A Challenge for Students of Multi-National Strategy - Essay Example

? Multi National Strategy Inserts His/Her Inserts Grade Inserts Critical issues for managerial consideration in the pharmaceutical sector operating in developing economies. Generally pharmaceuticals have been reluctant to operate in developing countries primarily because of the uncertainties when it comes to their patent protection. However, one of the managerial concerns is the prospect in these developing countries as these are the emerging economies and growing markets. One managerial advantage for companies to operate in developing countries could be the lower R&D costs. In these countries, the scientists can more quickly find patients for clinical trials as these areas are densely populated. This way a substantial amount of time taken in the drug development process can be saved. (Gonzalez-Benito, 30) The issue that occurs here is that testing drugs in poor countries gives rise to ethical concerns. Then dealing with the pharmaceutical critics becomes both a managerial concern and issue. These critics come up with claims that companies have failed to develop cures and only test drugs in the developing world intended for wealthy nations. (Lou Ann Di Nallo, 2008) In recent years the rising affluence in developing nations has created new incentives for drug makers to produce treatments over here. Also the huge population in developing countries makes a large market for the drug makers. However, according to advocates of social responsibility, the main responsibility for drug makers in the developing countries is to provide to their citizens an access to health care at affordable prices and to fight the neglected diseases prevalent over there. Which means these large companies need to come up with programs that would at any time put the need for meeting public health care ahead of their profits. These kinds of programs will then eventually lead to improved relations with the host countries and will also promote the growth of market there. Therefore, addressing to the needs of developing counties has become an important part of pharmaceutical companies’ agenda. (Nott, 1996) In developing countries, the issue of getting intellectual property rights for the development of new drugs by pharmaceutical companies becomes an issue. This is because property rights or patents can be a disadvantage for developing countries in two ways. Firstly, these will increase the knowledge gap and secondly the producers of knowledge will have more bargaining power as a result. And most of these producers of knowledge themselves live in developed countries. Giving out patents will put the developing nations in a weak bargaining position when negotiating prices from the monopoly suppliers of drugs. Also, is believed that by awarding such rights to multinational companies, the introduction of new products by the local industries will be delayed and new medicines will become more expensive for a common man in these poor countries to afford. The resulting impression will be that of denying the people an access to the new drugs. (Charles Y.J. Cheah, 2004) Therefore the defense of the intellectual property rights is one of the major managerial issues of pharmaceuticals in developing countries just like the case of Novartis in India These companies argue that these rights would promote innovation and technological development which will eventually lead to social welfare and economic growth in developing countries. Patents provide an incentive to producers for investing in research and development, hence innovation. (Shah, 2010) Therefore, choosing a strategy that gives the company a reputation of being responsible while at the same time lowers the innovation cost needs to be established. Companies expect reasonable rate of return for their investments on new drugs developed which would at times also mean charging a price that is much higher than what the market can afford to or is willing to pay. This lack of opportunity to make profits can be demotivating and lead to some diseases in poor countries being neglected. Drugs for these neglected diseases need to be developed. (Lou Ann Di Nallo, 2008) Extent to which there is a social responsibility case for businesses in the pharmaceutical industry particularly in developing economies Recently, this concept of corporate social responsibility or CSR has become of immense importance for the business community. This concept takes into consideration a lot of business practices which include community involvement or health and safety policies. For Many pharmaceutical companies CSR is part of their operations and strategies. They not just follow a socially responsible business model but perform many other activities related to healthcare especially in the developing economies. (Nott, 1996) Pharmaceutical businesses in developing countries try to be socially responsible by performing the following activities: They are improving an access to medicines for people in developing countries. They have started donation programs. A lot of investment in R&D for diseases widespread in developing countries. They are also investing a lot in education and prevention programs that are health related Global ethical and safety standards are being established into daily business practices in developing countries. In developing countries, pharmaceutical companies are confronted with new diseases every now and then. As a result their most important task has become a continued creation and development of new products. (Holme, 2010) The discovery and development of new vaccines and drugs then also then becomes their primary responsibility towards the society. According to some findings, currently the industry has more than about 100 vaccines and drugs being developed for HIV/AIDS along with these huge sums are being invested to advance R&D in developing drug for tuberculosis, malaria and other diseases widespread in developing countries. (Spinello, 2007) Pharmaceutical companies have a very strong influence on world trade because of the huge sums of revenues they generate and their high contributions to the GDP. It is highly essential to protect and enforce intellectual property rights so that more and more technological innovation is promoted and then the technology transferred and disseminated in such a way that the producers well as the user of this knowledge benefits while at the same time economic and social welfare is maintained. (Todd Green, 2011) When specifically talking of developing countries, they have this complaint regarding intellectual property that it protects the pharmaceutical patent owners much more than the poor population of their countries. Some of the critics of these intellectual property rights argue that these rights not be treated as inherent rights as they are not. On the other hand, property rights help in preventing unauthorized commercial exploitation and provides with more predictability. And specifically for high risk sectors that are also technology-intensive this protection is very critical. Therefore, it’s critical in the pharmaceutical industry as well. (Blackett, 1992) Also, governments of developing countries not giving out patents to pharmaceutical industries will demotivate these industries from innovating and investing in value-added production or research and development facilities. (Holme, 2010) Moreover these kinds of investments made by companies will also ensure a long term commitment from their side for the local market. In both the cases there is a mutual benefit in awarding patent rights to pharmaceuticals. (John Meehan, 2006) Need to understand complex corporate governance issues in addition to social responsibility The case of Novartis tells us that a company’s corporate governance strategy should be such that all it creates value for all of company’s stakeholders and also enhances shareholder value while at the same they should true to ensure that they are not harming the communities and environment in any way (Blackett, 1992) Understanding corporate governance and in fact setting high corporate governance standards is highly essential for companies. When particularly talking of pharmaceutical companies, there is a need to pursue best practices towards good corporate governance. The policies and procedures of a company should reflect their core values, system of accountability and professionalism in all of their departments. (New indicators for the UK pharmaceutical industry, 2002) Also as part of their their social responsibility, they need to work towards improving their corporate methodologies, procedures and practices. This way they can guarantee a long term value for all of the company stakeholders. A moral duty for the pharmaceutical industry to provide low cost drugs? There is a special duty when medicines are being sold and pharmaceutical companies hold this moral duty to provide low cost drugs especially in developing countries. However, in cases where drug companies give more importance to short term gains than to their social responsibility, they often charge higher prices. (John Meehan, 2006) For pharmaceutical companies the spending on R&D involves a substantial cost therefore producing low cost drugs becomes very hard. According to estimates, the global R&D expenditure in 1981 was not any less than $5.4 billion and is further estimated to increase over the years. (London, 2010) However, the pharmaceutical business is widespread with high demand for drugs and high profits and revenues generated for the companies. It is estimated that about 50 billion aspirin tablets are consumed each year all over the world. This higher demand and even higher revenues generated should encourage selling the drugs at lower prices and taking it up as their moral duty. The availability of these tablets to the poor population at lower prices will eventually result in an increased life expectancy which in return will have a positive impact on their economies. (Yeoh, 2011) In recent years as from what we see, corporations have started claiming to be good citizens as they are now being driven by other higher aspirations and not just profit alone. Some efforts of delivering cures to poor countries by bid pharmaceutical companies’ donations have also been researched. Drugs were donated by six big firms to poor countries which were afflicted with diseases like dengue fever and leprosy. The contributions included an unlimited supply of leprosy treatments from Novartis also. (Gonzalez-Benito, 30) Other than this, drugs can be provided or sold at lower prices if donors, which could be governments also, subsidize the cost of developing vaccines so the drug makers could sell these medicines at reasonable enough prices. Some huge drug companies sponsor their own initiatives. According to some findings GSK is sharing about 800 of its patents with various other companies that are also trying to find treatments for some neglected tropical diseases. In some lesser developed countries like Ethiopia, Cambodia and Rwanda, GSK has also cut prices for a lot of its drugs. (Lynette M. McDonald, 2011) Extent to which private-sector organizations are primarily economic rent acquiring entities The primary responsibility of any organization’s manager is towards the owners of that organization. And as some people claim managers should not have any consideration for the society’s needs as their only main objective is profit maximization for the owners of the business. (Strugatch, 2011) According to the profit maximization theory, the corporations or companies will sell their products at a price at which they will be able to achieve highest total profit. Producing at the lowest cost in order to maximize profits at times would mean that these private sector entities would indulge in business practices that are socially unethical .for example; in order to cut its cost a company may locate its factory at a location where land price, labour and transportation costs are lower. So this way they will not be socially responsible because they would not care if they would destroy the land, are paying unfair wages or exploiting a country’s resources. The only objective is to maximize profits. (Holme, 2010) Recently, however large and well known companies are moving away from such behaviour and adopting a more socially responsible approach in conducting their businesses in order to protect the reputation of the company as well the goodwill in the market. In this era of communication and technology where either a bad or good word of mouth does not take long to make or break a company’s reputation, most of the private sector organizations are no more primarily rent acquiring entities? (Lou Ann Di Nallo, 2008) Consumers are more aware and with the day by day increasing level of competition in the business markets, they have more choice in terms of pricing and quality both. They are in a better position to make more rational choices about which company’s products they want to consume and will refrain from consuming products of a company that is known for its socially irresponsible and unethical behaviour. (Todd Green, 2011) All communications media helps in quickly spreading bad word of mouth for a company and the resulting declining sales could eventually lead to lesser profits. Therefore, a socially responsible behaviour on part of these private sector organizations has now become an important content of their profit maximization objective. They are no more primarily rent acquiring entities. Conclusion The cost of innovation is very high and time consuming. Therefore investments need to be made for long term .also the methods of drug development need to design with a lot of care so that risks are minimized in this long term process. Also, corporate social responsibility suggest a that factories need to reduce their environments effects and also perform at highest standards. The market leaders in this industry are dealing with CSR in a very serious and systematic manner. Although global issues are being faced, the companies try to get in contact with the stakeholders to find out about the new innovations and prospects that will make this sector a good contributor to the well being of people. (Strugatch, 2011) Bibliography Blackett, T. (1992). Branding and the Rise of the Generic Drug. marketing Intelligence & Planning , 10. Charles Y.J. Cheah, M. J. (2004). An open framework for corporate strategy in construction. Engineering, Construction and Architectural Management , 40. Gonzalez-Benito, J. (30). Supply strategy and business performance: An analysis based on the relative importance assigned to generic competitive objectives. International Journal of Operations & Production Management , 2010. Holme, C. (2010). Corporate social responsibility: a strategic issue or a wasteful distraction? Industrial and Commercial Training , 50. John Meehan, K. M. (2006). Lynette M. McDonald, Chia Hung Lai. International Journal of Social Economics , 40. London, M. (2010). Understanding social advocacy: An integrative model of motivation, strategy, and persistence in support of corporate social responsibility and social entrepreneurship. Journal of Management Development , 29. Lou Ann Di Nallo, J. S. (2008). Insights into the issues facing pharmaceutical companies for information provision: a report on the P-D-R special meeting, La Grande Motte, 28-29 February 2008. Interlending & Document Supply , 40. Lynette M. McDonald, C. H. (2011). Impact of corporate social responsibility initiatives on Taiwanese banking customers. International Journal of Bank Marketing , 30. New indicators for the UK pharmaceutical industry. (2002). International Journal of Health Care Quality Assurance , 15. Nott, R. (1996). 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