Roche Holdings - International Business Strategy - Case Study Example

Roche Holdings: International Business Strategy Name: Lecturer: Course: Date: 1. As a senior manager based in the headquarters (HQs) of Roche Holdings in Switzerland, I would place the firm’s corporate strategy in the transnational organisation strategy (or transnational strategy) cell, of the integration/ responsiveness (I/R) framework (See Figure 1). Figure 1: Roche placed at the Transnational Strategy cell in the Integration/Responsiveness-Framework The reason for this is that Roche employs a synchronized approach to internationalization where we seek to respond to the local needs while simultaneously striving to retain adequate control of the international businesses at the headquarters. Through this, we can ensure innovation and learning. The products are locally produced, where the patients at put at the centre of the company’s business model. For instance, the company invested some 9 billion Swiss francs in research and development in 2013 to innovate medically differentiated products across its subsidiaries, leading to 137 million customers being served with locally produced Roche products (Roche 2013). As a manager of Roche Products Limited in the UK), we have often implemented the transnational strategy by seeking to exploit the economies of scale through sourcing of raw materials from a reduced mix of global suppliers. We also tend to concentrate the production of our products in relatively few locations where we hope to maximize our competitive advantage, such as in China and the United Kingdom. Additionally, we ensure that operational strategies such as production and marketing are on a global scale while simultaneously ensuring that we optimise local flexibility and responsiveness. There is also sufficient capital, human resources, products, and knowledge transfer between the head quarters in Switzerland and its subsidiaries internationally. Additionally, innovation often happens occurs in diverse locations before being diffused across Roche’s operations worldwide. The foreign subsidiaries such as Philippines, China and UK also often serve strategic roles, such as of production of certain products. For instance, in Philippines, Roche Philippines deals in diagnostics and manufacture of cancer medicines. The Tokyo-based pharmaceutical firm Chugai deals in the sale of medicines (Roche Holding AG 2015). Overall, the transnational strategy is expected to enable the company to expand to the emerging market, from 11 percent between 2012 and 2017. Its international market is worth US$964 billion, and is expected to grow each year by 5% from 2012 to 2017. The growth will depend on the emerging markets in Africa and Asia. The mature markets in UK are expected to growth by nearly 3 percent in the same period (Roche 2013). 2. The most appropriate organisational structure consistent with Roche Holdings is the matrix organisational structure. The structure is consistent the firm’s corporate strategy of transnational organisation strategy. Indeed, the organisational structure is suitably designed to ensure that a firm attain certain results through the use of teams of specialists it draws from diverse functional areas within the organisation. By design, the structure overlays a horizontal mix of divisions and the procedures for reporting in a hierarchical functional structure. Roche Holdings’ organisational structure has multiple reporting lines across the company’s varied functional areas such as manufacturing (production), human resources, sales, marketing, IT, where each report to the country’s head management or the region’s head (See Figure 2). Figure 2: Roche Holdings’ organizational structure showing multiple reporting lines For these reasons, the structure is consistent with the transnational business strategy that Roche uses as it ensures there is a decentralised system of making decisions in its various subsidiaries. It also ensures there is efficient research and product co-ordination among its global operations. 3. Roche Holdings’ flagship relationship network is the network model, specifically an integrated network. The model follows the traditional hierarchical approach, including the Uppsala model of internationalization process. The Network model points to Roche’s changing internationalisation situation because of its position within a network of subsidiaries and foreign partners, such as Corrange in Bermuda. Each partner has identified roles, which provides Roche with divergent business opportunities in a foreign country. For instance, Corrange in Bermuda deals in distribution of medicines. The network model stresses on the network of company, which in this case means the wider system with its partners instead of the company itself or the individual relationships between the head office and its subsidiaries. Roche has a direct or indirect relationship between its subsidiaries and country networks that are used in internationalization (See Figure 3). For instance, Switzerland is Roche’s home country where it has a sub-supplier that has as well created a subsidiary in the United Kingdom. At the same time, Roche has a production plant in the UK. As there us a pre-existing connection between Roche and the sub-supplier from Switzerland, it is easy for its production subsidiary to utilize a sub-supplier’s subsidiary in the UK. Additional linkages also exist among other actors within the model. The relationships function as bridges among Roche’s networks within one country in addition to networks in foreign country. Figure 3: Roche’s direct or indirect relationship with its subsidiaries and country networks Ultimately, Roche’s US-based subsidiary companies such as Tastemaker and LabCorp perform downstream functions, including supplying drugs to its agent and partmer in Bermuda called Corrange. However, Roche' also plans to acquire Corrange (by 100% stake) as an entry strategy into Bermuda. Since Corange has a 100% stake in Boehringer Mannheim of Germany, in addition to 84.2% stake in DePuy in the United States, Roche hopes to continue increasing its operations in Germany and the United States. 4. As a manager of the UK subsidiary, my specific role is to ensure there is a differentiated contribution to the Roche’s competitive advantage in the United Kingdom. As a manager, I acknowledge that the Roche Products Limited’s resources and key activities are neither centralised in the headquarters in Switzerland nor wholly decentralised to the UK. Rather, the activities and resources are dispersed geographically yet specialised. This leads to scale economies and flexibility. Therefore, I ensure that the company leverages scale economies by identifying and recruiting recruiters in the UK. I also concentrate the production of drugs in UK, particularly where we can maximize competitive advantage. My key roles include ensuring uniform policies are adapted in UK relative to those of the headquarters. I also ensure effective planning, resource allocation, and budgeting consistent with directions from the headquarters in Switzerland. I organize production and marketing in the UK, in addition to associated value-chain activities in the UK to optimize local receptiveness and flexibility. I also seek to facilitate organisational learning in the UK, as well as knowledge transfer with the headquarters in Switzerland as well as other subsidiaries globally. 5. The major financing sources of Roche Products Limited between 2010 and 2015 has included profits from the subsidiary and loan from the parent company, in this case Roche Holdings in Switzerland. For instance, in 2012 Roche Products Limited was granted US$373,001 by the parent company for pharmaceutical development, while in 2013, it was given US$365,651. In 2012 and 2013, the parent company also issued it a financing of US$327,941 and US$329,317 respectively (Roche Products Limited 2013; Roche Products Limited 2014). A review of the company’s financial statements does not show that the company has attempted to use mechanism to manipulate profits in my subsidiary in the UK. Indeed, there appears to be asymmetric information between our headquarters in the UK and the subsidiary where I operate. Roche Products Limited (the subsidiary) has not showed any motive of maximizing its utilities by submitting fake performance information, as the financial statements are truly reflective of the subsidiary’s performance. The headquarters also frequently takes part in our local business operation. Hence, it can identify such tendencies. This is bases on the “principal-agent” model, which the headquarters uses to ensure optimal supervision mechanisms are in place that enables the subsidiary to submit truthful performance information. Roche Products Limited uses the hedging strategies as measures for managing foreign exchange management so as to reduce the company’s vulnerabilities from significant exchange rate movements that may adversely affect the company’s profit margins. The strategy entails eliminating or reducing such risk. For instance, it uses tactical hedging to prevent transaction risks is strategically to protect cash flows and earnings, specifically for short-term receivable and payable transactions. It also uses passive hedging for long-term periods to hedge balance sheet or translation risk. It hedges the net balance sheet exposures, such as the net assets of the subsidiary, which is susceptible to adverse exchange rate shifts. For instance, the transactions that are in foreign currency become translated to Roche Product's functional currency at the exact foreign exchange during the date of the transaction. Again, the liabilities and monetary assets also become denominated in foreign currencies at the balance sheet date also are translated to the firm's functional currency at the actual exchange rate at the date of transaction. Reference List Roche 2013, Annual Report, viewed 8 Jan 2016, Roche Holding AG 2015, Member of DJSI World, DJSI Europe, viewed 8 Jan 2016, Roche Products Limited 2013, “Director's Report and Financial statement,” Registered number 100674, 31 Dec 2013, Roche Products Limited 2014, “Director's Report and Financial statement,” Registered number 100674, 31 Dec 2014, Read More