Strategic Management of Auxilium Pharmaceutical - Assignment Example

?During the last three years Auxilium Pharmaceutical has experienced accumulative losses that exceed $150 million. The current strategy the company is using has not been very effective. One of the reasons for the firm’s lackluster performance is that the company’s main two product lines are specialized products. The market size for the products in the United States is limited. The company has to implement a new strategic approach in order to expand its sales. Three strategies to realize growth that the firm must consider are value disciplined, generic strategy, and grand strategy. The value discipline approach was created by Michael Tracy and Fred Wiersema. The three value disciplines are operational excellence, product leadership, and customer intimacy. Operational excellence deals with having superb operations and executions and execution quality at a reasonable price (Valuebasedmanagement, 2011). This strategy is not aligned with the objectives of Auxilium Pharmaceutical. The company has two patented product one of them, Xiaflex, was introduced in 2011. The company must implement a retail price strategy for its drugs, thus selling cheap or at discounted price is not a possibility. Product leadership is associated with innovation and brand marketing in dynamic marketplaces. This approach would be very suitable for Auxilium Pharmaceutical. The company already has build up some brand value due to its 13 years of existence in the marketplace. The third value discipline is customer intimacy. This approach is achieved by providing superb customer service and customer attention. The use of this value discipline can help the company achieve long term growth. The second strategy that the company can consider to achieve growth is the use of a generic strategy. The generic growth strategy approach was developed by Michael Porter. The three generic strategies are cost leadership, differentiation, and focus strategy. Cost leadership implies attempting to become the market leader in terms of prices in your industry. A cost leadership strategy is not well suited for a pharmaceutical company that sells patented drugs. Drug companies have to invest at least $1.2 billion to develop a new drug. Pharmaceutical companies such as Auxilium Pharmaceutical are given 20 years of patent protection to be able to recover their investment and to obtain a reasonable profit. Auxilium Pharmaceutical should not pursue a cost leadership strategy. The second generic strategy is called differentiation. “A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition” ( Mcraigh, 2011). This growth strategy is aligned with the mission, vision, and objectives of Auxilium Pharmaceutical. The third generic strategy is focus. Focus is a hybrid strategy that attempts to achieve both cost and differentiation. Such a strategy is suitable for large companies with multiple products. Auxilium Pharmaceutical only has two products the company is aggressively marketing. The third strategy that Auxilium Pharmaceutical may pursue is a grand strategy. A grand strategy can be defined as a comprehensive long term plan of actions by which a firm plans to change its long term objectives (Businessdictionary, 2011). Some of the ways a company can implement a grand strategy to achieve business growth are joint ventures, acquisition, strategic alliances, divesture and diversification. A joint venture occurs when went two or more companies unite forces to form a new single entity. Prior to China’s acceptance into the WTO in 2001 the only way for foreign companies to penetrate the Chinese market was to form joint ventures with Chinese state owned companies. Strategic alliances occur when two or more companies participate together in a project or business function. For instance in the airline industry it is common for companies to form strategic alliances. A divesture is the sell off of a particular division or product of a company. The primary reason for divesture is to eliminate business divisions or products that are unprofitable. An acquisition is the purchase of another company. Diversification occurs when a company introduces a new product. Auxilium Pharmaceutical must establish a clearly defined grand strategy. The mission statement of the company is: “To improve the lives of patients throughout the world by rapidly and efficiently identifying, developing and commercializing innovative specialty biopharmaceutical products” (Auxilium, 2011). The two grand strategies that Auxilium Pharmaceutical should implement are strategic alliances and diversification. The company must begin a networking process to identify pharmaceutical companies that do not compete directly with the company. The company must find at least five companies. The firm will then negotiate a marketing strategic alliance with these companies. The purpose of the alliance is to share marketing resources and to perform combined ads for all participants in the alliance. The reason the companies needs to implement a diversification strategy is to add products to its product offering. Adding a profitable business unit could help offset some of the losses incurred by Testim and Xiaflex. Product leadership, customer intimacy, and differentiation are the value disciplined and generic strategies selected for implementation at Auxilium Pharmaceutical. The company must build up the image of the company and reinforce its brand value across the domestic United States marketplace. The company needs the doctors to recognize the firm brands as one of the best alternatives to treat Dupuytren’s contracture and hypogonadism. The company must hire a temporary workforce of pharmaceutical sales representatives for a period of six months. Each state will be allocated 100 pharmaceutical sales representatives. The goal of the program is for the pharmaceutical sales representatives to visit the offices of every doctor in the United States and to give them several samples of both drugs. As of 2008 there were 661,400 doctors in the United States (Bls, 2011). The purpose of the initiative is to create brand awareness of the firm’s products and to provide a personalized customer service to the doctors that prescribe the drugs. The company will also target the end user of the medicine, the patient. The company must increase its marketing budget a lot in 2012. The firm’s marketing budget must be at least twice of its 2010 spending. An effective branding strategy requires a high capital investment. The firm should create a new advertising campaign to be launched on Christmas day. The commercial will be launched simultaneously on the written press, television, radio, and the internet. The written press commercial will be a reanimation of the commercial in cartoon format. The radio commercial will provide the same audio as the television commercial. The television and internet commercial are identical. The total elapse time of the commercial will be 15 seconds. The advertising campaign will be run on television and radio for 30 days. The written press will have the commercial on for a period of 30 days with an offering of the commercial once a week. The internet campaigns will be ran for 90 days. The reason the internet campaign will be run longer is due to the lower cost of internet commercials. Auxilium Pharmaceutical has reached a crossroad in its business development. The company has two excellent products, but the firm has not achieved sufficient market share to be able to cover expenses and overhead. To make the company grow the firm will implement value discipline and generic strategies. The purpose of these strategies is to improve the customer service and brand value of the company. In the long run these strategies will increase the sales of the company as well as its customer retention rate. Auxilium Pharmaceutical still has time to turn its operation around and covert it into a profitable business. References Bls.gov (2011). Physicians and Surgeons. Bureau of Labor Statistics. Retrieved October 26, 2011 from http://www.bls.gov/oco/ocos074.htm Businessdictionary.com (2011). Grand strategy. Retrieved October 26, 2011 from http://www.businessdictionary.com/definition/grand-strategy.html Mccraigh.doc (2011). Porter’s Three Generic Strategies. Retrieved October 26, 2011 from http://www.mccraigh.com/Archives/porter.html Valuebasedmanagement.net (2011). Value Discipline Model – Treacy and Wiersema. Retrieved October 26, 2011 from http://www.valuebasedmanagement.net/methods_valuedisciplines.html Businessweek.com (2004). Just How Cheap is Chinese Labor? Businessweek. Retrieved Read More