to the drug giant. Due to the position that Pfizer occupies in the UK medical research and pharmaceutical manufacture, the decision to fold up will affect various units of the UK in several way. They are examined below. Impact on Technological Development in the UK Pfizer UK uses state-of-the-art technology and innovative tools that are used in the study and manufacture of drugs for the local and international markets. “Technology is the practical application of scientific or engineering knowledge to conception, development or application to products or offerings, processes or operations” (Floyd, 2009 p1). Pfizer UK’s processes and systems are imported from the United States and the effective nature of incorporating innovation enables Pfizer UK to employ the most sophisticated and most current systems and methodology in its operations and processes. Technology transfer refers to the ways and means through which technology is transferred from one entity to another (Cohen, 2004 p2). With an appropriate system through which cutting edge research from the United States is brought to the UK, Pfizer maintains the most up-to-date methods and processes. With their decision to disinvest in the UK, Pfizer will create a technology vacuum in the UK. This is because the UK will lose one outlet through which modern systems and structures are transmitted into the pharmaceutical industry. Additionally, this decision to fold up in the UK will mean that Pfizer will develop its technology elsewhere in a foreign country, commercialize it and when that system is needed in the UK, it must be paid for. Thus the decision to fold up in the UK will have two impacts on technology. First there will be a limitation on the technological level of the UK’s pharmaceutical industry. Secondly, there will be financial implications because the UK will have to pay in one way or the other, to acquire modern technology from Pfizer when the need arises. Impact on the Trading Position of the UK Economy The decision of Pfizer to fold up in the UK has some impacts on the macro-economy of the UK. First of all, Pfizer’s products are exported to over 180 countries from the UK. This means that when it folds up in the UK, revenue from these exports would be lost and the UK economy will suffer adversely. On further analyses, the fact that Pfizer will fold up will mean that the UK will have to import from Pfizer’s foreign operations when it folds up in the UK. This will have further consequences on the UK’s balance of payment position. The concept of backward linkage will come to play significantly in the UK ad this will affect the UK adversely. The concept states that when a productive TNC operates in a country, orders are processed according to high standards. This increases the experience of local partners who work with the company and this ensures that new jobs are created and new firms are set up and the economy grows. In this situation, Pfizer is a world-class manufacturer of pharmaceutical products. Its presence in the UK ensures that all its employees and partners maintain the highest standards in the industry. This prepares these employees and partners for higher and better opportunities on the global level. The folding up of Pfizer will mean that all these supporting entities and employees will have to find other means of generating revenue. This might not be as challenging and as fruitful as their encounter with Pfizer. This will mean that the UK’s economy will suffer in the long-run. Impact on the Level of Entrepreneurship in the UK The growth of foreign entities in a given country squeezes domestic borrowers. This collapses new and smaller competitors. This implies that the exit of Pfizer could be positive for other UK entrepreneurs because they would have more opportunities to grow since there will be less competition and they will get more access to financial assistance. However, the absence of competition and advance technology which Pfizer possess means that there is a big chance that UK firms related with pharmaceuticals will slump into complacency. This is because there will be no motivation to set and adhere to high and superior standards. This will mean that there will be a slowdown in the growth of innovation and corporate entities in the UK after Pfizer folds up and leaves the UK completely. Impact on the Quantity & Quality of UK Employment Pfizer employs over 7,000 people in the UK. Most of them are top-class educated, experienced and qualified researchers who possess rare and exceptional skills. Pfizer also pays very high remuneration to keep these individuals motivated and productive. Most of their employees are the best of the best of Cambridge PhDs and other global geniuses. Due to this, Pfizer maintains a rare concentration of extremely skilled individuals. With the folding up of Pfizer in the UK, these extremely skilled individuals might find it difficult finding other jobs that pay as well as Pfizer does. This therefore means that they will either have to stay idle and allow their skills and potentials to go stale. This will be disadvantageous to these persons, their families and the economy as a whole. On the other hand, there is a big chance that because these individuals possess rare and exceptional skills, other world-class pharmaceutical companies will poach them and give them offers in other countries, like the United States. This will mean the UK will suffer a brain drain and the new country that will receive them will get a brain gain. Conclusion Although Pfizer is a TNC, it occupies a very significant position in the UK’s pharmaceutical industry. This therefore means that it is connected to different entities and institutions in the country and is thus a very key organization in the UK. Due to this, its decision to fold up its UK operations will have consequences on technology, entrepreneurship, the economy and the individuals it employs in the UK. The folding up of Pfizer UK will block technological transfer to the UK and this will mean that the level of technology in the UK will decline. Also, the pull out of Pfizer will have cost implications because Pfizer will develop its technology and research elsewhere and the UK will have to pay for that. If Pfizer UK folds up, the UK’s volume of exports will decline and it might have to import and this will have implications on the balance of payment of the UK. In the long run though, the fold up of Pfizer UK will have a negative backward linkage effect on the UK economy. There will be lower standards in the industry, local firms will go redundant, UK nationals who are potential employees in the industry will be denied the opportunity to learn and gain experience, there will be job losses and the new firms that may be set up to fill the vacuum might not be able to meet the high standards Pfizer has built over the years. Also, the fold up of Pfizer UK will be advantageous for smaller British pharmaceuticals in the short run, but in the long run, there will be less competition and this will cause the industry to decline. Finally, the folding up of Pfizer will mean its stock of exceptional workers and researchers will become redundant or there might be offers overseas that will lead to a brain drain for the UK economy. References Cohen, Goel (2004) What is Technology Transfer: Strategic Management in Developing Countries London: SAGE Publications. Floyd Chris (2009) Managing Technology for Corporate Success Gower Publishing. Jones, Geoffrey & Dunning John (1997) Transnational Corporations London: Taylor Routledge Letto-Gilles, Grazia (2005) Transnational Corporations & International Production Edward Elgar Publishing Pfizer Careers Website (2011) Global Careers in Pfizer Available online at: http://pfizercareers.com/ Accessed 29th November, 2011 Pfizer UK Website (2011) About Us Available online at: http://www.pfizer.co.uk/sites/uk/about_us/Pages/default.aspx Accessed 29th November, 2011 Pfizer UK Website (2011) Corporate Overview Available online at: http://www.pfizer.co.uk/sites/uk/about_us/Pages/Corporateoverview.aspx Accessed 29th November, 2011 Pfizer UK Website (2011) Our Commitments Available online at: http://www.pfizer.co.uk/sites/uk/about_us/Pages/Ourcommitments.aspx Accessed 29th November, 2011. Pfizer UK Website (2011) Research Available online at: http://www.pfizer.co.uk/sites/uk/research/Pages/default.aspx Accessed 29th November, 2011 Read More