Bowman's Strategy Clock and Other Business Strategies - Assignment Example

Business Strategy The possible sources of global pharmaceutical industry’s competitive advantage in reference to Bowman’s strategy clock. Bowman’s strategy clock is a marketing strategy that analyses the competitive alignment of a business entity or company in relation to its competitors. The strategy clock presents eight possible strategies in four quadrants that are determined by price and unity axes. These strategies are low price and low value, low price, hybrids, differentiation, focused differentiation, higher prices and higher value, and low values and standard prices (Cadogan, 2009). It is an extension to the three porter generic strategies. Owing to the decrease in the profit margin, pharmaceutical companies have adopted innovative marketing strategies in a bid to sustain and neutralise the impact of price regulation such as exploring new markets, establishing the effectiveness in distribution and building customer loyalty. Some of the challenges in the global pharmaceutical industry that the managers are facing include: increased globalisation, increase in competition, lack of new products despite the improved research and quick development of generic markets among others. The application of Bowman’s strategy clock in the establishment of competitive advantage among the global pharmaceutical companies will result in value improvement and product promotion with minimal reliance on drug pricing. This is because the industry is bound by legal and medical restrictions that make application of marketing strategies difficult. The strategy is normally focused on value, product promotion and differentiation. Most pharmaceutical companies improve the value for their products while maintaining product standards or increasing prices for drugs. The industry ensures value for pharmaceutical products through conducting pharmaco-economic evaluations meant to show the efficacy and effectiveness of a new drug. For instance, a study on the cost of diabetes confirmed that less patients applied pharmaceutical medicine in managing it (Holland, 2005: 552). This provided an opportunity for pharmaceutical companies to invest in disease management initiatives that created awareness among the population on the existence and effectiveness of their products. The competitive advantage for most companies in the pharmaceutical industry is related to their prowess in marketing with a focus on product promotion. For example, in the U.S, spending on DTC advertisement reached an estimate of 4.8 billion dollars in 2008 (Holland, 2005:553). According to the case study, the industry also involved direct communication between the sales representatives and the doctors on the merits of the drug which helped in building product loyalty. To maintain constant sales in specialist and primary care products, their handling mode was split. The marketing of primary care products was assigned to the office-based practitioners while the specialist products were typically prescribed in hospitals. The industry also applied high compression marketing whereby the primary care products underwent near-simultaneous global launches, promotions and heavy investment. This created higher peak year sales earlier in the product life cycle. For instance, the 1999 launch of the Celebrex led to a billion product sales in the first nine months (Holland, 2005:553). Discuss the dangers of a hybrid strategy and how managers can protect against them Companies applying hybrid strategy offer products at a lower cost but with a perceived high quality compared to that of other low cost competitors (Moingeon and Soenen, 2002). They normally build loyalty among customers by reducing prices for goods at a higher value. The hybrid nature of the pharmaceutical industry shapes the customer’s ambivalence towards the industry. The public normally views the pharmaceutical farms as investor-owned profit-seeking firms instead of rate-regulated utilities and non-profit organisations. Firms with a hybrid strategy are normally stuck in a dilemma owing to the need for a conflicting set of organisational arrangements. Application of the strategy in pharmaceutical industry will lead to the formation of a corporate brand implying that all the activities of the firm will be attributed to its brand. Hybrids create a unique brand that requires distinct marketing strategies and budgets with no synergy between products. Any negative press or problems with a certain product will affect both brands. This implies that any product can affect the overall brand and individual brands will be muddled in the overall shared value. In order to protect the industry against such dangers, the managers have instituted on enhanced research and development activities to make sure that the products’ value is high and that there is no room for hybrids (Holland, 2005:554). New drugs are evaluated first to ascertain their value before being channelled into the market. The managers ensure that the legislation that controls prices is applied by all the pharmaceutical firms to ensure that the prices of drugs being channelled in the market are worth their value. The managers can also practise industry consolidation where companies merge and combine their processes to improve the quality of their products. This minimises competition related to quality difference and curbs hybrid strategies (Holland, 2005: 554). Managers of pharmaceutical companies have been forced to revise strategic thinking and planning in order to fit in the emerging trends and challenges. The changes in global marketing are fast and profound, and most managers are finding it difficult to cope with them, especially when competing with the companies that apply hybrid strategy when marketing their products. The global pharmaceutical companies operate in a business environment that is marred by constant turbulence that requires hasty adaptation and making of quick and sound decisions. The design of the value chain analysis is one way in which an organisation can make it different from competitors and, therefore, contribute to competitive advantage. a. Detail the value chain model Value chain analysis describes the organisational activities and relates them to the competitive capability of the company (Keane and London, 2008). The concept evaluates the value of each activity towards an organisation industry. The idea was established in relation to the insight that an organisation is not a mere assembly of machinery, equipment and money. These organisation aspects require organisation for a successful production of a product desirable to customers. Porter argues that the competitive advantage arises from the ability to undertake certain activities and manage the linkages between them. The value chain of a firm links the value chains of upstream suppliers and down stream buyers. This leads to the formation of value system that is a resultant larger stream of activities. The value system also contributes to the development of competitive advantage within a firm. These activities are divided into two; primary and secondary. b. Discuss how each of the primary and secondary activities of the value chain contributes to the identification of sources of advantage. Support your argument with relevant examples. Primary activities lead to the creation or delivery of a product or service. They are grouped as inbound logistics, operations, outbound logistics, marketing and sales, and service (Singer and Donoso, 2008: 669-677). Inbound logistics are all those activities that are associated with receiving and storing outsourced materials. An example includes storage of raw materials in a warehouse and handling the inventories for drug supplies to the customers. Operations are the processes involved in conversion of raw materials into finished products and services i.e. manufacture of products and services. The pharmaceutical industry undertakes its operations through transformation of raw material (chemicals) into drugs. Outbound logistic are those activities that are necessary to transfer the finished products i.e. drugs to customers for consumption, for instance, order fulfilment and dispatch. Marketing and sales are primary activities that convince the buyers to purchase the products e.g. pricing and advertisement. Services are those activities that offer support to customers after the products have been sold to them. Such include educating the customers on the drug usage. Secondary activities are indirectly linked to production although they increase its effectiveness and efficiency. Primary activities are supported by infrastructure of the firm that defines its culture and control systems and human resource management. This includes activities such as employees training and hiring. Other secondary activities include procurement i.e. purchase of supplies and raw materials, and technology development that manages information development and preservation of knowledge within the industry. The Boston Consulting Group (BCG)/Growth Share matrix helps an organisation to understand the relationship between financial risk and financial return. Critically discuss. Support your argument with relevant examples. If efficiently utilized, the model provides the guidance required for resource allocation and use. It is the most applied management instrument in most business portfolios. For instance, each strategic business units of Siemens Company require different strategies that enable it to compete efficiently in the market. The matrix serves four distinct roles namely: classifying the business portfolio based on four graphics namely cash cows, stars, question marks and dogs; determination of the product portfolio in a company; classifying the product portfolio according to financial usage and generation; and offering efficient management strategies to improve various product lines (McDonald, 2003: 175-245). The share matrix is relevant in helping the organisation understand the relationship between financial risk and financial return as it normally deals with two dimensional variables namely market growth and relative market share. This implies that those products with a greater market share or that have high demand would yield relatively greater profit margins. For instance, the marketing department in Pfizer Company failed to realise the marketing demand of the Lipitor drug leading to patent expiry and dramatic loss of sales value (Holland, 2005:549). Growth share matrix captures the actual market share of a product or business unit in relation to the competitor products. The analysis is derived from the correlation between the relative market share and financial generation of the product in the market (Drummond and Ensor, 2004: 96-100). The paradigm postulates that a business entity enjoys reduced financial risks through conducting efficient business operations overtime. The concept alludes that market share is correlated to experience as the market share increases overtime. Therefore, the business firm with a bigger share has a cost advantage over competitor firms. Success in the pharmaceutical industry requires that a firm establish and align its operations in the market. The firm should also adopt a number of strategies that can enable it overcome government restrictions. Another example is the Apple computer’s iPod product that occupies a dominant share of 73% for portable music player market (Cantrell 2006). The market growth curve of the matrix indicates the financial requirements of a product relative to the market growth. The cash cows are considered to be high, profitable products due to the fact that they dominate the market in the low growth markets. On the other hand, stars are leaders in the best performing markets and generate maximum profits at the same measure e.g. iPod devices of the Apple Company. Question marks do not generate much cash as they have not achieved dominant market position, for instance, the small share of the digital camera market for Hewlett Packard. Dogs are normally the cash drainers of the company and generate very little cash due to their low market growth, for instance, Pfizer’s Inspra (Holland, 2005). “Culture will inform and drive strategy. This can underpin success or cause difficulties” (Financial Times, 2003). Critically discuss with reference to an organisation of your choice using the “cultural web”. Organisational culture is described as a set of beliefs, norms, principles and ways of behaviours that gives an organisation a distinctive character. It is normally defined as that ethereal thing that is ignored in an organisation but influences the way work is done, critically affects project success or failure, determines an organisation’s mood and decides who fits and does not fit in an organisation. The impact of culture is normally experienced during organisational change, for instance, during consolidation of pharmaceutical firms that merge during industry consolidation to create a competitive advantage. The merging firms possess divergent cultures that drive their strategies, and once they come together, the cultures may clash leading to management difficulties. Culture can also be elusive in some cases. Such include when growth and strategic change of pharmaceutical companies such as Pfizer means that the existing organisational culture becomes inappropriate and prevents rather than supports advancement. Cultural elusiveness may lead to low morale, high staff turnover and absenteeism (Martin and Chaney, 2009). However, approaches have been developed for proper analysis of culture to prevent negative effects. The cultural web plays a central role in formulating strategy and planning change strategies. The cultural web identifies six related factors that assist in identifying the pattern of the work environment. The analysis of such factors helps one see the bigger picture of the organisational culture related to what works, what does not work and the necessary changes required (Ellis, 2011). In relation to Pfizer, these factors includes; stories of the people and past occurrences talked about e.g. the patent expiry that faced Lipitor drug and rituals and routines as portrayed by the behaviour and actions of people and symbols such as logos and formal or informal dress codes. Others include the organisational structure as stipulated in Pfizer’s organisational chart and the unwritten lines of power, control systems such as rewards, financial systems and quality systems, and power structures in the company. Pfizer Company is controlled by a chief executive officer who presides over decisions, strategic direction and operations. References Cadogan, J.W. (2009) Marketing strategy, London, SAGE. Cantrell, A. (2006). Apple’s Remarkable Comeback Story, retrieved September 28, 2006 Drummond, G. & Ensor, J. (2004) Strategic marketing: Planning & Control, Butterworth-Heinemann, MA, pp. 96-100. Ellis, M. (2011) Managing and growing a cultural heritage web presence: a strategic guide, London, Facet. Holland, S. (2005) The global pharmaceutical industry: swallowing a bitter pill, retrieved from static.skynetblogs.be/media/169675/517646745.pdf Keane, J. & London, E. (2008) A 'new' approach to global value chain analysis, London, Overseas Development Institute. Martin, J.S. & Chaney, L.H. (2009) Passport to success: the essential guide to business culture and customs in America's largest trading partners, Westport, Conn., Praeger. McDonald, M. (2003) Marketing plans: how to prepare them, how to use them., MA, Butterworth-Heinemann, pp. 175-245. Moingeon, B. & Soenen, G.B. (2002) Corporate and organisational identities: integrating strategy, marketing, communication, and organisational perspectives, London, Routledge. Singer, M. & Donoso, P. (2008) Upstream or downstream in the value chain? Journal of Business Research, vol. 61, no. 6, pp. 669-677. Read More